Anda di halaman 1dari 20

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page1 of 17

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: ) ) CORDILLERA GOLF CLUB, LLC ) Case No. 12-24882 (ABC) dba The Club at Cordillerra, ) ) Chapter 11 Debtor. ) ______________________________________________________________________________ MOTION OF CHERYL M. FOLEY, THOMAS WILNER, JANE WILNER, CHARLES JACKSON, MARY JACKSON and KEVIN B. ALLEN, INDIVIDUALLY AND AS REPRESENTATIVES OF A CERTIFIED CLASS OF MEMBERS, TO APPOINT CHAPTER 11 TRUSTEE ______________________________________________________________________________ Cheryl M. Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin B. Allen, as representatives of a certified class in Case Number 11CV552, pending in the District Court of Eagle County, Colorado (collectively, Member Representatives), by their attorneys Appel & Lucas, P.C. and pursuant to sections 1104(a)(1) and (2) of title 11 of the United States Code (Code), hereby move the Court to appoint a trustee in this Chapter 11 case. INTRODUCTION 1. The Debtor, Cordillera Golf Club, LLC (Debtor), owns various recreational

amenities in the Cordillera residential community located in the heart of the Vail Valley in Eagle County, Colorado. The Cordillera community consists of several hundred single family homes. Integrated with the homes throughout the Cordillera community are a variety of recreational amenities, including, among other things, golf courses, restaurants, and swimming pools. The Club is owned and operated by Cordillera Golf Club, LLC (the Debtor). 2. The Debtor and the homeowners in the Cordillera community, including the

Member Representatives, are inextricably bound to one another. The amenities owned by the Debtor greatly affect the value of the homeowners homes and lifestyle.
1

Moreover, the

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page2 of 17

homeowners were the primary members of the Club and hence its primary source of revenue. More than 600 Cordillera homeowners are or were members of the Club and each paid a substantial deposit to join, which the Debtor is contractually obligated to repay. The current and former members are the most numerous creditors of Debtor and, in aggregate, by far the largest. 3. Unfortunately for everyone involved, the Debtors actions and misdeeds have

irretrievably soured its relationship with the members and other interested community constituencies. That has resulted in ongoing litigation between the Debtor and most of the stakeholders in this Chapter 11 case. 4. The Cordillera Property Owners Association (the CPOA), a group composed of

owners of real property in the Cordillera community, appointed an informal group to study the alternatives and to explore solutions with David Wilhelm (Wilhelm) for the possible sale of Cordillera to the community. On October 20, 2010 this group incorporated as the Cordillera Transition Corporation (the CTC). 5. When the CTC would not make a sufficiently high offer to purchase Cordillera,

the Debtors current management, under the direction and control of Wilhelm, initiated in May 2011 a lawsuit as a brutal business tactic under the Colorado racketeer laws against both these civic organizations and their respected community volunteer members, claiming $96 million in damages. Wilhelm initiated the lawsuit to exert pressure on the community to increase its purchase offer and to mask Wilhelms failures to fulfill his promises to Club members. The members defense costs in this Wilhelm-initiated litigation have been extraordinary and noninsured costs will be paid by the Cordillera community. Wilhelms lawsuit against the CTC has caused the Cordillera community to view him with scorn and derision.

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page3 of 17

6.

Separately, the Member Representatives commenced a (now-certified) Class

Action Lawsuit in June 2011 against the Debtor, Wilhelm, Patrick Wilhelm (Wilhelms son) and several Wilhelm-controlled entities. The Class Action Lawsuit (as defined below) seeks

damages for the defendants breaches of contract and misrepresentations in connection with the defendants false solicitation of $8,000,000+ in dues payments in 2011 (on the false promise that all Club facilities would be open in 2011). Based upon Wilhelms breaches of the Club

membership agreement, the Class Action Lawsuit also seeks damages in the amount of the Membership Deposits (in total exceeding $100,000,000) made upon joining the Debtor. In addition, the class litigation seeks damages exceeding $4,000,000 for defendants false statements, contract breaches and violations of securities and consumer protection laws in connection with the sale of Premier Memberships in 2009-2010. Wilhelms and Patrick

