One Vision Park, Inc.

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MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
ONE VISION PARK, INC.,
Debtor.
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Case No. 09-31130 TEC
Chapter 11
MEMORANDUM DECISION RE CLAIM NO. 22 (MICHAEL OHAYON)
On May 17, 2010, the court held a hearing on Debtor’s Motion
for Summary Judgment re claim no. 22 filed by Michael Ohayon (the
Claim). 	Peter W. Ito appeared for Debtor. 	John C. Elstead
appeared for Michael Ohayon. 	Upon due consideration, and for the
reasons stated in this memorandum, the court hereby disallows the
Claim in its entirety. 	This memorandum shall constitute the
court’s findings of fact and conclusions of law.
BACKGROUND
In 2006, Michael Ohayon (Ohayon) filed a lawsuit against David
Papera (Papera) in San Francisco County Superior Court. 	In April
2008, that suit was settled. 	In March 2009, Ohayon obtained a
judgment against Papera in the amount of $2.8 million, after Papera
Signed and Filed: June 02, 2010
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 03, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-31130 Doc# 640 Filed: 06/02/10 Entered: 06/03/10 13:08:22 Page 1 of
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MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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failed to perform as required under the settlement agreement.
Papera was a founder and officer of Debtor One Vision Park
(OVP). 	Papera was also the settlor of the Usdi Trust, a revocable
trust established for the benefit of Papera’s son and daughter. 	In
November 2007, OVP issued 5,250 shares to the Usdi Trust, pursuant
to a stock purchase agreement ratified by the board of directors of
OVP. 	The stock purchase agreement contains restrictions upon the
subsequent transfer of shares, but creates an exception to those
restrictions for transfers between family members.
On March 13, 2009, Papera caused the Usdi Trust to transfer
its shares to the Walela Trust (the Transfer). 	The Walela Trust is
a revocable trust created by Elizabeth Papera for the benefit of
Papera’s son. 	Elizabeth Papera is Papera’s ex-wife.
On March 17, 2009, Papera caused the board of directors of OVP
to approve the transfer of shares from the Usdi Trust to the Walela
Trust.
On April 22, 2009, Ohayon attempted to enforce his judgment
against the OVP shares of the Usdi Trust, on the theory that the
assets of that trust could be reached by Papera’s creditors,
because Papera was the settlor of the trust and the trust was
revocable. 	This enforcement effort was unsuccessful, because the
Usdi Trust had transferred the shares to the Walela Trust more than
a month before.
Papera filed a chapter 7 petition in this court on
June 1, 2009. 	The trustee in that case filed an action against the
Walela Trust, seeking to avoid the March 13, 2009 transfer of OVP
shares. 	The trustee has dismissed the action without prejudice
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28 1 All the assets of OVP have been liquidated in its chapter 11
case. 	If the claim of Ohayon at issue here and Ohayon’s claim for
administrative expense are disallowed, the sale proceeds may
provide a small surplus for OVP shareholders.
MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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because it appears that OVP shares have little or no value. 1
OVP filed a petition under chapter 11 on April 30, 2009.
Ohayon timely filed a claim against OVP in the amount of $2.8
million, based on the board’s March 13, 2009 ratification of the
Transfer. 	Ohayon contends that Papera made the Transfer with the
intent to frustrate Ohayon’s efforts to enforce his judgment
against Papera. 	The essence of Ohayon’s claim against OVP is
Ohayon’s assertion that OVP actively participated in Papera’s
fraudulent transfer. 	Ohayon contends that the Transfer could not
have occurred without the consent of the OVP board of directors,
because OVP’s bylaws required board approval of any transfer of
shares, and in ratifying the Transfer at the March 17, 2009
meeting, the board conspired with Papera to effect a fraudulent
transfer of the shares.
Debtor OVP filed a motion for summary judgment, seeking to
have this court disallow Ohayon’s claim on the basis that the
Transfer was effective without the March 17, 2009 approval of the
OVP board, and that Ohayon therefore suffered no damage as a result
of any actions by OVP.
