The opinion
ACCEPTED
03-13-00855-CV
8058852
THIRD COURT OF APPEALS
AUSTIN, TEXAS
12/2/2015 4:03:19 PM
JEFFREY D. KYLE
CLERK
No. 03-13-00855-CV
FILED IN
3rd COURT OF APPEALS
IN THE AUSTIN, TEXAS
COURT OF APPEALS FOR THE 12/2/2015 4:03:19 PM
THIRD CIRCUIT JEFFREY D. KYLE
Clerk
AT AUSTIN
KENNETH LOBELL
Appellant
v.
CAPITAL TRANSPORT, LLC
Appellee
ON APPEAL FROM THE 146™ DISTRICT COURT
OF BELL COUNTY, TEXAS
MOTION TO SUPPLEMENT RECORD
WONDERLY & PEPPER, P.C.
Matthew L. Pepper
State Bar No. 24066817
25211 Grogan's Mill Rd., Suite 450
The Woodlands, Texas 77380
(281) 367-2266
(281) 292-6072 (Fax)
ATTORNEYS FOR APPELLANT,
KENNETH LOBELL
NO. 03-13-00855-CV
IN THE
COURT OF APPEALS FOR THE
THIRD CIRCUIT
AT AUSTIN
KENNETH LOBELL
Appellant
CAPITAL TRANSPORT
Appellee
ON APPEAL FROM THE 146Tu DISTRICT COURT
OF BELL COUNTY. TEXAS
BRIEF FOR APPELLANT
KENNETH LOBELL
TO THE COURT OF APPEALS:
The Appellant's Special Appearance for lack of personal jurisdiction was
overruled by the Trial Court without any evidence that Appellant Kenneth Lobell,
submitted himself to the jurisdiction of Texas. Appellees could show no regular or
systematic contacts or purposeful availment that Mr. Lobell or his corporations made
with the state of Texas. All of the corporate defendants were dismissed. The same
should be true of Appellant Mr. Lobell. At all times pertinent to this case he was
acting as a principal for his corporations who have already been dismissed. The was
no evidence submitted by the Appellees that Mr. Lobell was the alter ego of the other.
Accordingly, the Trial Court's ruling on Mr. Lobell's special appearance for lack of
personal jurisdiction overtuned and Appellant be dismissed.
At oral argument of this matter on October 22, 2015, in Burton, Texas, the
panel expressed interest in seeing the actual transcript of the proceeding in the North
Dakota Federal Court in order to help them understand the facts of the case at bar.
To that end appellant, Kenneth Lobell, desires to supplement the record so that the
panel may have the benefit of the sworn record (Exhibit "A") in that matter at their
disposal.
Accordingly, Appellant suggests that by supplementing the record by reviewing
the sworn testimony from the North Dakota Federal Court proceedings the
supplementing materials will help the Court recognize that Mr. Lobell's special
appearance for lack of jurisdiction should be maintained and the Trial Court's
decision on his special appearance should be reversed.
PRAYER
For the reasons stated above, Appellant, Kenneth Lobell respectfully prays that
this Court grant this Motion to Supplement the record and ultimately reverse the
judgment of the Trial Court and sustain his special Exception oflack of jurisdiction;
and, further, that this Court grant to Appellant, Kenneth Lobell, such other and fmiher
relief to which she may be justly entitled.
Respectfully Submitted,
BY: ~~~~~~--~--~~r---
Matthew L. Pepper
State Bar No. 24066817
25211 Grogan's Mill Rd., Suite 450
The Woodlands, Texas 773 80
(281) 367-2266 -
(281) 292-6072 (Facsimile)
ATTORNEYS FOR APPELLANT,
Kenneth Lobell
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing has
been forwarded to all parties and/or counsel of record by certified mai 1, return rece ·
requested, on this 2th day ofDecember, 2015.
CERTIFICATE OF COMPLIANCE
In accordance with Texas Rule of Appellate Procedure 10.1 (5) I hereby certify
that I conferred with opposing counsel and he opposes the Motion set forth herein and
objects to the introduction of the sworn testimony taken in the Federal urt
proceeding related to this matter.
FEB 0 t 2013
[]
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
NORTHWESTERN DIVISION
Kenneth H. Lobell, )
a/k/a/ Kenny Lobell, )
)
Plaintiff, )
)
vs. ) File No. 4:12-cv-156
)
capital Transport, LLC, )
capital oil Field services, )
and chad Denton, )
)
Defendants. )
TRANSCRIPT OF PROCEEDING
Taken at
united States courthouse
Bismarck, North Dakota
January 9, 2013
BEFORE THE HONORABLE DANIEL L. HOVLAND
-- UNITED STATES DISTRICT COURT JUDGE --
SANDRA E. EHRMANTRAUT
Certified Realtime Reporter
Bismarck, North Dakota
(701) 530·2337
APPEARANCES
MR. MATTHEW L. PEPPER
Attorney at Law
compass Bank Building
25211 Grogan's Mill Road, suite 450
The woodlands, Texas 77380
AND
MR. JORDON J. EVERT
Furuseth Law Firm, PC
612 Fourth Street East
P. 0. BOX 417
williston, North Dakota 58802-0417
AND
MR. SCOTT K. PORSBERG
smith, Bakke & oppegard
116 North Second Street
P. 0. Box 460
Bismarck, North Dakota 58502-0460
FOR THE PLAINTIFF
MR. STEPHEN R. COCHELL
The cochell Law Firm, P.C.
7026 old Katy Road, suite 259
Houston, Texas 77096
AND
MR. CHRISTOPHER J. NYHUS
MR. BENJAMIN WARD KEUP
Pearce & Durick
314 East Thayer Avenue
P. o. Box 400
Bismarck, North Dakota 58502-0400
FOR THE DEFENDANTS
2
PLAINTIFF'S WITNESSES
Page No.
Kenneth Lobell
Direct Examination by Mr. Pepper 9
Cross-Examination by Mr. cochell 36
Redirect Examination by Mr. Pepper 85
Recross-Examination by Mr. Cochell 86
Walter Morales
Direct Examination by Mr. Pepper 88
Cross-Examination by Mr. Cochell 92
Redirect Examination by Mr. Pepper 100
Chad Denton
Direct Examination by Mr. Pepper 101
Cross-Examination by Mr. cochell 126
Examination by The Court 144
Recross-Examination by Mr. Cochell 146
Redirect Examination by Mr. Pepper 148
Randy Baker
Direct Examination by Mr. Pepper 152
Cross-Examination by Mr. Cochell 158
Redirect Examination by Mr. Pepper 187
Recross-Examination by Mr. Cochell 189
Myer stabi nski
Direct Examination by Mr. Pepper 191
Cross-Examination by Mr. cochell 196
Redirect Examination by Mr. Pepper 203
Recross-Examination by Mr. Cochell 204
Redirect Examination by Mr. Pepper 205
DEFENSE WITNESS
chad Hansen
Direct Examination by Mr. Cochell 206
cross-Examination by Mr. Pepper 225
Redirect Examination by Mr. Cochell 231
3
PLAINTIFF'S EXHIBITS
No. Description offered Received
1 Complaint and Notice of Lis Pendens
from Williams County, North Dakota,
dated October 18, 2012 (10 pages) 27 27
2 warranty Deed dated 9/27/11 (2 pages) 12 12
3 williston Herald publication, Talkin'
the Bakken, dated April 2012 10 10
4 weekly Draws (2 pages) 13 15
) Cory of rhPrk from Willi~m R~kPr TO
Capital Transport dated 8/2/11 for
$61,385.62 22 22
6 Plaintiffs' original Pet1t1on and
Request for Temporary and Injunctive
Relief filed in Bell county, Texas,
(35 pages) 104 105
7 Plaintiffs' First Amended original
Petition and Request for Temporary
and Iniunctive Relief in Bell County,
Texas,· filed 10/1/12 114 114
8 Form 205, Certificate of Formation,
Limited Liability company for capital
oil Field services, LLC, state of
Texas (2 pages) 117 117
9 Uniform Offer to Purchase dated May 9,
2011, from capital Riggers Lodge to
Mark schmidt 104 105
4
DEFENDANTS' EXHIBITS
No. Description offered Received
51 E-mail dated 7/11/11 attaching Capital
Lodging Investment Packet (25 pages) SO 51
52 E-mail dated 7/11/11 attaching capital
Lodging Proposal (7 pages) 51 52
53 E-mails dated December 2012 and unsigned
Affidavit of chad Hansen (12 pages) 72 72
54 Williston Herald article dated 10/17/11 140 140
55 Affidavit of Randy Baker dated 11/14/12 170 170
58 E-mail dated 7/25/11 from Randy Baker
(2 pages) 170 170
59 E-mail dated 10/16/11 from chad Hansen
to Rick watson with attached letter to
N.D. Dept. of Health (2 pages) 177 177
60 Responses to original Pet1t1on and
Request for Temporary & Injunctive
Relief filed 7/9/12 188 189
61 Affidavit of Myer Buster Stabinski
dated 11/14/12 (2 pages) 206 206
62 capital Transport Statement of Work 206 206
63 E-mails dated December 2012 and unsigned
Affidavit of Chad Hansen (12 pages) 223 224
5
1 (The above-entitled matter came before the Court, The
2 Honorable Daniel L. Hovland, United States District Court
3 Judge, presiding, commencing at 10:03 a.m., Wednesday, January
4 9, 2013, in the United States Courthouse, Bismarck, North
5 Dakota; with counsel appearing on behalf of the respective
6 parties as hereinbefore indicated. The following proceedings
7 were had and made of record in open court:)
8
9 THE COURT: Good morning. We will open the record in
10 the case entitled United States -- or, I'm sorry, Kenneth
11 Lobell versus Capital Transport, eta/. I'm used to opening
12 the record in criminal cases. I would ask that counsel who are
13 here, along with those seated with them at counsel table, first
14 identify themselves for the record. We'll start with the
15 plaintiffs.
16 MR. EVERT: Thank you, Your Honor. Jordon Evert, and
1 7 would you prefer that \"Je remain seated so vve --
~'
18 THE COURT: Whatever you're most comfortable with.
19 It doesn't matter.
20 MR. EVERT: Okay. Thank you.
21 MR. PEPPER: Your Honor, Matthew Pepper on behalf of
22 the plaintiff, Kenneth Lobell.
23 MR. PORSBERG: And Scott Porsberg on behalf of the
24 plaintiff, Mr. Lobell.
25 THE COURT: And Mr. Lobell, that is --
6
1 MR. LOBELL: Kenneth Lobell.
2 THE COURT: Okay. And then we'll start with the
3 defendants.
4 MR. COCHELL: Yes, sir. Good morning, Your Honor.
5 Stephen Cochell appearing on behalf of Mr. Denton.
6 MR. DENTON: Chad Denton.
7 MR. NYHUS: Your Honor, I'm Chris Nyhus from Pearce
8 and Durick, local counsel for Mr. Denton, and I'd like to
9 introduce Ben Keup, K-E-U-P. He's an attorney at our firm, and
10 maybe after the proceedings are over, we would move his
11 admission into federal court.
12 THE COURT: Oh, okay. Very well. Well, welcome to
13 all of you and particularly the out-of-state counsel that are
14 here. This is scheduled as a hearing on a motion for a
15 temporary injunction and cancellation of a lis pendens filed on
16 November 15,2012. I have reviewed all ofthe pleadings and
17 submissions of the parties before today. We had a telephone
18 conversation last week about the scope of this hearing. The
19 plaintiffs certainly have the burden of presenting evidence,
20 first of all, to support their request for injunctive relief
21 and cancellation of lis pendens, so we'll start with the
22 plaintiffs.
23 MR. PEPPER: Thank you, Your Honor. Your Honor, we
24 begin our case and, first of all, I wanted to ask if Your Honor
25 would like to have a beginning oral argument, or would you like
7
1 us to just simply--
2 THE COURT: I don't really need it, but if you want
3 to provide a short summary, you're more than welcome to do so.
4 MR. PEPPER: Your Honor, at this point I think we'll
5 just proceed.
6 THE COURT: Okay.
7 MR. PEPPER: Your Honor, I call to the stand
8 Mr. Kenneth Lobell.
9 MR. COCHELL: Your Honor, we request sequestration of
10 the witnesses who are here for this hearing.
11 THE COURT: Sequestration in a civil proceeding?
12 MR. COCHELL: That they be excluded from the
13 courtroom during--
14 THE COURT: No, I understand. I know what
15 sequestration is, but it's rather unusual in connection with a
16 motion for preliminary injunctive relief at this early stage,
17 h11t I'll nt"::lnt- tho
~1'-4.11\,.
lo..JY\,. 1 I I \,.11'-
tvtn:tinn
IIIV\.IVIIo
18 MR. COCHELL: Thank you, Your Honor. That means the
19 witnesses who are in the courtroom need to be outside the
20 courtroom until they're called as witnesses in the case. Thank
21 you.
22 KENNETH LOBELL,
23 having been first duly sworn, was examined and testified as
24 follows:
25
8
1 DIRECT EXAMINATION
2 BY MR. PEPPER:
3 Q. Mr. Lobell, could you please state your name and address
4 for the record?
5 A. It's Kenneth Lobell, 473 Walnut, New Orleans, 70118.
6 Q. Mr. Lobell, can you give the Court a brief idea of what
7 the man camp up in Tioga is?
8 A. It's one of the largest, if not the largest man camp. We
9 house anywhere from 1, 700 to maybe right under 2,000. We feed
10 them. We house them. It's temporary stays, long stays for oil
11 field workers.
12 MR. PEPPER: Your Honor, may I approach?
13 THE COURT: Certainly, and you don't need to ask
14 permission to do so in this case.
15 MR. PEPPER: Just good manners, Your Honor.
16 THE COURT: Yep, absolutely.
17 Q. (MR. PEPPER CONTINUING) Mr. Lobell, I'm going to show you
18 a document which we have identified as P-3. It's a magazine
19 that's published by the Williston Herald. Do you recognize
20 this magazine?
21 A. I do.
22 Q. Now, does this magazine describe in detail some of the
23 general aspects that you were describing about the man camp?
24 A. It does. They did an issue on us just because we're a
25 little bit different than most man camps. We provide services
9
1 as if we wanted to be there. They got individual housing, a
2 little bit higher grade of food and things of that nature, so
3 they did a story on us because of the size and the quality.
4 Q. And is this a widely published newspaper?
5 A. It's pretty-- it's all through this area, North Dakota.
6 MR. PEPPER: Your Honor, in connection with the
7 witness's testimony, I'd like to offer and file, introduce into
8 evidence P-3, which is the magazine article regarding the man
9 camp that describes it in detail.
10 MR. COCHELL: No objection, Your Honor.
11 THE COURT: Exhibit P-3 will be received.
12 MR. COCHELL: Your Honor, I am having difficulty
13 hearing both the witness and counsel when he's-- when counsel
14 in particular, when he's up at the podium, so if perhaps
15 counsel could speak a little louder, that would help.
16 MR. PEPPER: Sure.
17 MR. COCHELL: Nobody has ever made that complaint
18 about me.
19 THE COURT: All right.
20 THE WITNESS: Can you hear me okay?
21 MR. COCHELL: Or just speak a little closer in the
22 mike.
23 THE COURT: Just pull that microphone as close as you
24 can, please.
25 MR. COCHELL: Thank you.
10
1 Q. (MR. PEPPER CONTINUING) Mr. Lobell, when did you sign a
2 purchase agreement to buy the property on which the man camp
3 sits?
4 A. july 25, 2011.
5 Q. And ultimately did you buy the property and receive a
6 warranty deed?
7 A. I did.
8 Q. Before you purchased the property, did you have a title
9 search done on the property?
10 A. The law firm did that, did the title work.
11 Q. And did Mr. Denton or any other entity show up in the
12 search as having ownership interest in the property other than
13 the sellers from whom you purchased the property?
14 A. No.
15 MR. COCHELL: Objection, calls for hearsay.
16 THE COURT: Overruled.
17 Q. (MR. PEPPER CONTINUING) Your answer?
18 A. No, the gentleman that had it, had it for a hundred -- a
19 hundred years. The same family had it. It was farmland.
20 Q. I'm going to show you what we have marked as Exhibit P-2.
21 Do you recognize this document?
22 A. I do. It's a Warranty Deed with my-- my Warranty Deed.
23 Q. I was going to ask, is that the Warranty Deed that you
24 received from the sellers?
