In re Baker & Getty Financial Services, Inc.
| Citation | 98 BR 300 |
| Decision Date | 15 March 1989 |
| Docket Number | Bankruptcy No. B87-00074-Y,Adv. No. 87-0079. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
| Parties | In re BAKER & GETTY FINANCIAL SERVICES, INC., Baker & Getty Diversified, Inc., Baker & Getty Securities, Inc., Philip Cordek, Susan Bierman Cordek, Debtors. Carl D. RAFOTH, Trustee, Plaintiff, v. The FIRST NATIONAL BANK OF BARNESVILLE, et al., Defendants. |
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D. Keith Roland, Youngstown, Ohio, for plaintiff/trustee.
Robert M. Morrow, Means, Bichimer, Burkholder & Baker Co., L.P.A., Columbus, Ohio, for defendant First National Bank of Barnesville.
Thomas Paris, Cleveland, Ohio, for defendant Philip Cordek.
Plaintiff Trustee has moved for summary judgment pursuant to Bankruptcy Rule 7056, incorporating Rule 56, Federal Rules of Civil Procedure. The Trustee seeks to recover from Defendant FIRST NATIONAL BANK OF BARNESVILLE ("FIRST NATIONAL") Two Hundred Forty-Five Thousand, Eight Hundred & 00/100 Dollars ($245,800.00) in payments made by Debtors on a promissory note, the value of two automobiles, and interest on these amounts. This is a core proceeding pursuant to 28 U.S.C. Sec. 157(b)(2)(F).
The Trustee's Motion is based (1) on a theory of preferential transfers, as set forth in 11 U.S.C. Sec. 547; and, (2) on a theory of fraudulent transfers under 11 U.S.C. Sec. 548. Both the Plaintiff and Defendants have submitted affidavits, depositions and exhibits to support their respective positions.
An involuntary petition was filed on January 22, 1987, naming as Debtors BAKER & GETTY FINANCIAL SERVICES, INC., BAKER & GETTY DIVERSIFIED, INC., and BAKER & GETTY SECURITIES, INC., PHILIP CORDEK and STEVEN MEDVED were principals of the Debtor Corporations.1
BAKER & GETTY FINANCIAL SERVICES, INC., incorporated in August, 1985, was intended to operate as a full-service financial brokerage firm. In December 1985, BAKER & GETTY DIVERSIFIED, INC., was formed to obtain and loan funds and develop real estate opportunities for BAKER & GETTY FINANCIAL SERVICES. In May 1986, BAKER & GETTY SECURITIES, INC., was formed to replace the two prior Corporations to overcome difficulties encountered by Debtors in obtaining licenses for securities trading. JOHN CHARLES, INC., was incorporated on June 10, 1986, to serve as a real estate investment company for the BAKER & GETTY entities and its principals.
The BAKER & GETTY entities were engaged in a "Ponzi" scheme.2 No securities were traded. Rather, some investors received returns on investments which were financed by the money received from newly attracted investors. By November 1, 1986, various investors were defrauded of an estimated $2.5 million dollars.
At all times pertinent herein, Defendant FIRST NATIONAL maintained a customer account for and in the name of BAKER & GETTY and a personal account for PHILIP CORDEK.
On August 27, 1986, PHILIP CORDEK, BYRON RICE, and ROSE RICE3, as individuals, executed a promissory note to FIRST NATIONAL for $1.1 million dollars. (Deposition of Charles J. Bradfield, pp. 8-10, hereafter "CJB p. 8-10"; Plaintiff Exhibit 1 to Summary Judgment Motion). Both Mr. Rice and Mr. Cordek pledged various items of collateral to secure the obligation. The collateral pledged by Mr. Cordek consisted of several automobiles, a mortgage on Mr. Cordek's home in Shaker Heights, Ohio, and a lien on a boat. (CJB p. 19). The note was due in full on September 11, 1986, but was not paid when due.
On October 24, 1986, Thirty Thousand & 00/100 Dollars ($30,000.00) was wired to Defendant FIRST NATIONAL from an account belonging to Mark L. Hocevar at Ohio Savings Association in Cleveland.4 The funds were designated for the benefit of BAKER & GETTY but were immediately applied, on Mr. Bradfield's order, to the promissory note of Mr. Cordek and the Rices. (CJB p. 43).
On November 8, 1986, Defendant FIRST NATIONAL withdrew Fifteen Thousand, Eight Hundred & 00/100 Dollars ($15,800.00) from BAKER & GETTY's account at FIRST NATIONAL and applied the funds to the Cordek/Rice promissory note obligation. (CJB pp. 44-46; Plaintiff Exhibit 4 to Summary Judgment Motion).
