Canney v. Fisher & Strattner, LLC (In re Turner & Cook, Inc.)

• Decision Date: 14 March 2014
• Docket Number: Bankruptcy No. 10–11344.,Adversary No. 11–1033.
• Citation: 507 B.R. 101
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re TURNER & COOK, INC., Debtor. John R. Canney, III, Trustee, Plaintiff, v. Fisher & Strattner, LLC, Mark Fisher, et al., Defendants.

507 B.R. 101

In re TURNER & COOK, INC., Debtor.

John R. Canney, III, Trustee, Plaintiff,

v.Fisher & Strattner, LLC, Mark Fisher, et al., Defendants.

Bankruptcy No. 10–11344.

Adversary No. 11–1033.

United States Bankruptcy Court,

D. Vermont.

Signed March 14, 2014.

John R. Canney, III, Esq., Rutland, VT, Chapter 7 Trustee, Plaintiff.

Peter Bilowz, Esq., Goulston & Stores, P.C., Boston, MA, for the Trustee.

Mark Fisher, Jacksonville, VT, Pro se Defendant.

MEMORANDUM OF DECISION

Granting in Part and Denying in Part Plaintiff's Motion for Partial Summary Judgment

COLLEEN A. BROWN, Bankruptcy Judge.

The Chapter 7 Trustee (the “Plaintiff” or “Trustee”) has filed a motion for summary judgment seeking avoidance of certain alleged fraudulent transfers from Turner & Cook, Inc. (“T & C” or the “Debtor”) to Mark Fisher (the “Defendant” or “Mr. Fisher”) and recovery of transferred property. For the reasons set forth below, the Court finds no material facts are in dispute with respect to some of the alleged fraudulent transfers, and the estate is entitled to relief with respect to those transfers. To the extent the Trustee has demonstrated he is entitled to judgment as a matter of law with respect to the undisputed transfers, summary judgment is granted. Where there are facts in dispute or the Trustee has failed to meet his burden of demonstrating entitlement to relief, summary judgment is denied.

Jurisdiction

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157 and 1334, and the Amended Order of Reference entered by Chief Judge Christina Reiss on June 22, 2012. The Court declares the claims addressed by the instant summary judgment motion to be core matters under 28 U.S.C. § 157(b)(2)(F) and (H), over which this Court has constitutional authority to enter a final judgment. To the extent any of the claims in the Plaintiff's complaint are outside this Court's constitutional authority pursuant to Stern v. Marshall, ––– U.S. ––––, 132 S.Ct. 56, 180 L.Ed.2d 924 (2011), the Plaintiff filed a statement indicating he consents to this Court entering a final judgment (doc. # 126), and due to the presence of disputed facts, those claims are not addressed by this decision.

Procedural History

The Debtor's creditors filed an involuntary Chapter 7 petition against it on October 21, 2010, and the Court entered an order for relief on December 15, 2010 (ch. 7 # 10–11344, doc. 1, 14). On December 5, 2011, the Chapter 7 Trustee filed a complaint initiating this adversary proceeding (doc. # 1). ¹ On June 1, 2012, the Trustee filed an amended complaint seeking a determination that the Debtor had made certain fraudulent transfers to the Defendant (doc. # 33). The Court entered a scheduling order on July 30, 2012, which gave the parties until March 4, 2013 to file all dispositive motions (doc. # 46). In December 2012, stipulations of dismissal were entered (doc. 65, 66) against two of the original defendants. Subsequently, the Court entered an order extending the due date for dispositive motions to May 8, 2013, based in part on Mr. Fisher's delays in fulfilling discovery request (doc. # 52).

On November 15, 2012, however, the Trustee moved for entry of default against Defendant Fisher, for failure to respond to the amended complaint (doc. # 56). After a hearing held on the application on December 18, 2012, the Court granted Mr. Fisher's request for an extension of time to respond to the amended complaint, and ordered him to respond by January 21, 2013 (doc. 64, 71). On January 23, 2013, Mr. Fisher moved for an extension of time to respond, citing his health condition and pro se status (doc. # 74). After a hearing held on January 25, 2013, the Court ordered Mr. Fisher to provide evidence of his health condition and turn over certain discovery documents; it set a further hearing on the matter for February 19, 2014 (doc. # 77). The Court then granted additional extensions of time for Mr. Fisher to turn over the required documents and held continued hearings on the matter on March 26 and May 21, 2013 (doc. 88, 93). The Trustee filed a second amended complaint (the “Second Amended Complaint”) on May 16, 2013, to which the Defendant responded by cursorily denying the majority of the allegations (doc. 99, 113). The Court entered a resulting scheduling order setting further deadlines for the production of documents and requiring all dispositive motions to be filed by January 2, 2014 (doc. # 108).