Wilhelms actions precipitating the Class lawsuit have further made them anathema to the Cordillera community. 7. The Debtor, under Wilhelms direction and control, has burned its bridges with its

customers the homeowners in Cordillera and these homeowners will not deal with a Debtor operated by Wilhelm. This is dramatically evidenced by the fact that several hundred members have either resigned, refused to pay dues, or otherwise indicated they believe their membership agreements have been so materially breached that they are no longer binding. Without these members, the Debtor does not have a viable business. The Debtor, however, has a chance at being reorganized and emerging from Chapter 11, but only if the members return and begin and begin paying dues. However, the members will only return to the Club if Wilhelm is gone. The unique facts and circumstances of this Chapter 11 case present one of those rare instances where

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page4 of 17

a Chapter 11 trustee should be appointed for cause and because appointment would be in the best interests of creditors and other parties-in-interest. BACKGROUND FACTS Acquisition of the Cordillera Club 8. The Debtor acquired the Cordillera Club in June 2009. Wilhelm is the Debtors

current equity owner. Wilhelm previously owned 30% of the Debtor and acquired the remaining 70% in 2009 as part of the settlement of a dispute with the Debtors former owners. See Fitchett Affidavit ( Delaware Docket No. #2), paragraph 20. The dispute between the owners involved allegations by Wilhelm that management had diverted substantial funds away from the Debtor's operations. Id. 9. Rather than contribute cash to acquire the Club, Wilhelm caused the Debtor to

borrow $13,700,000 from Alpine Bank secured by the assets of the Club. Upon information and belief, the Member Representatives believe that Wilhelm has personally guaranteed the Alpine Bank loan. Wilhelm apparently also lent the Debtor $6,500,000, which he secured with a lien on the assets of the Debtor, even though the Clubs membership plan in effect at that time required the Debtors owner to pay all operating deficits and stated that Members are not subject to any operating or capital assessments. 10. The Debtors sources of revenue are membership deposits, initiation fees, annual

membership dues, transfer fees, golf fees, guest fees, pro shop revenue and food and beverage sales. Fitchett Affidavit, paragraph 12. Following Wilhelms acquisition of the Debtor and his improper actions described in this Motion, there was a mass exodus of the members. To the best of the Member Representatives knowledge, the Clubs membership has declined drastically from over 600 dues paying members in 2011 to approximately a quarter of that number of dues

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page5 of 17

paying members at the present time. These members have withheld 2012 dues payments and presumably will not have any further participation in the Club. This is evidence of their distrust of and disdain for Wilhelm. Wilhelms complete alienation of the membership his customers resulted in a predictable and precipitous decline in revenue. At present, the revenue does not come close to paying for maintenance and operations of the Club facilities, as evidenced in the Debtors DIP financing papers. This condition cannot be remedied with Wilhelm in charge of the Debtor because the resigned members the Debtors only hope for rebuilding its customer base and revenues will not return. Wilhelms Assault on the Cordillera 11. Wilhelms and Debtors loss of their customer base and complete inability to

formulate a viable business plan is directly attributable to their abusive lawsuit against the CTC/CPOA and to Wilhelms misrepresentations to members and fraudulent misuse of their dues that precipitated the Class Action lawsuit. 12. At the time Wilhelm acquired the Club, he distributed to Club Members a

document entitled Addendum To Application For Membership Privileges ("Addendum"). In the Addendum, the Club Facilities are defined to include the four golf courses, golf practice facilities, tennis courts, club houses, athletic club, Trailhead center, and related Club Facilities. 13. Part of Wilhelms plan for the Club when he acquired the Debtor in 2009 was to

sell upgraded Premier Memberships. The Premier Memberships were first offered to the Clubs "Signature Members" in or around June 2009. "Signature Members" are members with full golf privileges. Two letters, dated June 26 and July 1, 2009, respectively, together with a brochure titled Cordillera 20/20 (the "20/20 brochure" or the "brochure") were sent by Wilhelm and the Debtor promoting Premier Memberships. The 20/20 brochure promotes

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page6 of 17

Premier Memberships by stating there will be almost certain increase in value of the Premier Memberships as well as your Cordillera real estate connected to these benefits. 14. There were approximately 160 Premier Memberships sold to Signature Members.