On November 7, 1986, a Two Hundred Thousand Dollar ($200,000.00) cashier's check, payable to "Malcolm Jacobs Aviation" and endorsed by Malcolm Jacobs in blank, was handed over to Mr. Rice. Mr. Rice delivered the check to Mr. Bradfield, President of Defendant FIRST NATIONAL, the same day, with instructions to apply the proceeds of the check against the amount owed on the Cordek/Rice promissory note. Contrary to Mr. Rice's request, Mr. Bradfield insisted that Mr. Rice endorse the check. Mr. Bradfield then deposited the funds in the account of Mr. Rice until the check cleared the banking system. Thereafter, on November 15, 1986, Defendant debited Mr. Rice's account and applied the funds to the promissory note. (CJB pp. 44, 53-57; Rice Deposition, pp. 36, 38, 179-180; Plaintiff's Exhibits 5 and 11 to Summary Judgment Motion).
As noted above, an involuntary petition naming the BAKER & GETTY entities as debtors was filed on January 22, 1987. PHILIP CORDEK was joined as an affiliate on April 28, 1987. The Court entered an Order consolidating the estate of Mr. Cordek with the BAKER & GETTY entities on September 8, 1987. This adversary proceeding was filed on September 1, 1988. DISCUSSION
Fed.R.Civ.P. 56 is made applicable to adversary proceedings by Bankruptcy Rule 7056. According to Rule 56, summary judgment is appropriate only where there is no genuine issue of material fact when viewing the evidence in a light most favorable to the opposing party and movant is entitled to judgment as a matter of law. Adickes v. S.H. Kress & Co., 398 U.S. 144, 153-57, 90 S.Ct. 1598, 1606-08, 26 L.Ed.2d 142 (1970); Watkins v. Northwestern Ohio Tractor Puller's Assn., Inc., 630 F.2d 1155, 1158 (6th Cir.1980). It is the movant's burden to establish that no genuine issue of fact exists. Shearson/American Express, Inc., v. Mann, 814 F.2d 301, 305 (6th Cir. 1987). However, if a motion has been made and properly supported, the opposing party may not rest on the pleadings. Instead, the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1324 (6th Cir. 1983).
Defendant FIRST NATIONAL has objected to acceptance of the testimony found in the depositions of PHILIP CORDEK and STEVEN MEDVED. The basis for the objection is that the depositions were taken prior to the date when Defendant FIRST NATIONAL first entered its appearance on June 5, 1987, with the filing of an Objection to a Motion for Substantive Consolidation. Defendant asserts that since it was neither present nor notified nor given the opportunity to be present at the deposition, the Court must disregard the testimony in those depositions pursuant to Bankruptcy Rule 7032.
Defendant FIRST NATIONAL has further objected to the Court's consideration of Plaintiff Exhibits 2, 6, 7 and 9, asserting that Plaintiff did not properly authenticate and identify the exhibits.
As a predicate to determining whether genuine issues of material fact exist, we must first determine whether the Court may properly consider the CORDEK and MEDVED depositions in a motion for summary judgment.
Defendant FIRST NATIONAL correctly asserts that Fed.R.Civ.P. 32(a) and Bankruptcy Rule 7032 bar the use of depositions against a party deprived of notice and an opportunity to be present at the examination. Defendant fails to distinguish the appropriate use of such deposition testimony when the deposition serves the function of an affidavit. As the court noted in In re Robert Landau Associates, Inc., 56 B.R. 648, 651 (Bankr.S.D.N.Y. 1986), courts have approved the admissibility and use of depositions in motion practice. See Hoover v. Switlik Parachute Co., 663 F.2d 964, 966-67 (9th Cir.1981) (); United States v. Fox, 211 F.Supp. 25 (E.D.La. 1962), aff'd. 334 F.2d 449 (5th Cir.1964); In re Melton, 39 B.R. 762 (Bankr.N.D.Ga. 1984); Tormo v. Yormark, 398 F.Supp. 1159, 1168 (D.N.J.1975). Here, the depositions are based on the personal knowledge of Mr. Medved and Mr. Cordek and were taken under oath and were signed by them.5 As such, the depositions meet the requirements for affidavits under Fed.R. Civ.P. 56. Accordingly, the depositions will be considered as affidavits in support of the Plaintiff's Motion for Summary Judgment.
Defendant FIRST NATIONAL has objected to Exhibits 2, 6, 7 and 9.6 Defendant has offered no evidence challenging the substance of the Exhibits, but merely asserts that the Exhibits have neither been properly identified nor authenticated according to the Federal Rules of Evidence. However, Defendant ignores the affidavit of the Trustee, CARL D. RAFOTH, submitted in support of Plaintiff's Motion, which avers that all exhibits attached to the Motion are true and accurate copies of documents obtained from Debtor's business records and in the Trustee's personal possession. Furthermore, the documents comprising the exhibits have been made available to all defendants through the bankruptcy proceedings. Exhibit 2, in particular, was introduced in the hearing on the Objection to FIRST NATIONAL's Proof of Claim. Moreover, the Trustee properly points out the self-authenticating nature of commercial paper and related documents pursuant to Fed.R.Evid. 902. Accordingly, the Exhibits are accepted as submitted in support of the Trustee's Motion for Summary Judgment.
Plaintiff Trustee seeks to recover as preferences transfers to Defendants within ninety (90) days of January 22, 1987, the date the involuntary petition was filed. The burden is on the Trustee to prove every element of a...
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