Opinion
CASE NO. 01-41202-BJH-11 (Chapter 11); ADVERSARY NO. 01-4034
July 11, 2001
MEMORANDUM OPINION
Before the Court is Mel T. Nelson's and Metro Auto, Inc.'s Motion for Change of Venue (the "Motion"). The hearing on the Motion commenced on April 26, 2001 and concluded on June 19, 2001. The Motion seeks to transfer this case to Colorado. The Court has jurisdiction over the Motion pursuant to 28 U.S.C. § 157 and 1334. The Motion is a core proceeding pursuant to 28 U.S.C. § 157. This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52, made applicable here by Bankruptcy Rule 7052.
Two questions must be answered in deciding the Motion. First, is venue of this case proper in the Northern District of Texas? For the reasons explained below, the Court finds that venue is proper in the Northern District of Texas. Second, is the Court compelled in the interest of justice and for the convenience of the parties to transfer this case to Colorado? Again, for the reasons explained below, the Court finds that the interest of justice and the convenience of the parties is best served by retaining this case in the Northern District of Texas.
I. Contentions of the Parties
John J. Pico (the "Debtor") filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code on February 21, 2001. Thereafter, Mel T. Nelson and Metro Auto, Inc., (collectively, "Nelson") filed the Motion. In the Motion, Nelson contends that the Debtor is not domiciled in Texas; has no significant assets in Texas; has no principal place of business in Texas; conducts business outside of Texas; and maintains and pays for a residence in Colorado where his wife and family reside and where he should be found to reside. Nelson further contends that the Debtor's largest creditor, whose claim represents over 95% of the Debtor's total debt, is located in Colorado as are most of the Debtor's tangible assets, several other creditors of the Debtor and many of the key witnesses in this case. In short, Nelson contends that venue in the Northern District of Texas is improper and that Colorado is the proper venue. Alternatively, Nelson contends that the Court should transfer this case to Colorado in the interest of justice and for the convenience of the parties.
The Debtor contends that he established residency in Dallas, Texas for the longer of the 180 day period before his case was filed and that venue is proper in the Northern District of Texas. The Debtor further contends that the interest of justice and convenience of the parties would not be served by transferring his case to Colorado as he resides in Dallas, his attorneys are located in Fort Worth, he does no business in Colorado, he has no significant assets in Colorado, and it would be inconvenient and costly for him to attempt to reorganize in Colorado.
II. The Underlying Facts
The Debtor is in the business of brokering car dealerships. Nelson owned and operated several car dealerships in Denver, Colorado during the 1980s. In 1990, Nelson decided to sell one of the dealerships and engaged the Debtor to find a buyer. Eventually, John Elway and Rod Buscher became prospective buyers. As a result of the sales transaction between the Debtor and the prospective buyers, Nelson sued the Debtor, John Elway, Rod Buscher and their various businesses in 1992 in Colorado state court. The claims against the Debtor included breach of fiduciary duty, intentional interference with prospective business relations and a request for punitive damages. On September 22, 1999, the Colorado state court entered a judgment in the amount of $10,528,001.48 against Aspen Brokerage Co., d/b/a Pico Corp., and the Debtor, nunc pro tunc to September 2, 1999, as a result of a jury verdict in which the jury determined that the Debtor had breached his fiduciary duty to Nelson (the "Nelson Judgment"). See Nelson's Exhibit 4.
Following entry of the Nelson Judgment and various collection activities, the Debtor filed this bankruptcy case on February 21, 2001. On May 28, 2001, the Debtor filed a Complaint to Determine Dischargeability of Debts Owed to Mel T. Nelson and Metro Auto, Inc. (Adversary No. 01-4034) seeking a declaratory judgment that the Nelson Judgment is dischargeable in this bankruptcy case. The Debtor admits that his ability to reorganize turns on whether the Nelson Judgment is dischargeable. See Debtor's Response to Motion of Mel T. Nelson and Metro Auto, Inc. For Change of Venue, p. 2.
