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MacCONAGHY & BARNIER, PLC
JOHN H. MacCONAGHY, State Bar No. 83684
JEAN BARNIER, State Bar No. 231683
645 First Street West, Suite D
Sonoma, CA 95476
Telephone: (707) 935-3205
Email: [email protected]

Attorneys for Plaintiff,
JEFFREY G. LOCKE

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

Case No. 13-11158
(Chapter 7)

AP No.

COMPLAINT FOR DISSOLUTION OF
CORPORATION, TURNOVER OF
PROPERTY, AND FOR INJUNCTIVE
RELIEF

In re

JOHN EDWARD FRAINE,

Debtor.

JEFFRY G. LOCKE, Trustee in Bankruptcy
of the Estate of John Edward Fraine,

Plaintiff,

v.

THE PERFECT BUILDER, INC., a
California corporation; JOHN EDWARD
FRAINE, an individual,

Defendants.

Plaintiff alleges:

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JURISDICTION AND VENUE

1.

On June 10, 2013, the debtor John Edward Fraine filed his voluntary petition for

relief under Chapter 7 of the Bankruptcy Code in the above-entitled Court (the “Main Case”).

Thereafter, Plaintiff Jeffry G. Locke was duly-appointed as the Chapter 7 Trustee in Bankruptcy

of the debtor.

2.

This Court has subject matter jurisdiction over this adversary proceeding pursuant

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to the provisions of 28 USC §§ 157, 1334(d), and 1346(f). Venue is proper here pursuant to the

provisions of 28 USC § 1409.

3.

This matter is a “core proceeding” as defined by 28 USC § 157(b)(2)(A), (E), (M),

and (O). Alternatively, Plaintiff consents to final judgment of the Bankruptcy Court pursuant to

the provision of 28 USC § 157(c)(2).

PARTIES

4.

Plaintiff is informed and believes and on that basis alleges that Defendant The

Perfect Builder, Inc., is a California corporation. At all relevant times, the Defendant John E.

Fraine was the sole shareholder, director, and officer of Defendant The Perfect Builder, Inc.

5.

Plaintiff, as the duly appointed Trustee in Bankruptcy of John E. Fraine, has

succeeded by operation of law to any and rights and powers of all of the shareholders of Defendant

The Perfect Builder, Inc., including without limitation, all of the rights and powers to compel the

dissolution and winding up of Defendant The Perfect Builder, Inc., set forth in California

Corporations Code §§1800 et seq and 1900 et seq.



GENERAL ALLEGATIONS

6.

On December 17, 2002, the Defendant John Edward Fraine organized the

Defendant The Perfect Builder, Inc., as a California corporation. Thereafter, Defendant Fraine

made a number of capital contributions to The Perfect Builder, Inc., in the form of advances and

purchases funded by his personal credit cards, including Bank of Marin VISA XXXXXX2282,

Bank of Marin VISA XXXXXX0364, Bank of Marin VISA XXXXXX2410, and Capital One

VISA XXXXXX6223 (the Personal Credit Accounts).

7.

Plaintiff is informed and believes and on that basis alleges that as of the filing of

the petition for relief, the Personal Credit Accounts had a combined balance in excess of $100,000.

8.

Plaintiff is informed and believes and on that basis alleges that as of the filing of

the petition for relief, the Defendant The Perfect Builder, Inc. had assets in excess of $150,000,

consisting of cash in the amount of $97,000 and the balance in the liquidation value of motor

vehicles, tools, and furniture, fixtures and equipment.

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9.

Plaintiff is further informed and believes and on that basis alleges that as of the

filing of the petition for relief, the only legitimate debts of Defendant The Perfect Builder, Inc.

were (1) two corporate credit card, including Capital One VISA XXXXXX7905 and Citi VISA

XXXXXX4400, having an aggregate balance of less than $10,000, (2) a consumer deposit in the

amount of $4,958.50, and (3) a shareholder loan in the amount of $16,038.55, leaving net equity in

the corporation in the approximate amount of $119,000.00.

10.

