Kaiser, In re

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Citation722 F.2d 1574,11 BCD 529
Docket NumberD,No. 96,96
Parties9 Collier Bankr.Cas.2d 910, 11 Bankr.Ct.Dec. 529, Bankr. L. Rep. P 69,511 In re Gerald KAISER, Debtor. Chester B. SALOMON, as Trustee of the Estate of Gerald Kaiser, Debtor, Plaintiff-Appellee, v. Gerald KAISER, Defendant-Appellant. Chester B. SALOMON, as Trustee of the Estate of Gerald Kaiser, Debtor, Plaintiff-Appellee, v. Gerald KAISER, Joan Kaiser, Harry Gorowitz and Yetta Gorowitz, Defendants, Gerald Kaiser and Joan Kaiser, Defendants-Appellants. ocket 83-5019.
Decision Date18 November 1983

Seymour J. Silberberg, New York City (Ruben Schwartz, Brett J. Meyer, Ruben, Schwartz & Schnall, New York City, of counsel), for defendants-appellants.

David M. Green, New York City (Chester B. Salomon, New York City, of counsel), for plaintiff-appellee.

Before KAUFMAN, MESKILL and PIERCE, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal from a decision of the United States District Court for the Southern District of New York, Werker, J., dated April 11, 1983, 32 B.R. 701, affirming a decision by the United States Bankruptcy Court for the Southern District of New York, Lifland, J., dated January 17, 1983.

The bankruptcy judge below denied appellant Gerald Kaiser a discharge in bankruptcy on the grounds that (a) he transferred property with intent to hinder, delay or defraud his existing and future creditors within one year before the filing of the bankruptcy petition in violation of 11 U.S.C. Sec. 727(a)(2)(A) (1982); and (b) he knowingly, willfully and fraudulently made false oaths in his petition and schedules in contravention of 11 U.S.C. Sec. 727(a)(4)(A) (1982). In addition, the judge impressed a constructive trust on Florida property held in the name of appellant Joan Kaiser to avoid unjust enrichment of Gerald Kaiser to the detriment of his creditors.

Appellants challenge these decisions and the jurisdiction of both the bankruptcy court and the district court to hear this dispute. We reject all of appellants' contentions and affirm.

I

The bankruptcy judge found the following facts. In 1968, appellants Gerald and Joan Kaiser lived in Lawrence, New York, in a residence owned by Joan Kaiser's parents. Gerald Kaiser made all of the mortgage payments on the property from that date until the property was sold. In 1970, in exchange for $12,000 paid by Gerald Kaiser to his in-laws, they transferred title to the property to their daughter Joan. Until the property was sold in 1978, only Gerald Kaiser's funds were used to pay for the expenses and improvements to the residence.

In October, 1978 Joan Kaiser took title to residential property in Miami, Florida. Joan Kaiser paid no financial consideration for the transfer to her of the Florida property; the $50,000 cash down payment was provided solely from Gerald Kaiser's funds. Both appellants executed a purchase money mortgage in the amount of $245,000. Appellants then moved into the Florida residence.

At that time, Gerald Kaiser had no cognizable assets and had outstanding liabilities of at least $494,901.32, the majority of which remained outstanding at the time of the filing of the petition in bankruptcy.

Gerald Kaiser continued to exercise full dominion and control over the property. He claimed deductions for real estate taxes paid in computing taxable income on his individual federal income tax returns for 1979 through 1981. He listed the property among his assets on a personal financial statement given to a Florida bank when he sought to obtain a loan.

Although Gerald Kaiser's funds were used for mortgage payments and maintenance and improvement of the Florida property, these payments were not made directly from accounts in his name. Rather, they were made from the accounts of corporations that he alone created and funded. These corporations conducted no business whatsoever.

In his February 1981 bankruptcy petition, Gerald Kaiser stated that New York was his state of domicile for the 180-day period preceding the filing of the petition. In May 1982 he stated under oath at the Adjourned Meeting of Creditors that his domicile was New York. In spite of this, in an affidavit in support of his motion to dismiss the appellee's complaint dated July 9, 1982, he swore under penalty of perjury that he had been a domiciliary of Florida for four years. He made a similar statement in a subsequent affidavit dated August 17, 1982.

