Berman v. Empower FCU (In re Ling Wang)

• Decision Date: 10 August 2016
• Docket Number: Case No. 13–31150,Adv. Proc. No. 15–50002
• Citation: Berman v. Empower FCU (In re Ling Wang), 556 B.R. 27 (Bankr. N.D.N.Y. 2016)
• Parties: In re: Ling Wang, Debtor. Roger Berman, Plaintiff, v. Empower FCU and Ling Wang, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of New York

556 B.R. 27

In re: Ling Wang, Debtor.

Roger Berman, Plaintiff,

v.Empower FCU and Ling Wang, Defendant.

Case No. 13–31150

Adv. Proc. No. 15–50002

United States Bankruptcy Court, N.D. New York.

Signed August 10, 2016

Filed August 11, 2016

Anthony N. Elia, Esq., Miller Mayer, 202 East State Street, 7th Floor, P.O. Box 6435, Ithaca, N.Y. 14851–6435, appearing for Plaintiff Roger Berman

Anthony R. Hanley, Esq., Costello, Cooney & Fearon, PLLC, 5701 West Genesee Street, Camillus, N.Y. 13031, appearing for Defendant Empower FCU

Memorandum–Decision and Order Granting Defendant's Motion for Summary Judgment

Margaret Cangilos–Ruiz, United States Bankruptcy Judge

Before the court is Defendant Empower Federal Credit Union's (“Empower's”) motion for summary judgment seeking dismissal of Plaintiff Roger Berman's claims (Doc. 29) (“Motion”).¹ Plaintiff seeks to recover $70,000 from Empower on a constructive trust theory.²

Plaintiff lent $70,000 to Debtor's live-in partner, Peter Beaudry for a purported business deal which he claims was extended under false pretenses.³ In fact, the $70,000, which was sent via two wire transfers and deposited into Debtor's bank accounts, was primarily used to cure mortgage arrears of $59,715.74 (“Cure Payment”)⁴ and halt Empower from foreclosing against Debtor Ling Wang's residence where she, Peter Beaudry and their child lived.

It is Plaintiff's position that Empower was unjustly enriched and should be ordered to disgorge the funds. Plaintiff claims that Empower's acceptance of the Cure Payment from Debtor (i) exceeded the automatic stay relief previously accorded Empower, and (ii) violated provisions of the Confirmation Order as an unauthorized post-petition borrowing by the Debtor and an unauthorized transfer of property. Plaintiff contends that Empower knew or should have known that the funds were not earned by Debtor and were fraudulently obtained based upon Debtor's disclosures in her bankruptcy case. Plaintiff requests that this court invoke its equitable powers to accord him relief under 11 U.S.C. § 105.⁵

Empower claims to have had no prior relationship with Plaintiff and no knowledge regarding the source of the funds it received. Empower asserts that it lawfully acted within its rights as a secured creditor and seeks summary judgment dismissing the claims in their entirety.

The record on summary judgment consists of the pleadings filed in connection with the Motion.⁶ Additionally, the court takes judicial notice of the proceedings related to the Debtor's and Beaudry's bankruptcy cases, as noted, which are a matter of public record.

For the reasons discussed below, the Motion is granted.⁷

Jurisdiction

The court has jurisdiction to hear and determine this matter pursuant to 28 U.S.C. §§ 1334 and 157(b)(2)(O).

Undisputed Background Facts

Debtor and her boyfriend, Peter Beaudry (“Beaudry”), resided in a single-family house in Cortland, New York which was titled in the Debtor's name. (“Property”). The Property was the subject of a foreclosure action and a judgment of foreclosure and sale was entered in state court that was stayed by the filing of this case. Claims filed in Debtor's case total $354,309.16. Empower's secured claim at $232,305.29 represents 65% of the filed claims. The Debtor's confirmed chapter 13 plan provided for payment to Plaintiff of 2.23% of his unsecured claim of $70,000 or $1,561.00.

Debtor defaulted in making her post-petition mortgage payments. Empower moved for relief from stay, and the court terminated the stay “to permit [Empower] to commence and carry out to completion a foreclosure action” with respect to the Property.⁸ After relief was granted, Empower noticed a foreclosure sale.

In April 2014, Beaudry told Plaintiff that he had an excellent business opportunity, but did not have enough personal funds to close the deal. Plaintiff and Beaudry were long-time friends from college. Beaudry represented that if Plaintiff would loan him $60,000, the deal would close in June 2014, and there would be sufficient funds to repay Plaintiff in full. Plaintiff relied upon Beaudry's representations. At Beaudry's direction, three days prior to the foreclosure sale, Plaintiff wired $60,000 to Debtor's bank account at Empower. Plaintiffs understanding was that Beaudry and the Debtor were working on the “business deal” together. However, there was no pending business deal and Beaudry did not repay Plaintiff as promised.⁹ Of the $60,000 deposited into Debtor's account at Empower, the Cure Payment ($59,715.14) was immediately transferred by the Debtor to Empower to cure mortgage arrears and avoid the pending foreclosure sale. Empower accepted the Cure Payment, discontinued its foreclosure action and reinstated the Debtor's mortgage.