25 A. Yes, sir.
11
1 MR. PEPPER: Okay. Your Honor, in connection with
2 · the witness's testimony, I'd like to offer and file and
3 introduce into evidence Exhibit P-2, which is the Warranty Deed
4 for the property on which the man camp sits.
5 MR. COCHELL: No objection, Your Honor.
6 THE COURT: Exhibit P-2 is received.
7 MR. PEPPER: Your Honor, would you like me to start
8 giving these exhibits to the clerk?
9 THE COURT: Sure.
10 Q. (MR. PEPPER CONTINUING) Mr. Lobell, after you bought the
11 property, did you --what was the property-- what did the
12 property look like when you bought it?
13 A. just barren farmland, no water to it, no sewer to it, no
14 electric to it.
15 Q. Was there any-- any other access to water, sewer or
16 electric near it?
17 A. No, it vvas coming, but it vvasn't near.
18 Q. So after you bought the property, did you make
19 improvements to the property?
20 A. Absolutely.
21 Q. What did you have to do to make this site ready?
22 A. We basically had to build a small city. We had to put
23 sewer, we had to put-- well, we ran off of generators for
24 upwards of six months. We put a well, and then we put a dome,
25 which we fed and did the laundry in the --for all the clients,
12
1 and then we basically put individual module homes.
2 Q. And in connection with your operation of the business, did
3 you keep records of the money that you spent on the
4 improvements?
5 A. Every day.
6 Q. And did you keep a summary of-- an ongoing summary of the
7 improvements that you made to the property?
8 A. Every week we had a weekly draw that we -- it would get
9 sent down from Tioga to me. The bank in New Orleans would wire
10 the money to Tioga to pay the bills.
11 Q. Okay. And did you keep a written summary of those --
12 A. I did.
13 Q. --bills that were paid?
14 A. I did.
15 Q. Mr. Lobell, I'm going to show you an exhibit, which is
16 marked as P-4, which is a copy of the weekly ledger that you
17 had testified about. Now, you testified that you kept these
18 records in the normal course of business, is that correct?
19 A. Correct. These summaries are taken off of the draw sheets
20 sent to me by Tioga every week.
21 Q. Okay.
22 A. Now, this is only until, I think-- it's only until the
23 first week of November of '12. There's still more.
24 MR. PEPPER: Your Honor, in connection with the
25 witness's testimony, I'd like to offer and file and introduce
13
1 into evidence P-4, which is a copy of the monthly ledger-- or
2 the weekly ledger report in summary fashion.
3 MR. COCHELL: Your Honor, we just want to ask a few
4 questions on voir dire on this particular document.
5 THE COURT: You may inquire.
6 MR. COCHELL: Mr. Lobell, who actually keeps the
7 records of weekly draws in your organization?
8 THE WITNESS: Well, the original draws come to me.
9 keep them, and then we have a balance-- we have -- I have an
10 accountant and Walter Morales has an accounting group, so we
11 have two groups keeping them.
12 MR. COCHELL: Okay. And who actually generated this
13 document that's marked as Exhibit 4?
14 THE WITNESS: I did.
15 MR. COCHELL: You did?
16 THE WITNESS: I did.
1 '7
..L I MR. COCI---IELL: Okay. So you got on the con1puter and
18 you somehow put it together, is that correct, sir?
19 THE WITNESS: What I did, I took the weekly draw and
20 I took-- at the bottom of the draw every week, that's the
21 exact number I sent to Tioga that we had to pay, whether we
22 bought amenities or for services rendered or we paid employees.
23 MR. COCHELL: So this is your personal summary of the
24 draws and not something that's generated-- this is not
25 generated on a weekly basis, this summary, is that correct,
14
1 sir?
2 THE WITNESS: No. No, on a weekly basis you'll have
3 a whole sheet of everybody that's paid out of that number.
4 MR. COCHELL: We object to the admission of four.
5 It's not a proper summary. It's not kept in the ordinary
6 course of business. We haven't seen the underlying documents.
7 THE COURT: The objection is noted, overruled.
8 Exhibit P-4 will be received.
9 Q. (MR. PEPPER CONTINUING) All right. Mr. Lobell, looking
10 at page 1 of Exhibit 4, let's start with the first week,
11 7/22/11, and the second week, 7/29/11. What was going on in
12 that period in july?
13 A. I think that was-- it was basically monies put into that
14 to pay Mr. Stabinski and Randy Baker and, I think, Mr. Hansen.
15 That was just some money upfront. When they first came to me,
16 they had no money, and so that was the money that we had put in
17 just to support them to start the project.
18 Q. How far along did you keep putting money into this project
19 before you started to see any income coming from the project?
20 A. I think it's at least-- I think we had our first tenants
21 move in sometime in late February.
22 Q. So the entries for july, August, September, October,
23 November and December of 2011 and then probably january and
24 February were monies that were just out-of-pocket, without any
25 money coming in?
15
1 A. Absolutely. We had some problems because everything just
2 up there is a whole different animal. You couldn't get the
3 subs. I think everybody went into it thinking that, okay,
4 everybody could do what they said they could do, but at that
5 point it was just-- the subs would quit. They would basically
6 charge you too much. Again, we had trouble getting some
7 equipment. You had to run off of generators.
8 The housing that was particularly picked in the very
9 beginning was not suitable for the climate, so we had to go
10 back and revamp. Mr. Baker had to go up to Indiana and some
11 other places to redesign all the houses. It went from like
12 $60,000 a home to 140,000 a home, so it was just-- it was a
13 learning curve for everybody. I've never been in this business
14 and nor have they been in the business, so we thought we would
15 just build it no problem, but it was just-- it got out of
16 hand.
17 THE COURT: So vvho is rv1r. Baker?
18 THE WITNESS: Mr. Baker, Your Honor, is the gentleman
19 who brought me the deal with Mr. Stabinski, Myer --Randy Baker
20 and Myer Stabinski. I think I saw that gentleman on July 15th,
21 actually. Mr. Stabinski, Myer Stabinski, worked with myself
22 with the BP claim in New Orleans. I was friends with him. He
23 called me in sometime late June, asked if I wanted to put up
24 $6 million into the project. And I immediately told him-- I
25 said, "I won't lend you the money, Myer," I said, "because, you
16
1 know, I won't do that. I just don't do that in my profession."
2 And he said, "Will you just look at the deal because we're
3 going to lose the property?" And I said, "Yes, I would." And
4 he said, "I'm going to send Mr. Baker down to talk to you about
5 the project."
6 THE COURT: All right.
7 MR. PEPPER: And, Your Honor, just as matter of
8 housekeeping at this point, I think a couple of people have
9 filed into the courtroom that may be witnesses. So that we
10 don't have a violation of the sequestration rule, I'm going to
11 ask that some of them identify themselves so they can be seated
12 outside.
13 THE COURT: Well, both counsel should know who's
14 going to be called as witnesses and what those people look
15 like, so I would ask that you inform those people that you
16 intend to call as witnesses, that they need to remain outside
17 the courtroom until they're called.
18 MR. PEPPER: Is there a Walter Morales? That would
19 be the only one that I wasn't sure. I had never seen
20 Mr. Morales.
21 THE COURT: All right.
22 Q. (MR. PEPPER CONTINUING) All right. Mr. Lobell, getting
23 back to those monies that were initially put in to build the
24 camp out of-- out of the vast prairie, did Mr. Denton ever
25 contribute any money to the sums that you've spent here?
17
1 A. Absolutely not.
2 Q. When did you first talk to Mr. Denton?
3 A. I think Mr. Denton --first of all, you've got to
4 understand I didn't even know who Mr. Denton was, and I got a
5 call. He was -- introduced himself, I think, on july -- I want
6 to say 23rd. I think he knows better than I do. He introduced
7 himself, that he could help with the camp because he had a
8 transportation company and he does trucking. And he wanted to
9 run the checking account and everything through his company and
10 he could help do that, and I said no. I said, "I'm opening up
11 new companies because I don't know who you are. I don't know
12 who Mr. Baker is. I know who Mr. Stabinski is." I said, "I've
13 opened up Capital Lodge and Capital Transport in my own name in
14 Louisiana." And I said, 'Thank you, and you know, if I need
15 your services, I would call you."
16 Q. Prior to that time, were you aware of any relationship
17 vvith rv1r. Denton and rv1i. Baker?
18 A. I knew of a person that was involved because when Randy
19 Baker came to me, he said there was a gentleman who was
20 supposed to put up the money for the camp and he was going to
21 buy-- he was going to purchase the land, and he didn't. In
22 fact, when I was talking to Mr. Baker, that day their contract
23 expired and that's why they were nervous, that they thought
24 they would lose the land.
25 And they -- Mr. Baker introduced himself as he did
18
1 the whole thing, he did the budget, he did the project, he did
2 the layout. He's in construction business. He was the
3 gentleman that told me that I only had to put up $6 million.
4 And I said, "I think you're all going to be wrong, but, you
5 know, let's look at it." I said, "I don't want any partners.
6 I will pay you all the salaries, and if it works out, we'll
7 work out something if you're all right." But I said, "You
8 don't have a job, you don't have a job, so I don't know if you
9 all know how to do a man camp, if you're all qualified."
10 Q. Did Mr. Denton tell you that Mr. Baker owed him some
.11 money?
12 A. Well, in a roundabout way. The first introduction to Mr.
13 Denton was to tell me that I had to watch the guys that came to
14 see me. He said that they work for him and they were not of
15 the -- not very ethical and that they didn't know what they
16 were doing, so I said, "Chad, I don't understand that." I
17 said, "I know Myer. I never met Mr. Baker, but if he is, you
18 know, the proof is going to be in the pudding because I own the
19 company. If he doesn't do what he's supposed to do, then he
20 won't have a job." I then met Mr. Baker-- I mean Mr. Denton
21 again. I think he had went up to --when he found out that I
22 was going to do the deal and I had no partners -- and, Judge,
23 tell me if I'm talking -- I'm just trying to set a scenario, so
24 if you don't want me to say anything, just tell me.
25 MR. COCHELL: I'm still having trouble hearing you.
19
1 Could you maybe just speak a little closer to the microphone,
2 sir?
3 THE WITNESS: Sure. I'm from New Orleans, so that
4 might be my accent.
5 MR. COCHELL: Well --
6 THE WITNESS: I understand.
7 MR. COCHELL: -- I've heard a few Louisiana accents
8 before.
9 THE WITNESS: I got you. No, what happened was Mr.
10 Denton had then-- after I spoke to him, going up to North
11 Dakota to-- at that point saying to ask Mr. Baker and Mr.
12 Stabinski and Mr. Hansen to sign partnership papers, and he
13 said he was a partner with them. I said, "If you're a partner
14 with them, Chad, I don't know that." I said, "I've never met
15 you, so I'm only dealing with those people." He then went up
16 to North Dakota and insisted they sign partnership papers.
"1 'I td ..... :+L... ...... .,. 1\A.,. U..-..n..- ...... .,... 1\11..- D-..1(,....,. ,........, 1\11.,. C-t-..-.hi ...... .-1.,.; ...,.,...,. ... ,... ..... ......1 + ...... ,.I,.... it-
..L / l'llt::llllt::l lVII. IICll.:>t::ll, lVII. UCll t l Ul lVII. JlClUIII;:)~I Cl~IC:C:U \.V UU llo
18 He then got mad. Then he called me, said, "Kenny, I'd like to
19 have lunch with you." I said, "Well, okay. I have no problem
20 with that, Chad. Come see me."
21 So he and his girlfriend came down. We had lunch.
22 He proceeded to say again how the guys were no good and that
23 you had to watch them and that they owed him money. I said,
24 "Chad, I can assure you, ifthey owe you money, I'll ask them
25 -- I'll reimburse you money. I'll lend them the money."
20
1 Well, I called Mr. Baker. He said they did owe him
2 about $60,000. I said, "Randy, if that's the case, I'm going
3 to lend you the money because, you know, if this gentleman put
4 up money for you all and you all owe him money, I want you to
5 pay him back." Immediately I sent him, Mr. Baker, $61,000. He
6 wrote a check to Mr. Denton, and then that's the last I really
7 heard of Mr. Denton until the lawsuit.
8 THE COURT: So you mentioned a Mr. Hansen for the
9 first time. Who's he?
10 THE WITNESS: Well, he's another gentleman I never
11 met, but what happened, when Mr. Baker came to me with Mr.
12 Stabinski, they said they had another gentleman that was
13 involved with the camp, and went on paying him $10,000 a month.
14 Well, I thought I was lending him $10,000 a month, but they
15 wanted $1 0,000 a month as salaries. I told Mr. Baker and
16 Stabinski, I said, "I'll pay you all. I'm going to watch this
17 whole thing from an outsider looking in. I don't know who
18 anybody is in here, but if you all are coming to me with a deal
19 and you say this guy is important, then I'll do it." Mr.
20 Hansen worked with Mr. Baker. I've only talked to Mr. Hansen
21 twice in my life. And so Mr. Hansen was part of their little
22 partnership.
23 Whatever Chad Denton and Myer Stabinski and Mr. Baker
24 and Hansen had, they were trying to form some --they were
25 moving oil rigs, and this whole deal came about because
21
1 Mr. Baker and Mr. Stabinski was going six miles -- I mean,
2 hours a day, driving three hours there and three hours back,
3 and they came up with the idea. Mr. Denton was having to move
4 oil rigs, but they needed somewhere to stay. It was
5 Mr. Baker's idea to get the man camp, so he went and tried to
6 find everything. And then Mr. Denton came in, said he was
7 going to put the money up for the --for those three to form a
8 partnership.
9 Q. (MR. PEPPER CONTINUING) And so in conjunction with your
10 discussion with Mr. Denton, did you forward the money to
11 Capital Lodging and have them -- or have Randy Baker issue a
12 check to him?
13 A. Absolutely, the same week.
14 Q. Is this a copy of that check made out to Capital Transport
15 in the amount of $61 ,385.62?
16 A. Yes, and at the bottom it says "reimbursement."
17 ~JIR. PEPPER: Your Honor, in connection VJith the
18 witness's testimony, I'd like to offer and file, introduce into
19 evidence Exhibit 5, which is a copy of the check for the
20 reimbursement of Chad Denton through his entity, Capital
21 Transport.
22 MR. COCHELL: No objection, Your Honor.
23 THE COURT: Exhibit P-5 is received. So tell me
24 again, this is money paid to Mr. Baker, who owed 60 grand to
25 Mr. Denton.
22
1 THE WITNESS: Well, Your Honor, what happened --and
2 again, all this happened so fast. I had --you know, when I
3 looked at the deal on july 15th, I asked him when I had to make
4 the decision. He said, "Today." I said, "I have to make a
5 $6 million decision in ten minutes?'' He said, "Yeah." He
6 said, "What do you think?" I said, "I'm going to do it." He
7 said, "What?" I said, ''I'm going to do it." So I've done
8 things like this, you know, in the past.
9 But what happened, as far as the money goes, when Mr.
10 Denton, you know, again started saying that these gentlemen
11 owed him money, you know, for housing out there, for moving the
12 rigs and some other stuff, I didn't want any hard feelings with
13 anybody, and so I actually felt sorry for Mr. Denton, if he was
14 trying to do something out there and it didn't work.
15 Mr. Baker and them, if they owed the money for
16 whatever it is, living expenses or whatever they did, had to
17 do, and they confirmed it, I said, "I want to start a clean
18 slate here. I don't want any hard feelings with anybody. I'll
19 lend you all the money, and then I'll take it out of your
20 salaries." Because Mr. Denton seemed like a nice guy when I
21 met him with his girlfriend. So I said, "If you all owe this
22 gentleman money, let's pay him," so I put "reimbursement" on
23 the bottom. I had them put reimbursement for anything that
24 they did owe so there was no discrepancy on anything that--
25 who was who in this deal. You know, and --
23
1 THE COURT: So you meet a guy one time with his
2 girlfriend and talk about a project up in North Dakota, and
'
3 you're willing to send him 61,000 bucks just on a--
4 THE WITNESS: No, I asked Mr. Baker-- because I gave
5 him the money, I asked Randy Baker and Myer Stabinski, was he
6 --was he owed that money? And they said yes, and I just put
7 it in as part of the cost of doing business.
8 THE COURT: All right.
9 Q. (MR. PEPPER CONTINUING) And did Mr. Baker and Mr.
10 Stabinski pay you back?
11 A. In a roundabout way they're doing it now. I just take it
12 out from whatever they're going to get.
