United States District Court, D. Utah
GENA GOLDEN, an individual, and SUSAN GOLDEN, an individual, Plaintiffs,
MENTOR CAPITAL, INC., a Delaware corporation, LABERTEW & ASSOCIATES, a Utah limited liability company, and MICHAEL L. LABERTEW, an individual, Defendants. MENTOR CAPITAL, INC., a Delaware corporation, Third-Party Plaintiff,
RICHARD GOLDEN, an individual, and SCOTT VAN RIXEL, an individual, Third-Party Defendants.
MEMORANDUM DECISION AND ORDER GRANTING
PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT
N. Parrish, United States District Judge.
the court is Plaintiffs' Motion for Partial Summary
Judgment (Dkt. No. 70) (the “Motion”). The court
held oral argument on the Motion on January 31, 2017.
Plaintiffs Gena and Susan Golden (the “Goldens”)
seek summary judgment on Count I of the Second Amended
Complaint against Defendant Mentor Capital, Inc.
(“Mentor”) for violation of the Securities Act of
1933. Specifically, the Goldens argue that Mentor was not
authorized to issue the shares it sold to them in March 2014
because it failed to comply with the Bankruptcy Court's
Order Confirming Mentor's Plan of Reorganization and,
consequently, those shares were invalidly issued and not
exempt from the Securities Act's registration
requirement. Mentor opposes the motion, arguing that genuine
disputes of material fact preclude summary judgment.
Mentor filed for bankruptcy in the United States
Bankruptcy Court for the Northern District of California (the
“Bankruptcy Court”) in August 1998.
Mentor filed its Third Amended Plan for Reorganization (the
“Plan”) on September 30, 1999, and a supplement
to that Plan on December 2, 1999.
January 11, 2000, the Bankruptcy Court confirmed the Plan
(“Order Confirming Plan”) and incorporated it
into the bankruptcy court's order.
Plan allowed Mentor to issue several classes of warrants to
its creditors. The warrants were exercisable for shares of
Mentor's common stock at various prices, depending on the
class of warrant held.
Section 6.4(a) of the Plan provides that “[t]o the
extent provided in § 1145 of the [Bankruptcy] Code, the
New Equity Securities [defined in the Plan to include the
warrants] . . . and all securities issued in exchange
therefor or on conversion thereof, shall be exempt from the
registration requirements of the Securities Act of 1933, as
amended . . . .”
Section 1.1 of the Plan defines the “Effective
Date” of the Plan as “the date on which [Mentor]
files the amendment to its articles of incorporation required
by §6.7 hereof.”
Section 6.7 of the Plan provides:
6.7 Amendment of Articles of Incorporation: Not
later than 120 days after Confirmation [May 10, 2000],
[Mentor] shall file amendments to its articles of
incorporation which provide for:
(a) Authorization of sufficient shares of its common stock to
permit issuance of the New Common Stock, the shares issuable
on exercise of all Warrants to be issued under this Plan, and
such additional common stock as [Mentor] considers
appropriate to have available for future transactions; and
(b) Prohibit the issuance of nonvoting equity securities.
Section 6.8 of the Plan provides:
6.8 Validity of Corporate Actions: Pursuant to
§ 1400 of the California Corporations Code, Confirmation
shall constitute due authorization required for the full
validity, enforceability, and effectiveness of all
transactions provided for in this Plan, notwithstanding any
provisions of the California General Corporation Law which
would otherwise require approval of such transactions by the
Debtor's board of directors, shareholders, or otherwise.
Confirmation shall constitute authorization for Debtor's
Responsible Individual designated under B.L.R. 4002-1 to take
all actions and execute, deliver and file all certificates,
notices, and other documents as he deems necessary or
appropriate to consummate the transactions provided for in
this Plan, including certificates of amendment of the
Debtor's Articles of Incorporation.
There is no evidence that amended articles of incorporation
were filed within the prescribed 120-day period. The office
of the California Secretary of State has no record of such an
amendment, there is no mention of an amendment in any
document, and no testimony that such amendment was filed.
March 21, 2008, Mentor filed a Certificate of Amendment of
Articles of Incorporation of Mentor Capital, Inc. (the
“2008 Amendment”). The 2008 Amendment states that
“[t]he total number of authorized common shares is
unchanged at 400, 000, 000.”
only other amendment on file with the California Secretary of
State is an amendment filed December 10, 2007. The filing
record indicates that this amendment changed the name of the
company from Main Street AC, Inc.
Scott Van Rixel was the recipient of warrants that were
issued to Mentor's creditors as contemplated under the
late February 2014, Mr. Richard Golden was looking for an
investment opportunity for his wife, Plaintiff Gena Golden,
and his daughter, Plaintiff Susan Golden.
Van Rixel informed Mr. Golden of a potential investment
opportunity to purchase Mentor stock.
Van Rixel showed Mr. Golden a letter that Chester
Billingsley, CEO of Mentor, had written to Mr. Va n Rixel
representing that the shares in Mentor were unrestricted and
r. Van Rixel offered to front the purchase price for the
Goldens' purchase of the Mentor shares and indicated that
Mr. Golden could then pay him back.
Goldens and Mr. Van Rixel sought to confirm with Mentor that
the shares were unrestricted. Mr. Billingsley responded via
e-mail that “The [shares] are unrestricted and fall
under the exemption from registration afforded under Section
1145 [of the Bankruptcy Code].”
Golden decided to commit funds on behalf of Gena and Susan to
purchase the Mentor shares.
Golden paid Mr. Van Rixel $146, 250.00 for 75, 000 shares of
Mentor stock through the issuance of two checks, both dated
March 20, 2014.
20. M r
. Va n Rixel e-mailed Mr. Billingsley, “I wanted to
know if I was able to put the shares I committed to in
different peoples [sic] names as I would like to use them as
thank you's [sic] for peoples [sic] efforts in helping us
make the decision to move forward with you.” Mr. Van
Rixel was informed that he could put the shares in other
March 21, 2014, Mentor received a check for $204, 750.00,
dated February 28, 2014, from Mr. Van Rixel. The check, which
was drawn on the account of the Scott J. Van Rixel Family
Trust, was for the purchase of 105, 000 shares of Mentor
common stock at a price of $1.95 per share.
March 23, 2014, Mr. Van Rixel requested that Mentor issue 25,
000 shares in the name of “Gena Golden” and 50,
000 shares in the name of ...