As established by Ms. Redhead's affidavit, neither she nor any other Empower employee made any representations to Plaintiff regarding the wired funds nor communicated with either Beaudry or Debtor as to the source of the wired funds.¹⁰

Standard for Summary Judgment

Fed. R. Civ. P. 56 provides, in pertinent part, that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a) ; see also Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir.2011). When the movant has demonstrated ‘the absence of a genuine issue of material fact,’ Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), the opposing party must come forward with specific evidence demonstrating the existence of a genuine dispute of material fact.” Brown, 654 F.3d at 358 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ) (emphasis added). The non-movant must show there are triable issues and cannot rely merely on pleadings containing allegations or denials. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “A party asserting that a fact ... is genuinely disputed must support the assertion by citing to particular parts of materials in the record, including depositions, ... affidavits, admissions ... or other materials....” Fed. R. Civ. P. 56(c)(1)(A). The court may consider as undisputed any fact not properly supported or addressed. Fed. R. Civ. P. 56(e).

On summary judgment, the court must “resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.”

Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir.2003) (citing Stern v. Trustees of Columbia Univ., 131 F.3d 305, 312 (2d Cir.1997) ). The court must also consider the burden of proof the moving party would face at trial and award judgment against a party who has failed to make a sufficient showing on an essential element of a dispositive issue on which it shoulders the burden. Celotex Corp., 477 U.S. at 322–23, 106 S.Ct. 2548.

Discussion

Claim I: Constructive Trust and Unjust Enrichment

Plaintiff claims that Empower was unjustly enriched by the Cure Payment and that the court should impose a constructive trust. Under New York law, to establish a constructive trust claim, a plaintiff must establish four elements: “(1) a confidential or fiduciary relationship; (2) a promise, express or implied; (3) a transfer made in reliance on that promise; and (4) unjust enrichment.” In re Koreag, Controle et Revision S.A., 961 F.2d 341, 352 (2d Cir.1992) (collecting New York cases). Unjust enrichment constitutes the “key factor” in determining whether a constructive trust should be imposed. Id. at 354 (citing Cavallaro v. Lewis, 198 Misc. 412, 98 N.Y.S.2d 730, 731 (Sup.Ct.1950) ). “[T]he purpose of a constructive trust is prevention of unjust enrichment.” In re First Central Financial Corp., 377 F.3d 209, 212 (2d Cir.2004) (citing Simonds v. Simonds, 45 N.Y.2d 233, 242, 408 N.Y.S.2d 359, 380 N.E.2d 189 (1978) ).

To establish a claim for unjust enrichment under New York law, a plaintiff must show “that (1) defendant was enriched (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.” Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir.2004) (citing e.g., Clark v. Daby, 300 A.D.2d 732, 751 N.Y.S.2d 622, 623 (2002) ). “A conclusion that one has been unjustly enriched is essentially a legal inference drawn from the circumstances surrounding the transfer of property and the relationship of the parties.” Sharp v. Kosmalski, 40 N.Y.2d 119, 386 N.Y.S.2d 72,351 N.E.2d 721, 724 (1976). The burden of proof to establish a constructive trust is clear and convincing evidence.¹¹ In re MBM Entm't, LLC, 531 B.R. 363, 414 (Bankr.S.D.N.Y.2015).

Confidential or Fiduciary Relationship and a Promise, Express or Implied and a Transfer made in Reliance thereon

Plaintiff cannot prevail on his unjust enrichment claim unless he had a sufficiently close relationship with Empower. Georgia Malone & Co., Inc. v. Rieder, 19 N.Y.3d 511, 950 N.Y.S.2d 333, 973 N.E.2d 743, 746 (2012) (citing Sperry v. Crompton Corp., 8 N.Y.3d 204, 215–16, 831 N.Y.S.2d 760, 863 N.E.2d 1012 (2007) ). “[W]hile ‘a plaintiff need not be in privity with the defendant to state a claim for unjust enrichment,’ there must exist a relationship or connection between the parties that is not ‘too attenuated.’ ” Georgia Malone & Co., Inc. v. Rieder, 950 N.Y.S.2d 333, 973 N.E.2d at 746 (citing Sperry v. Crompton Corp., 8 N.Y.3d at 215–16, 831 N.Y.S.2d 760, 863 N.E.2d 1012 ). Here, the record is devoid of any evidence to support a finding that a relationship existed between Plaintiff and Empower. The record similarly fails to establish facts to support a finding that Empower promised Plaintiff anything upon which Plaintiff relied when making the loan to Beaudry. Plaintiff has submitted no evidence that there was any communication between Empower and Plaintiff.

There is not a scintilla of evidence that Ms. Redhead or any...