13 Q. So you've been taking it out of their salary from--
14 A. Not quite at this point because what happened is Mr.
15 Stabinski and Mr. Baker-- Myer still works on a full-time
16 basis. Mr. Baker works as a consultant because he got real bad
17 diabetes, so he's being paid as a consultant, so vve just--
18 we're going to work it out.
19 Q. Okay. And at that point did you think that you had
20 resolved any business dealings that Mr. Denton had with your
21 now consultants, Baker and Stabinski?
22 A. Well, personally I didn't think I had any dealings with
23 Mr. Denton at all because there was no partners. When I --
24 when I told Mr. Baker and Mr. Stabinski --there was no
25 partnership. There was no operating agreement. They were not
24
1 a part of this. If they could do what they said they could do,
2 we would talk about some sort of bonus, a split at the end of
3 the project because, again, I didn't know-- neither one of
4 these guys had a job, no money, and they didn't have any
5 profession. It was just an idea they had.
6 I've been in business in real estate for 30 years.
7 wasn't going to put $6 million, which I knew was probably going
8 to be more, for somebody just with an idea and a whim. And
9 they wanted SO percent of the deal. I said, "I'm not giving
10 any partnership any-- you know, any ownership to something and
11 it doesn't work. I'm stuck out in North Dakota. You all have
12 nothing to lose. You live in an apartment and you live in a
13 house that, you know, is-- you might not have." And they all
14 agreed, said, "We just want the opportunity to show you and to
15 work for you," because they had no money. They had no jobs.
16 Q. And getting into your experience in the real estate
17 business, is it typical when you buy a piece of property, to
18 put it in your name directly, and if so, why do you do that?
19 A. Well, I did this purposely because if I sold the company,
20 the land would be in my name. It could be a real estate play
21 where I could keep the land and lease the land too if somebody
22 wanted to buy Capital Lodge.
23 Q. And have you done this in the past with success?
24 A. Many times.
25 Q. When did you first find out about the filing of the notice
25
1 of lis pendens?
2 A. Well, I didn't know about the lis pendens, but the
3 lawsuits showed up about a year, or so, after Randy Baker told
4 me he was served with a lawsuit. I hadn't heard it from Mr.
5 Denton or anybody, you know, claiming he owned anything, and
6 all of a sudden he sues Mr. Baker. And then after that they
7 were trying to serve me, but I was out of town, and I saw
8 Mr. Baker's lawsuit.
9 But then I was trying to merge with my 10 percent
10 partners, with another gentleman out of New York, and they ran
11 an abstract on the property, so before we could get any monies
12 or sell any part of my ownership, the abstract showed that
13 there was a lis pendens, so two things happened. We tried to
14 get a $5 million line of credit that was approved, and they
15 found out about it right after the Moraleses found out about
16 it.
17 Q. Okay. And did you have an attorney in North Dakota file a
18 state court action to have the notice of lis pendens canceled?
19 A. I did, Mr. Evert.
20 Q. I'm going to show you, Mr. Lobell, a document identified
21 as Exhibit Number 1. Is this a copy of the lawsuit that you
22 had Mr. Evert file on your behalf?
23 A. I believe it is.
24 Q. In North Dakota state court?
25 A. I believe it is.
26
1 MR. PEPPER: Your Honor, in conjunction with the
2 witness's testimony, I offer and file and introduce into
3 evidence P-1, which is, I believe, already part of the official
4 record, but for purposes of this hearing, P-1, a copy of the
5 original North Dakota lawsuit to cancel the notice of lis
6 pendens.
7 MR. COCHELL: We have no objection, Your Honor.
8 THE COURT: P-1 is received.
9 Q. (MR. PEPPER CONTINUING) In this suit, Mr. Lobell, is it
10 true that you seek cancellation of the notice of lis pendens
11 and injunctive relief in the form of a temporary restraining
12 order?
13 A. Yes.
14 Q. How has Mr. Denton's filing of this lis pendens harmed
15 your ownership in the property?
16 A. Well, again, it's -- Mr. Morales just walked in, if you
17 need him to step out. Sorry, Your Honor.
18 Well, it just keeps harming it. We had, first of
19 all, a merger of $45 million that was-- that we have
20 affidavits to that effect that they said they absolutely could
21 not go any further unless the lis pendens was lifted. Then --
22 THE COURT: But what do you mean, merger of
23 $45 million?
24 THE WITNESS: Well, they were going to buy some of my
25 stock and input money. See, we're still building the camp. We
27
1 still had to put up backup generators for the winter. We had
2 amenities building that we were building, about a 10,000 square
3 foot amenities building. We had boot rooms, mud rooms around
4 the whole thing.
5 THE COURT: What?
6 THE WITNESS: Boot rooms, mud ··
7 THE COURT: Boot rooms.
8 THE WITNESS: Boot rooms, mud rooms, we had all this
9 in the ongoing -·every penny I've made-- I'm not taking a
10 dime out of this thing ··we've put back into the camp. We
11 haven't paid dividends. We haven't paid anything, so we knew
12 that this was an ongoing thing.
13 Hess Oil Company came to us and said, "We need more
14 rooms. Could you please do something?" We put Phase 3 in
15 effect. Well, putting Phase 3 in effect, they had a $5 million
16 line of credit, knowing it was taking that income to live
17 v IIIVIIlll;:),
... L.. ............. L... ... t... ..... .... l ........
l.IIIUU~II lii'C :liUV
. . . . . . . . . . . t... ... ••• ~-. ....... ~..... ...........
VVIJILII VVO.:>
~~. ............... """"L.. .........
I'IVVt:IIJUt::l,
r'\e--m'-e ....................... .
Ll \...t::l IU l,jQ.IIUQ.IY
18 and February with this $5 million line of credit. By taking
19 income and building out for Hess because they had to be in, I
20 want to say, by September or late August, we took every penny,
21 so we didn't have any cash flow. And so what happened, we had
22 the amenities building and all that, but I-- and then all of a
23 sudden the lis pendens came. The $5 million line of credit was
24 pulled because they couldn't take the land as collateral.
25 So now what it's done-- we had three blackouts,
28
1 complete blackouts for six hours, and we didn't have the backup
2 generators. We could only put the backup generator into the
3 dome. And we have a-- Your Honor, it's a dome, and if you
4 look at the picture, it's 70 feet wide by 20-some feet high by
5 300 feet long. Everybody has to go in the dome in emergencies
6 because that's the only thing we could do instead of putting in
7 a generator for the whole camp, so he's basically took any form
8 of refinance.
9 Even the First International Bank and Trust in
10 Watford has given us a line of credit, but they will not go any
11 further. We have 7 million. They were going to do-- we were
12 going to refinance the whole camp, but since this has happened,
13 I had two people that wanted to buy and merge that I've lost.
14 And I had financing, two-- my bank in New Orleans, First NBC,
15 had pulled a $5 million line of credit; and First International
16 Bank and Trust, I can't do anything until I get it lifted.
17 We're trying to do a $1 5 million refinance right now.
18 THE COURT: Fifteen, one-five?
19 THE WITNESS: Fifteen million, mm-hmm. We have
20 seven, and we're going to try to do the whole thing. And I
21 have a gentleman from New York that is trying to purchase it at
22 a reduced price because of the lis pendens, but I may have to
23 do it if we can't resolve some financing.
24 THE COURT: All right.
25 Q. (MR. PEPPER CONTINUING) And is it true, Mr. Lobell, that
29
1 all this financing requires your personal guarantee?
2 A. Every loan I have, I'm personally guaranteed on.
3 Q. And so as it's your personal guarantee, you have to put up
4 as collateral, property, not just here that's in your name, but
5 property wherever you have it that's in your name.
6 A. Because of the missed budget, the budget not being
7 correct, I now have my house up, company. I had to sell part
8 of another company. I had to bring a $1 0 million partner in to
9 buy some shares, and if I don't get the refinancing, I'm on
10 personally 10 million, 12 million -- I'm on $19 million of
11 personal debt between First International Bank, Fleetwood, and
12 the lines of credit I have in New Orleans.
13 Q. But you are-- despite all that, you're still committed to
14 the state of North Dakota to make sure that this project is a
15 success, that you're willing to take on another seven, or so,
16 million dollars?
17 A. Oh, yes, vve're still building. VJe can't stop really
18 because we have projects that are partially unfinished right
19 now.
20 Q. Has this lis pendens stopped your ability to grow the
21 camp, to fulfill the needs of the drillers seeking to house
22 workers?
23 A. We have Phase 1, 2, 3 and 5 completed. We have 4 that we
24 put the infrastructure. We paid about $500,000 in
25 infrastructure and electrical, but we can't put the homes in
30
1 Phase 4, which are another 500 men, 480 men, and the generators
2 and the amenities building and the mud rooms.
3 Q. And in your opinion, does this pose a threat of
4 irreparable harm if the defendants are not restrained from
5 further filing any lis pendens on your property?
6 MR. COCHELL: Objection, calls for legal conclusion.
7 THE COURT: Overruled.
8 THE WITNESS: Well, what it's done is that the
9 amenities building was promised. You got to understand, when
10 we first did this --and you can look in the ads, and even when
11 we did the advertising in the first part of doing this, we have
12 --we have a weight room. We have things. We had to put it
13 all into the dome because these guys are stir crazy. They have
14 nothing to do, so the pool tables, the little games and the
15 physical workout plant is inside where the guys eat because now
16 all we have is the building. I just got the rest of the money
17 to put a slab in the amenities building, but these guys
18 constantly ask, "Where is the amenities building?" And that's
19 all they're worried about.
20 What I'm more worried about is in the winter months,
21 when the power goes down and you have these guys sitting in
22 these-- now, nobody really claimed-- you know, filed
23 anything, but the head of each agency, like the Hess personnel
24 calls and say, "What's going on? You know, what happened with
25 the power?" So it's a little embarrassing that you got someone
31
1 --you know, it's 12 below zero and they're in there and
2 they're all going to their cars to start their cars to be warm.
3 Now, they could go-- it's not life-threatening in a way it
4 would kill them because they could go in the dome, but it's
5 actually halted the expansion.
6 And things were promised to these people that are
7 paying $11 5 a day for these guys, you know, expecting a workout
8 facility and, you know, TVs and all this kind of stuff, but
9 because we have the other services -- you know, we have
10 separate cabins for them and better food and we take care of
11 them. They really want to stay there. They're not going to
12 leave for the amenities building, but when you promise them
13 something, don't think for one minute the head of these Hesses
14 are not asking whether it's coming.
15 Q. So if a restraining order is not granted, it will affect
16 the goodwill of your business in a negative manner, wouldn't
17 it?
18 A. Well, it would be a definite negative manner as far as the
19 clients go, but there's a lot more serious problem with the
20 money, to keep the cash flow going because, again, you're in
21 the slow months, and without the money here --we're funding
22 the camp besides still building. Everybody's leases ran up,
23 Your Honor, November 31st. We had like 1 ,200 people in there.
24 When November 31st came, Hess pulled out--
25 THE COURT: November 30th?
32
1 THE WITNESS: 30th. Okay, 30th. The end of November
2 came. Everybody stops. Now, they'll keep skeleton crews in
3 there, but they won't commit to any long-term leases because if
4 it gets too cold, they still got to pay for that room. So what
5 they do, they might keep 200 people there, but they'll go week
6 to week, month to month, so you have no income and no-- you
7 can't have --you can't project your cash flow. So by stopping
8 us with all these loans, it's actually-- it's stifled the
9 camp. It's basically strapping us because we can't-- we had
10 to stop building to a minimal. We've worked out deals with the
11 construction people because they know we pay, so I asked some
12 of the guys to give us a favor.
13 But if this lis pendens is not lifted, it could-- it
14 could actually throw us into a Chapter 11. We would never,
15 ever not pay anybody, and they know this. I've already talked
16 to Sodexo, the big national company that runs our camp. I
17 talked to Fleetwood Homes. I said, "We may have to do it.
18 We're going to protect you all in this, but we just may need a
19 little help." And so if we can make it through maybe the end
20 of March --the summer it starts picking up again --we're
21 going to be fine, but we got that little time frame that's very
22 crucial.
23 THE COURT: So when you say everybody's leases have
24 expired, you're talking about Amerada Hess and who else?
25 THE WITNESS: Well, we have Hess. We have-- Sanjel
33
1 has -- they move out and they come back. We have Sanjel. We
2 have-- we had Nabors. We had Superior. We had-- Reliance
3 has come in. The pipeline company has come in and kind of
4 saved us a little bit. We have Woods. We have-- well,
5 Halliburton moved out and they're coming back in March because
6 they go down --everybody goes down to skeleton crews, so they
7 go to their own camps, and then they come back into our area.
8 They'll inconvenience the people just because they don't want
9 to-- because you figure if somebody puts in a hundred people,
10 it's millions of dollars. I mean, it's -- it might be a
11 million dollars a month for these people and -- or three
12 million, so they don't want to commit to me, and I understand
13 that. So what we made a deal with them is, listen, you can go
14 week to week, you go day-to-day, don't sign anything. And
15 because we did that and some of the competitors like Target
16 didn't work with them like that, they actually moved over to
17 our camp because they--
18 THE COURT: Competitors like?
19 THE WITNESS: Target Logistics.
20 THE COURT: Target Logistics. Okay.
21 THE WITNESS: So we try to treat people like-- not
22 so much like a business, but they're helping us and we're
23 helping them.
24 Q. (MR. PEPPER CONTINUING) So, Mr. Lobell, it's your
25 testimony that because of the cyclical nature of your business,
34
1 that a line of credit is essential.
2 A. Well, absolutely. Again, this is my first time I've ever
3 done a man camp, so I don't know how it's supposed to be, but
4 all I do know is that when I first did it with Mr. Baker, he
5 alluded that in the winter months you have more people because
6 they couldn't keep the people out in the snow. And this is one
7 of the things I was trying to tell Mr. Stabinski and Mr. Baker
8 when they did this. I said, "Look, you all never built a man
9 camp. I've never built a man camp, so nobody knows what's
10 going to happen here."
11 So what does happen, instead of them doubling the
12 crews in the winter-- because they said they're going to work
13 less hours, they don't want to shut the well down. That's not
14 true at all. They shut the well down and they work a skeleton
15 crew, and they put minimal people out in the winter.
16 Q. To this day, to your knowledge, has Chad Denton ever shown
17 you a written document indicating that he has a claim on title
18 to the property that you bought for the man camp?
19 A. There's no way he could have anything written from me.
20 Q. Do you think the public and the oil exploration industry
21 would be better served if Mr. Denton or any of his entities
22 would be restrained from interfering with your property?
23 A. They would be, and I sure would be too.
24 MR. PEPPER: Your Honor, we tender the witness.
25 THE COURT: You may inquire.
35
1 MR. COCHELL: Yes, Your Honor.
2 CROSS-EXAMINATION
3 BY MR. COCHELL:
4 Q. Mr. Lobell, if the lis pendens is lifted, that still
5 doesn't solve the fact that you've been sued in Texas for
6 fraud, breach of fiduciary duty, inducing Mr. Stabinski, Hansen
7 and Mr. Baker for breaching their fiduciary duties to
8 Mr. Baker, isn't that right, sir?
9 A. Well, I say the lawsuits, they have put all the
10 allegations. You all are doing that. I never did fraud.
11 Q. I'm sorry?
12 A. I said that's you all's allegations on the fraud. That's
13 the lawsuits you're claiming, but, yes, the lawsuit will still
14 stay in place.
15 Q. And you expressed surprise that this lis pendens showed
16 up, is that correct, sir?
17 A. Absolutely.
18 Q. Okay. And with respect to your surprise, you remember the
19 process servers that tried to serve you with this lawsuit over
20 a year ago? You remember them, don't you, sir?
21 A. No, I don't know if it was a year ago. I travel and do
22 other things in Biloxi, Mississippi, and I told the processor
23 server to meet me there one day, and I didn't go. That was the
24 only time he was going to meet me, and so if he was supposed to
25 be there-- and he never called back the second time.
36
1 Q. So you don't recall the process server calling you back a
2 second time and arranging to meet you, and you failed to show
3 that time, sir?
4 MR. PEPPER: Objection, Your Honor--
5 THE WITNESS: He may have.
6 MR. PEPPER: -- relevancy.
7 THE WITNESS: I don't remember.
8 THE COURT: Overruled.
9 Q. (MR. COCHELL CONTINUING) He may have, but sitting here
10 you just don't recall?
11 A. Mm-hmm.
12 Q. Fair enough. And do you remember the e-mail that I sent
13 you asking you to waive service of the citation and lawsuit
14 approximately three or four months ago? Do you remember that,
15 sir?