On June 29, 2013, Plaintiff acting in his capacity as the sole shareholder of the

Defendant The Perfect Builder, Inc., duly enacted a unanimous resolution of the shareholders to

voluntarily dissolve the Defendant The Perfect Builder, Inc., effective June 30, 2013, and

transmitted this resolution to Defendant John E. Fraine, care of his counsel, with the instruction to

immediately terminate all business operations, liquidate the corporation’s tangible assets, and pay

over all liquidation proceeds and the cash on hand to Plaintiff. A correct copy of this resolution is

attached to this Complaint and labeled Exhibit 1.

11.

Since June 30, 2013, in breach of his fiduciary duty to Plaintiff, Defendant Fraine

has failed and refused to comply with this resolution.

12.

Plaintiff is informed and believes and on that basis alleges that Defendant Fraine is

engaging in a sophisticated scheme of misfeasance to wrongfully retain the cash stockpile and

other assets of The Perfect Builder, Inc. for his own purposes, even though the filing of the

Chapter 7 case has divested him of all rights as a shareholder of The Perfect Builder, Inc.

Specifically, Defendant Fraine has inaccurately characterized the Personal Credit Accounts as

liabilities of the Defendant Perfect Builder, Inc., so as to create the false impression that the

corporation has zero value. Yet Defendant Fraine has scheduled these same Personal Credit

Accounts as his personal liabilities, so as to obtain a discharge of the subject indebtedness. The

net effect of Defendant Fraine’s scheme, if successful, is to retain all of the corporate assets of

Defendant, The Perfect Builder for his personal use without making those assets available for his

legitimate creditors, yet eliminate the vast majority of liabilities associated with those assets

through his personal bankruptcy.

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FIRST CLAIM FOR RELIEF

(Voluntary Dissolution and Winding Up of Corporation –

California Corporations Code § 1900 et seq)

(Against All Defendants)

13.

Plaintiff realleges and incorporates the allegations contained in paragraphs 1

through 12, inclusive.

14.

Plaintiff, as the duly appointed Chapter 7 Trustee in Bankruptcy of the Debtor John

E. Fraine is the holder of 100 % of the outstanding shares of The Perfect Builder, Inc.

15. Plaintiff has duly enacted a resolution for the voluntary dissolution and winding up

of Defendant The Perfect Builder, Inc., pursuant to his rights under the bylaws of the corporation

and the provisions of California Corporations Code §1900(a).

16.

Due to the fact that Defendant Fraine, as sole director and officer of The Perfect

Builder, Inc., has failed and refused to comply with Plaintiff’s direction to dissolve and wind up

the corporation, it is necessary for Plaintiff to seek judicial supervision of the dissolution, as set

forth in California Corporations Code §1904.

17. By reason of Defendant Fraine’s refusal to comply with the direction of Plaintiff as

the sole shareholder of the Defendant Perfect Builder, Plaintiff is entitled to a judicial decree

compelling the winding up and dissolution of the corporation, the removal of Defendant Fraine as

the sole director of the corporation, the appointment of a provisional director and/or receiver as

nominated by Plaintiff, and a distribution of all of the assets and liquidation proceeds of the

Defendant The Perfect Builder, Inc., after payment of its legitimate debts other than the Personal

Credit Accounts.

WHEREFORE, Plaintiff prays for judgment as set forth below.

SECOND CLAIM FOR RELIEF

(Involuntary Dissolution and Winding Up of Corporation –

California Corporations Code § 1800 et seq)

(Against All Defendants)

18.

Plaintiff realleges and incorporates the allegations contained in paragraphs 1

through 17, inclusive.

19.

Plaintiff, as the duly appointed Chapter 7 Trustee in Bankruptcy of the Debtor John

E. Fraine is the holder of 100 % of the outstanding shares of The Perfect Builder, Inc.

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20. Plaintiff has duly enacted a resolution for the voluntary dissolution and winding up

of Defendant The Perfect Builder, Inc., pursuant to his rights under the bylaws of the corporation

and the provisions of California Corporations Code §1900(a).

21.

Defendant Fraine, in breach of his fiduciary duty to Plaintiff, has refused to dissolve

The Perfect Builder, Inc, and otherwise follow Plaintiff’s instructions. Defendant Fraine has been

guilty of persistent and pervasive mismanagement, unfairness, and abuse of authority with respect

to Plaintiff and the property of the corporation, as alleged above, particularly in Paragraph 12

above.

