760 F.2d 406 (2nd Cir. 1985), 493, In re Feit & Drexler
|Docket Nº:||493, Docket 84-5071.|
|Citation:||760 F.2d 406|
|Party Name:||In re FEIT & DREXLER, INC., Frank Feit Associates, Inc., and William R. Drexler International, Inc., a/k/a William R. Drexler International, Ltd., Debtors. David M. GREEN, as Trustee of Feit & Drexler, Inc., Frank Feit Associates, Inc., and William R. Drexler International, Inc., a/k/a William R. Drexler International, Ltd., Debtors, Plaintiffs-App|
|Case Date:||April 12, 1985|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Dec. 17, 1984.
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David M. Green, New York City (Chester B. Salomon, P.C., New York City, on the brief), for plaintiffs-appellees.
Harvey Weinig, Port Washington, New York (Ressa, Nappi & Weinig, Port Washington, New York, on the brief), for defendant-appellant.
Before MESKILL, KEARSE, and CARDAMONE, Circuit Judges.
KEARSE, Circuit Judge:
Defendant Violet Drexler ("Violet") appeals from a July 17, 1984 order of the United States District Court for the Southern District of New York, John F. Keenan, Judge, continuing and refusing to modify earlier orders that preliminarily restrained Violet from transferring or disposing of any of her property and directed her to deliver to her attorney, as escrow agent, all of her property capable of delivery pending trial of certain claims brought against her and her former husband William R. Drexler ("William") by plaintiff David M. Green, the trustee in bankruptcy (the "Trustee") of companies formerly owned and controlled by William or Violet. 42 B.R. 355 (S.D.N.Y.1984). On appeal, Violet claims principally that the district court lacked statutory authority to grant the turnover order and that it applied erroneous standards in issuing its preliminary injunctions. The Trustee has moved to dismiss the appeal on the ground that the order is not appealable under 28 U.S.C. Secs. 1291 or 1292(a) (1982), or, alternatively, on the ground that Violet may not appeal the order because she is in contempt of it. For the reasons below, we decline to dismiss the appeal and we affirm the order of the district court.
This appeal arises from an adversary proceeding brought in the United States Bankruptcy Court for the Southern District of New York by the Trustee against William and Violet Drexler to recover funds allegedly improperly paid to them by Feit & Drexler, Inc., Frank Feit Associates, Inc., and William R. Drexler International, Inc. (collectively the "Drexler Companies"), each currently a debtor in an involuntary Chapter 7 bankruptcy proceeding. The Trustee's complaint alleged conversion, corporate waste and mismanagement, breach of fiduciary duty, fraudulent conveyance, and fraudulent transfer; it sought money damages, a prejudgment attachment of William and Violet's property, and a preliminary injunction restraining William and Violet from transferring or disposing of any of their property.
After filing the complaint, the Trustee obtained from the bankruptcy court a preliminary injunction enjoining Violet from transferring or encumbering her interest in any real property, particularly her home in Belleair, Florida. The court granted the injunction in an order dated September 27, 1983 ("September 27 Order"), finding, inter alia, "that there were sufficiently serious questions going to the merits to make them a fair ground for litigation, and that the balance of hardships tipped decidedly toward the trustee." Violet took no appeal from the September 27 Order, and the adversary proceeding was subsequently transferred to the district court, pursuant to the Southern District's Emergency Rule of Bankruptcy Procedure I, Sec. (d)(1), where it was assigned to Judge Keenan.
The Trustee proceeded in his investigations of William, Violet, and the Drexler Companies. In sworn deposition testimony, Violet stated that she had no substantial assets other than her Florida residence and an unvested interest in a pension fund. She testified that she had no bank accounts other than several small checking accounts in New York and Florida, owned no commodities, had no brokerage accounts, and had never had any communication with any brokers or brokerage firms. She testified that she had no accounts in Swiss banks and had never done any banking in Switzerland; she denied ever having been a shareholder, officer, or director of any of the Drexler Companies; she stated that she had never managed any business or financial functions for the Drexler Companies although she admitted that, for a limited
period of time, she had had authority to sign checks on behalf of some of them. Violet stated that her only work for the Drexler Companies had been on a part-time basis with responsibility only for scheduling clerical staff, and that her annual salary was "probably less" than $30,000. There was also testimony by William, who agreed that Violet had performed limited services for the Drexler Companies; William's testimony indicated, however, that in the period 1977-1980, Violet had been paid some $616,000.