16 A. I do remember that.
17 Q. You do?
18 A. Mm-hmm.
19 Q. Okay.
20 THE COURT: What does that-- what does it mean,
21 service of the citation? That's a summons?
22 MR. COCHELL: It's equivalent of a summons under
23 Texas -- and it's accompanied with the lawsuit.
24 Q. (MR. COCHELL CONTINUING) So you didn't execute that
25 waiver of summons, is that correct-- waiver of citation?
37
1 A. No, actually, I didn't.
2 Q. You did not?
3 A. I did not.
4 Q. Okay. And you had been told after either Mr. Baker or
5 Mr. Hansen were served, that there was a lawsuit pending in
6 Texas, is that correct?
7 A. Well, I knew there was. Mr. Baker called me.
8 Q. And you got a copy of that lawsuit, didn't you, sir?
9 A. No, I had parts of it.
10 Q. What's that?
11 A. I had a page or two of it.
12 Q. A page or two. Okay. And you've been represented by
13 Mr. Pepper for some time, isn't that correct? He's represented
14 you in other matters before this one?
15 A. I did. I do.
16 Q. And Mr. Pepper was aware of the lawsuit because Mr. Pepper
17 represents Randy Baker, isn't that correct, sir?
18 A. He does.
19 Q. Okay. And so you got a copy of the lawsuit when
20 Mr. Pepper undertook representation of Mr. Baker, isn't that
21 correct, sir?
22 A. No, I didn't. I asked Mr. Pepper what it was about, and
23 he told about what Mr. Denton was alluding to, so I knew what
24 was coming.
25 MR. PEPPER: Your Honor, I object. He's starting to
38
1 get into lawyer-client privilege. This is a hearing on a
2 cancellation for a notice of lis pendens. This has absolutely
3 nothing to do with what we're seeking here in terms of trying
4 to overcome our proof that they had no interest in the
5 property. What the Texas lawsuit or service of process of
6 Mr. Lobell or my conversations with Mr. Lobell has to do with
7 trying to overcome our proof, I do not see a shred of
8 relevance, Your Honor.
9 THE COURT: Well, the relevance is somewhat suspect,
10 but the witness already answered the question after the
11 objection was made, so the objection is overruled.
12 MR. COCHELL: Thank you, Your Honor.
13 Q. (MR. COCHELL CONTINUING) With respect to-- and so, in
14 fact, we had to get alternative service of process and post
15 that process-- that citation and lawsuit on your door, isn't
16 that correct?
17 A. I don't remember that. I remember the girl coming up the
18 back steps dressed in short pants and a halter top come to my
19 house.
20 Q. Okay. And so-- and she served you with the lawsuit then?
21 A. Mm-hmm.
22 Q. And did you read the lawsuit?
23 A. No.
24 Q. And when did that happen, about four months ago?
25 A. Yeah, about four months ago.
39
1 Q. So you got served with the lawsuit, but you didn't read
2 it, sir, is that correct?
3 A. I read parts of it.
4 Q. Did you send it on to anybody?
5 A. I sent it to Mr. Pepper.
6 Q. Fair enough. Okay. So with respect to this lawsuit,
7 you're saying this is the first time that you ever heard that
8 Mr. Denton was partners with Mr. Baker, Hansen and Stabinski?
9 A. I didn't say that. I always knew that they had a
10 relationship. Not with me. He does have a partnership or
11 something with Hansen and Baker. I don't know if he had it
12 with Stabinski, but that doesn't pertain to me. just as I told
13 Chad Denton at lunch, "It's not my deal if Mr. Baker and them
14 owe you money. This is my company. If they do, I can ask them
15 to give it to you, but I can't make them." I did not make a
16 deal with this gentleman.
17 Q. All right. And so you're suggesting --you're conceding
18 that there-- that there probably was a partnership between
19 Mr. Baker, Denton, Stabinski and Hansen, is that correct, sir?
20 A. No, I'm not saying there's a partnership. There's
21 something going on over there because when you ask them,
22 there's no document signed with that gentleman. They think
23 they have partnerships, but there's no paperwork. Mr.
24 Stabinski is livid that every time he says a partnership,
25 there's no paperwork. And if there was paperwork, he wouldn't
40
1 have run over there after I talked to him to get him to try to
2 sign something when I was going to do the deal, so I don't know
3 if there's a partnership. That's not for me to say.
4 Q. And there's --and it's your testimony, sir, that you
5 didn't enter into a partnership with Mr. Baker, Hansen and
6 Stabinski, is that correct?
7 A. No.
8 Q. Okay. And you didn't enter into an agreement whereby you
9 would pay them 68 -- you would -- you would pay them 20 percent
10 -- or 32 percent profit while your debt was being repaid, and
11 you would have 65 percent for a period of time?
12 A. No.
13 Q. You never entered into any such deal?
14 A. No.
15 Q. You never discussed any such deal with them, is that
16 correct?
17 A. I discussed the deal, but you have it all wrong.
18 Q. I'm sorry?
19 A. I discussed the deal, but you have it all wrong.
20 Q. Okay. Tell us what the deal was.
21 A. Okay. The deal was, they came to me on july--
22 THE COURT: When you say "they," now--
23 THE WITNESS: Mr. Baker.
24 THE COURT: Mr. Baker.
25 THE WITNESS: I'm going to calm down here, okay?
41
1 They came to me on july 15th. Mr. Baker asked me to go into
2 business. He said there was a gentleman that was supposed to
3 put up the money. I said, "Okay, so what happens now?" He
4 said, "He can't do it. The money man is gone." They brought
5 Mr. Baker to three or four people with Mr. Denton, and I didn't
6 know his name at that point, but the gentleman with the money,
7 and he couldn't put the money together, so he said they would
8 like to work and do a deal. They would like 50 percent of the
9 deal, and I said --first of all, they came to me and said they
10 wanted $6 million.
11 Let me back up. Myer called at the end of june and
12 said, "Listen, we have a proposal for you. Would you put up
13 $6 million, get interest rate and get 20 percent of the deal?"
14 I said, "Don't even come, Myer. I won't do it. I'm not a
15 bank. I'm not going to lend somebody money that doesn't know
16 what they're doing and never been in this business." He said,
17 11
\A/oll
i{Y'-11,
rd/-:::11\/ ran
V1'-1..4.y 1 '- II
'\f\'0 i11cT rrH'Y\0
V\- JUJ\. '-..VI I l L
rii"'\\Ain
UVVVII
-;onrl t-111.1' T" \Jrua?
UIIU l.UI" \.V yvu:
11
1 ..:;;__ril;U,-ll
1 _........,
18 "Well, if you want to do it, but if you're coming for
19 $6 million, I won't do it." He said, "No, no, we'll do
20 something different. just look at it. Help us out. You might
21 know somewhere to raise the money."
22 Mr. Baker came on july 15th. Like I said, he came to
23 me, says, "Kenny, this is the deal. You know, we'll pay you
24 the money. After it's paid, we'll all get 20 percent." I
25 said, "Randy, save your oxygen. I won't lend the money." He
42
1 said, "What would you do?" I said I'd open my own company.
2 I'd put up $6 million. He said, 'We would like 50 percent of
3 the deal." I said, "I know you would, and I would like -- I
4 would like a hundred percent of the deal. I would not put up
5 money if you all don't even have the wherewithal to do this.
6 tell you what I'll do. I'll give you a job. I'll pay you each
7 $1 0,000 a month, and let's see who everybody is and what they
8 can do, and if $6 million is all I got to pay up, we'll do some
9 sort of split if we make some money." I said, "But if I got to
10 put up more money, I'm going to fire you," just kidding with
11 him. I said, "So let's see what happens."
12 Well, as you see, February I got over $15 million
13 with no income coming in. The houses went doubled-- doubled
14 up, so the deal that they projected never was anywhere. And I
15 said, "Listen, you don't have ownership. You'll never have
16 ownership. We may do some share in profits." And you'll see
17 Mr. Baker and Mr. Stabinski, the only two people I talked to
18 about the deal, are going to confirm that, and they confirmed
19 that in the affidavits. I never, ever talked to Mr. Denton
20 about any type of partnership, proposals, 20 percent. That
21 must have been in their book, and it was in their book. That's
22 the deal they wanted to do, but that would never fly. I would
23 not put $6 million for people that don't even have jobs and I
24 got to put 20 million, $30 million in a project. I just don't
25 do that.
43
1 Q. (MR. COCHELL CONTINUING) So you knew that there was some
2 relationship between Mr. Baker, Mr. Stabinski and Mr. Denton,
3 correct?
4 A. Yeah.
5 Q. And you decided that whatever their relationship was, it
6 didn't matter to you. You were going to ignore that
7 relationship in going forward with them.
8 A. It had nothing to do with me.
9 Q. Okay. So you knew of the relationship, but you decided to
10 ignore it because you didn't think it had anything to do with
11 you.
12 A. I didn't ignore it. I didn't-- I didn't-- when I tell
13 them I would go open up a camp of my own, do they want to work
14 for me, they said yes. They had no relationship with anybody.
15 Q. Now--
16 A. They became employees, so I had no obligation to worry
17 -:lh.r"\11+ \/1/h"':)+l"\,,1"'\V +h,...,, h-..rl
~IJVt..H. VVIIUI.'C:V'CI liiC:Y IIO.U.
Th ...... ,, .. , ............... .........
lltc:y VVC:I'C Ill 0 .. : ............. : .... ,.. -rt..e··
VIIIY II~:>.
···e·e
I l l y vv I
--~
IIUl
18 opening up a man camp. They couldn't do the man camp.
19 Q. Understood. Now let me ask you, sir, with respect to
20 information, did you get any information from them before you
21 met them on July 1 5?
22 A. Yeah, they gave me a book that's all wrong.
23 THE COURT: They gave you a what?
24 THE WITNESS: A book, a budget book, project book, a
25 nice pretty book with pictures.
44
1 Q. (MR. COCHELL CONTINUING) I'd like to show you, sir,
2 what's been marked as Defense Exhibit 1 for identification.
3 I'd ask you, sir, if you recognize that document.
4 MR. COCHELL: One moment, Your Honor.
5 MR. NYHUS: Your Honor, would you like a copy of
6 these exhibits as well?
7 THE COURT: Yes, it would be nice.
8 Q. (MR. COCHELL CONTINUING) Do you recognize that document,
9 sir?
10 A. I recognize some of this, but I also see a purchase
11 agreement here made out to Capital Riggers Lodge, and it has
12 $40,000. I never saw that. That has nothing to do with me.
13 Q. You never saw that?
14 A. No.
15 Q. You never heard of Capital Riggers Lodge?
16 A. Capital Riggers Lodge was the name that they put on the
17 application when they needed a name. Mr. Baker said they had
18 to have names. Ms. jill, or whatever, at the commission office
19 said they had to have a name of something, but it was just a
20 name they came up with. It's never been incorporated. It's
21 nothing.
22 Q. Okay. Do you -- do you understand that that was the
23 predecessor name of Capital Lodging?
24 A. That's the name they were using. My license in Capital
25 Lodge. You can have a -- you can have names, but if you don't
45
1 have a company or have --where did that go to? That doesn't
2 go to anything.
3 Q. I wasn't asking to argue the point, sir.
4 A. Okay.
5 Q. I was just asking you if you understood that to be the
6 name that the-- a predecessor name to what ultimately became
7 Capital Lodging.
8 A. Mm-hmm.
9 Q. Okay. And on this particular document--
10 A. It didn't become a-- it didn't ultimately become Capital
11 Lodging. My company was Capital Lodging. Capital Riggers did
12 not become Capital Lodging. My company is out of Louisiana.
13 don't know where this company is.
14 Q. One moment.
15 A. And let me just tell you about these documents.
16 Q. Let me just --let me just ask the questions if you--
17 A. Okay.
18 Q. --would, sir.
19 A. You asked me about the documents.
20 Q. This is a-- this is a document that's dated july 11th,
21 2011, is that correct, sir?
22 A. Wait. Wait. I'm sorry, what? This document here?
23 Q. Yeah, Defense 1.
24 A. Well, you know, I don't know what this is, I mean,
25 because --
46
1 Q. Do you remember getting the e-mail that's sent to you,
2 khlobell@cox.net? That's your e-mail address, isn't it, sir?
3 A. Yeah, it's my-- it came, but I don't remember seeing this
4 because this is the same thing they brought me in a-- in a
5 book.
6 Q. Okay. So but do you believe it's probable that you
7 received this document, D-1 -- marked D-17
8 A. Yeah. Myer Stabinski, I see, sent it to me. Chad Denton
9 didn't send it to me. Myer Stabinski sent me this evidently.
10 Q. Right, but Chad Denton's e-mail address is on this
11 particular document, Defense 1, isn't that correct, sir?
12 A. Sure.
13 Q. Okay. And so you did know who he was when you first met
14 with him on july 1 5.
15 A. No, I didn't pay-- I mean, they may have said his name,
16 but it was no -- they never-- they never brought anybody's
17 name up. They were more-- Chad Denton's name did not come up.
18 Randy Baker came to me, said that this was their idea, he and
19 Myer Stabinski. I don't know what happened to anybody in the
20 past. They pitched this thing as that they had the opportunity
21 to open a man camp. I don't even know these people. I know
22 Mr. Stabinski, so I got to believe what they're saying is true.
23 Now, they could have had Chad Denton. They had Chad Hansen.
24 didn't even know Chad Hansen's name until I got to the bank and
25 they said I had to write him a $1 0,000 check.
47
1 Q. Well, let me just invite your attention to the last page
2 of Defense Exhibit 1, where it says "List of Assets."
3 MR. PEPPER: Your Honor, for clarity's sake, I would
4 ask that the defense mark each page alphabetically maybe at the
5 bottom so there's no confusion as to which page he's talking
6 about.
7 MR. COCHELL: I think the last-- referring to the
8 last page of the document is pretty clear, Your Honor. We're
9 not --
10 THE COURT: As long as it remains the last page.
11 MR. COCHELL: Yes, sir. That's --that's about all
12 that I plan to ask the witness about.
13 THE COURT: All right.
14 Q. (MR. COCHELL CONTINUING) Do you see that list of assets,
15 sir?
16 A. You're talking about 80 acres of land on Highway 2?
17 Q. Eighty acres of land on Highway 2, VVillian1s County, North
18 Dakota?
19 A. Sure.
20 Q. Okay. And so that was listed as one of the assets of the
21 investment package being proposed by Mr. Stabinski and, to your
22 knowledge, Mr. Baker, is that correct?
23 A. Well, I didn't look at this, but I'm looking at it now.
24 It says assets. Assets are usually something that's owned.
25 mean, that was something they were trying to buy or put
48
1 together as assets. It wasn't their assets, is what you're
2 saying?
3 Q. My question was, this was listed as one of the assets in
4 the investment package. Can you answer that yes or no, sir?
5 A. I see it here, but I didn't see it when I looked -- I
6 didn't see this before. This is the first time I'm seeing
7 this.
8 Q. With respect to the-- and this is very similar to the
9 document that they gave you, is that correct, when they visited
10 you on--
11 A. You know, it might be in the book. Even to this day I
12 didn't even go through the whole book because it would just
13 tell me what they needed. And they said they had to buy a
14 dome. They had to buy 80 acres of property, so, yeah, these
15 are things that you have to buy if you're going to do a camp.
16 Q. I'd like to show you a copy of what's been marked as
17 Exhibit 2 for identification. I'm going to ask you, sir, if
18 you can recognize that document.
19 MR. COCHELL: There's a copy of the document for Your
20 Honor. Actually, I believe this is the wrong copy. Sorry.
21 No, it is the wrong copy. I'm sorry.
22 THE COURT: How many exhibits do you have, sir?
23 MR. COCHELL: I have about-- probably about 1 5 or 16
24 exhibits for this witness, Your Honor.
25 THE COURT: All right. Well, why don't we start
49
1 renumbering early in the game and start defendants at SO.
2 MR. COCHELL: At 50?
3 THE COURT: Fifty, and you can just scribble it on
4 the document if you're going to offer those exhibits.
5 MR. COCHELL: What we refer to as Exhibit 1 is now
6 Exhibit 50, and this exhibit is 51. All right.
7 THE COURT: Well, it's probably easier if we start
8 with D-51.
9 MR. COCHELL: Oh, D-51, yes, Your Honor.
10 THE COURT: Then you can at least maintain one of the
11 numbers for each of the exhibits that will be the same.
12 MR. COCHELL: Okay. So I show you what's been
13 previously marked as-- by the way, Your Honor, we'd move the
14 admission of 51.