The Debtor is currently employed by Automotive Advisors of America, Inc. ("AAA"), a Nevada corporation. Nelson has filed a Motion for Leave to File Adversary Complaint against the Debtor seeking to establish that the Debtor is the alter ego of AAA. This motion is set for hearing shortly, as are several other motions.
III. Is Venue Proper in the Northern District of Texas?
Venue of a case under title 11 is permissible in the district "in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case, have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principal place of business, in the United Sates, or principal assets in the United States, of such person were located in any other district." 28 U.S.C. § 1408.
The Debtor testified that he began investigating a move to Texas in November 1999. In December 1999, the Debtor obtained a Dallas mailing address and began receiving his paychecks at that address. In January 2000, the Debtor obtained a Dallas telephone number and a Texas Department of Public Safety Identification Card. See Debtor's Exhibit 2. In February 2000, the Debtor filed a financial aid form for his son and used Dallas, Texas as his mailing address. See Debtor's Exhibit 3. In March 2000, the Debtor turned in his Colorado driver's license and obtained a Texas driver's license using his Dallas address. See Debtor's Exhibit 4. In July of 2000, the Debtor opened a bank account in Dallas, Texas. See Debtor's Exhibit 5. The Debtor testified that he deposited his paychecks there. On August 11, 2000, the Debtor rented an apartment at 8815 Southwestern Boulevard in Dallas, Texas. See Debtor's Exhibits 6 and 7. On September 14, 2000, the Debtor moved into that apartment. See Debtor's Exhibit 8. Thereafter, the Debtor changed the address on his Texas driver's license to his new apartment address. See Debtor's Exhibit 10. The Debtor registered to vote in Dallas County and actually voted in Dallas in the general election held on November 7, 2000. See Debtor's Exhibit 11. Also in November 2000, the Debtor registered his car in Dallas County and obtained Texas license plates. See Debtor's Exhibit 12. The Debtor pays for local phone service and other utilities. See Debtor's Exhibits 13 and 14.
While the Debtor travels extensively on business, the Debtor testified that he returns to his Dallas apartment when his business activities do not require him to be away. The Debtor further testified that he has only returned to Colorado one time since October 1999 for the purpose of giving a deposition under subpoena and has not been in Colorado since April 2000. Finally, the Debtor testified that he does not own significant assets in Colorado nor does he maintain a place of business in Colorado.
These actions and testimony support the Debtor's contention that he intended to make Dallas his place of residence, and did in fact make Dallas his place of residence on September 14, 2000 when he actually moved into his Dallas apartment. Based on this evidence, the Court finds that the Debtor currently resides in the Northern District of Texas and has resided in the Northern District of Texas since September 14, 2000. Thus, the Debtor established the Northern District of Texas as his residence 160 days before he filed his bankruptcy case.
Nelson contends that the Debtor does not reside in Dallas, Texas because he spent more time in California than in Texas during the 180 day period prior to filing his bankruptcy case. The Court disagrees.
Under Texas law, residency is a matter of physical presence and intent. Once the two coincide, a residence is established and endures until physical presence and intent change. Mills v. Barlett, 377 S.W.2d 636 (Tex. 1964). On September 14, 2000, the Debtor took possession of his apartment in Dallas with the intent to make Dallas his home. Under Texas law, the Debtor's residence was fixed at that time. The Debtor testified that the nature of his business requires him to travel. Although the Debtor traveled extensively to California prior to and following the filing of his bankruptcy case, there is no evidence that the Debtor intended to establish a residence in California thereby abandoning his Dallas residence. In fact, the Debtor testified that he stays in motels or hotels close to where his business requires him to be when he travels outside of Texas. This testimony was not controverted by Nelson.
