One Vision Park, Inc.

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MEMO RE MOTION FOR STAY
PENDING APPEAL
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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 RE MOTION FOR STAY PENDING APPEAL FILED BY
OHAYON INVESTMENTS, LLC AND MICHAEL OHAYON
On September 10, 2010, the court held a hearing on the joint
Motion filed by Ohayon Investments, LLC and Michael Ohayon for a
stay pending appeal of three orders entered on July 12, 2010:
(1) an order denying Ohayon’s motion for reconsideration of the
Order Disallowing Claim No. 22; (2) an order denying Ohayon
Investment LLC’s motion for reconsideration of the Order
Disallowing Claim No. 36; and (3) an order denying the motion of
Ohayon Investments, LLC to excuse and permit the late filing of
claim no. 36. 	Peter W. Ito appeared for Debtor. 	Christopher D.
Kuhner appeared for the Creditors Committee. 	Michael Ohayon
Signed and Filed: October 07, 2010
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
October 07, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-31130 Doc# 785 Filed: 10/07/10 Entered: 10/07/10 13:04:51 Page 1 of
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1 $850,000 is ten percent of the sale price of the Property.
MEMO RE MOTION FOR STAY
PENDING APPEAL
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appeared in pro per and for Ohayon Investments, LLC. 	Arlo Smith,
an unsecured creditor, appeared in pro per.
Upon due consideration, and for the reasons stated below, the
court denies the motion for stay pending appeal, notwithstanding
the possibility of irreparable harm to Ohayon Investments, LLC and
Michael Ohayon, because these claimants have a very small chance of
prevailing on appeal. 	This memorandum shall constitute the court’s
findings of fact and conclusions of law.
FACTS UNDERLYING CLAIM NO. 36 (FINDER’S FEE)
In January 2009, Ohayon Investments, LLC (the LLC) and Debtor
One Vision Park, Inc. (OVP) executed a prepetition agreement
entitling the LLC to a ten percent finder’s fee if the LLC
introduced an investor to OVP that resulted in an investment in
OVP.
On April 30, 2009, OVP filed a petition under chapter 11 of
the Bankruptcy Code.
On August 4, 2009, Debtor OVP filed, and served upon creditors
including Michael Ohayon, an application to employ NAI BT as
Debtor’s exclusive agent to market and sell Debtor’s primary asset:
an option to purchase 1,311 acres in Solano County (the Property).
On November 10, 2009, the court signed an order granting Debtor’s
application to employ NAI BT as its real estate broker. 	The court
later awarded NAI BT compensation in the sum of $255,000 for its
services regarding the sale of the Property.
The administrative claims bar date fixed by the court expired
on December 18, 2009. 	On January 15, 2010, the LLC filed claim no.
36, asserting an administrative claim in the sum of $850,000 1 for
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MEMO RE MOTION FOR STAY
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allegedly finding the buyer that purchased the Property from Debtor
in the chapter 11 case.
On June 3, 2010, this court entered an order denying claim
number 36: (1) because the LLC was seeking compensation for
professional services governed by section 327(a) of the Bankruptcy
Code and the court had not appointed the LLC as a professional; and
(2) because the court could not appoint the LLC retroactively,
because the LLC was not disinterested due to the large, pre-
petition claim filed against the estate by the LLC’s principal,
Michael Ohayon.
On July 12, 2010, the court entered an order denying the LLC’s
motion for reconsideration of the order denying claim no. 36 and an
order denying the LLC’s motion to excuse the untimeliness of claim
no. 36, on the basis that the LLC had not established either that
it failed to receive adequate notice of the bar date or that its
failure timely to file claim no. 36 was the result of excusable
neglect. 	The order denying the claim as an untimely administrative
claim also allowed claim no. 36 in full as a tardily-filed general
unsecured claim.
On July 23, 2010, the LLC filed a notice of appeal regarding
the orders entered on July 12, 2010 regarding claim no. 36.
FACTS UNDERLYING CLAIM NO. 22 (IMPROPER TRANSFER OF SHARES)
In March 2009, Michael Ohayon (Ohayon) obtained a $2.8 million
state-court judgment against David Papera, a founder and officer of
Debtor OVP. 	On March 13, 2009, Papera caused the Usdi Trust, a
revocable trust Papera established for the benefit of his children,
to transfer 5,250 OVP shares to the Walela Trust, a revocable trust
created by Elizabeth Papera (David’s ex-wife) for the benefit of
Papera’s son. 	On March 17, 2009, David Papera caused the board of
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28 2 The memorandum decision incorrectly stated that the stock-
purchase agreement was adopted in November 2007. 	This mistake was
not material to the court’s decision, because the stock-purchase
agreement was adopted prior to the share transfer in 2009.
MEMO RE MOTION FOR STAY
PENDING APPEAL
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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. 	This enforcement effort
was unsuccessful, because the Usdi Trust had already transferred
the shares to the Walela Trust.