15 MR. PEPPER: Your Honor, I didn't hear anything from
16 the witness clearly identifying the conglomeration of exhibits
17 as something he iecognized as the book, only parts of it, so
18 again, we come to the problem of clear identification of which
19 parts of the exhibit that could be admitted based upon the
20 witness's testimony.
21 MR. COCHELL: The witness did say that he probably
22 got it by e-mail, and he's also ignored a couple -- he's also
23 indicated that he seems to ignore documents when they come in.
24 We believe it was received by the witness.
25 THE COURT: Well, is Exhibit D-51 the same project
50
1 book that you're contending Mr. Lobell received, or is this
2 something else?
3 MR. COCHELL: It is.
4 THE COURT: It's the project book? The objection is
5 noted and overruled. I'll receive Exhibit D-51 for whatever
6 purposes i~s intended.
7 Q. (MR. COCHELL CONTINUING) Mr. Lobell -- Mr. Lobell, if you
8 could, please tell us if you recognize this document.
9 A. Which one?
10 Q. Fifty-two.
11 A. Well, as it starts off-- well, you got to understand, at
12 this point it just confirms what's going on. My relationship
13 is with Myer Stabinski.
14 Q. Tha~s a yes or no question.
15 A. Okay.
16 Q. Can you identify this document?
17 A. I saw the first page from Myer Stabinski. Myer Stabinski
18 sent this one, correct?
19 Q. Do you -- do you recall getting this e-mail from Myer
20 Stabinski on or about July 11, 2011?
21 A. From Myer Stabinski, yeah, absolutely do.
22 MR. COCHELL: Okay. And so we move the admission of
23 52, Your Honor.
24 MR. PEPPER: Your Honor, we object inasmuch as I
25 think the witness has only testified as to receiving the first
51
1 page. I don't believe there's any testimony being elicited on
2 any other parts of the document that's been listed as 0-52,
3 which looks like a conglomeration of--
4 THE COURT: Well, I don't have the Exhibit 52 in
5 front of me, so I don't even know what it is.
6 MR. COCHELL: Oh, I'm sorry, Your Honor. I thought I
7 gave you a copy. I apologize.
8 THE COURT: You gave me a copy of Exhibit 51.
9 MR. COCHELL: That's 52. I have it remarked, Your
10 Honor.
11 THE COURT: So, Mr. Lobell, did you see all seven
12 pages of Exhibit--
13 THE WITNESS: Well, Your Honor--
14 THE COURT: -- 51 -- or 52 I should say?
15 THE WITNESS: And again, this-- I'm not saying this
16 isn't it. It looks like it is, but this is dated July 11th.
17 This is when they were trying to get me interested in a deal,
18 so, yes, they could have sent this. This is parts of their
19 pitch book that I didn't agree to because I see it right here
20 on the first page, so I'm assuming it's all the same because I
21 didn't even go through all --a budget is only as good as you
22 want to make it to be, so, yeah, this is probably it.
23 THE COURT: Objection is overruled. Exhibit 0-52
24 will be received.
25 Q. (MR. COCHELL CONTINUING) And, of course, on page-- on
52
1 the third page of that document, 52, that refers to startup
2 financials; land cost, $816,000, is that correct, sir?
3 A. Yeah, it is. It says it.
4 Q. Okay. And, Mr. Lobell, you did not ask any questions on
5 july 15th about whether they had a partnership that included
6 Mr. Denton. That was just something that you decided that
7 wasn't your problem, is that correct?
8 A. No, I didn't ask the question, but they told me there was
9 --you know, there was no partnership.
10 Q. They told you they didn't have a partnership with Mr.
11 Denton?
12 A. No, they said -- no, they didn't tell me they had a
13 partnership. There was no partnership that was coming to me.
14 I'm sorry. I misunderstood your question. I don't know what
15 they had with Mr. Denton. They were just looking for somebody
16 to do this opportunity with them.
17 Q. I see. And so did you ask them -- did you have an
18 understanding of how long they spent up in North Dakota
19 developing or getting the groundwork laid for this project?
20 A. No.
21 Q. You didn't realize that they had spent two-and-a-half or
22 three months getting-- identifying the land, getting the water
23 permit, getting a conditional use permit, pulling together
24 marketing information such as the information you got here?
25 You have no understanding of that one way or another?
53
1 A. I don't know if they spent two months or two years. They
2 came to me with an opportunity and they needed money, and they
3 were going to lose their opportunity, so I don't know how long
4 it took them.
5 Q. All right. And so with respect to all of that, you
6 entered into this deal with them where you had no obligation to
7 them, but you got all the benefit of all the work that they had
8 done prior to approaching you, is that correct, sir?
9 MR. PEPPER: Objection to the form of the question.
10 The predicate assumes facts not in evidence or testified to,
11 Your Honor.
12 THE COURT: Overruled.
13 THE WITNESS: If I had to do over again, I wouldn't
14 do it because what they brought me-- you're saying I had all
15 the upside? I had $34 million in here. They said I needed 6,
16 so what opportunity-- I wish Mr. Denton were to come in and
17 participated. I vvas looking for investors, so there's no
18 upside in here. I don't get money for two-and-a-half years.
19 Q. (MR. COCHELL CONTINUING) All right. But my question,
20 sir, is that these-- you're telling the Court that these
21 gentlemen did substantial work as far --you don't know one way
22 or the other--
23 A. No, I didn't say that.
24 Q. -- if they did substantial work.
25 A. I don't know what they did.
54
1 Q. Okay. But if the evidence showed they did substantial
2 work and they came to you and said, "Please give us a job,"
3 that's --that's how you viewed the situation, that they
4 weren't--
5 A. No, I viewed the situation that if I'm going to put
6 $6 million into something with somebody I don't know, I'm not
7 giving them a partnership. They have --they have to prove
8 themselves. At the very end of everything, neither one of them
9 proved themselves, nor did Mr. Hansen. They went millions over
10 budget. Mr. Baker had to quit. I had to bring in other
11 people. Every sub they had, I had to redo two and three times.
12 We're probably $5 million over budget because these guys knew
13 what they were doing? No, they didn't, and I knew because I've
14 been in business long enough that this stuff happens, just
15 because somebody has a good idea.
16 So if Mr. Denton would've wanted to come in and if
17 they would've said, "I'll hold this and I'll pay you, Kenny,
18 anything over," in hindsight-- like I said, being in New
19 Orleans and putting $34 million into a city, you know, this
20 whole budget-- that's why I didn't look at this, because I
21 knew it-- I put my own budget together. I do subdivisions
22 now. I knew they were wrong, but they had a good idea.
23 But I don't know what they did because let me tell
24 you, we had to get our own permit. The water bill is in our
25 name. The electric bill is in my name. just because Mr.
55
1 Denton did all this and couldn't do it, that doesn't mean --
2 that's the price of doing business. I do this every day of my
3 life. I put hundreds of thousands and it doesn't work, so you
4 can't be rewarded if you can't do it. Now, Mr. Baker still,
5 just so you know-- when he comes, you can ask him. He was the
6 guy who brought the deal. It wasn't Mr. Denton. Mr. Denton
7 was supposedly a money man. Mr. Baker alludes he was the
8 project. I don't have any reason not to believe this
9 gentleman.
10 Q. Let me ask you something, sir. Don't you use people to
11 negotiate deals for you or to, you know, break the ice in
12 trying to discuss deals with other partners?
13 A. No.
14 Q. Okay. But your lawyers negotiate the details of deals for
15 you, right?
16 A. Ask my lawyer if he negotiates. No.
17 .....
n Okay. And so you never use agents acting for and on your
18 behalf when you do business?
19 A. You know, I might use an agent, but I don't know if
20 Mr. Baker-- he never alluded that he was agent of Mr. Denton.
21 Mr. Baker said he was the deal, and Mr. Stabinski said he was
22 the deal. I don't have-- I don't know these people. I don't
23 have any-- like if I want to buy a house -- I don't know if
24 Mr. Denton tried to buy the house before I did. The house is
25 for sale right now.
56
1 Q. All right. And so let me ask you this. You met with
2 these fellows on july 15th, and then would you say that you
3 reached an agreement with them about a week later? Is that
4 correct?
5 A. I would say so.
6 Q. Okay. And so at that point, on or about july 23rd, a deal
7 -- a firm deal, you know, going forward where you would be the
8 owner of everything and you would give them money if you felt
9 at the end of the day that they deserved some money --
10 A. No, they had to prove themselves because, again, you have
11 two guys that are unemployed, talking about a $34 million
12 operation that haven't made $100,000 a year. I mean, so-- I
13 mean, I know what I'm dealing with, but I'm the kind-- look, I
14 went into BP and spent $22 million and didn't know what I was
15 doing, but it ended up being okay. I don't-- I don't mind
16 taking chances, but I also know what I'm dealing with, so the
17 opportunity was good. I had some free time. The way I was
18 . going to invest in it seemed like a good idea, but I knew I'd
19 have to go in here and it was a lot of risk, and there still is
20 a lot of risk.
21 Q. With respect to this relationship with Mr. Baker and Mr.
22 Stabinski, before you jumped into this deal, you didn't conduct
23 your own due diligence to see who Mr. Baker was or to really
24 figure out whether that deal was real, other than just talking
25 to them, isn't that correct?
57
1 A. No, that's not true. I looked at Mr. Baker. I Googled
2 him, and I-- and Mr. Stabinski vouched for him, that he was a
3 fair guy. I met him. He seemed like he was honest. He was in
4 the construction business. I knew I could do the -- I knew I
5 could take it over. I mean, I didn't give them full rein. I'm
6 in the-- I'm in the real estate business. He just had an
7 idea, knowing -- I knew he couldn't do it probably and I knew
8 I'd have to come probably do it. And I brought Mr. Boudreaux
9 in to run the whole company when I had to-- when Mr. Stabinski
10 got sick-- I mean Mr. Baker.
11 Q. With respect to Mr. Baker, you did not have him enter into
12 an agreement with you for employment or consultation with you,
13 did you, at that time in july of 2011?
14 A. Yeah, they both got ten-- before they walked out of New
15 Orleans, I gave $30,000 because they had no money. They each
16 wanted $10,000, so I think that was an agreement. They worked
1..1... '7
I
fnt"
lVI
l'YlO
111\..o
18 Q. So it's not a written agreement where they say--
19 A. No.
20 Q. -- Kenny Lobell is taking over this project and we waive
21 any right, title or interest in the project. You didn't do
22 that, isn't --
23 A. They didn't ask me that--
24 Q. --thatcorrect,sir?
25 A. -- because I owned the company. I bought the land. I
58
1 opened my company. I gave them a job, so why should I have to
2 ask them. They have rights to what? They don't-- they didn't
3 give me anything. They gave me an idea. That's what they gave
4 me. Everything they gave me was not right anyway. They almost
5 jeopardized us with the permit and everything else, so you
6 think this is a finished package. Here, go get $6 million.
7 You still --they say we make 43 million a year.
8 Q. I'm not trying to argue with you, sir. I'm just--
9 A. Well, you --
10 Q. -- asking you a question.
11 A. Okay.
12 Q. You know, I just asked, you did not clarify in writing
13 what your relationship was with them for bringing you an idea
14 that had multimillion-dollar potential, isn't that right?
15 Isn't that right?
16 A. No.
17 Q. Okay. You did not have anything put in writing in july of
18 2012 or August of 2012 or September of 2012, indicating to
19 Mr. Baker and Mr. Stabinski or Mr. Hansen, I am taking over
20 this project in its entirety. I appreciate you bringing the
21 deal to me, but you don't share in any profits. You'll be my
22 employees, or words to that effect?
23 A. No, I didn't.
24 Q. Nothing like that.
25 A. No, because --
59
1 MR. PEPPER: Objection, Your Honor. Objection to the
2 form of the question in terms of relevancy. Again, we're
3 talking about a cancellation of a notice of lis pendens. What
4 Mr. Lobell decided to do when he paid Mr. Baker, Mr. Hansen and
5 Mr. Stabinski has nothing to do with Mr. Denton or for that
6 matter any one of the entities that he is claiming have an
7 interest in that property.
8 MR. COCHELL: If one takes a one-sided view and just
9 prejudges that everything they say is true, then that might be
10 a relevant objection, Your Honor. The issue of relevance is
11 broader, however, because we allege and have alleged for some
12 time that there was a partnership by Baker, Stabinski, Denton
13 and Hansen, that this partnership came to him with an
14 investment package listing this property as an asset, and he
15 accepted that deal going forward. He agreed.
16 And we haven't gotten to a couple things, but he
,
..L
'"7
1
.... ,.... ........ ,..rJ + ......
c.t~lCCU t.u, yvu
v ............. ! ....................... : .......................... ,..,... ........ e Ill
• ~ ........ ,.................
J'.IIUV, a11 Qll.C:IJJQ.liVC: Q.IIQ.IIYC:III
................
VVII
e-e
I
~,... ...
l i t V UUIU
··v~··•...J
18 be listed as the owner. However, they would have an operating
19 agreement, and we contend that he reneged on that agreement and
20 that he cut out Mr. Hansen -- Mr. Denton as soon as he got all
21 the permits and licenses and all of the benefit of the work
22 that he had funded and so on, so while I understand counsel
23 would like to continue this objection, we'd like to continue
24 asking the witness questions which go to our case.
25 THE WITNESS: I'm okay answering that.
60
1 THE COURT: Objection overruled.
2 Q. (MR. COCHELL CONTINUING) All right. Now, Mr. Lobell --
3 THE COURT: Are any of these so-called partnership
4 agreements in writing anywhere, or are we just talking about
5 e-mails and thoughts and plans and ideas?
6 MR. COCHELL: E-mails, budgets, plans, verbal
7 agreements between people and people performing on those
8 agreements, which is quite important, as I'm sure Your Honor
9 understands that. And I think the evidence will show that
10 there was reliance on the promises made and the conduct that
11 was consistent. This is a de facto partnership, Your Honor,
12 which is recognized in Texas, and I also believe in North
13 Dakota as well.
14 THE COURT: De facto partnerships?
15 MR. COCHELL: De facto partnerships.
16 THE COURT: Continue with your questions.
17 MR. COCHELL: Thank you, Your Honor.
18 Q. (MR. COCHELL CONTINUING) Now, Mr. Lobell, you currently
19 have an agreement with Mr. Baker, is that correct?
20 A. I have an agreement with Mr. Baker. He got sick, and I
21 got an agreement with Mr. Baker that would still pay him his
22 consulting fee. I do have that agreement. That was the only
23 agreement, but I'll go back to your other question. I had 2 50
24 people working for me. Not one has an agreement when I pay
25 them as an employee or a consultant. There's no contract. I
61
1 have Mike Boudreaux I paid $1 50,000 a year. He doesn't have a
2 contract with me. He works for me.
3 Q. Okay. Thank you. With respect to Mr. Baker, have you
4 entered into a written agreement with him as a consultant?
5 A. Yes, I do have that. No, that's --
6 Q. So he's the first one out of 2 50 employees to get a
7 written agreement. Is that what you're saying, sir?
8 A. No, he wanted an agreement because he was sick, and so
9 what I told him, that he doesn't have right to come back and
10 sue me or do anything. This is -- he got sick. He wanted
11 something in writing to protect him, so I did, so I'm paying
12 him his $1 0,000 a month for a year-and-a-half. I forgot
13 exactly, and he gets his truck, because when they came to me,
14 Mr. Stabinski and Mr. Baker, I told them that they could have
15 their trucks. The company would pay for their trucks if they
16 worked, and when they got paid off, I would give them their
+ .......... I,,..
17 ll ULI\..::>.
18 Q. I see. Have you had occasion to-- but you do have this
19 in writing, is that correct?
20 A. Mr. Baker?
21 Q. Right.
22 A. Not the first one, the second one. Not his employment
23 when he came to work.
24 Q. I understand.
25 A. Okay.
62
1 Q. Okay. The second agreement is in writing and it provides
2 for release of all claims against you, to come back against him
3 for any reason.
4 A. No, I don't know if that's what it says. I don't know if
5 that -- I got to see what it says. I want to see that.
6 Q. Why were you concerned with Mr. Baker suing you?
7 A. I'm not -- I'm not concerned about him suing me.
8 Q. Okay. With respect to Mr. Baker, have you ever threatened
9 Mr. Baker --
10 A. No.
11 Q. -- if he didn't-- if he didn't come here to testify
12 today?
