Capasso v. Midland Funding, LLC (In re Capasso)
| Decision Date | 22 June 2020 |
| Docket Number | AP Case No.: 19-03007 (AMN),Case No.: 18-31692 (AMN) |
| Citation | 618 B.R. 389 |
| Court | U.S. Bankruptcy Court — District of Connecticut |
| Parties | IN RE: Donna L. Calandrelli CAPASSO, Debtor Donna L. Calandrelli Capasso, Plaintiff v. Midland Funding, LLC, Defendant |
Counsel for the Plaintiff: David C. Pite, Esq., Pite Law Office LLC, 1948 Chapel Street, New Haven, CT 06515.
Counsel for the Defendant: A. Michelle Hart Ippoliti, Esq., McCalla Raymer Liebert Pierce, LLC, 1544 Old Alabama Road, Roswell, GA 30076, Linda St. Pierre, Esq., McCalla Raymer Liebert Pierce, LLC, 50 Weston Street, Hartford, CT 06120.
RE: AP-ECF No. 22
Midland Funding, LLC ("Midland") seeks summary judgment and dismissal of a preference claim brought by Donna L. Calandrelli Capasso (the "Debtor"), asserting the transfer date for purposes of a preference claim under the Bankruptcy Code1 is the date a bank execution is served on the bank. The Debtor and plaintiff defends, arguing the "transfer" caused by the bank execution is not completed until the resolution of any claim to exemption. If Midland is correct, then the Debtor's preference claim fails because it occurred outside of the ninety (90) day preference period set forth in 11 U.S.C. § 547(b)(4)(A). If the Debtor is correct and the relevant transfer date is when a state court denied the Debtor's exemption claim as to the bank execution, several months later, the transfer date within the ninety (90) day preference period.
In essence, the parties ask whether the court agrees with and adopts the clear majority view set forth in Lind v. O'Connell (In re Lind ), 223 B.R. 64 (Bankr.D.Conn. 1998) (Shiff, J., Ret.), and its analysis of Connecticut statutory bank execution procedures pursuant to Conn.Gen.Stat. § 52-367b. After review, the court concludes the date of service of a bank execution is the transfer date for purposes of a preferential transfer claim under § 547, consistent with Judge Shiff's 1998 ruling in Lind . Accordingly, Midland's Motion for Summary Judgment is GRANTED .
The United States District Court for the District of Connecticut has jurisdiction over this adversary proceeding by virtue of 28 U.S.C. § 1334(b). This court derives its authority to hear and determine this matter on reference from the District Court pursuant to 28 U.S.C. §§ 157(a), (b)(1), and the District Court's General Order of Reference dated September 21, 1984. This is a "core proceeding" pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), and (F). This memorandum constitutes the court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, applicable here pursuant to Rules 7052 and 9014(c) of the Federal Rules of Bankruptcy Procedure.
On October 13, 2018 (the "Petition Date"), the Debtor filed a voluntary Chapter 7 bankruptcy petition. ECF No. 1. On June 21, 2019, the Debtor initiated this adversary proceeding, alleging Midland had obtained funds in the amount of $11,211.65 from a bank account held jointly by the Debtor and her mother within the ninety (90) days preceding the Petition Date. AP-ECF No. 1. On July 25, 2019, Midland moved to dismiss the complaint. AP-ECF No. 5. In its motion to dismiss, Midland asserted it had perfected its interest outside the preference period, on February 15, 2018. AP-ECF No. 5. During a Pre-Trial Conference held on September 25, 2019, the court noted that Midland's motion to dismiss required the court to accept the factual assertion that perfection had occurred February 15, 2018, a fact not alleged in the debtor's complaint. See , AP-ECF No. 15. Consistent with the conversation during the hearing, it was agreed the motion to dismiss would be treated as a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d), made applicable here by Federal Rule of Bankruptcy Procedure 7012(b), and the court ordered compliance with D.Conn.L.Civ.R. 56(a). AP-ECF No. 18.
On October 22, 2019, Midland filed the instant Motion for Summary Judgment in support of its position that the date of service of a bank execution on the bank is the transfer date for purposes of a preferential transfer claim.2 AP-ECF No. 22. Also filed by Midland was the affidavit of Jeanine M. Dumont and a Local Rule 56(a)1 Statement of Undisputed Material Facts (the " Rule 56(a) 1 Statement"). AP-ECF No. 22. On November 8, 2019, the Debtor filed a response to the Motion, as well as a memorandum of law, a supporting affidavit, an exhibit, and a Local Rule 56(a)2 Statement of Undisputed and Disputed Material Facts (the " Rule 56(a) 2 Statement"), all in support of her stance that the date the funds were transferred by the bank to Midland – after the resolution of the exemption process in the state court – is the date relevant to a preference claim under Bankruptcy Code § 547. AP-ECF No. 23.