Ohayon timely filed claim no. 22 against Debtor OVP, seeking
damages of $2.8 million, based on the OVP board’s March 13, 2009
ratification of the stock transfer, which Ohayon claimed
constituted participation by OVP in a fraudulent transfer of the
shares by David Papera.
On June 3, 2010, this court entered a memorandum and order
denying claim no. 22, on the grounds that Papera’s transfer of OVP
shares from the Usdi Trust to the Walela Trust was effective
without the approval of OVP’s board. 	The court determined that the
transfer was not subject to the right of first refusal contained in
Debtor’s January 2005 bylaws, because in November 2008 2 the board
had acted within its powers in adopting an exception to OVP’s right
of first refusal for transfers of stock from a shareholder to a
trust created for the benefit of a lineal descendant of that
shareholder.
The memorandum decision also noted that even if the OVP
board’s action regarding the share transfer was wrongful, the
transfer caused Ohayon no damage, because at the time they were
transferred, the shares were worthless. 	The court noted that the
chapter 7 trustee in the bankruptcy case filed by David Papera had
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filed an action to avoid the March 13, 2009 transfer, but later
dismissed the action on the basis that it appeared the OVP shares
had little or no value. 	The court also noted that the transfer
occurred shortly before OVP filed its chapter 11 case, that OVP’s
assets have been liquidated in that case, and that the proceeds of
those assets are insufficient to pay claims, leaving no estate
assets to distribute to shareholders.
LAW
Federal Rule of Civil Procedure 8005 provides in relevant part
that a “bankruptcy judge may suspend or order the continuation of
other proceedings in the case under the Code or make any other
appropriate order during the pendency of an appeal on such terms as
will protect the rights of all parties in interest.” 	To obtain a
stay pursuant to Rule 8005, the appellant must prove: (1) a
likelihood of success on the merits of the appeal; (2) irreparable
injury absent the issuance of a stay; (2) no substantial harm to
the appellee if a stay is issued; and (4) no harm to the public
interest as a result of issuance of a stay. 	In re Irwin, 338 B.R.
839, 840 (E.D. Cal. 2006). 	The appellant bears the burden of
proving these four elements. 	Id.
(1) Likelihood of success on the merits
(a) Claim No. 36
The LLC has an exceptionally small chance of establishing an
administrative priority claim for a finder’s fee, because such a
fee is payable only to a professional appointed by the court,
because the LLC had not been appointed by the court as a
professional. 	The court declined to appoint the LLC as a
professional retroactively because the LLC was not disinterested,
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MEMO RE MOTION FOR STAY
PENDING APPEAL
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and because the court had already appointed a real estate broker to
perform the substantially the same services offered by the LLC.
The LLC also has an exceptionally small chance of establishing
that its claim should be treated as a timely filed general
unsecured claim, because the LLC’s principal received adequate
notice of the general unsecured claims bar date.
(b) Claim No. 22
Ohayon has only a small chance of establishing the merits of
his conspiracy claim, because OVP’s board of directors acted in
conformity with the governing bylaws in authorizing the family-
transfer exception to the restriction on share transfers, and
because the share transfer at issue came within that family-
transfer exception. 	Even if an appellate court were to conclude
that this court’s interpretation of the bylaws were unsound,
however, Ohayon will not be able to prove damages caused by the
share transfer, because the transfer occurred shortly before OVP
filed its bankruptcy petition, and because the bankruptcy case has
shown the shares to have no value. 	Thus, Ohayon was deprived only
of the right to attach worthless shares of stock.
(2) Irreparable Injury
If the LLC and Ohayon were to establish entitlement to an
administrative priority claim and entitlement to damages caused by
the alleged conspiracy, the absence of a stay pending appeal would
cause the LLC and Ohayon irreparable harm, because the appeal would
be moot. 	Because of the possibility of irreparable harm, this
court ordinarily would stay the distribution on other claims
pending resolution of the appeals regarding the Ohayon and LLC
claims. 	The court declines to issue a stay in this case due to the
extreme weakness of the administrative claim, the weakness on the
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MEMO RE MOTION FOR STAY
PENDING APPEAL
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merits of the conspiracy claim, the exceptionally weak case for
damages on the conspiracy claim, the large dollar amounts of the
administrative and conspiracy claims ($3.65 million), and the
substantial resulting harm to creditors with allowed claims that
would be caused by a delay in the distribution on their allowed
claims.
(3) Balance of Hardships
Balancing the mootness of the appeal against the delay in
payment to holders of allowed claims, the court determines that the
delay in payment to holders of allowed claims is not justified
where the merits of the appeal are so weak.
(4) Public Interest
The only significant public interest in this case is the
prompt payment of legitimate claims, and does not weigh in favor of
a stay pending appeal.
**END OF MEMORANDUM**
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MEMO RE MOTION FOR STAY
PENDING APPEAL
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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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