Nelson next contends that the Debtor could not have intended to establish residency in Texas because his wife, to whom he was still legally married, continued to reside in Colorado in an apartment paid for by the Debtor, along with all of their marital property. In short, Nelson contends that notwithstanding the Debtor's testimony and actions in Texas, the Court should find that the Debtor was a resident of Colorado for the 180 days prior to his bankruptcy filing. In response, the Debtor testified that his wife remained in Colorado so that they could receive lower tuition rates for their daughter who was attending a university in Colorado, but that he moved to Dallas with the intent never to return to Colorado and that his wife has now joined him here. The Court concludes that the fact that the Debtor and his wife lived in different apartments in different states does not mean that the Debtor failed to establish residency in Texas.
Nelson contends, without authority, that the Debtor should be estopped from denying that Colorado was his legal residence for the 180 days prior to his bankruptcy filing due to the benefit he received from claiming in-state tuition for his daughter. While perhaps interesting to the appropriate parties in Colorado, the Court can find no authority to support such an estoppel argument.
After considering all of the evidence, the Court finds that the Debtor established his Texas residency on September 14, 2000 (160 days prior to filing his bankruptcy case) and that the Debtor resided in the Northern District of Texas for a longer portion of the 180 day period prior to the filing of his bankruptcy case than he resided in any other district. Thus, venue is proper here.
IV. Should the Case be Transferred to Colorado in the Interest of Justice and for the Convenience of the Parties?
Nelson seeks a transfer of this case to Colorado. To transfer this case, the Court must find a transfer to be in the interest of justice or for the convenience of the parties. 28 U.S.C. § 1412. The decision to transfer or retain a case lies within the sound discretion of the court. Matter of Commonwealth Oil Refining Co., Inc., 596 F.2d 1239 (5th Cir. 1979), cert. denied, 444 U.S. 1045 (1980). The burden of establishing that a case should be transferred is on the moving party and must be shown by a preponderance of the evidence. See, e.g., In re Moss, 249 B.R. 411 (Bankr.N.D.Tex. 2000); In re Weatherly Frozen Food Group, Inc., 133 B.R. 862 (Bankr. W.D. Ohio 1991); In re Pope Vineyards, 90 B.R. 252 (Bankr.S.D.Tex. 1988); In re Toxic Control Technologies, Inc., 84 B.R. 140 (Bankr.N.D.Ind. 1988).
In exercising its discretion, this Court must weigh a number of factors including:
(1) the proximity of creditors of every kind to the Court;
(2) the proximity of the debtor to the Court;
(3) the proximity of the witnesses necessary to the administration of the estate;
(4) the location of the assets;
(5) the economic administration of the estate; and
(6) the necessity for ancillary administration.
Commonwealth Oil, 596 F.2d at 1247. See also, In re Moss, 249 B.R. at 425. According to the court in Commonwealth Oil, the most important of these considerations is whether the requested transfer would promote the economic and efficient administration of the estate. Commonwealth Oil, 596 F.2d at 1247.
The Court concludes that this case can be administered more economically and efficiently in the Northern District of Texas. The person most necessary for the administration of this case is the Debtor. The Debtor resides here. If the case were transferred to Colorado, the Debtor would be required to travel to attend the various hearings that are expected in this case. This would mean that the Debtor would have to pay for transportation, lodging and meals while in Colorado. This would be costly and inconvenient for the Debtor. Additionally, the Debtor's counsel is located in the Northern District of Texas. The Debtor testified that his current counsel will no longer represent him if his case is transferred to Colorado. David Cohen, an attorney with the firm representing the Debtor, also testified that the Debtor would need new counsel if this case were transferred to Colorado. The Debtor testified that he does not have sufficient funds to hire new counsel and pay them to become familiar with the issues involved in the case, and that the search for new counsel would significantly delay the administration of the estate. Moreover, the Debtor's creditors are scattered across the United States. They are not centered in Colorado. The Debtor has three creditors in Iowa, two in Arizona, one in Nevada, three in California, and six in Colorado. Three of the Colorado creditors filed concurrences with the Debtor seeking to retain venue in the Northern District of Texas. These creditors include Karsh, Fulton, Gabler Joseph, P.C.; Comiskey Co.; and the Law Office of Douglas McKinnon. Although the Court does not find these concurrences especially persuasive in light of the fact that these creditors appear to be friends of the Debtor or persons with long standing business relationships with the Debtor, the fact remains that these Colorado creditors do not oppose venue in the Northern District of Texas. Other non-Colorado creditors, including the Internal Revenue Service, can participate here as easily as they could participate in Colorado. Nelson has demonstrated his ability to pursue his efforts to collect his judgment regardless of where this case is pending. Prior to the filing of this case, Nelson brought actions to attempt to collect his judgment in several other states. Since this case was filed, Nelson's attorneys have appeared before this Court, have been admitted Pro Hac Vice to the Northern District of Texas, and have associated local counsel to assist them here. See Debtor's Exhibit 24. There is no indication that Nelson will be unable to participate in this case if it remains in Texas. In fact, Mel Nelson has testified to the contrary — he testified that he will pursue the collection of his judgment regardless of where this bankruptcy case is pending. See Nelson's Exhibit 14, p. 46-47.
