Opinion
Case No. 05-15441-RS.
October 27, 2006
JEFFREY B. KARLL'S RESPONSE TO ALL OBJECTIONS OF CLAIM NO. 10 AND AMENDED CLAIM NO. (10) AND CLAIM NO. 17 AND AFFIDAVIT IN SUPPORT THEREOF
Jeffrey B. Karll in his capacity as the claimant of the Caruso Music Plan Trust, a trust created pursuant to the terms of the Confirmed plan in the above referenced Chapter 11 Case of Caruso Music Company (the "Debtor") hereby responds to the all objections of claim No. 10 and claim No. 17 by offering the following as his affidavit in support of his claim:
1. The undersigned affiant, Jeffrey B. Karll, is a Creditor in the above-referenced proceeding and states that the following paragraphs are true to the best of his information and belief.
2. On June 14, 2005 (the "petition Date"), an involuntary petition for relief under Chapter 7 of the Bankruptcy Code was filed against the Debtor in the United States Bankruptcy Court for the District of Massachusetts (the "Court"). On August 2, 2005, the Court entered an order for relief in the case and granted a motion by the Debtor to convert the case to a case under Chapter 11.
3. The Debtor managed and operated its business as a debtor-in-possession in accordance with 11 U.S.C. §§ 1107 and 1108 from August 2, 2005 until August 7, 2006.
4. On July 20, 2006, the United States Bankruptcy Court for the District of Massachusetts entered an order confirming the Plan of Reorganization of Caruso Music Company, Jointly Proposed By Caruso Music Company, Dr. Alfred L. Arcidi, Louise Marotta, Frank Caruso, R egency Realty Group and J Donegan Company dated April 28, 2006 (as modified) (the: Plan").
5. The effective Date of the plan was August 7, 2006.
6. Pursuant to Article 5.5 of the Plan, on the Effective Date the Caruso Music Plan Trust was established and the Plan Trustee was deemed to have accepted his appointment as Plan Trustee.
7. On September 1, 2005, the Debtor filed a motion seeking the establishment of a bar sate by which creditors would be required to file claims.
8. On September 2, 2005, the Court entered an order granting the Debtor's motion and establishing October 21, 2005 as the last date by which creditors could file claims.
Jeffrey B. Karll (No. 10)
9. On October 21, 2005, Jeffrey B. Karll ("Karll") filed a claim (claim no. 10 on the Court's docket). The claim states that the basis for the claim is "One (1) share of stock." The amount of the claim is stated to be "value unknown." The claim states that it is secured claim and that it is secured by "one (1) share of Frank Caruso Voting Stock." The claim states on its face that it was incurred on July 31, 2001.
10. Pursuant to the Plan, the Class 5 holders of interests in the Debtor will receive payment, on a pro rata basis, of the balance of funds available after payment in full of all of the Administrative, Priority Tax Claims and allowed claims in Classes 1 through 4 of the Plan.
11. The alleged records of the Debtor indicate that there are a total of 168.8529 shares of stock of the Debtor outstanding as follows:
Alfred Arcidi 41.36895 shares *shares disputed Louise Marotta 41.36895 shares *shares disputed Frank J. Caruso Jr. 36.115 shares Timothy Demakis, Trustee 13 shares of Joseph Caruso Sr. Qualified Marital Trust Timothy Demakis, Trustee 13 shares (non voting) of Joseph Caruso Sr. Qualified Marital Trust Timothy Demakis, Trustee 12 shares of Joseph Caruso Sr. Family Trust Timothy Demakis, Trustee 12 shares (non voting) of Joseph Caruso Sr. Family Trust*INVALIDATED BY COMMONWEALTH OF MASSACHUSETTS SECRETARY OF STATE DECISION ON OCTOBER 30, 2001 (SEE EXHIBIT E) AND INVALIDATION REAFFIRMED ON MARCH 14, 2002 (SEE EXHIBIT F).
12. Jeffrey B. Karll seeks a determination that one share of the 36.115 shares held by Frank Caruso, Jr. was or should have been transferred to him by Frank Caruso Jr. on or about July 31, 2006. (See Exhibits A B C and D)
13. Jeffrey B. Karll requests that he receive at a minimum one (1) share on a pro rata basis, of the balance of the funds available after payment in full of all of the Administrative, Priority Tax Claims and allowed claims in classes 1 through 4 of the plan.
14. In addition. Jeffrey B. Karll requests that based on the documents in EXHIBIT G his Claim NO. (10) be amended as follows:
"One (1) share plus the proceeds of the value of 84.115 shares when it is distributed from the "Plan Trust" or when it is distributed for the benefit of John and Joe Caruso beneficiaries of the Caruso Trusts that hold 25 shares each."
15. Finally, Jeffrey B. Karll requests that this court hold evidentiary hearings as to who owns stock in the "Plan Trust" since there is clear evidence that the 1999 stock Purchase Agreement of Louise Marotta and Alfred Arcidi should be set aside or rescinded due to lack of consideration, breach of contract, and gross negligent arithmetical errors in the closing documents in regards to the consideration and calculation of the alleged stock purchases. Also, I request that no monies be disbursed to the Interests of Class 5 until all stock ownership is settled.
Karll (No. 17)
17. On October 20, 2005, Jeffrey B. Karll filed a claim (claim no. 17 on the Court's docket). The claim states as its basis that Jeffrey B. Karll paid the taxes owed by the Debtor to the Town of Saugus in December 2002 in the amount of $98,874.09. The Interested Party Joseph G. Butler, Trustee of Caruso Music Plan Trust ("Plan Trustee") has asserted that (1) there was no corporate authorization to borrow; and (2) the tax obligation was a lease obligation of the tenant, Foods, Inc. of Saugus. From these two assertions, the Plan Trustee argues that Jeffrey B. Karll is owed nothing. The Plan Trustee does so without producing an executed lease between the Debtor and Foods, Inc. Jeffrey B. Karll denies such a lease existed and denies that Foods, Inc. ever owed such an obligation.
18. The taxes owed by the Debtor to the Town of Saugus are not dischargeable and, thus, the Plan Trustee is essentially asking the Court to ignore entirely the doctrine of equity and confer an unjust enrichment upon the Debtor.
19. Jeffrey B. Karll reserves the right to supplement this response and submit further supporting affidavits, including the affidavit of Attorney Scott R. Stevenson, who prepared the documents now disputed by the Estate of Frank J. Caruso, Jr. and is currently in Ohio and unavailable until October 30, 2006.
SIGNED UNDER THE PAINS AND PENALTIES OF PERJURY THIS 27TH DAY OF OCTOBER 2006.
EXHIBITS