Signature Members paid an additional $30,000 to convert to a Premier Membership. In total, the Debtor received nearly $5,000,000 from the sale of Premier Memberships.1 In return, Premier Members were supposed to receive additional rights and benefits that supplement the rights they originally acquired as Signature Members. 15. The annual membership dues for 2011 were payable in February 2011. Before

paying those dues, the Clubs members sought assurances from Wilhelm and the Debtor that, in accordance with the Clubs membership plan, all of the golf courses and the Clubs other facilities would be open for use in 2011. On January 10, 2011, the Debtor sent an e-mail to the Clubs members expressly providing those assurances. The e-mail stated, among other things, as follows: 2011 Dues: Club Facilities Open in 2011. This has been a hot topic over the past couple of months. Here is our official position on the subject.. (a) We will open and provide Members access to all four golf courses, clubhouses and related facilities in 2011. We understand this has been a concern for many of you and we trust that this will allay any fears or reservations you may have. This serves as a response to the Members who have requested assurances of services. (b) The annual dues for 2011 will be $18,000 for each golf membership. As in years past, we are offering an early payment discount.[and] the golf Annual Dues are $13,800 if the Member pays before February 4, 2011.

These funds have not been accounted for by the Debtor.

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page7 of 17

16.

The discounted golf member dues of $13,800 represented a 25% increase over

the 2010 dues. The e-mail further assured the Clubs members that: A special annual dues account is established at a local bank . . . All FY 2011 dues will be deposited in this account. [N]o portion of the dues or other Club revenues shall be used for any purpose other than to pay for valid Club expenditures. An independent CPA will review and confirm to the Club on a monthly basis that all funds [are] used for valid Club purposes.

17.

On January 20, 2011 Wilhelm and Patrick Wilhelm sent another e-mail to

Fellow (Club) Members stating, among other things, We are . . . committed to open all the facilities in 2011. 18. Based on those assurances, approximately 590 of the Clubs members paid their

2011 annual dues, totaling an estimated $7,760,868. However, in late May 2011, in direct contravention of Wilhelms assurances which induced the members to pay the 2011 dues, and after he had collected the dues, Wilhelm announced in an e-mail to the Clubs members that to preserve cash flow he would open only one of the four golf courses and their associated clubhouses and was going to close the Clubs main restaurant, Timberhearth, and the Trailhead facility. In that e-mail, Wilhelm admitted that his actions were particularly unfair and

burdensome to our loyal members who have paid dues in expectation of having access to all facilities. On July 21, 2011, after the Class Action Lawsuit was filed in June 2011, the Club opened one additional golf course, but none of the Clubs other facilities were opened. 19. On August 19, 2011, the Class Representatives completed a court-ordered audit of

the Debtors finances from January 1, 2011 through July 31, 2011. The audit disclosed that the
7

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page8 of 17

Debtor, under Wilhelms direction and control, during the audit period, collected $7,760,868 in dues and that at least $6,600,533 of the dues were received in January 2011. The audit also disclosed that Wilhelm paid himself $842,536 from the Clubs members dues from April 2011 through July 2011 as purported interest expense and management fees. 20. The audit also disclosed that Patrick Wilhelm, was paid $50,000 in June 2011

from Clubs members dues as purported severance and accrued vacation pay and that $60,000 was paid to WFP, an entity controlled by Wilhelm, in July 2011 as a purported reimbursement for severance pay paid to Wilhelms son, Nicholas Wilhelm. 21. The audit also disclosed that Wilhelm paid $323,483 from March through July

2011 to architects and lawyers for matters not necessary for the operation of golf courses and Clubs other facilities, and have since made additional payments of approximately $340,000 for matters not necessary for the operation of golf courses and the Clubs facilities. 22. Finally, the audit showed that as a result of not opening all of the golf courses and

the Clubs other facilities, the Debtors cash flow was approximately $1,300,000 greater than the Debtor had forecast in January 2011. Wilhelm, his son Patrick, and other defendants in the Class Action Lawsuit, utilized this cash to pay themselves instead of opening all golf courses and the Clubs other facilities as they had agreed and were obligated to do. Litigation commences 23. As discussed above, in May, 2011, the Debtor, Wilhelm and affiliated entities

sued the CTC, a corporation formed by certain concerned Cordillera residents, the CPOA and fifteen community member volunteers who were associated with the CTC or the CPOA. In the Complaint, the Debtor and Wilhelm contend that the defendants engaged in improper conduct with regard to the Debtor. The Complaint sought damages of $96 million.