The following facts are undisputed:
On October 9, 2013, Midland obtained a judgment against the Debtor in the Superior Court of Connecticut. AP-ECF No. 22 ¶ 2; AP-ECF No. 23 ¶ 2. Over four years later, on January 11, 2018, Midland sought a writ of execution, commonly referred to as a bank execution, from the state court to collect on the judgment. AP-ECF No. 22 ¶ 3; AP-ECF No. 23 ¶ 3. Service on Webster Bank of the notice of execution occurred on or before April 10, 2018 (the "Service Date"). AP-ECF No. 22 ¶ 4; AP-ECF No. 23 ¶ 4. On April 30, 2018, the Debtor sought to exempt the funds held in her Webster Bank account through the Connecticut statutory procedure for adjudicating in the state court whether any funds are protected from execution. AP-ECF No. 22 ¶ 5; AP-ECF No. 23 ¶ 5. Over two months later, on July 12, 2018, the state court denied the exemption claim. AP-ECF No. 22 ¶ 8; AP-ECF No. 23 ¶ 8. On July 16, 2018 (the "Receipt Date"), Webster Bank transferred $11,211.65 to Midland. AP-ECF No. 22 ¶ 9; AP-ECF No. 23 ¶ 9.3 The Petition Date of October 13, 2018, rendered the Service Date outside the ninety (90) day preference period, and the Receipt Date within the ninety (90) day preference period.
In her Rule 56(a) 2 Statement, the Debtor adds the following factual allegations.
On the Service Date, a second writ of execution was served on Webster Bank pursuant to a judgment held by Portfolio Recovery Associates, LLC (the "Other Judgment Creditor"), in the amount of $11,832.55. AP-ECF No. 23 ¶ 4. The Debtor's exemption claim related to the executions of both Midland and the Other Judgment Creditor, and after the state court denied the exemption claim, Webster Bank transferred funds in the amount of $11,211.65 to Midland and funds in the amount of $11,832.55 to the Other Judgment Creditor on the Receipt Date. AP-ECF No. 23 ¶¶ 5, 8. The Chapter 7 Trustee later recovered the $11,832.55 received by the Other Judgment Creditor purportedly as a preferential transfer.4 AP-ECF No. 23 ¶ 8.
"Summary judgment is appropriate only where ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ " Ass'n of Car Wash Owners Inc. v. City of New York , 911 F.3d 74, 80 (2d Cir. 2018) (quoting Jaffer v. Hirji , 887 F.3d 111, 114 (2d Cir. 2018) (quoting Fed. R. Civ. P. 56(a) )). A movant for summary judgment "bears the initial burden of showing that there is no genuine dispute as to a material fact." Jaffer , 887 F.3d at 114 (quoting CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP , 735 F.3d 114, 123 (2d Cir. 2013) ).
As noted, Midland relies on Lind v. O'Connell (In re Lind) , 223 B.R. 64, 68 (Bankr.D.Conn. 1998), to assert the Service Date is the date of the transfer for purposes of § 547(b)(4)(A) because service of the writ of execution perfected Midland's interest in the funds held in the Debtor's bank account up to the amount of its judgment. AP-ECF No. 22.
In response, the Debtor preliminarily asserts that Ms. Dumont's affidavit supporting Midland's Motion for Summary Judgment is not based not upon personal knowledge, but upon hearsay. Second, though acknowledging Lind 's relevance here, the Debtor finds Lind inapplicable or alternatively, asks the court to reassess Lind 's interpretation of the Connecticut statute governing the bank execution process, Conn.Gen.Stat. § 52-367b. AP-ECF No. 23. To that end, the Debtor contends that Conn.Gen.Stat. § 52-367b does not grant a secured lien to the judgment creditor upon service and further asserts that a judgment creditor cannot hold a secured lien, and a transfer cannot occur, until the state court resolves any exemption claim. AP-ECF No. 23. The Debtor distinguishes Lind on grounds that (1) this case involves a joint bank account, rather than an account held only by the judgment debtor, (2) the bank account was subject to a simultaneously-filed execution, as opposed to the single execution filed in Lind , and (3) the Debtor filed an exemption claim in state court whereas in Lind , the debtor did not pursue an exemption claim. AP-ECF No. 23. Further, the Debtor believes Lind should be reconsidered as both contrary to public policy, because it discourages judgment debtors from seeking an exemption claim, and against general practice, as shown by the facts related to the Trustee's recovery from the Other Judgment Creditor. AP-ECF No. 23.
The Bankruptcy Code permits avoidance of certain pre-petition transfers as preferences pursuant to § 547, providing as follows:
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