United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON APPEAL FROM BANKRUPTCY
TIMOTHY S. HILLMAN, DISTRICT JUDGE.
Robert Armistead, a Court Approved Creditor in the bankruptcy
of Na-Mor, Inc. (“Debtor”), brings this appeal
from an Order of the United States Bankruptcy Court for the
District of Massachusetts dated September 22, 2016
(“Order”), denying Armistead's Motion to Show
Cause as to Why this Court Should not Find O'Donnell in
Contempt, Sanction Him, Order a New Corrective Accounting and
Order O'Donnell to Place Missing Funds into Escrow with
the Court (“Motion to Show Cause”). Armistead
also argues that the that the Bankruptcy Court erred in
denying his request for an Evidentiary Hearing on newly found
evidence pursuant to Fed.R.Bankr.P. 2004. For the reasons
outlined below, the Order of the Bankruptcy Court is
March 22, 2010, Na-Mor, Inc. filed a voluntary petition for
bankruptcy relief under Chapter 11 of the U.S. Bankruptcy
Code. See Voluntary Petition, Bankr. Case No.
10-41302, Docket No. 1. This was later converted to a Chapter
7 petition on December 5, 2015 by the appointed Chapter 11
Trustee, Joseph Collins (“Collins”), who was then
appointed Chapter 7 Trustee. Prior to the bankruptcy filing,
Eugene O'Donnell (“O'Donnell”) was
appointed by Worcester Probate and Family Court as Receiver
of Cynthia Dziurgot (“Cynthia”)'s business
interests, including Na Mor, Inc., in the context of divorce
proceedings between Cynthia and John Farnsworth
(“Farnsworth”). As part of this Receivership,
O'Donnell sold personal and real property belonging to
Cynthia, and distributed the proceeds in accordance with
Orders from the Worcester Probate and Family Court. In one
example, in the context of the divorce proceedings,
O'Donnell was appointed Master by Worcester Probate and
Family Court and ordered to sell Cynthia's personal
property located at 75 Walnut St., Clinton, MA. He hired
Skinner Auction house to conduct the auction in June 2009,
which generated $16, 729.60 in proceeds, all of which
O'Donnell distributed to Attorney John Anastasi, counsel
was also responsible for liquidating assets belonging to
Na-Mor, Inc, and he filed the initial voluntary petition for
Chapter 11 bankruptcy for Na Mor, Inc., in March of 2010. Per
order of the Bankruptcy Court dated October 29, 2014,
O'Donnell filed a “Final Accounting” on
November 25, 2014. Bankr. Case No. 10-41302, Docket No. 600.
Dziurgot (“Robert”), Cynthia's brother, is a
court approved creditor of the Debtor, and Appellant
Armistead is the assignee of Robert's
interests. Armistead claims that O'Donnell, in
his role as Receiver, sold property belonging to the Debtor
and misappropriated the proceeds. He further claims to have
found newly discovered information to support a finding that
O'Donnell committed perjury numerous times, as well as
theft, fraud, and embezzlement. By way of example, he
maintains that O'Donnell
did not account for funds in his Last and Final Accounting
belonging to the Debtor from Skinner Auctions, that were
taken by O'Donnell and given to Attorney Anastasi,
attorney for John Farnsworth, who after substantial
litigation in the bankruptcy court was found not to be a
creditor of the Debtor….The Appellant is entitled to
an evidentiary hearing to determine if, Farnsworth's
attorney was entitled to receive any of the funds belonging
to the Debtor and if O'Donnell, in his capacity as
Receiver of Na-Mor Inc. conspired with Anastasi to
misappropriate the funds of the Debtor….
Brief at p.6. In the same vein, Armistead offers a handful of
other examples of assets belonging to the Debtor that he
contends O'Donnell failed to disclose in his Final
Accounting, however, Armistead points to no documentary
evidence to support that the specific assets he mentions are
or were, in fact, property of the Debtor.
also takes issue with Trustee Collins, who did not oppose
O'Donnell's Final Accounting, and who moved to
abandon assets of the Debtor that related in any way to the
Receivership or any transactions involving O'Donnell.