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page9 of 17

24.

In June 2011, the Member Representatives commenced a lawsuit (certified as a

class action in November 2011 (the Class Action Lawsuit) against the Debtor, Wilhelm and certain entities affiliated with Wilhelm and the Debtor. The Class Action Lawsuit was filed after Wilhelm obtained more than $7, 700,000 in dues from the Clubs members based on his misrepresentations that all of the Clubs facilities would be opened for the summer and that the dues would be used only for operation and maintenance of the Club. The Eagle County District Court certified the class of members in this lawsuit, over the vigorous objection of Wilhelm and the Debtor. In the Class Action Lawsuit, the plaintiffs seek, among other things, damages for fraud and misrepresentation relating to Wilhelm and the Debtors misuse of the 2011 member dues and refusal to open all the Clubs facilities, the return of all initial member deposits, , and the Premier membership deposits exceeding $4,000,000. 25. In connection with the Class Action Lawsuit the plaintiffs, concerned that the

Debtor and Wilhelm would misappropriate the 2011 member dues, sought and on June 24, 2011 obtained, a temporary restraining order ("TRO"), which provided in pertinent part: The court orders that defendants shall not use funds from 2011 annual dues received from Club at Cordillera ("Club") members for any purpose other than the necessary maintenance and operation of the Club's four golfcourses and related facilities. Payments in Violation of the TRO and Misuse of the Dues 26. In violation of the TRO: On June 30, 2011, the Debtor paid Foley & Lardner, LLP,2 $33,250 for legal work for, according to the Debtors internal accounting, "restructuring" the Clubs ownership and "equity conversions." On July 7, 2011, the Debtor paid Wilhelm $104,066 as an "interest expense."

This is the same firm that has acted as the Debtors bankruptcy counsel.

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page10 of 17

On July 20, 2011, the Debtor paid Zehren & Associates, an architectural firm, $73,420 for plans to renovate the Cordillera Valley Club clubhouse. On July 27, 2011, the Debtor paid WFP, an entity affiliated with Wilhelm, $60,000 as a purported reimbursement for a 2010 "severance payment" to Wilhelm's son, Nicholas Wilhelm. On August 12, 2011, the Debtor paid Wilhelm $53,797 for interest. On August 15, 2011, the Debtor paid Thomas & Genshaft, LLP,3 the law firm representing the Debtor and Wilhelm in the spurious lawsuit that Wilhelm commenced against the CPOA, the CTC and community volunteers, $20,012 for legal work in connection with that lawsuit. On August 31, 2011, the Debtor paid Foley & Lardner $5,445 for restructuring Club ownership. The foregoing payments, in violation of the TRO, were just the tip of the iceberg.

27.

The audit disclosed that since January 1, 2011, the Debtor and Wilhelm diverted $1,275,919 from the dues they collected from members to make payments that benefitted Wilhelm and were unrelated to the maintenance and operation of the golf courses and related facilities. Among other things, Wilhelm paid himself $315,000 in "management fees" on May 23 (the day before he announced the closure of golf courses and the Clubs other facilities), another $110,000 for "severance and accrued vacation" payments, and $527,536 as alleged "interest expense.

3 The payment of $20,012 to the law firm of Thomas & Genshaft to fund the CTC Lawsuit was

explicitly prohibited by the TRO, which provided: The court notes that a lawsuit has been filed by some of the named defendants against Club members and Club-related entities and that an adversarial and acrimonious relationship has developed between the factions. In light of this and plaintiffs' showing that defendants have failed to perform under their promises to open all golf courses and to account for the 2011 dues, the court finds that the 2011 dues may be dissipated to fund defendants' said lawsuit and for other non-Club-related expenditures if notice were provided to defendants prior to the court granting this order.

