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Rishell v. Alvion Properties, Inc.

United States District Court, S.D. Illinois

March 17, 2017

DON RISHELL, Appellant,
v.
ALVION PROPERTIES, INC., Appellee. Bankruptcy No. 15-40462

          MEMORANDUM AND ORDER

          NANCY J. ROSENSTENGEL United States District Judge

         Appellant Don Rishell appeals the May 5, 2016 Order of the Bankruptcy Court striking and disallowing an informal proof of claim asserted by both Rishell and Pegula Rishell, LLC, in the bankruptcy case of Debtor/Appellee Alvion Properties, Inc. (“Alvion”). For the reasons set forth below, the decision of the Bankruptcy Court is affirmed.

         Background

         On May 14, 2015, Alvion filed a voluntary petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Illinois, Case No. 15-40462.[1] Alvion, a mining company with 1, 294 acres of land and 4, 513 acres of minerals in Scott County, Virginia, [2] is owned by Shirley Karnes Medley and Harold M. “Jack” Reynolds (BK Doc. 1). Robert E. Eggmann[3] subsequently was appointed and retained as disbursing agent for Alvion in the Bankruptcy Case, pursuant to 11 U.S.C. § 327(a) (BK Doc. 117).

         On May 15, 2015, a Notice of Chapter 11 Bankruptcy Case, Meeting of Creditors, and Deadlines was issued, notifying potential creditors of the date of the Meeting of Creditors and setting forth a September 15, 2015 deadline for filing a Proof of Claim (BK Doc. 8). On or about June 17, 2015, the Meeting of Creditors was held pursuant to 11 U.S.C. § 341 (BK Doc. 25), which Rishell attended (Doc. 29, p. 1). Rishell is the managing member of Pegula Rishell, LLC; George Pegula is the other member of the company (see BK Doc. 130, p. 5).

         On November 20, 2015, Alvion filed a Motion for Order Authorizing Sale of Real Property, seeking approval for the sale and transfer of a majority of its real estate and mineral interests in Virginia (BK Doc. 87). On December 14, 2015, Rishell, acting pro se, sent a letter to the Bankruptcy Court, which the Court deemed an objection to Alvion's motion (BK Doc. 114). On December 15, 2015, the Bankruptcy Court considered and overruled all objections to Alvion's motion to sell, including Rishell's objection (BK Doc. 115). The Bankruptcy Court then entered an Order authorizing the sale of Alvion's real property on December 15, 2015 (BK Doc. 116).

         Prior to the hearing on Alvion's motion to sell, counsel for Alvion spoke with Rishell in order to ascertain the nature of Rishell's objection (BK Doc. 130). Based on that conversation, Alvion's counsel came to understand that Rishell was actually seeking money that he claimed was owed to him by Alvion. Counsel “strongly urged Rishell to file a proof of claim immediately” (Id.).

         Rishell never filed a formal proof of claim, but, in an effort to cover all its bases, on January 13, 2016, Alvion filed a formal objection to any possible claim of Rishell or Pegula Rishell, LLC (Id.). Alvion's objection noted that, while it was unclear what Rishell believed he was entitled to, it appeared he was seeking expenses and/or a brokerage fee for a contemplated sale or loan that never closed (Id.). Attached to the objection was a commitment letter from Grand Rivers Community Bank addressed to Pegula Rishell, LLC, outlining conditions of a loan that it was prepared to consummate. The $8, 900, 000 loan to Pegula Rishell, LLC, was to have a term of 364 days at a fixed rate of 4.00%. Among other terms, the loan required a one-time fee of $5, 000 from the borrower, as well as the signatures of both George Pegula and Donald Rishell on the Promissory Note and Assignment of Deposit (Id.). The commitment letter stated that the purpose of the loan was “to assist in the clearing of title on acreage located in Scott County, Virginia being purchased by Pegula Rishell, LLC.” (Id.). Alvion's objection to Rishell's informal proof of claim argued that, pursuant to a conversation with a Grand Rivers Community Bank representative, the conditions of the loan were never met and the loan was never consummated. Therefore, Rishell or Pegula Rishell, LLC, never incurred any brokerage fees or any expenses and, thus, were owed nothing.