13 A. No. You ask Mr. Baker that. I don't threaten anybody.
14 Q. Okay. And have you promised anyone money in exchange for
15 their testimony here today?
16 A. Absolutely not.
17 Q. Okay. And did you make any offer of compensation, either
18 directly or indirectly through Mr. Baker or through Mr. Pepper,
19 offering to pay $20,000 to Chad Hansen --
20 A. No.
21 Q. -- if he signed one of your affidavits that you filed with
22 the Court?
23 A. No. May I explain?
24 Q. Well, I asked--
25 A. Okay.
63
1 Q. --the question.
2 A. Well, Mr. Morales, the gentleman that's going to be here
3 with the gentlemen that are in here right now, their lawyer
4 prepared an affidavit for Mr. Hansen because they are trying to
5 work a deal with you and that gentleman right there. You know
6 they've been trying to do it for the last month. They had
7 Mr. Hansen -- I fired Mr. Hansen because there was something
8 going on with the landscape and things like this. I didn't
9 feel comfortable with it. I found out something, so I
10 terminated him because I was paying money to everybody that I
11 didn't know I was paying, and it was up to hundreds of
12 thousands of dollars a month. Mr. Hansen was fired, okay? And
13 so-- terminated, but I still paid him after he was terminated,
14 just so you know too.
15 Q. How long?
16 A. I don't know. Maybe four months, five months.
17 Q. c,... \yuu
...JV
Jr..ll 1""\-.irl
pcuu
hi ........ <tl" {\{'\{'\
IIIII I ..j) I V,VVV lUI
+,.... ... +...................
IVUI VI
t': •. ,... .......... ,.. ......... 1.... ... "")
IIVt IIIUIIUI::,~
18 A. No. No, I only paid him 2,000. I paid him $1 0,000 for
19 months and months, and then I started finding out-- when I
20 finally could see who could do what, I was asking Randy what's
21 -- he was basically Randy's secretary. I mean, there was no
22 value to these people, and you can see that I'm writing, you
23 know, a million-three a week-- a week.
24 So what happened was Mr. Morales' lawyer prepared an
25 affidavit to give to Mr. Hansen because they didn't want
64
1 Mr. Hansen --just like they're trying to get Mr. Denton not to
2 sue them if I sell them the company. You can come sue me. So
3 they were saying they didn't want Mr. Hansen --that affidavit
4 was prepared by them, and Mr. Morales will attest to that, and
5 I sent it to Randy. I wasn't paying -- I didn't care if Mr.
6 Hansen testified or didn't because he's got to tell the truth.
7 I never talked to Mr. Hansen about this deal, by the way. It
8 was only Myer and Mr. Baker.
9 Q. All right. Now, so you paid --you terminated Mr. Hansen
10 for what you thought might be -- might be theft or might be--
11 A. I just wasn't comfortable with everything.
12 Q. Huh?
13 A. I just terminated him because I wasn't comfortable with
14 what was going on. There was too much money going back and
15 forth. And the last thing was I called the landscape company.
16 As soon as I questioned Mr. Hansen that it was too expensive,
17 the bill went down by $5,000. I felt uncomfortable, so I don't
18 know if he did something, but I told Randy-- Randy will attest
19 to this. He was going 300 miles an hour. Randy could not run
20 the project. People were overcharging us. There were
21 kickbacks. I took charge of my own project and I said, "Randy,
22 it's got to stop." He had a maintenance man making a $1 50,000
23 a year. I said, "It's got to stop."
24 Q. Did anyone send him a letter saying, "You're terminated
25 for cause"?
65
1 A. No.
2 Q. Okay. Did Randy-- was Randy instructed to tell him that
3 he was terminated for cause?
4 A. I told Randy, I said, "We don't need Mr. Hansen anymore.
5 We can't keep spending $10,000 a month."
6 Q. So a guy who did a terrible job for you and may have even
7 been stealing from you, you continued to pay him $2,000 a month
8 for several months after he was terminated, is that correct?
9 A. That's exactly how I paid him the $61,000. Yes, I did.
10 Q. All right. And he has been gone from the project since
11 about November or December of 2011, is that correct, sir?
12 A. I believe. I don't know.
13 Q. Okay. It sounds about right to you?
14 A. It does.
15 Q. All right. Then all of a sudden out of the blue, Walter
16 Morales is concerned about whether he was terminated for cause
17 over landscaping? Is that vvhat you're telling the Court, sir?
18 A. No, I'm not saying that at all. Walter Morales is worried
19 about everybody suing him if-- it's okay for Chad to sue me,
20 okay? I don't care, but if I sell the company, they're worried
21 about everybody in -- Chad and Mr. Hansen, the hostile guy
22 that's going to be against me because I let him go, and Mr.
23 Denton, who I don't even know, suing these gentlemen, coming
24 back and suing them and me. That's what they're worried about,
25 so they want an affidavit signed.
66
1 Q. Okay. So you're laying this off on Mr. Morales, but isn't
2 it true, sir, that Mr. Pepper drafted that affidavit and
3 forwarded it to you?
4 A. Mr. Pepper took their-- their draft and forwarded it to
5 us.
6 Q. I see.
7 THE COURT: Somebody needs to tell me who Mr. Walter
8 Morales is because that name just surfaced.
9 THE WITNESS: He's --Your Honor, he's my 10 percent
10 partner that they're recovering --they're 10 percent partners.
11 They're trying to buy me out right now and make the camp bigger
12 because they have a hedge fund or some investors that are
13 coming in.
14 THE COURT: When you say "they," who are you
15 referring to?
16 THE WITNESS: Well, they had BlackRock, a big hedge
17 fund out of New York. They had White Oak. They have--
18 THE COURT: They have these entities in line. Who is
19 "they"?
20 THE WITNESS: They, Moraleses. The Moraleses have
21 these funding agencies in place.
22 THE COURT: All right.
23 Q. (MR. COCHELL CONTINUING) Now, when he forwarded it to
24 you, did you ignore the e-mail or did you read through it?
25 A. I'm sorry. What are you talking about, the affidavit?
67
1 Q. When Mr. Pepper sent you the e-mail -- let me mark the
2 document, if I may. For the record, this is an e-mail chain
3 that starts with Mr. Pepper to Mr. Lobell and then on to
4 Mr. Baker and then to Mr. Hansen, and then he forwards it to
5 Mr. Denton. I show you this document, sir, and ask you if you
6 recognize that document.
7 THE COURT: What document is it?
8 MR. COCHELL: This is Number 53, Your Honor, Defense
9 Exhibit 53, which purports to be an affidavit that looks very
10 similar to some other affidavits filed with the Court, as well
11 as a release and settlement agreement.
12 THE WITNESS: This was a document drafted by Jose
13 Canseco that was sent to Mr. Pepper, and it was not my idea
14 about $20,000 because I knew Mr. Hansen was not going to be
15 friendly to me. They wanted to help Mr. Hansen to try to get
16 him not to sue them.
17 Q. (rv1R. COCI--·IELL CONTINUING) So vvhy -- vvhy vvould they think
18 that Mr. Hansen is going to sue them?
19 A. Why would they think Mr. Denton would sue them? Because
20 he does sue.
21 Q. But does Mr. -- has Mr. Hansen filed a claim against you
22 or against them?
23 A. No.
24 Q. In fact, he's a defendant in the Texas case, isn't that
25 correct, sir?
68
1 A. And he's a witness for you all.
2 Q. Yep. Okay. So-- and this doesn't say anything about any
3 problems with the landscape. It's just very general, this
4 settlement agreement, that there's a disagreement for payment
5 of services and issues surrounding his services that have never
6 been resolved.
7 A. That was one thing. There was a lot of other things.
8 There was no-- there was no value to Mr. Hansen.
9 Q. Oh, I see.
10 A. I was paying a million people that-- I finally caught on
11 to like nobody was doing anything, and Mr. Baker-- these were
12 friends of Mr. Baker, and I don't think he wanted to tell me.
13 Q. I see. Now, with respect to this --a couple issues with
14 respect to your testimony, you mentioned earlier that you had
15 paid Mr. Denton after you met with him in New Orleans, is that
16 correct?
17 A. I believe -- I didn't pay Mr. Denton. Mr. Baker paid Mr.
18 Denton.
19 Q. Okay. I see. But you authorized the payment. You wanted
20 him to be paid, correct?
21 A. Yeah, because the gentleman said he was out the money and
22 he felt like he was --you know, it wasn't fair that he
23 supported them and he-- but again, that's their partnership,
24 but I did do it because I didn't want any hard feelings with
25 any one of these guys.
69
1 Q. During-- you met with him on August 31st of 2011, is that
2 correct, sir?
3 A. I don't know the date.
4 Q. Okay. But it's around that time frame?
5 A. I would say so.
6 THE COURT: Met with who?
7 MR. COCHELL: Met with Mr. Denton. I'm sorry, Your
8 Honor.
9 THE WITNESS: He insisted a meeting.
10 Q. (MR. COCHELL CONTINUING) All right. And so you met with
11 him and his girlfriend, Tammy. Do you recall that?
12 A. They were very nice.
13 Q. And you admitted to him-- do you recall admitting to him
14 that you had agreed to a 68 percent, 32 percent deal with Mr.
15 Stabinski and with Mr. Baker, and that the 65 percent would go
16 to you while your debt was repaid, and after repayment, each of
17 the five partners vvould get 20 percent of the net profit? Do
18 you remember admitting that to him, sir?
19 A. No, I didn't say-- that was never the deal. You got part
20 of it right. If they could do what they said they could do, we
21 would do a 68/32 split. It was me -- I actually participated
22 in the 32 also. It was Chad Hansen. It was Myer. It was
23 Randy, and it was myself. It was never Mr. Denton, and I --
24 and Mr. Denton was mad because he said, 'They owe me. I should
25 be partners." And I told him, and he will say this today, "If
70
1 they owe you money, all I can do is ask them to pay you money.
2 You're not in their partnership because they don't have a
3 partnership with me. I own the company."
4 So to go back to your question, it was never once it
5 was paid they're going to get 20 percent. I never said that.
6 What they would do is that when the bills were paid, if there
7 was profit and they did what they said they could do, we would
8 do some sort of split. There was nothing signed. That's why I
9 didn't sign anything, and I did tell him it would be sort of
10 like that. And his question to me says-- he said, well-- I
11 told him, I said, 'These guys are not businessmen and they
12 don't know-- they can't run a company. They don't know what
13 they're doing, but if they-- if they happen to do it and they
14 come close, I'll give them some money."
15 Well, what happened was they all quit-- or, I mean,
16 it was somebody's idea, and he said -- and then he used that
17 against-- they weren't in business and I took advantage of
18 them. That wasn't what I was saying. It was that I knew they
19 couldn't-- once it started-- by the time August came, I was
20 already 500,000, 600,000. The next month I was $4 million, the
21 next month, and so right off the bat what they told me I had to
22 do out of this supposed budget book was already blown by the
23 first two months, and that's what I told him.
24 And he-- and he met me to tell me how bad they were,
25 not how good they were and how they were partners, how they
71
1 were-- they were no good, they were unethical, they would
2 steal, they would cheat, they robbed him of money, and that's
3 when the money came up. I said, "Look, if you have this hard
4 feelings, let me know what it is. I'll make them pay you," and
5 I did.
6 Q. So you're testifying here today that Mr. Denton told you
7 that these are -- he used the words that they cheat and they
8 steal?
9 A. In so many words he said -- he said that they-- they
10 basically were not treating him fairly and that you had to
11 watch them. He did say that.
12 Q. Okay. Well, I'm just asking, what specific words are you
13 saying--
14 A. I don't know what specific words. He alluded that they
15 were no good and why am I going to hire them, and I acted like,
16 well, why did you hire them.
17 ~v1R. COCHELL: I see. And vvith respect to Exhibit 53,
18 we offer Exhibit 53 into evidence, Your Honor.
19 MR. PEPPER: Your Honor, again, it's a multipage
20 document. I think there's been no testimony as to the first
21 page of the document as being received by Mr. Lobell, actually,
22 and as to the affidavit, actually, that he saw these or had
23 these documents, so, you know--
24 THE COURT: The objection is overruled. D-53 will be
25 received.
72
1 Q. (MR. COCHELL CONTINUING) With respect to-- with respect
2 to Mr. Hansen, to your knowledge -- strike that. The terms of
3 Mr. Baker's agreement with you, you said he got sick. How is
4 he sick, do you recall?
5 A. Well, what happened, the stress got to him because I think
6 he realized he was way in over his head when --when I was
7 writing $4 million a month and it kept going on and on and on.
8 And I think part of that, his nerves got-- he has Number 2
9 diabetes and he couldn't fulfill the job, so part of it was
10 nerves, part of it was he was over his head, and part of it, he
11 had to get the hell out of there.
12 Q. Let me ask you this. Do you know if the offer to
13 Mr. Hansen for $20,000 went up to 30,000 like a day later?
14 A. I never made the 20,000, so I don't know.
15 Q. You never participated in authorizing the 20 or the 30
16 thousand dollars?
17 A. I never offered him anything. Mr. Morales just-- Randy
18 Baker alluded that Mr. Hansen needed some money. He told me
19 that. I told Mr. Morales that. He says, "Well, maybe we'll
20 compensate him because if he needs money, we don't want him to
21 come back to sue us."
22 Q. So 14 months after he left the job, there was a discussion
23 about Hansen needs some money, so let's --just as you're
24 coming up on this hearing, there's a discussion, let's-- let's
25 get this affidavit and let's get a release from him. Is
73
1 that --
2 A. Yeah, 14 months later--
3 Q. -- what happened?
4 A. Fourteen months later I talked to Mr. Baker, and
5 Mr. Morales asked me if he would sign an affidavit because he
6 was tired of just people putting arbitrary lawsuits against
7 everything, and this was another one that could be lingering
8 out there, so he asked me-- and he said we'll compensate him.
9 And the 20,000 is not for the affidavit, as you see. The
10 20,000, if you should have any such future claims, they didn't
11 want him to sue.
12 Q. But they sent him the affidavit along with the offer, so
13 that they knew-- he knew that he had to sign an affidavit to
14 get the release and settlement, isn't that correct, sir?
15 A. He didn't have to sign anything. He doesn't have-- he
16 didn't sign it, as you can see. I didn't make him.
17 Mr. Morales didn't make him. He doesn't have to sign it.
18 Q. Fair enough. So he didn't get the money because he didn't
19 sign the affidavit, is that correct?
20 A. Well, I don't know. I mean, he never got back to us. He
21 just didn't do anything.
22 Q. Isn't it true that he communicated with Mr. Baker that he
23 wasn't going to perjure himself or give false testimony in a
24 courtroom proceeding?
25 A. Well, I don't know if he did that, but we don't want him
74
1 to perjure himself. If that affidavit wasn't right, he
2 shouldn't sign it.
3 Q. Isn't it true you told Mr. Baker to make that offer of
4 $20,000 to get the affidavit from him?
5 A. They had, I think-- I don't even know what it says.
6 think it says it in there, that he has $20,000 for any-- any
7 future claims. That's what they're buying. They're not buying
8 for the affidavit. I think it says it. Hold on.
9 Q. And when he didn't immediately accept the $20,000, you
10 authorized Mr. Baker to offer him $30,000, isn't that correct,
11 sir?
12 A. I don't know if I did, but if Mr. Morales wanted to give
13 him more-- Mr. Morales is tired of being sued. He's involved
14 with this lawsuit at ten-- he doesn't even know about Mr.
15 Denton. I asked this man for $10 million. A year later Mr.
16 Denton comes and sues us.
17 Q. Let me ask you something, sir. You've made it sound like
18 you're getting nothing out of this refinancing and that you all
19 have been trying, through Mr. Morales, to come to some
20 arrangement with us, but have been unsuccessful. Let me just
21 kindof--
22 MR. PEPPER: Objection to the form of the question.
23 MR. COCHELL: Let me rephrase the question. Let me
24 just withdraw that, rephrase the question.
25 Q. (MR. COCHELL CONTINUING) In fact, there is a major buyout
75
1 of your interest in this property and --which is going to--
2 the property and the land is going to be transferred to another
3 group called, I believe, MC (sic) Credit or something like
4 that? What's the name of the group?
5 A. Well, they're trying to do that. I'm not-- they're
6 trying to do it. I'm not saying I'm accepting this.
7 Q. I understand that, sir. What's the name of the group?
8 A. M6 Partners.
9 Q. Okay. And so they're going to take over the ownership and
10 the operation of the man camp under this agreement, isn't that
11 correct?