10

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page11 of 17

The Contempt Motion 28. On December 2, 2011, the plaintiffs in the Class Action Lawsuit filed a contempt

Motion, advising the Eagle County District Court of Wilhelms repeated violations of the TRO. On January 17, 2012, the Court issued its Order to show cause, finding there were sufficient grounds for Wilhelm and the Debtor to appear before the Court and show grounds why they should not be held in contempt of court for violation of the TRO. The show cause hearing was scheduled for April 11, 2012. 29. In his first effort to avoid the contempt hearing, Wilhelm caused the Class Action

Lawsuit to be removed to Federal District Court in Denver on February 9, 2012. That tactic failed and the Federal District Court remanded the matter back to the Eagle County District Court on April 5, 2012. Wilhelms appeal of the remand order was rejected by the 10th Circuit Court of Appeals on May 2, 2012. The Eagle County District Court then rescheduled the contempt hearing for July 20, 2012. The Debtor then filed its Chapter 11 case in the Bankruptcy Court in Delaware on June 26, 2012. 30. A few days later, after the Debtor commenced its Chapter 11 case, the Debtor

under Wilhelms control - commenced an adversary proceeding, seeking to extend the automatic stay arising under 362(a) of the Code to Wilhelm so that he would not have to explain his contemptuous acts to the Eagle County District Court. At an emergency hearing before Judge Gross on July 3, 2012, the Debtors effort to shield Wilhelm from his contempt was summarily denied, with the Court concluding: it would be highly inappropriate for this Court to enjoin a Judge in Colorado from enforcing an order that he entered over a year ago now. Transcript of July 3, 2012 hearing, page 44.

11

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page12 of 17

ARGUMENT The Standard for Appointment of a Trustee 31. Section 1104(a) provides as follows: (a) At any time after the commencement of the case but before confirmation of a plan, on request of a party in interest or the United States trustee, and after notice and a hearing, the court shall order the appointment of a trustee-(1) for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management, either before or after the commencement of the case, or similar cause, but not including the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor; or (2) if such appointment is in the interests of creditors, any equity security holders, and other interests of the estate, without regard to the number of holders of securities of the debtor or the amount of assets or liabilities of the debtor. 32. The moving party has the burden of proof and "[i]t is settled that appointment of a

trustee should be the exception, rather than the rule." In re Sharon Steel Corp., 871 F.2d 1217, 1225-6 (3d Cir. 1989). In the usual chapter 11 proceeding, the debtor remains in possession throughout reorganization because current management is generally best suited to orchestrate the process of rehabilitation for the benefit of creditors and other interests of the estate. In re V. Savino Oil & Heating Co., 99 B.R. 518, 524 (Bankr. E.D.N.Y. 1989). Thus, the basis for the strong presumption against appointing an outside trustee is, in typical Chapter 11 cases, there is often no need for one: The debtor-in-possession is a fiduciary of the creditors and, as a result, has an obligation to refrain from acting in a manner which could damage the estate, or hinder a successful reorganization. Petit v. New England Mort. Servs., 182 B.R. 64, 69 (D. Me. 1995) (internal quotations omitted). In re Marvel Entertainment Group, 140 F3d 463, 473 (3d Cir.
12

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page13 of 17

1998). However, for the reasons set forth below, this is not the typical Chapter 11 case. Therefore, the Court should appoint a Chapter 11 trustee to manage the business and affairs of the Debtor to right this sinking ship. 33. The provisions of 11 U.S.C. 1104 are an important protection for creditors to

ensure that the bankruptcy estate is managed and protected in a proper manner. "The Court should not lightly disregard or encumber with overly protective attitudes towards debtors-inpossession." Colorado-Ute Elec. Assoc., Inc., 120 B.R. 164, 173-4 (Bankr. Colo. 1990), quoting In re V. Savino Oil & Heating Co. Inc., supra, at 525. There is Cause for Appointment of a Trustee Under 1104(a)(1) 34. A Trustee will be appointed under 1104(a)(1) if the debtor has engaged in

fraudulent conduct. In re Stein & Day, Inc., 87 BR 290 (Bankr. S.D.N.Y. 1988). Appointment of a trustee is mandatory if cause, including fraud, dishonesty, incompetence, or gross mismanagement of the debtor's financial affairs is established. In re Rivermeadows Associates, Ltd., 185 B.R. 615, 617 (Bankr. Wyo. 1995). Cause is established where management engaged in self-dealing, transferred assets out of the reach of creditors, stripped debtor of cash, and depleted assets so as to require working capital loans at unreasonably high interest rates. In re Sharon Steel Corp., 86 BR 455 (Bankr. W.D. Pa. 1988). In addition, at least one bankruptcy court has held that appointment of a Chapter 11 trustee is mandatory if fraud, dishonesty, incompetence, or gross mismanagement of the debtors financial affairs is established. In re Rivermeadows Associates, Ltd., 185 B.R. 615, 617 (Bankr. D. Wyo. 1995). 35. Wilhelm was dishonest with the Clubs members one of the most significant