         On February 29, 2016, Rishell filed an “Answer to Objection to Informal Claim of Don Rishell/Pegula Rishell, LLC and New Matter.” (BK Doc. 163). With this filing, Rishell attempted to explain his claim to the Bankruptcy Court. According to Rishell, he served as an advisor to a man named Bernd Weber, who was Alvion's chief financial officer (Id.; see also BK Doc. 52). For reasons that are unknown, the Alvion property came under the control of Weber from 2007 to 2012 by way of stock ownership (BK Doc. 52, p. 3). At some point, Rishell suspected “fraud, dirty dealings and unclean hands . . . on all sides of the transaction . . . .”[4] (BK Doc. 163). Rishell then claims he contacted Alvion and met with its principals in late 2011. At this meeting, Rishell allegedly “offered to come over to their side, ” and in return Alvion agreed to pay Rishell $300 per hour for consulting work, to be paid when they closed any deal “regarding the monetization of the Alvion property and/or mineral rights.” According to Rishell, Alvion would not sign a contract memorializing the agreement because they did not want a court to know they were “paying for information” (a lawsuit had been initiated against Weber). In April 2013, control of the property was returned to Alvion pursuant to a court order that, Rishell claims, was the result of “items [Rishell] helped them recover and discover.” Rishell further asserts that from the time of the 2011 meeting to the present, he had worked diligently to vet deals proposed to Alvion, all at his own expense. Rishell also claimed to have negotiated settlements with creditors on Alvion's behalf.

         Attached to his Answer to Objection were three exhibits that, Rishell claims, purportedly demonstrate the “meeting of the minds” that occurred between Rishell and Alvion's principals regarding the $8, 900, 000 sale of Alvion assets to Pegula Rishell, LLC. Exhibit A was a July 14, 2015 e-mail signed by Pegula Rishell, LLC, and Donald Rishell addressed to Shirley Medley, Don Medley, and H. M. Jack Reynolds, wherein Rishell summarizes the deal that was purportedly negotiated. The e-mail refers to a commitment letter from Shirley Medley as President of Alvion; however, the letter is not attached and appears nowhere in any of Rishell's filings. It also refers to various handwritten payment schedules and the commitment letter from Grand Rivers Community Bank (Doc. 163, pp. 5-6).

         Exhibit B was an unsigned, undated letter addressed to a Mr. Covert, apparently from Rishell, expressing shock at the sale and financing of Alvion Properties, Inc. for $23, 000, 000 when, “pursuant to negotiated agreements, Pegula Rishell, LLC, has secured a loan commitment of $8, 900, 000, for the purchase of the assets of Alvion Properties, Inc.” The letter also states that Rishell relied on a December 15, 2014 email from Shirley Medley (which is not in evidence) in proceeding to negotiate settlements with Alvion creditors, and that Pegula Rishell, LLC, “relied on the representations and agreements of Mr. Medley and Mr. Reynolds to get all parties to this point, and have damages if this deal is not completed. Based on the circumstances associated with this transaction, there has been a ‘meeting of the minds' regarding this real estate transaction.”

         Exhibit C was a handwritten document dated December 15, 2014 to Rishell from Don Medley providing a list of accounts payable and the amounts owed, which apparently would be distributed from the $8, 900, 000 loan (BK Doc. 163, p. 10). The list includes payments to various people, including two payments of $1, 000, 000 and one payment of $300, 000 to Don Rishell. The first $1, 000, 000 payment has a notation next to it that appears to state “pur gems.” The notation next to the second $1, 000, 000 payment appears to say “Wells Fargo [illegible].” The third entry, for $300, 000, has a notation next to it that looks like “expenses.” Rishell claims this exhibit makes it “plain to see that Medley owes the fees and expenses presented to the Bank as charges in his own handwriting.”

         At a hearing on February 29, 2016, the Bankruptcy Court ordered Rishell and Pegula Rishell, LLC, to retain counsel by March 28, 2016, and to file a formal proof of claim by April 11, 2016 (BK Doc. 164). Rishell was warned that failure to do so may result in the informal claims being stricken and disallowed. A written order to that effect was entered on March 2, 2016 (BK Doc. 166).

         Rishell and Pegula Rishell, LLC, failed to comply with the Bankruptcy Court's oral and written orders. On April 19, 2016, Alvion filed a motion to strike and disallow the informal claim of Don Rishell/Pegula Rishell, LLC, ...


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