DISCUSSION
The original bylaws of OVP, adopted in January 2005, provide
for the following restriction upon transfer of shares:
No shareholder shall be authorized to transfer or assign
any of his shares except with the consent of the Board of
Directors, unless he has first offered said shares to the
Corporation and the [sic] to the other shareholders, in
accordance with procedures that shall be adopted by the
Board of Directors.
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28 2 The bylaws were later amended to remove this provision, but
Ohayon contends that the amendment was not properly ratified by
shareholders. 	For the purpose of this decision, I assume the
original bylaws remain in effect.
MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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Article VII, Section 2 (emphasis added). 2
In November 2007, the board approved stock purchase agreements
with various shareholders, including David Papera. 	Those stock
purchase agreements establish procedures for and exceptions to the
right of first refusal established in the bylaws, as the bylaws
expressly authorize the board to do.
1. 	Restrictions on Transfer.
. . . .
E. 	Transfer of Shares. 	No Shares purchased
pursuant to this Agreement, nor any beneficial interest
in such Shares, shall be sold, transferred, encumbered or
otherwise disposed of in any way (whether by operation of
law or otherwise) by the Purchaser or any subsequent
transferee, other than in compliance with the Company’s
right of first refusal provisions contained in Section 2
of this Agreement.
2. 	Company’s Right of First Refusal. 	Before any Shares
acquired by the Purchaser pursuant to this Agreement (or
any beneficial interest in such Shares) may be sold,
transferred, encumbered or otherwise disposed of in any
way (whether by operation of law or otherwise) by the
Purchaser or any subsequent transferee (each a “Holder”),
such Holder must first offer such Shares or beneficial
interest to the Company and/or its assignee(s) as
follows.
. . . .
F. 	Exception for Certain Family Transfers.
Notwithstanding anything to the contrary contained
elsewhere in this section, the transfer of any or all of
the Shares during the Holder’s lifetime or on the
Holder’s death by will or intestacy to . . . (ii) the
Holder’s lineal descendants 	. . . [or] (iv) a trust or
other similar estate planning vehicle for the benefit of
the Holder or any such person . . . shall be exempt from
the provisions of this section . . . .
Papera Stock Purchase Agreement, §§ 1, 2 (italics in original).
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MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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The Transfer comes within the above-quoted exception to the
transfer restrictions (the Family-Member Exception), because it was
a transfer to a trust established for the lineal descendants of the
transferor.
Ohayon does not contend that the Transfer does not come within
the language of the Family-Member Exception; he contends instead
that the Family-Member Exception is invalid because it is
inconsistent with the original bylaws.
This argument is unpersuasive, because the same provision of
the bylaws that creates the restriction on transfer of shares
expressly permits the board to authorize exceptions to that
restriction. 	The Family-Member Exception is such an exception.
Neither the bylaws nor any authority cited by Ohayon states that
the board may not create general exceptions to the restriction on
transfer, but instead must approve each transfer on a case-by-case
basis at the time of that transfer. 	The language of the bylaws
affirmatively suggests that the board has the power to create
general exceptions, in that it provides that the restriction on
transfer of shares may be waived by the board “in accordance with
procedures that shall be adopted by the Board of Directors.”
Ohayon has not produced any evidence that the framers of the bylaws
intended the language of Article VII, Section 2 to have any special
meaning precluding the board from adopting the Family-Member
Exception.
I determine that the board was permitted to adopt the Family-
Member Exception under the original bylaws, that the board approved
the Family-Member Exception in ratifying numerous stock purchase
agreements containing that exception in November 2007, that the
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MEMO RE CLAIM 22 SUMM. JUDG. MOTION
Transfer was effective without board approval, and that the board’s
ratification of the Transfer in March 2009 caused no harm to
Ohayon.
Ohayon was afforded time pursuant to Rule 56(f) to do
discovery. 	Ohayon has not produced any evidence that OVP
participated in Papera’s alleged fraudulent transfer in any manner
other than via the board’s acts on March 17, 2009.
For the reasons set forth above, I determine that OVP caused
Ohayon no legally cognizable harm. 	Ohayon’s claim is therefore
disallowed.
**END OF MEMORANDUM**
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MEMO RE CLAIM 22 SUMM. JUDG. MOTION
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Court Service List
John C. Elstead, Esq.
The Elstead Law Firm
7460 Woodrow Dr.
Oakland, CA 94611
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