stakeholders in this Chapter 11 case telling them one thing and doing another. Particularly galling is the fact that he induced the members to pay nearly $8,000,000 in 2011 dues by

13

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page14 of 17

promising that all of the Clubs facilities would be opened and that the funds would be used solely for the operation and maintenance of the Club. That clearly was untrue and his actions have caused Cordillera residents to view him with scorn. 36. Wilhelm also filed a contrived lawsuit against CPOA, CTC and volunteer

community members for allegedly conspiring to induce the Clubs members to leave the Club as the ostensible cause for his inability to operate the Club profitably. However, as the Debtors own filings in the failed adversary proceeding show, Wilhelm had already concluded by mid2010, several months prior to the commencement of the lawsuit, that the Debtor had insufficient members to operate. 37. Wilhelm has demonstrated without question that he is willing to disregard court

orders when it suits his needs. Despite the TRO in the Class Action Lawsuit, which specifically enjoined Wilhelm and the Debtor from misusing the members dues, they ignored the order and used the funds. Wilhelm misappropriated more than $200,000 for his own benefit in direct violation of the TRO. That followed his misappropriating for his personal benefit or the benefit of his family and controlled entities more than $1,200,000 in the months leading up to the issuance of the TRO. To make matters worse, all of these funds were misappropriated from the Debtor at a time when Wilhelm was telling the Clubs members that operational cutbacks were needed because cash was short. All of this will be considered by the Eagle County District Court at the contempt hearing now rescheduled to August 6-8, 2012. 38. Finally, Wilhelm has misused the Debtors assets for his own benefit, both pre-

petition and post-petition. Pre-petition, he used the Debtors funds in violation of the TRO in the Class Action Lawsuit to pay, among other things, his own attorneys. That pattern has continued post-petition with the filing of the Adversary Proceeding in the Delaware Court, the sole purpose

14

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page15 of 17

of which was to attempt to use the Bankruptcy Court to shield Wilhelm personally from the consequences of his contempt for the Eagle County District Court. 39. According to Debtors own admission, Wilhelm remains in control of the Debtor.

At the hearing on the Debtors attempt to stay the state court contempt proceedings against Wilhelm, Counsel stated that when you follow the trail of a party and owners, et cetera, and manager all the way to the top, you get to Mr. David Wilhelm. Mr. Wilhelm is in control of all of these entities. . . . I understand that Mr. Wilhelm has remained in control of the debtors. Transcript of July 3, 2012 hearing, pp. 37-8. This is the same person who has already betrayed and alienated the members by filing a callous lawsuit against Cordillera community

organizations and individuals, disobeying the TRO and spending the Debtors funds improperly, including self-dealing by transferring large sums to himself, his family and other insiders. These actions constitute fraud, dishonesty and self-dealing and are cause under 1104(a)(1) for appointment of a trustee. The Interests of the Parties Require Appointment of a Trustee under 1104(a)(2) 40. In determining whether the appointment of a Chapter 11 trustee is in the best

interests of creditors and other parties-in-interest pursuant to 1104(a)(2) of the Code, the Court should consider the following factors: (1) trustworthiness of the debtor; (2) the debtors past and present performance and prospects for debtor's rehabilitation; (3) confidence or lack thereof of the business community and of the debtors creditors in present management; and (4) the benefits derived by the appointment of a trustee, balanced against the costs of appointment. In re Colorado-UTE Electric Ass'n, 120 B.R. 164 (Bankr. Colo. 1990). 41. In addition, the Third Circuit Court of Appeals has recognized, as have a number

of other courts, that whereas mere conflicts or acrimony between the debtor and creditors do not

