A Utah federal judge has dismissed a $14.8 million suit the bankrupt Summit Park Water Co. filed against 320 defendants, including all homeowners in the Summit Park subdivision.
Bankruptcy Judge John Allen ruled he could find "no claim" the plaintiffs could legally make and said, "I will dismiss this complaint, the whole complaint."The water company had provided culinary water to the subdivision, near the Park City resort community. It filed for reorganization bankruptcy in May 1987. But the bankruptcy was forced into foreclosure in December 1987 and a court-appointed trustee was ordered to operate the utility.
Because of increasing water delivery problems, the homeowners formed a service district to replace the company. With financial help from the state, they purchased the company's assets with a $550,000 loan.
The suit filed July 18 alleged trustee Harriet Styler, the homeowners and the service district conspired to defraud Summit Park Water of the utility, which it claimed was worth $2.8 million. It also claims the defendants violated anti-trust laws.
Defense attorney Gerald Kinghorn said Summit Park Water's claims "are so bizarre, they escape us as lawyers."
The suit, Kinghorn alleged, was an effort by the company "to circumvent the claims process" under way in the bankruptcy court, and that only the trustee and not the company's founders had standing to sue for the company.
Tamara Hauge, representing the bankrupt company, said the Soter Family brought the suit because Styler would not sue herself.
Styler conspired with the homeowners, Hauge alleged, "by allowing the property to be sold at a below-market price" and by allowing the reorganization bankruptcy to be converted into a foreclosure bankruptcy.
Those issues, Allen said, should have been brought up during the bankruptcy proceedings or on appeal. The conversion issue was appealed to Utah's U.S. District Court, which upheld the decision.
Kinghorn called the suit "really a complaint by the plaintiff about the administration of the bankruptcy court."
But Hauge said it was "a new issue" to protect the debtor from being "deprived of the fair market value" of the water company. Summit Park Water, she said, still was trying to negotiate a sale of the company to a third party.
Hauge also said, "I don't know who was involved or who was not" in the alleged conspiracy, and that "probably not all 320 defendants were involved," but they all had been sued to determine the truth.
Allen said, however, he was "concerned about the propriety" of such action and said he will "determine later whether any rules of this court were violated."