Based on Mr. Fisher's non-compliance with production of certain documents, the Court granted an additional and final extension of time in which to file dispositive motions (doc. 111, 122). The Trustee then filed a timely motion for summary judgment with memorandum of law, on January 30, 2014 (doc. # 131) (collectively, the “Motion”). Pursuant to the order entered February 4, 2014, Mr. Fisher's response to the Motion was due February 21, 2014 (doc. # 140). In the order, the Court specifically informed the pro se Defendant that if he failed to respond to the Motion, and failed to file a motion setting forth cause for an extension of time to do so, by February 21, 2014, he risked having the Court enter a default judgment against him. On February 21, 2014, Mr. Fisher filed a motion for an extension of time to respond to the Motion, which the Trustee opposed (doc. 142, 143). The Court denied the request, concluding that Mr. Fisher's last-minute request for a further extension of time was merely an attempt to escape judgment for another day, at the expense of the Debtor's estate and its creditors (doc. # 144).

Accordingly, the Court treated the Motion as unopposed, and took the matter under advisement.

Undisputed Material Facts

Based upon the record in this case and adversary proceeding, and pursuant to Vt. LBR 7056–1(a)(3),² the Court finds the following facts to be material and undisputed.

1. T & C was a residential construction company based in Jacksonville, Vermont. T & C focused on custom, “high end” home construction and historical renovations and restorations in New England. Statement of Undisputed Facts (“SUMF”) (doc. # 133), ¶ 1; Declaration of James Strattner (“Strattner Decl.”) (doc. # 134), ¶ 2.

2. T & C was managed by Mr. Fisher as director and vice president and James Strattner as director and president.³ SUMF, ¶ 2; Strattner Decl., ¶¶ 1–2.

3. In or around December 2001, T & C entered into a construction contract with Patrick and Carolyn Sullivan for construction of an approximately 10,000 square foot home in Sudbury, Massachusetts. T & C worked on the construction of the Sullivans' home until February 2006, when T & C entered into a dispute concerning the construction and its costs. The Sullivans formally terminated T & C as contractor in the summer of 2006. SUMF, ¶ 3; Strattner Decl., ¶ 6.

4. On or around October 24, 2006, Anthony Lee—a forensic accountant hired by the Sullivans following T & C's cessation of work on the Sullivans' project—provided T & C with an accounting for the project, alleging adjustments and credits due to the owners in the amount of approximately $4.5 million (the “Lee Accounting”). SUMF, ¶ 4; Strattner Decl., ¶ 7.

5. In April 2007, T & C filed an arbitration demand as a result of a disagreement among the parties concerning the Lee Accounting. On May 17, 2007, the Sullivans submitted a counterclaim against T & C in the arbitration based, in part, on the Lee Accounting. On October 1, 2009, the arbitrators awarded the Sullivans $3,270,412, or 75% of their original claim. The arbitration award was confirmed by the Massachusetts Superior Court on March 9, 2010. SUMF, ¶ 5; Strattner Decl., ¶¶ 8–10.

6. From November 2006, after T & C was on notice of the Sullivans' multimillion dollar claim, through the date of the involuntary petition against T & C in October 2010, T & C failed to carry any amount of liability for the Sullivans' claim on its books. T & C's net worth for this period, as reflected in the balance sheets, never exceeded $1.24 million, and was substantially less for a majority of the period. SUMF, ¶ 6; Strattner Decl., ¶¶ 14–15; doc. 134–3 through 134–8 (exhs. 3(a) through 3(nnn)).

7. As of October 13, 2009, T & C had no active projects or employees. SUMF, ¶¶ 7–8; Strattner Decl., ¶¶ 11–12.

8. During the period October 2006 to December 2010, Mr. Fisher had credit card accounts with American Express (“AMEX”). T & C had no credit card account with AMEX. Declaration of Catherine A. Bazal, ¶ 2; SUMF, ¶ 10; Strattner Decl., ¶¶ 16–17.

9. As further detailed in the AMEX Statements and T & C's own financial records, for the four-year period preceding this Court's entry of an order for relief (November 2006–December 2010), T & C paid AMEX approximately $130,000 for charges made on Mr. Fisher's AMEX credit cards. The vast majority of the payments to AMEX on account of Mr. Fisher's credit card accounts originated from T & C's account with Chittenden Bank, Bank Account ending in 0505 (the “505 Account”). SUMF, ¶ 11; Strattner Decl., ¶ 20.

10. Generally, the 505 Account was not used by T & C to pay T & C project related or overhead expenses, nor payroll. During this period, Mr. Fisher controlled the 505 Account. SUMF, ¶ 11; Strattner Decl., ¶¶ 18–19.

11. The total of AMEX charges paid by the 505 account which are conclusively unrelated to T & C's business is at least $76,526.91. SUMF, ¶ 12–14; Strattner Dec. ¶¶ 21–22.

12. In late 2008, Mr. Fisher installed a wood boiler in his home and T & C paid for the cost of the wood boiler and its installation. In the summer and fall of 2008, Mr. Fisher or his wife and T & C employee Stephanie Powers signed checks on T & C's 505 Account, paying “Alan K. Hadley, Electrician” $1,487 and Crystal Rock Farm, a seller of wood boilers, $12,719.79. SUMF, ¶ 15; Strattner Decl., ¶ 23.

13. Neither Mr. Hadley nor Crystal Rock Farm was a project related or overhead vendor for T & C during this period and T & C received no benefit for the payments to Mr. Hadley...