15

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page16 of 17

mandate appointment of a Chapter 11 trustee, a bankruptcy court does not abuse its discretion when it appoints a Chapter 11 trustee based upon acrimony between the debtor and the creditors. In re Marvel Entertainment Group, 140 F.3d 463 (3dd Cir. 1998). Where it appears that no meaningful progress towards reorganization is possible because of deep-rooted animosities between the Chapter 11 debtor and major creditors, an independent reorganization trustee may well be necessary. In re V. Savino Oil & Heating Co., 99 B.R. 518 (Bankr. E.D.N.Y. 1989). See also In re Celeritas Techs., LLC, 446 B.R. 514 (Bankr. Kan. 2011). 42. In the present case, there is enormous acrimony that has arisen between Wilhelm

and the entire Cordillera community. Wilhelm sued and is pursuing litigation against the CTC, the CPOA and the individual community volunteers, based on community members criticism of Wilhelms actions in operating the Club. Wilhelm and the Debtor are defendants in the Class Action Lawsuit brought by the Member Representatives on behalf of the certified class of 609 members and former members of the Club. Wilhelm has thus irretrievably alienated the entire Cordillera community. The animosity and acrimony are hugely significant in this case because the members are the Clubs customers and, by far, the Debtors largest creditors. Without them, there are no revenues and the Club will cease to exist. Even ignoring Wilhelms fraud, Wilhelm is simply not in a position to oversee the reorganization of this Debtor because of the bad feelings he has engendered. 43. Although the acrimony is itself sufficient for the Court to find that the

appointment of a trustee is in the interests of the parties, there are other factors to consider. Wilhelm claims to be a secured creditor of the Debtor to the tune of more than $6,500,000, plus interest. There are substantial issues about this alleged debt, including whether it can be

16

Case:12-24882-ABC Doc#:235 Filed:07/24/12

Entered:07/24/12 17:07:20 Page17 of 17

avoided as a fraudulent transfer under applicable law.4 Thus, Wilhelms alleged status as a secured creditor creates a significant conflict of interest. In addition, Wilhelm and Wilhelmcontrolled entities have guaranteed the Alpine Bank debt. conflicting loyalty. CONCLUSION 44. The alternative to the Debtors approach in this case is obvious to everyone This status creates yet another

except the Debtor and Wilhelm. What is needed is an agreement that will bring the members back to the Club, immediately increase revenues and avoid the substantial litigation expense the Debtor otherwise plans to incur. Unfortunately, this Debtor, managed by Wilhelm, cannot arrive at an agreement with the Clubs members or the other Cordillera community constituents.

Dated: July 24, 2012 /s/ Garry R. Appel Garry R. Appel, Reg. No. 8883 Shaun A. Christensen, Reg. No. 23131 Appel & Lucas, P.C. 1660 17th Street, Ste 200 Denver, CO 80202 Telephone: 303-297-9800 Appelg@appellucas.com Christensens@appellucas.com Attorneys for Cheryl Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin Allen

Applicable law is likely to be 544 of the Code, through which the Colorado Uniform

Fraudulent Transfer Act would be applied. The transfer of the security interest in the Debtors assets to Wilhelm is within the four year statute of limitations under CUFTA and it appears that the loan from Wilhelm to the Debtor could well be avoidable as part of an apparent levered buyout. In addition, there have been numerous and substantial payments by the Debtor to Wilhelm on the alleged debt. These payments may also be avoidable, either as fraudulent transfers or as preferences.
17

Case:12-24882-ABC Doc#:235-1 Filed:07/24/12

Entered:07/24/12 17:07:20 Page1 of 3

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLORADO In re: ) ) CORDILLERA GOLF CLUB, LLC ) dba The Club at Cordillerra, ) ) Debtor. )

Case No. 12-24882 (ABC) Chapter 11

______________________________________________________________________________ ORDER APPOINTING CHAPTER 11 TRUSTEE ______________________________________________________________________________ THIS MATTER is before the Court on the Motion of Cheryl M. Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin B. Allen, as representatives of a certified class, to Appoint a Chapter 11 Trustee (the Motion). The Court has reviewed the Motion and is otherwise advised. It is hereby ORDERED that the Motion is GRANTED and the Court hereby appoints __________________________ to serve as the Chapter 11 Trustee in this case.