22. By reason of Defendant Fraine’s refusal to comply with the direction of Plaintiff as

the sole shareholder of the Defendant Perfect Builder, Plaintiff is entitled to a judicial decree

compelling the winding up and dissolution of the corporation, the removal of Defendant Fraine as

the sole director of the corporation, the appointment of a provisional director and/or receiver as

nominated by Plaintiff, the publication of the notice to creditors of the corporation as specified in

California Corporations Code §1807, and a distribution of all of the assets and liquidation

proceeds of the Defendant The Perfect Builder, Inc., after payment of its legitimate debts other

than the Personal Credit Accounts.

WHEREFORE, Plaintiff prays for judgment as set forth below.

THIRD CLAIM FOR RELIEF

(Turnover of Property of the Estate)

(Against All Defendants)

23.

Plaintiff realleges and incorporates the allegations contained in paragraphs 1

through 22, inclusive.

24.

There is a surplus of not less than $110,000 in the amount of assets over the amount

of the legitimate liabilities of Defendant The Perfect Builder, Inc.

25.

Due to Plaintiff’s status as the sole shareholder of The Perfect Builder, Inc., and

Plaintiff’s direction to dissolve Defendant The Perfect Builder, Inc., this surplus is property of the

estate.

26.

27.

Defendants are in possession of this property.

Despite repeated demands by Plaintiff, Defendants have failed and refused to turn

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over this property of the estate to Plaintiff.

28.

Plaintiff is therefore entitled to judgment compelling Defendants and each of them

to turnover this property of the estate to Plaintiff.

WHEREFORE, Plaintiff prays for judgment as set forth below.

FOURTH CLAIM FOR RELIEF

(Preliminary and Permanent Injunction)

(Against All Defendants)

29.

Plaintiff realleges and incorporates the allegations contained in paragraphs 1

through 28, inclusive.

30.

On June 29, 2013, in his capacity as sole shareholder of Defendant The Perfect

Builder, Inc., Plaintiff duly enacted a shareholder’s resolution for the dissolution and winding up

of Defendant The Perfect Builder, Inc., and instructed Defendant Fraine, in his capacity as the sole

officer and director of the corporation, to immediately cease business operations, and cease non-

essential expenditures of the corporation’s cash.

31.

Thereafter, Plaintiff instructed Defendant Fraine, in his capacity as the sole officer

and director of the corporation, to immediately cease all expenditures of the corporation’s cash.

Despite repeated demands, Defendant Fraine has failed and refused to account for the

corporation’s cash currently under his control and has further failed and refused to agree to cease

disbursements of this cash.

32.

Unless Defendants are enjoined from dissipating the cash and other assets of the

corporation, Plaintiff will be irreparably harmed in that Plaintiff has no practical means of

recovering money damages from Defendants, given the insolvency of Defendant Fraine.

33.

Plaintiff is therefore entitled to a preliminary and permanent injunction barring

Defendants, and each of them, their agents, employees, successors, heirs, and assigns, and all

others acting on their behalf from conducting any business, making an expenditures of the cash or

cash proceeds of the corporation’s assets, or otherwise dissipating the assets of the corporation.

WHEREFORE, Plaintiff prays for judgment against Defendants as follows:

1.

For an order compelling the dissolution and winding up the affairs of Defendant

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The Perfect Builder, Inc. and the distribution of all net surplus of the corporation to Plaintiff in his
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capacity as Chapter 7 Trustee in Bankruptcy of John E. Fraine;

2.

For a preliminary and permanent injunction judgment barring Defendants, and each

of them, their agents, employees, successors, heirs, and assigns, and all others acting on their

behalf from conducting any business, making an expenditures of the cash or cash proceeds of the

corporation’s assets, or otherwise dissipating the assets of the corporation;

3.

4.

For costs of suit incurred herein; and

For such other and further relief as the Court deems proper.

Dated: July 17, 2013

MacCONAGHY & BARNIER, PLC

/s/ John H. MacConaghy
John H. MacConaghy
Attorney for Plaintiff, JEFFRY G. LOCKE

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