Dery v. Karafa (In re Dearborn Bancorp, Inc.)
Decision Date | 20 April 2018 |
Docket Number | Case No. 13–44665, Adv. Pro. No. 13–5095,Adv. Pro. No. 13–5094 |
Citation | 583 B.R. 395 |
Parties | IN RE: DEARBORN BANCORP, INC., Debtor. Fred J. Dery, Trustee, Plaintiff, v. Jeffrey Karafa, Defendant. Fred J. Dery, Trustee, Plaintiff, v. Michael J. Ross, Defendant. |
Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Paul R. Hage, Louis P. Rochkind, Jaffe Raitt Heuer & Weiss, P.C., Southfield, MI, for Plaintiff.
Howard S. Sher, Debra Beth Pevos, Jacob & Weingarten, P.C., Troy, MI, for Defendants.
TRIAL OPINION
Each of the above-captioned adversary proceedings is a preference action arising out of the Chapter 7 bankruptcy case of Dearborn Bancorp, Inc. The Plaintiff Chapter 7 Trustee seeks to avoid pre-petition transfers the Debtor made to Defendant Jeffrey Karafa totaling $130,422.00 (Adv. No. 13–5094) and pre-petition transfers the Debtor made to Defendant Michael Ross totaling $228,344.00 (Adv. No. 13–5095). The Trustee seeks judgments for these amounts against the Defendants, plus interest. The Trustee also seeks disallowance, under 11 U.S.C. § 502(d), of each Defendant's claim filed in the Debtor's bankruptcy case.
The Court granted partial summary judgment for the Plaintiff Trustee in each of these cases, and then held a joint bench trial. The parties then filed post-trial briefs.
The trial focused on two of the statutory defenses to the avoidance of preferential transfers—namely, the "contemporaneous exchange for new value" defense under 11 U.S.C. § 547(c)(1), and the "subsequent new value" defense under 11 U.S.C. § 547(c)(4).
The Court has considered all of the arguments of the parties; all of the exhibits admitted into evidence at trial, namely Plaintiff's Exhibits 1–4 and 8–27, and Defendants' Exhibits C, D, F–1, F–2, G–1–D, G–4–A, G–4–B, I–1, I–2, J–3, K–2, L–2, L–3, O, and P, and each of the following Defendants' Exhibits for a limited purpose as stated during trial: J–1, M–1, M–2–A, M–3, M–4–B.1 And the Court has considered all of the testimony that was admitted into evidence at trial, of the following witnesses: William Demmer, Defendant Michael Ross, and Defendant Jeffrey Karafa.
This opinion constitutes a statement of the Court's findings of fact and conclusions of law in these two adversary proceedings. For the reasons stated in this opinion, the Court will enter judgment in favor of the Plaintiff Trustee against each of the Defendants.
The following quotation from Defendants' trial brief accurately states some basic background facts that are not disputed:
The Plaintiff Trustee's complaints in these two adversary proceedings are similar, and each complaint contains six counts.3 Count I of each complaint seeks to avoid the pre-petition transfers the Debtor made under the Consulting Agreements with Defendants—totaling $130,422.00 to Karafa and $228,344.00 to Ross—as preferential transfers under 11 U.S.C. § 547(b). Counts II through IV, which are no longer part of these cases, sought to avoid the same transfers, as fraudulent transfers under several provisions in 11 U.S.C. § 548. Count V seeks recovery of the avoided transfers from each Defendant, as an initial transferee, under 11 U.S.C. § 550. And Count VI seeks disallowance of each Defendant's claim filed in the bankruptcy case under 11 U.S.C. § 502(d).
Before trial, Plaintiff moved for summary judgment in each adversary proceeding. Plaintiff sought summary judgment on Count I (the preference claim), and also on Counts III and IV (fraudulent transfer claims) of his complaint in each case. Defendants opposed the summary judgment motions.
After holding a hearing, the Court issued a bench opinion4 and entered an order in each adversary proceeding, granting Plaintiff's motions in part and denying them in part. The Court denied Plaintiff's summary judgment motions entirely with respect to the fraudulent transfer claims (Counts III and IV). But the Court granted partial summary judgment with respect to Plaintiff's preference claims in each adversary proceeding (Count I), as follows:
The Court then held a joint trial in the two adversary proceedings. Before trial, Plaintiff abandoned all of his fraudulent transfer claims, Counts II through IV in each case,6 and the Court now will enter judgment dismissing those claims with prejudice. Trial was held on Plaintiffs preference claims under Count I, and the related claims that depend on Plaintiff's success in avoiding the transfers as preferences—Counts V (the § 550 recovery claim), and VI (the § 502(d) claim).
This Court has subject matter jurisdiction over this adversary proceeding under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a) (E.D. Mich.). All of Plaintiff's claims in these adversary proceedings are core proceedings, under 28 U.S.C. §§ 157(b)(2)(B), 157(b)(2)(F) and 157(b)(2)(H).
In addition, each of these adversary proceedings falls within the definition of a proceeding "arising under title 11" and of a proceeding "arising in" a case under title 11, within the meaning of 28 U.S.C. § 1334(b). Matters falling within either of these categories in § 1334(b) are deemed to be core proceedings. See Allard v. Coenen (In re Trans–Industries, Inc. ), 419 B.R. 21, 27 (Bankr. E.D. Mich. 2009). Each is a proceeding "arising under title 11" because it is "created or determined by a statutory provision of title 11," see id. , namely Bankruptcy Code §§ 502(d), 547, 548, and 550. And each is a proceeding "arising in" a case under title 11, because it is a proceeding that "by [its] very nature, could arise only in bankruptcy cases." See Allard v. Coenen , 419 B.R. at 27.
For these reasons, this Court has statutory authority, under 28 U.S.C. § 157(b)(1), to enter a final judgment on all of Plaintiff's claims. If and to the extent this Court might otherwise lack constitutional authority to enter a final judgment, under Stern v. Marshall , 564 U.S. 462...
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