Dated this ___ day of __________, 2012. BY THE COURT:

_________________________________________ United States Bankruptcy Judge

Case:12-24882-ABC Doc#:235-1 Filed:07/24/12

Entered:07/24/12 17:07:20 Page2 of 3

Cheryl M. Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin B. Allen, as representatives of a certified class in Case Number 11CV552, pending in the District Court of Eagle County, Colorado (collectively, Member Representatives), by their attorneys Appel & Lucas, P.C., and pursuant to sections 105(a) of the United States Bankruptcy Code and Federal Rules of Bankruptcy Procedure 2002 and 9006, hereby move the Court to shorten the notice period from twenty-one (21) days to fourteen (14) day regarding the Member Representatives motion to appoint a trustee in this Chapter 11 case filed on same day as this motion. In Support of this motion to shorten notice, the Member Representative state as follows: 1. The Debtor, Cordillera Golf Club, LLC (Debtor), filed its petition for relief under title 11 of the United States Bankruptcy Code on June 26, 2102 (the Petition Date) in the United States Bankruptcy Court for the District of Delaware. 2. Only July 16, 2012, venue was transferred to the United States Bankruptcy Court for the District of Colorado, commencing the above captioned case. 3. On even date with this motion, the Member Representatives have filed their motion requesting appointment of a Chapter 11 Trustee for his case pursuant to sections 1104(a)(1) and (2) of the Bankruptcy Code (the Trustee Motion). The Member Representatives have made their intention to file the Trustee Motion clear to all parties in this case for some time, including counsels statements to that effect at the Status and Scheduling Conference held on July 20, 2012, and the statement made in the Member Representatives objection to the Debtors motion to appoint a chief restructuring officer filed on July 16, 2012. This Motion is no surprise to the Debtor or any other party who has participated in this case to date. 4. The grounds set forth in the Trustee Motion also favor shortening notice on the Trustee Motion. Specifically, as alleged in the Trustee Motion, the current owner and ultimate manager of the Debtor, David Wilhelm (Wilhelm), has demonstrated that he cannot act as a proper fiduciary and is alleged to have violated court orders which were intended to prevent him from spending the Debtors funds inappropriately. The Trustee Motion is a vital issue in this case, and the concerns raised therein dictate that the matter be bought before this Court as quickly as possible in order to preserve the assets of the Debtor and to move this case forward. 5. Further, it is a certainty that the Debtor will object to the Trustee Motion, and there is good reason to expedite the objection/response time in order for the substance of the Trustee Motion to be before the Court and ripe for determination within a reasonable time. 6. This shorten notice motion requests that the Court enter an Oder shortening the notice period applicable to the Trustee Motion from twenty-one (21) days to fourteen (14) days. RELIEF REQUESTED

Case:12-24882-ABC Doc#:235-1 Filed:07/24/12

Entered:07/24/12 17:07:20 Page3 of 3

7. Under Federal Rule of Bankruptcy Procedure 9006(c), the Court may for cause shown order a reduction in the notice time set forth in Rule 2002. State Bank of Southern Utah v. Gledhill (In re Gledhill), 76 F.3d 1070, 1084 (10th Cir. 1996). 8. A reduction of the notice period from twenty-one (21) day to fourteen (14) days will not prejudice any party in this case. All parties who have participated in the case, and the Debtor in particular, have been made aware of the Member Representatives intention to file the Trustee Motion. 9. There is good cause to shorten the notice period as one of the grounds asserted the Trustee Motion is that the Debtors manager cannot be trusted to use the funds of the Debtor in accordance with the duties of fiduciary. Time is therefore of the essence. WHEREFORE, the Member Representatives request that the Court enter an Oder shortening the notice period applicable to the Trustee Motion from twenty-one (21) days to fourteen (14) days, and grant such other or further relief as is just. Dated: July 24, 2012 /s/ Garry R. Appel Garry R. Appel, Reg. No. 8883 Shaun A. Christensen, Reg. No. 23131 Appel & Lucas, P.C. 1660 17th Street, Ste 200 Denver, CO 80202 Telephone: 303-297-9800 Email: Appelg@appellucas.com
Christensens@appellucas.com

Attorneys for Cheryl Foley, Thomas and Jane Wilner, Charles and Mary Jackson and Kevin Allen