In the meantime, the Trustee discovered that, contrary to Violet's deposition testimony, there existed several bank accounts at Swiss Bank Corporation in Zurich, Switzerland, in the name and for the benefit of William, Violet, or one of the Drexler Companies. The Trustee obtained an attachment of those accounts by the Zurich Debt Collector's Office in early February 1984. Swiss Bank Corporation, in a letter to the Debt Collector's Office, confirmed the existence and attachment of four such accounts, stating that they were maintained in Violet's name and contained approximately 635,000 Swiss francs (then worth approximately $285,000). In late May 1984, the Trustee also obtained evidence that, again contrary to Violet's testimony, Violet maintained accounts with the brokerage firm of J.B. Hanauer & Co. ("Hanauer").
Accordingly, on June 7, 1984, the Trustee moved in the district court for a preliminary injunction restraining Violet from transferring or encumbering any of her property and a prejudgment attachment of all such property; he sought ex parte a temporary restraining order prohibiting Violet, pending determination of the injunction and attachment motions, from transferring or encumbering any interest she might have in any brokerage account. The Trustee argued that Violet's false testimony at her deposition showed an intention to secrete her assets so as to avoid paying any judgment obtained against her by the Trustee. The application was supported by (1) the Trustee's affidavit describing the issuance of the September 27 Order, the testimony of Violet and William, and the Trustee's discovery of the Swiss bank accounts and the brokerage accounts, and (2) copies of the September 27 Order, the pertinent testimony, and the letter from Swiss Bank Corporation confirming Violet's record ownership of and the Trustee's attachment of the Swiss bank accounts.
On June 7, 1984, the district court issued a temporary restraining order "restrain[ing] and prohibit[ing Violet] from transferring, mortgaging, encumbering, or dissipating in any way any interest which [she] may have in any brokerage accounts or assets maintained therein," and ordered Violet to show cause on June 15, 1984, why the Trustee's application for a preliminary injunction and attachment should not be granted ("June 7 Order").
Upon the issuance of the June 7 Order, the Trustee learned from Hanauer that bonds purchased by Violet through that firm had been turned over to Violet. The Trustee therefore sought and obtained from the district court on June 8 an ex parte order ("June 8 Order") supplementing the June 7 Order by restraining Violet from transferring not only assets held in brokerage accounts but also securities held directly by her. Thus, Violet was "restrained and prohibited from transferring, mortgaging, encumbering, or dissipating in any way any interest which ... Violet Drexler may have in any securities, bonds, money-market instruments, or other non-demand deposits, or the proceeds therefrom...." (June 8 Order.)
On June 15, the return date of the June 7 order to show cause, the Trustee applied for further prejudgment relief against Violet in the form of a mandatory preliminary injunction ordering Violet to turn over to an escrow agent all her property capable of delivery. At the hearing held later that day, Violet requested additional time to prepare her opposition to the Trustee's June 7 and June 15 applications. The Trustee stated that he had no objection, on condition that his application for a turnover order be granted on an interim basis.
The district court granted Violet additional time and asked the Trustee to present his evidence supporting an interim turnover order. The Trustee submitted business records of Hanauer and authenticating and explanatory testimony of one of its agents showing that Violet had purchased $250,000 worth of municipal bonds from that firm in 1983. Violet offered no evidence.
On June 20, 1984, by Supplemental Temporary Restraining Order Compelling Turnover of Property ("June 20 Order"), the district court granted the Trustee's request for an interim turnover of Violet's property and
ORDERED that Violet Drexler, her agents, employees, and all persons holding property for her or acting in concert with her, are prohibited from transferring or disposing of any property of Violet Drexler except in accordance with this order or any further [order] of this court; and ... further
ORDERED that Violet Drexler, her agents, employees, and all persons holding property for her or acting in concert with her, are directed to transfer forthwith all...
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