Trustee Collins asserted that any such property was
“burdensome to the Estate in that it continues to be
the source of multiple motions and pleadings that have had
the effect of diminishing assets available to creditors of
the Estate, ” and cited numerous actions taken by
Armistead's predecessor in interest, Robert Dziurgot,
throughout the case, attacking O'Donnell, including the
filing of several motions, which were routinely denied.
Bankr. Case No. 10-41302, Docket No. 736. On December 18,
2015, the bankruptcy judge authorized the Trustee and the
Na-Mor, Inc. Bankruptcy Estate to abandon certain legal and
equitable claims that arose from or were related to the
Receivership, or transactions involving O'Donnell. Bankr.
Case No. 10-41302, Docket No. 760.
August 15, 2016, Armistead filed with the Bankruptcy Court
the Motion to Show Cause, and requested an evidentiary
hearing on newly found evidence pursuant to Fed. R. Bankr.
2004. On September 22, 2017, the Bankruptcy Court denied
Armistead's motion and his request for an evidentiary
hearing. This appeal followed.
Court reviews a bankruptcy court's legal conclusions
de novo, and findings of fact for clear error.
Palmacci v. Umpierrez, 121 F.3d 781, 785 (1st
Cir.1997). The denial of Armistead's Motion to Show Cause
is reviewed for abuse of discretion. See, e.g., Rosado v.
Banco Popular de Puerto Rico, 561 B.R. 598, 604 (B.A.P.
1st Cir. 2017) (order on motion for contempt is reviewed for
abuse of discretion); In re 1095 Commonwealth Corp.,
236 B.R. 530, 535 (D. Mass. 1999) (order on a motion for
sanctions is reviewed for an abuse of discretion).
review of the record shows that this most recent motion by
Armistead is one in a long list of actions taken against
O'Donnell, throughout the pendency of the bankruptcy
case, including multiple motions for contempt and sanctions,
a motion to compel the deposition of O'Donnell, a motion
requesting the bankruptcy judge to take judicial notice of
the filing of false information, a motion seeking derivative
standing to sue O'Donnell, a motion to file summary
judgment against O'Donnell, and a motion for leave to
file an Adversary Proceeding - all denied. See,
e.g., Bankr. Case No. 10-41302, Docket Nos. 601, 602,
603, 604, 609, 610, 620, 626, 627, 629, 727, 637, 652, 653,
654, 664, 677, 678, 697, 698, 720, 721, 732, and 752.
Clearly, the bankruptcy court is aware of issues regarding
O'Donnell's Receivership, which has been under attack
and review for many years, first by Armistead's
predecessor in interest, and now by Armistead. The abundant
motions similar to the one on appeal is what obliged the
Trustee to abandon property related to claims as to
O'Donnell or his Receivership. Moreover, in
O'Donnell's Opposition to Armistead's Motion to
Show Cause, he provided documentation to the Bankruptcy Court
to support that assets Armistead identified as belonging to
the Debtor did not actually belong to the Debtor, and thus
were properly excluded from O'Donnell's Final
Accounting. Bankr. Case No. 10-41302, Docket No. 808. Such
documentary evidence provided ample support for the
bankruptcy judge's order denying Armistead's motion.
Accordingly, this Court finds the Bankruptcy Court did not
abuse its discretion in denying Armistead's latest
addition, the Bankruptcy Court's acceptance of
O'Donnell's Final Accounting concern questions of
fact, including which assets did or did not belong to the
Debtor. Factual determinations are reviewed for clear error.
After examining the documents presented, this Court finds no
such clear error. For example, Armistead asserts that $16,
729.60 from the Skinner Auction sale is part of the
Debtor's estate, but the Appellee provided the Settlement
Statement from Skinner Auction house identifying a list of
personal items that appear to belong to Cynthia, which were
auctioned nearly a year before the filing of the Debtor's
bankruptcy petition. See Docket No. 13-1, Ex. 2.
Armistead fails to show how or where the court erred in
finding that the listed items were not the property of