OPTICAL TECHNOLOGIES, INC.

Case Nos. 

96-0805-8P1

RECOMM OPERATIONS, INC.

96-1200-8P1

RECOMM ENTERPRISES, INC.

96-1201-8P1

RECOMM INT'L DISPLAY CORP., LTD.

96-1202-8P1

AUTOMATED TRAVEL CENTER, INC.,

96-1203-8P1

Debtors.

Chapter 11

ORDER GRANTING RAYMOND MANKLOW AND JEAN
FRANCOIS VINCENS' MOTIONS FOR SUMMARY JUDGMENT
(DOC. NOS. 70 AND 126)

     THE MATTERS under consideration in the above-styled proceeding are two Motions for Summary Judgment filed by Defendants, Raymond Manklow (Manklow) and Jean Francois Vincens (Vincens), respectively.  Manklow and Vincens contend that there are no genuine issues of material fact and that they are entitled to summary judgment in their favor as a matter of law, dismissing the Second Amended Complaint with prejudice.  

     The Second Amended Complaint sets forth nineteen counts.   Nine of the counts involve claims against Vincens alone and allege voidable preferential and fraudulent transfers based on 11 U.S.C. §§ 547 and 550 and Fla. Stat. § 726.105(1) (a).  Nine of the counts involve claims against Manklow alone and allege voidable preferential and fraudulent transfers based on 11 U.S.C. §§ 547, 548(1) and 550 and Fla. Stat. §§ 726.105(1) (a), 726.105(1) (b) (2).

     Lastly, in Count XIX, the Debtors contend that Manklow and Vincens owed a fiduciary duty to Operations and its creditors.  The Debtors seek damages against both Manklow and Vincens based upon an alleged breach of the fiduciary duty.

     The Debtors concede that the payments, which the Debtors contend are preferential and/or fraudulent transfers, were made by non-debtors.  The Debtors also concede that the funds paid to Manklow and Vincens technically were not funds of the estate of Operations.  Nevertheless, in opposition to the Motions for Summary Judgment, the Debtors contend that the payments to Manklow and Vincens were, in fact, payments by the Debtors based on a de facto merger of the non-debtor entities which made the payments into Operations.  This contention is the result of a Final Judgment entered by the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida (Circuit Court), in Case No. 97-3285, styled, Optical Technologies, et al. v. Robert Kellish and Sandra Braddock.  In that suit the Circuit Court determined that a de facto merger occurred of Recomm International Display Corporation (Display Corp.), Recomm International Corporation (International Corp.) and Recomm International Display, Ltd. (Display Ltd.) into Operations effective January 1, 1995.  The Final Judgment also declared that as of that date "all assets, rights, capital, franchises, powers, liabilities, claims and causes of actions of Display Corp., International Corp., and Display Ltd. were consolidated and merged into Operations effective January 1, 1995."  Based on the Final Judgment, the Debtors contend that all payments under scrutiny were in fact the funds of the Debtors, thus, properly challenged by the Debtors on the theories outlined in the Second Amended Complaint.  Equally, based on this so-called de facto merger, the Debtors contend that Manklow breached a fiduciary duty and can be held liable for damages claimed to have occurred as a result of the breach.

     This Court finds that no genuine issues of material fact are in dispute and, therefore, it is appropriate to consider the disposition of the Motions as a matter of law.

     It should be noted at the outset that the Debtors filed their suit in the Circuit Court after this Court dismissed the first Complaint filed in this adversary proceeding.  This Court held that the Complaint failed to state a viable claim against Manklow and Vincens because the mere allegation in the Complaint that Recomm Display and Recomm Ltd. were "predecessors in interest" of the Debtors was legally insufficient to support the claims and the relief sought.  An Amended Complaint was filed and also dismissed.

     Concerning the Second Amended Complaint, this Court is satisfied that the finding by the Circuit Court of the de facto merger equally fails to cut the mustard.  Manklow and Vincens were not parties in the State Court litigation.  Only Robert Kellish and Sandra Braddock, the officers of one of the Debtors, were named defendants.  It follows that the Final Judgment which declared this so-called de facto merger cannot possibly be binding on Manklow and Vincens or on Display, International and Display Ltd., the non-debtor entities.  It is elementary that no tribunal has the power to destroy the legal existence of a corporation which was created by a sovereign, other than the one whose court declared this so-called de facto merger.

     Viewing the Final Judgment of the Circuit Court in the most favorable way, the most that could be said is that it meant to pierce the corporate veil of these non-debtor entities which, as noted, were not parties to the suit and were not subject to the jurisdiction of the court rendering the Final Judgment.  Even assuming that the Final Judgment had effectively declared that all assets and liabilities of the two non-debtor entities which made the transfers are assets of these Debtors, the right to assert these claims could not be bestowed on these Debtors.  This is for the simple reason that the payments by the non-debtors were made long before the effective date of this so-called "de facto merger." In sum, this Court is satisfied that based on the undisputed facts as they appear from this record, none of the claims attacked as either preferential or fraudulent transfers subject to avoidance can be sustained.

     Concerning the claim set forth in Count XIX, the Defendants were never officers or directors of the Debtors while they were officers of the non-debtors.  They no longer held positions with the Debtors after 1993.  Vincens left the United States and had absolutely nothing to do with the affairs of any of these entities.  As to Manklow, one might argue that there is evidence in this record to warrant the inference that he was, in fact, the person controlling the Debtors' affairs even after he ostensibly divested himself of all interest in the non-debtor entities.  The record, however, is short to warrant such a conclusion.

     Accordingly, this Court is satisfied that the Defendants' Motions for Summary Judgment are well taken and should be granted.

     Accordingly it is,

     ORDERED, ADJUDGED AND DECREED that the Motions for Summary Judgments filed by Defendants, Manklow and Vincens, be and the same are hereby granted in favor of Defendants and against Plaintiffs.  The Second Amended Complaint filed by Plaintiffs, Recomm Operations, Inc. and Recomm Enterprises, Inc., is hereby dismissed with prejudice.

     A separate final judgment will be entered in accordance with the foregoing.

     DONE AND ORDERED at Tampa, Florida, on DEC. 23, 1997

/s/Alexander L. Paskay    
Alexander L. Paskay     
Chief Bankruptcy Judge