Although Kaiser listed in his amended schedule several creditors to whom his obligations arose after the filing of the petition, he omitted certain obligations and assets. He failed to note in his petition his obligation on the Florida mortgage. He also failed to list as assets any interest in moneys held in corporate accounts which he controlled, including those from which he paid the expenses of the Florida residence, despite the fact that he made deposits of his funds into these accounts within one year of the petition. These statements were made under oath.

The bankruptcy judge found that Gerald Kaiser had transferred funds and incurred obligations for the purchase, maintenance and improvement of premises in Florida and New York with actual intent to hinder, delay and defraud existing and future creditors. The judge stated that the transfers Gerald Kaiser made and obligations he incurred constituted fraudulent conveyances under 11 U.S.C. Sec. 548(a) (1982), N.Y.Debt. and Cred.Law Sec. 276 (McKinney 1945) and Fla.Stat.Ann. Sec. 726.01 (1969). He determined that Joan Kaiser either knew or had reasonable cause to know of Gerald Kaiser's actual intent. The judge ruled that the trustee in bankruptcy, pursuant to 11 U.S.C. Sec. 548(a)(1), could avoid those transfers and obligations that occurred within one year prior to the filing of the bankruptcy petition. The judge also concluded that the trustee in bankruptcy could avoid these transfers of funds pursuant to 11 U.S.C. Sec. 544 (1982) because at all times since the date of purchase of the Florida property, Gerald Kaiser had creditors who could have avoided the transfers.

The bankruptcy judge determined that because Kaiser transferred property without adequate consideration within one year of the filing of the petition with actual intent to hinder, delay or defraud his creditors, his discharge should be denied under 11 U.S.C. Sec. 727(a)(2)(A). He also concluded that Gerald Kaiser knowingly, willfully and fraudulently made false oaths and thus he denied Kaiser's discharge pursuant to 11 U.S.C. Sec. 727(a)(4)(A). Finally, the judge impressed a constructive trust in favor of the trustee upon the Florida premises held in the name of Joan Kaiser because the retention of the premises would result in unjust enrichment to Kaiser to the detriment of the creditors of the estate.

II

Appellants contend initially that the bankruptcy judge had no jurisdiction to hear the instant dispute and to render a final judgment. They assert that the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (Marathon ), invalidated the bankruptcy jurisdiction of both the bankruptcy courts and the district courts granted in 28 U.S.C. Sec. 1471 (Supp. IV 1980). They claim that even if the Court did not strike down the jurisdictional grant to the district courts, those courts could not enact Emergency Bankruptcy Rule I (Rule) to "revive" the bankruptcy courts and empower them to hear bankruptcy disputes and related matters. They argue that even if the Rule is valid as a general proposition, a bankruptcy judge cannot constitutionally enter a final judgment. Finally, they claim that even if the bankruptcy judge could enter a final judgment in a traditional bankruptcy matter, the instant case is one involving a "related proceeding" and thus cannot be finally determined by the bankruptcy judge in accordance with both Marathon and the Rule. In particular, they contest the bankruptcy judge's jurisdiction to issue a final judgment that imposes a constructive trust upon the Florida property in favor of the trustee in bankruptcy where the debtor was not the record owner of the property. We deal with these contentions individually.

A.

Appellants make the all-too-familiar claim that Marathon declared 28 U.S.C. Sec. 1471 unconstitutional in toto, leaving the district courts without jurisdiction to hear bankruptcy matters. 28 U.S.C. Sec. 1471 provides in pertinent part:

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11.

(c) The bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts.

Marathon in no way involved the jurisdiction of the district courts. The issue in the case was whether Congress could constitutionally invest the bankruptcy courts, as non-Article III courts, with the power to hear a case involving a state law claim extraneous to the bankruptcy action and to issue a final judgment therein. The plurality found that Congress could not constitutionally grant the bankruptcy court jurisdiction over the state law claim. Because the plurality could not conclude that Congress would have been willing to retain the jurisdictional grant only for some of the claims in section 1471 if the remainder of the jurisdictional grant was found unconstitutional, it simply struck down on separability grounds the entire grant of jurisdiction over bankruptcy matters to the bankruptcy court.

The plurality thus noted in Marathon that "the...

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