12 A. Well, they want to because I may have to sell it.
13 Q. My question, sir, is, they are taking over the operation
14 and the ownership of this group, which includes the land and
15 the man camp.
16 A. If I sell it.
17 "
'->(. 1 e::..
\.I--
18 A. If I sell it.
19 Q. Okay. And you want to sell it, correct?
20 A. No, I don't want to sell it. I'm not saying that. I may
21 have to sell it.
22 Q. All right, so -- and the major reason that we're here
23 today is that there's a lis pendens, and you weren't able to
24 consummate the sale with M6 Partners, isn't that correct?
25 A. No. One of the main reasons is I lost the $5 million and
76
1 I can't refinance. I had to go to them to see if they wanted
2 to buy it because I'm going to be negative cash flowing because
3 of the lis pendens, so I offered it to them, and we had a
4 $45 million opportunity. They're down to 25, which at the 25 I
5 walk away with like $6 million, and I'm making 3 million -- I
6 don't want to sell it, but if I have to sell it so they-- you
7 all are making me sell it at a loss. The value is way more,
8 but nobody wants to touch it with this lis pendens, the bank or
9 anybody. These are the cheapest guys on the block.
10 Q. So at the time of closing you get $12.5 million directly
11 transferred to you, isn't that correct, under this deal with M6
12 Partners?
13 A. Absolutely, and how much do you get out of $12.5 million?
14 Would you like to know?
15 Q. And my next question, sir, is, you get paid another $12.5
16 million over a period of five years from M6 Partners, is that
17 correct?
18 A. Absolutely.
19 Q. And you have claimed --
20 MR. PEPPER: Objection to the line of questioning,
21 Your Honor. For the most part it's all speculative because the
22 deal has never been done.
23 THE COURT: I understand that. The objection is
24 overruled.
25 Q. (MR. COCHELL CONTINUING) Okay. And one of the-- one of
77
1 the requests was that you come forward with documents to show
2 -- because what-- what loans you have, that personal
3 indebtedness to which you have to devote the $12.6 million
4 that's transferred to you --
5 A. Yes.
6 Q. -- isn't that correct?
7 A. Absolutely.
8 Q. You've been asked for those documents, but you haven't
9 given them to us, correct?
10 A. No, I didn't.
11 Q. And that's why a deal hasn't been done, isn't that
12 correct?
13 A. No, absolutely not.
14 Q. I see.
15 A. Let me tell you what happened. You have the documents.
16 You have audited statements. I spent $30,000. It says I have
17 8,000 -- $8 million in there. The other 3 mi!!ion, 3-and-a-
18 half million I got to pay taxes. Out of the 12-and-a-half
19 million dollars, if I sell it, I get zero. I get money over
20 five years. Do you know if I keep it, I make millions of
21 dollars? But your lis pendens is either making me go into
22 Chapter 11, sell it, or I've got to get it refinanced.
23 Q. Sir, apparently you're not aware that we requested copies
24 of the underlying loan documents.
25 A. You didn't request-- I gave them everything. Let me tell
78
1 you what happened here, and you --
2 Q. You don't know one way or the other whether those loan
3 documents have been provided to us, isn't that correct?
4 A. Because I --you didn't ask me for them.
5 MR. PEPPER: Your Honor, as far as I know--
6 THE WITNESS: You asked if the gentleman is trying to
7 buy the camp.
8 THE COURT: You know what, this court reporter can't
9 take down --
10 THE WITNESS: I'm sorry. I'm sorry.
11 THE COURT: -- speaking and talking from three
12 different people at the same time, unless she's superhuman, and
13 she's super, but she's not that good, so let's slow down.
14 Let's ask questions. Let's wait to answer the questions until
15 the questions have been completed. If there's an objection,
16 let's hold off on talking while the objection is made so that I
17 can rule on the objection, please.
18 MR. PEPPER: Your Honor, in this proceeding we object
19 as to this line of questioning as to relevance because there
20 has been no request for production of documents in this
21 proceeding. And as far as discovery in the Texas case, the
22 case is in limbo because there's a question of whether they
23 have jurisdiction in Texas at all, so there's been no discovery
24 transferred.
25 THE COURT: Well, the objection is overruled, but I'm
79
1 wondering how much time we're going to spend on a hopeful
2 $25 million project with M6 Partners and what that has to do
3 with the issues in this case.
4 MR. COCHELL: Your Honor, I got into it because
5 Mr. Lobell was portraying himself as someone who is a victim,
6 that we're holding up the project and that the lis pendens
7 couldn't have been removed. It could have been, and that's --
8 that's the point I'm making, that I made those requests, and
9 he's suggesting that I should have made those requests to him,
10 and so we're going --
11 THE COURT: Are you representing M6 Partners as well?
12 MR. COCHELL: No, Your Honor, I'm not, but I'm --
13 THE COURT: So why would you be requesting financial
14 documents from Mr. Lobell in connection with a deal with M6
15 Partners?
16 MR. COCHELL: Because they were making
17
18 weren't listed in the company books that they had no copies of,
19 and therefore, they couldn't verify the amount of the debt that
20 he claims he has to pay off in the wake of a closing, and we're
21 not filing a lis pendens to tie everything up. We're not
22 trying to be unfair to Mr. Lobell. What we're trying to do, if
23 we were able to reach an agreement, is to reserve an amount
24 that will cover our damages. And if he's got huge debt, let's
25 see proof of it rather than somebody making representations,
80
1 which obviously we have concerns about. And so we're here in
2 court, and for the first time we get a lot of information from
3 Mr. Lobell. That's fine, but for him to come in and portray
4 himself as a victim -- he's been in constant touch with his
5 partner, Walter Morales, about this. Mr. Morales has been
6 representing Mr. Lobell.
7 THE WITNESS: No.
8 MR. COCHELL: Not representing him formally, but
9 through Mr. Canseco.
10 THE COURT: Mr. Morales is an attorney?
11 MR. COCHELL: Mr. Morales, I think-- I don't know if
12 he is or not, but Mr. Canseco is an attorney and I have talked
13 to --
14 THE COURT: Jose Canseco, is that who we're talking
15 about?
16 MR. COCHELL: Exactly. Exactly.
17 THE COURT: Well, let's get back to this case in
18 North Dakota.
19 MR. COCHELL: Yes, Your Honor, we'll move on.
20 Q. (MR. COCHELL CONTINUING) With respect to the check that
21 was paid to Mr. Hansen -- Mr. Denton, I'm sorry, that was paid
22 on August 2nd of 2011, isn't that correct, sir?
23 A. I think it was.
24 Q. That's the date of the check, right?
25 A. Then it was.
81
1 Q. And then you subsequently claim that you learned for the
2 first time that he had money that should be reimbursed, is that
3 correct?
4 A. Yes, sir.
5 Q. Now, you've taken reimbursements from the company, haven't
6 you? You've taken draws?
7 A. The only thing I took was a hundred thousand dollars, and
8 the reason I took that is the Moraleses were going to put in
9 $10 million. They put in seven, and I had two-and-a-half
10 million dollars coming to me. It was my own money. I didn't
11 take draws. There's not disbursements. I took money owed to
12 me. The only thing I took was the $100,000 when they owed me
13 two-and-a-half million. There's no money to take.
14 Q. And with respect to your deal with the-- with M6
15 Partners, you are going to be reimbursed all of your capital
16 expenses, isn't that correct?
17 A. \'Vhat do you mean, ~~capital expenses'?
18 Q. Reimbursement of capital expense, the loans to the
19 company, what you invested in the company moneywise.
20 A. Correct. Correct.
21 Q. You get that back. In fact, that's what Mr. Baker and
22 Stabinski were proposing to you, that you get 65 percent of net
23 proceeds to pay you back, and then after that there would be
24 20 percent net profit distributed --
25 A. There's a little difference. These guys are writing me a
82
1 check. I'm paying this on my deal, so there is a big
2 difference. And just so you know, the propose, what they're
3 making, is 25 million. I have 34 million, so add that number
4 up. Why would I sell something for 24 when I got 34 in it?
5 Q. So there's a difference between them and you in terms of
6 how much money you have and how much money they have. There's
7 a difference between you and Mr. Denton in terms of how much
8 money he has .and you have, correct?
9 A. I don't know what you mean.
10 Q. As far as you know?
11 A. I don't know what you mean by that.
12 Q. Okay. Well, it's perfectly appropriate for Mr. Denton to
13 be reimbursed what's a relatively minor expense to this overall
14 project, $61,000, isn't that right? You've been reimbursed
15 funds. You're going to be reimbursed funds?
16 A. I haven't gotten reimbursed.
17 MR. PEPPER: Objection, he's --
18 THE WITNESS: This deal is not even close to being
19 done.
20 MR. PEPPER: Objection.
21 THE COURT: Well, here we go again. There's three
22 people talking and a court reporter that's got to take it all
23 down. The objection is?
24 MR. PEPPER: The objection is he's assuming facts not
25 in evidence, Your Honor, and it's irrelevant because there's
83
1 been no testimony as what Mr. Denton has put in other than that
2 61,000.
3 MR. COCHELL: That's all the questions we have, Your
4 Honor.
5 THE COURT: All right. Do you have any follow-up, or
6 --we're at a time where my court reporter has been sitting for
7 a long time, and we're close to the noon hour and --
8 MR. PEPPER: Very short redirect, Your Honor.
9 THE COURT: Short would be?
10 MR. PEPPER: Short would be 5,10 minutes, ifthat.
11 THE COURT: Well, we're going to take a recess
12 because I think five minutes from a lawyer, no matter who the
13 lawyer is, it usually turns out to be 15 or 20 minutes, so--
14 MR. PEPPER: Fair enough.
15 THE COURT: So we are going to recess until
16 1 o'clock, and please tell me how many more witnesses that we
1 '"7 I,...-.~''"'(.....,.......,..,.,,..,,.. I ,.J...,...,.I+ J.....-.~ ....... -.11 ...J-.~, ........ ...J....,,, ...,..,..,.J +..-..""""' .................... , .......... ..J +t... .....
..L I IIQVC U'CLQU.:JC I UUII l IIQVC Qll uay lVUay QIIU lUll lUI I UVV d.IIU l i l t
18 next day to deal with this case. I've got criminal cases that
19 are stacked on top of criminal cases here.
20 MR. COCHELL: Yes, Your Honor. We have testimony
21 from Mr. Denton and from Mr. Hansen, who have both traveled
22 here today to give testimony.
23 THE COURT: And what does the plaintiff have?
24 MR. PEPPER: Your Honor, we have Mr. Denton, Mr.
25 Baker, and Mr. Stabinski and Mr. Morales.
84
1 THE COURT: Okay.
2 MR. PEPPER: But they'll be significantly shorter
3 than this witness.
4 THE COURT: They'll have to be or we'll never get
5 done. All right. We'll see you back at 1:00.
6 (A lunch recess was taken from 11 :49 a.m. to
7 1 :04 p.m., the same day.)
8 THE COURT: Good afternoon. We will continue with
9 the testimony. We had Mr. Lobell on the stand. I don't know
10 if there were any further questions that--
11 MR. PEPPER: Yes, Your Honor, just one question on
12 redirect. And in light of Your Honor's concerns as far as time
13 constraints, we're going to try to truncate our case just to
14 the simple issues. And if your Honor would maybe give me a
15 heads up if we see that the thing is coming toward an end or
16 when you see an end date -- or an end time towards the end of
17 the day.
18 THE COURT: All right. Mr. Lobell, if you could
19 resume your seat on the witness stand.
20 THE WITNESS: Yes, sir.
21 REDIRECT EXAMINATION
22 BY MR. PEPPER:
23 Q. Mr. Lobell, earlier during the day opposing counsel showed
24 you Exhibit D-51, in which he showed you a list of assets that
25 were part of the pretty booklet that you had referred to, and
85
1 one of the assets that he has listed as an asset is 80 acres of
2 land, and this is on the last page of the document. Do you see
3 that here? Can you identify that?
4 A. Yes, sir. Yes, sir.
5 Q. When you began to do your due diligence and you
6 investigated this proposal, did Mr. Denton or any entity that
7 bore his name actually own this asset at the time that they
8 sent this to you?
9 A. On that page there's not one of those assets. It's a
10 dome. It's housing. That's just a list of items needed to be
11 bought. No, there's no ownership in --there's nothing,
12 nothing at all. This was a concept. There was no assets.
13 Q. At the time that you were shown this document, who owned
14 the property at the time?
15 A. A gentleman, Mark-- the farmer that had it for a hundred
16 years, or so.
17 Q. Is that ultimately the person vvho you bought it from?
18 A. Yes, sir.
19 Q. So they didn't-- the document misrepresented this as
20 being an asset of Capital Investment according to the e-mail?
21 A. I would say so.
22 MR. PEPPER: No further questions.
23 RECROSS-EXAMINATION
24 BY MR. COCHELL:
25 Q. Mr. Lobell, you understood at the time you got this
86
1 document and talked to these gentlemen, Mr. Baker and Mr.
2 Stabinski, that ownership of many of these assets were not
3 established by purchases, that these were planned assets of the
4 partnership that they were proposing to you? You understood
5 that, didn't you?
6 A. Well, yeah, there was not assets. Yeah, there was the
7 concept that they had to go purchase these things to make a man
8 camp.
9 Q. That's why they were coming to you for money, right?
10 A. Correct.
11 MR. COCHELL: Thank you.
12 MR. PEPPER: Your Honor, as our next witness we'd
13 call Walter Morales.
14 THE COURT: You may step down, sir.
15 THE WITNESS: Thank you.
16 THE CLERK: Please raise your right hand.
17 WALTER MORALES,
18 having been first duly sworn, was examined and testified as
19 follows:
20 MR. COCHELL: just for the record, Your Honor, we
21 were unaware-- Mr. Morales was not identified as a possible
22 witness at the pretrial. I don't know how strict the Court
23 wants to be on that sort of thing. In most circumstances, if
24 we're in a pretrial and witnesses are identified, I would move
25 to exclude a witness, but I leave that to the Court's
87
1 discretion.
2 THE COURT: There was no real clear consensus as to
3 who was going to be called as witnesses, and this isn't a
4 trial. It's just a hearing on preliminary motions, so--
5 MR. COCHELL: Yes, Your Honor, I agree.
6 DIRECT EXAMINATION
7 BY MR. PEPPER:
8 Q. Mr. Morales, could you please state your full name and
9 address for the record?
10 A. Walter A. Morales, 11 95 South Cloverdale Avenue, Baton
11 Rouge, Louisiana 70808.
12 Q. Mr. Morales, what is your primary occupation?
13 A. I'm an instructor at Louisiana State University. I'm the
14 managing member of M6 Partners, a family partnership, and I'm a
15 president and CEO of Commonwealth Advisors, an investment
16 management firm.
17 Q. Hovv did you get involved vvith the Capital Lodge man camp
18 in North Dakota?
19 A. My family office, M6 Partners, was negotiating with Kenny
20 Lobell to buy a part of-- property he owns in New Orleans
21 called Jack's Brewery, and in the course of that conversation
22 he approached us about making the investment in or partnering
23 with him in North Dakota. He had already sunk a lot of money
24 in the property up there and he was -- he was running out of
25 money to complete it and approached us about partnering with
88
1 him.
2 Q. When you investigated the ownership of the actual property
3 on which the man camp sits, did you do a full due diligence
4 search?
5 A. We did a title search on the property. We got all the
6 corporate documents that we could. There was -- there was not
7 an operating agreement in place. There was land and a title.
8 We did on site visit of the property. We did --we canvassed
9 the area. We did due diligence on foot and via plane. We went
10 into-- we did a lot of research on the crew housing situation
11 in North Dakota, so we did --we did what we would normally do
12 when we make an investment, as much due diligence as we can do,
13 as we can put our hands on.
14 Q. And did you do all of this prior to the filing of the
15 notice of the lis pendens?
16 A. Yes.
17 Q. In fact, you guys had been looking at purchasing the man
18 camp long before the issue of the lis pendens came up, hadn't
19 you?
20 A. That's correct.
21 Q. Okay. And prior to that time, did you find any ownership
22 interest by Mr. Denton or any of his entities?
23 A. No.
24 Q. As to the-- as to the real property.
25 A. Correct.
89
1 Q. What effect do you think that the lis pendens has on the
2 price of the property of the man camp?