As for the proximity of the witnesses necessary to the administration of the estate, the primary witness appears to be the Debtor. Other witnesses whose testimony may be necessary with respect to discrete issues in the case appear to be scattered across the United States. For example, some of the witnesses who may testify in the dischargeability action live in Colorado, but others live in Texas (Jappy Dickson), California (Glenn Hartzheim), and Tennessee (Tom Pritchard).
The Debtor's main assets, other than exempt personal belongings, include a copyright on a book about selling car dealerships and a legal malpractice claim against the attorney representing him in the lawsuit brought by Nelson in Colorado state court. The book copyright is located wherever the Debtor is located. London Film Prod. Ltd. v. Intercontinental Communications, Inc., 580 F. Supp. 47, 49 (S.D.N.Y. 1984) (citing 3 M. Nimmer D. Nimmer, Nimmer on Copyright § 12.01[c] 1983, stating copyright is an intangible incorporeal right; it has no situs apart from domicile of proprieter). Thus, this asset is located in the Northern District of Texas. As the for the legal malpractice claim, the Debtor asserts that he does not intend to pursue such suit as the insurance policy limits are minimal and there is a question as to whether the Debtor would succeed on the merits due to the fact that he actively participated in the trial, even making the closing argument. See Debtor's Response to Motion For Change of Venue, p. 9. Given these circumstances, the Court does not find that the existence of this arguably valueless asset requires transferring this case to Colorado. Further, Colorado courts have held that the proceeds of a potential lawsuit are a general intangible. See Board of County Comm'rs. v. Berkeley Village, 580 P.2d 1251, 1255 (Colo.Ct.App. 1978). As a general intangible, the asset would follow the Debtor. See, e.g., London Film Prod. Ltd. v. Intercontinental Communications, Inc., 580 F. Supp. 47, 49 (S.D.N.Y. 1984).
Obviously, it would be more convenient for Nelson if the case were transferred to Colorado. However, after taking all of the evidence into consideration and weighing all of the relevant factors, the Court concludes that Nelson failed to carry his burden of establishing that this case should be transferred to Colorado in the interest of justice or for the convenience of the parties.
Although not mentioned in the Motion or at the hearing on the Motion, Nelson complains in his written closing argument that this case was filed in an improper division of the Northern District of Texas. 28 U.S.C. § 1406 provides:
(a) The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.
Since the Debtor contends his residence is in Dallas, Nelson contends that the case should have been filed in the Dallas Division of the Northern District of Texas. The Court agrees. Other than the fact that his counsel is located in Fort Worth, the evidence shows that the Debtor has no other ties to Fort Worth. Accordingly, the Court believes that this case should have been properly filed in the Dallas Division and should be transferred to such division. See 28 U.S.C. § 1406. An Order Denying Transfer to Colorado and Transferring Case to the Dallas Division will be entered separately.