3 A. Well, it lowers it from our perspective. I mean, first of
4 all, it makes it very hard to finance a property. You know,
5 any lender who comes in right now is not sure what the title is
6 to that property if they were to have to repossess, so most
7 lenders aren't-- even nontraditional lenders are not going to
8 put a loan and take that-- you know, with the lis pendens
9 outstanding. And we can't move forward in our plan to
10 recapitalize capital with the lis pendens. We -- without some
11 type of a settlement that would let us move forward without
12 being dragged into litigation, you know, we-- even though
13 we've kind of lowered the-- the price has been lowered to us,
14 we legally are struggling to close it.
15 Q. Did you suggest and in order to do the deal -- you're
16 still interested in doing the deal, correct?
A v ..... .-
17 -"• I C;>.
18 Q. Did you suggest that Mr. Lobell send to Mr. Chad Hansen an
19 affidavit and settlement agreement?
20 A. That document that you're referring to, I don't believe
21 I've seen, but what I understand that we've sent to -- Chad
22 Hansen you're referring to? It's a settlement offer, but not
23 on behalf of Mr. Lobell. It's on behalf of us.
24 Q. Did your lawyer-- is your lawyer Jose Canseco?
25 A. Yes.
90
1 Q. Is he the one --
2 A. Who is not the baseball player.
3 Q. Right. Did he prepare that document and then send it to
4 me?
5 A. Yeah, he did.
6 Q. And was it you that were going to fund --you and your
7 group that was going to fund the settlement?
8 A. Yes.
9 Q. And was it the purpose of that to essentially free you
10 from being sued by Chad Hansen?
11 A. Yes.
12 Q. And was -- in your mind, was that one more piece of the
13 puzzle that was resolved that would allow the deal to go
14 through despite the lis pendens?
15 A. Well, we wouldn't settle with Chad Hansen alone. We need
16 a settlement with all the people that are --that are involved
17 or named in that suit, so we need Randy Baker, Myer Stabinski,
18 Hansen, and Mr. Denton, have to come to some kind of a
19 settlement with us for us to be able to move forward, so Chad
20 alone would not-- we would not settle or be able to give
21 consideration for a release from Chad alone. It wouldn't help
22 us.
23 Q. So it's your intention to get all parties agreed to before
24 you would allow the loan to--
25 A. I haven't talked to Randy Baker about a settlement, but
91
1 Kenny told me that he believes that whatever deal we could have
2 reached with Hansen, that Baker would agree to it as well.
3 We've talked to Myer and told him whatever we offered Chad,
4 we'd offer to him. And we've had discussions with the
5 Denton -- Denton's lawyer about trying to reach some kind of a
6 settlement with them that would allow us to close the
7 transaction.
8 MR. PEPPER: Okay. No further questions, Your Honor.
9 THE COURT: Any cross?
10 MR. COCHELL: Yes, Your Honor. I wanted to make sure
11 you had no questions before I started. It looked like you were
12 about to say something.
13 THE COURT: I was, but--
14 CROSS-EXAMINATION
15 BY MR. COCHELL:
16 Q. Okay. Mr. Morales, my name is Steve Cochell. I represent
17 Chad Denton. Do you remember talking to me once before?
18 A. I do, yes.
19 Q. Good to put a face with a name?
20 A. Yes, sir.
21 Q. Isn't it true, sir, that you never even heard of the
22 lawsuit in Texas until you became aware of it a couple of
23 months ago?
24 A. That's correct.
25 Q. Okay. Mr. Lobell, your partner, never told you that
92
1 Capital Lodging had been sued, is that correct, sir?
2 A. That's correct. I thought he had been, that Mr. Lobell
3 had been sued.
4 Q. Oh, he just said, "I've been sued," but not Capital
5 Lodging, not his other companies, is that correct?
6 A. That was my understanding, yes.
7 Q. All right. And so when you saw the lawsuit, what was your
8 reaction, when you learned that he hadn't shared that with you?
9 A. Well --
10 Q. Were you a little disappointed or angry?
11 A. I was certainly-- well, I was disappointed I didn't get
12 it, but more-- but my reaction really was more to do with the
13 transaction that was being contemplated and how we could
14 proceed. And the issue on the-- for the lawsuit is--
15 removing the lis pendens helps secure a lender, but it doesn't
16 help us move forward with the transaction alone. You know, the
17 lis pendens being removed doesn't make the suit go away, so the
18 suit would still be out there. And so, you know, my reaction
19 is that I need some resolution, at least with regard to me and
20 my partner, the Fine bergs (ph), and Capital, to move forward
21 with or without the-- you know, the lis pendens alone, removal
22 doesn't help.
23 Q. And so your partner, Mr. Lobell, knew of the lawsuit and
24 was negotiating a $25 million sale of his interest in the
25 property to you at the same time. Is that a fair statement,
93
1 sir?
2 A. That's right, but the --just to be fair, to make sure
3 that I'm correct on the record with the answer, I don't know
4 when Mr. Lobell got notice of the lawsuit. And I got notice of
5 the lawsuit roughly-- well, roughly around the time of the lis
6 pendens is when we first saw the lawsuit, so I don't know how
7 -- if that's a day or a month or-- you know, just so you
8 understand, I got it when --when I got the lis pendens is when
9 I knew about it.
10 Q. Let me represent to you that Mr. Baker was served with the
11 lawsuit almost a year ago and that Mr. Lobell was put on notice
12 of the lawsuit on that occasion and some other subsequent
13 occasions. Would that surprise you, sir?
14 MR. PEPPER: Objection to the form of the question,
15 Your Honor, actually, the relevancy of it. When Mr. Baker got
16 sued had nothing to do with Mr. Lobell being sued or any
17 .notice.
18 THE COURT: Objection is overruled, but in Texas, do
19 you have to file the action when the --when it's been served?
20 MR. COCHELL: Yes, the --we file the action and then
21 service is made, just like in the federal system, and --
22 THE COURT: The pleadings I've seen indicate that the
23 Texas action was commenced in June of--
24 MR. COCHELL: Of 2011, Your Honor.
25 THECOURT: --2011.
94
1 MR. COCHELL: Yes, sir. Maybe 2012, I believe, off
2 by a year, Your Honor.
3 THE COURT: So then nobody could have been served a
4 year ago.
5 MR. COCHELL: I'm sorry. I stand corrected. It
6 would have been served about six or seven months ago.
7 THE WITNESS: I didn't know Randy had been served six
8 or seven months ago. I actually don't have any contact with
9 Randy Baker.
10 Q. (MR. COCHELL CONTINUING) And the only reason you've
11 learned of the Texas lawsuit is because of the lis pendens, is
12 that correct?
13 A. That's correct.
14 Q. And as you understand it, that's one of the purposes of
15 the lis pendens law, if you know.
16 A. Well, I'm not a lawyer, but if that is a purpose, it
17 worked in my case.
18 Q. And it saved you, you know, some heartache down the road
19 if you bought the property without knowing of the existence of
20 the lawsuit. Isn't that a fair statement?
21 A. Yes.
22 Q. As far as you know sitting here today, you could have done
23 that deal, transferred the money, and then learned of the
24 lawsuit, is that right?
25 MR. PEPPER: Objection, hypothetical, Your Honor.
95
1 It's not --
2 THE COURT: It is, but I'll overrule.
3 THE WITNESS: The document, the purchase agreement,
4 would have required that disclosure prior to closing, so Kenny
5 would have had to make that disclosure prior to closing.
6 Q. (MR. COCHELL CONTINUING) That's assuming that he would
7 have made it at some point prior to closing on the sale,
8 correct?
9 A. Yeah.
10 Q. Okay. So you are -- I understand that you had a
11 discussion with Mr. Lobell about doing some sort of settlement
12 with Mr. Hansen, is that correct?
13 A. Yes.
14 Q. Okay. And you never saw the documents that were prepared
15 for the settlement?
16 A. No, I -- I don't -- I don't know if we marked up an
17 affidavit that Kenny vvas using or if vve prepared son1ething, but
18 it's been referred to as an affidavit. I didn't know it's an
19 affidavit. I thought it was just a release document.
20 Q. Okay. And so you're not aware that an affidavit was
21 prepared?
22 A. By my -- by my lawyer?
23 Q. Right.
24 A. No, I'm not.
25 Q. And you're not aware one way or the other whether your
96
1 lawyer prepared a settlement and release agreement for
2 Mr. Hansen to sign, is that right?
3 A. I am aware of that. We did prepare that.
4 Q. Okay. And do you know if M6 Partners is listed as a party
5 on that settlement?
6 A. I don't know who would be. I mean, it should have listed
7 the recovery fund. It should have listed the entity buying it,
8 but I haven't seen it, so I don't know who's listed on it.
9 Q. So it should have listed M6, but sitting here you don't
10 know.
11 A. I don't think it actually should have listed M6 because M6
12 itself is not the buyer, so it should not have listed M6.
13 Q. Was that release supposed to buy out Mr. Hansen's-- any
14 of Mr. Hansen's interest in any alleged partnership?
15 A. Yeah. My understanding is that-- first of all, that
16 document would have been used with the --with Stabinski and
17 with Randy Baker as well, and my understanding is, what the
18 document is supposed to say is that in the event you-- you own
19 something of this, whatever it is, you're conveying it to us
20 and releasing us from claims going forward.
21 Q. Okay. So sitting here today, you don't know if it said
22 that or not, is that correct?
23 A. Yeah. No, my testimony is I have not seen that document.
24 Q. Okay, and-- but it was supposed to talk about releasing
25 any right, title or interest in any part of the man camp or the
97
1 property, is that correct?
2 A. That's right because, you know, I understand -- I
3 understand there's a dispute about whether or not there's
4 ownership. From our perspective, we don't have a dog in that
5 fight. You know, in other words, we didn't-- this isn't
6 designed to settle the litigation. It's only supposed to keep
7 us out of it and allow us to close the transaction --
8 Q. Right.
9 A. -- recapitalize the camp and move forward.
10 Q. So the only reason you suggested that there be an approach
11 to Mr. Hansen was to make sure there was a release of any
12 interest-- right, title or interest in the man camp, correct?
13 A. To make sure that, yeah, that we don't have a jury down
14 the road come to some conclusion that he has an ownership and
15 then we discover that what we thought we bought we now have
16 other people who claim ownership.
17 Q. And you don't remember the particulars of whatever your
18 lawyer may have sent over there, is that correct?
19 A. I didn't see it.
20 Q. And you have no idea whether-- of what was actually sent
21 to Mr. Hansen.
22 A. No, I've testified that I have not seen the document.
23 Q. Okay. Did any of you look at the Answer filed by
24 Mr. Hansen in the Texas case?
25 A. I have not seen the Answer.
98
1 Q. Do you know it was a matter of public record as of the
2 time he filed it, which was July 9th, that he believed that
3 there was a partnership between the partners, Mr. Stabinski,
4 Hansen, Denton and Mr. Lobell? Would that surprise you?
5 A. Again, you know, I wouldn't say it surprises me, but I
6 tell you that I really don't-- I didn't read the Answer to it.
7 I wish Mr. Denton and Mr. Lobell good luck, you know. I mean,
8 they can fight this thing out. I would just like to keep this
9 camp out of bankruptcy and buy it and recapitalize it, and
10 that's what I'm trying to do.
11 Q. I understand.
12 A. I don't-- I don't really have an opinion one way or
13 another on the suit, the merits of it, and -- and I didn't read
14 the Answer to it.
15 Q. Now, your deal with Mr.-- your proposed deal with
16 Mr. Lobell is that you would be purchasing the real estate to
17 go with the man camp, what's located on the real property,
18 fair?
19 A. That's correct, yeah.
20 Q. Okay. That's because the man camp is not worth much if
21 you don't have the property. Isn't that a fair statement?
22 A. To me it's not, yeah.
23 Q. Now, did Mr. Lobell indicate to you that he had tried to
24 get a $5 million line of credit prior to coming to you?
25 A. Yes, there were some discussions. I don't remember the
99
1 amount, but there were some discussions about him trying to--
2 about borrowing on the facility, yeah.
3 MR. COCHELL: That's all the questions we have for
4 this witness, Your Honor.
5 MR. PEPPER: just one question on redirect, Your
6 Honor.
7 REDIRECT EXAMINATION
8 BY MR. PEPPER:
9 Q. Mr. Morales, isn't it true that jose Canseco, your lawyer,
10 had asked Mr. Lobell prior to the notice of lis pendens being
11 filed for a hold harmless agreement because he was aware of the
12 suit?
13 MR. COCHELL: Objection, hearsay.
14 THE COURT: Overruled. It's hearsay, but I can sort
15 itout.
16 THE WITNESS: No, I am aware of that. The question
17 that vvas directed to me vvas vvhether or not I knevv Capital vvas
18 named in the suit, and my answer to that was, I didn't know
19 Capital was named in a suit, but I was aware of the suit, that
20 Kenny was in it. And we did ask to be released and have a hold
21 harmless in our purchase agreement related to that suit so that
22 we wouldn't be brought in. That's correct, what you're saying.
23 Q. (MR. PEPPER CONTINUING) And it was five months ago, at
24 least, wasn't it?
25 A. That was in --that was in --well, we first started
100
1 negotiations to buy this in April, and the first pass of
2 documents would have been around June or july.
3 MR. PEPPER: Okay. No further questions, Your Honor.
4 MR. COCHELL: Nothing further, Your Honor.
5 THE COURT: Thank you, sir. You may step down.
6 MR. PEPPER: Your Honor, we call Chad Denton to the
7 stand.
8 THE CLERK: Mr. Denton, could you please raise your
9 right hand?
10 MR. DENTON: Sure.
11 CHAD CHRISTOPHER DENTON,
12 having been first duly sworn, was examined and testified as
13 follows:
14 DIRECT EXAMINATION
15 BY MR. PEPPER:
16 Q. Mr. Denton, please state your name and address for the
17 record.
18 A. Chad Christopher Denton, 3904 Palmer Drive, Round Rock,
19 Texas 78664.
20 Q. Mr. Denton, in your original Texas action, you filed a
21 suit for-- a claim for damages against Mr. Lobell, Mr. Baker,
22 Mr. Hansen and Mr. Stabinski, for damages for failing to honor
23 a partnership, correct?
24 A. Yes, sir.
25 Q. I'm going to show you a document that we've marked as P-6.
101
1 Do you recognize this document as the original petition that
2 you filed in Bell County?
3 A. Yes.
4 Q. Sir, I'm going to ask you to look through that document
5 and to see if you can see where anywhere your lawyer made a
6 claim for a-- to clear title to the property, which is --
7 which the man camp is situated on.
8 MR. COCHELL: Your Honor, we respectfully object to
9 this line of questioning because an amended petition, as I'm
10 sure under North Dakota law, under Texas law amends it as of
11 the date of the original filing, and Texas allows liberal
12 .amendments during the course of investigative or deposition
13 discovery, so this is irrelevant.
14 THE COURT: So what are you saying, there's been an
15 amended petition filed?
16 MR. COCHELL: There has been an amended petition
17 filed. VJelve been asking vvell, vve have a copy of it vve can
18 show to the Court.
19 MR. NYHUS: Your Honor, if I may, it's also included
20 --this is Chris Nyhus. It's included with our response brief.
21 I believe an exhibit of the amended petition was included as
22 Exhibit-- I believe it was A there.
23 MR. PEPPER: Your Honor, we offer the document for
24 purposes of comparison so that the Court can see what the
25 original petition included as pertains to what the amended
102
1 petition included--
2 THE COURT: Overruled.
3 MR. PEPPER: -- and the small differences thereto.
4 THE COURT: Overruled. You can answer the question
5 if you're able to, if you can remember what the question is.
6 THE WITNESS: I don't-- since I'm not an attorney, I
7 don't really know what you're asking me, but--
8 Q. (MR. PEPPER CONTINUING) Did you make a claim for
9 ownership of the property that the man camp is situated on in
10 your original Complaint?
11 A. I don't think so.
12 Q. Okay.
13 A. I don't-- like I said, I don't understand exactly when it
14 comes to the wording of everything, but--
15 Q. Did you read your Complaint before it was filed?
16 A. Yes, quite a few-- quite a bit.
17 Q. In fact, you signed a verifying affidavit that everything
18 in there was true and correct.
19 A. ltis.
20 Q. Okay. And yet you still don't know whether you made a
21 claim for a title or an interest in title to that property?
22 MR. PEPPER: Objection, misleading questions, Your
23 Honor. He didn't verify this particular petition. He --
24 THE COURT: I don't know whether he did or he didn't.
25 I don't know what Texas Civil Procedure requires in that
103
1 regard, but the objection is overrul
This text is long and has been trimmed here. Open the source document for the complete record.