Desmond v. Ng
| Citation | 552 B.R. 781 |
| Decision Date | 08 October 2015 |
| Docket Number | Civil Action No. 15-11155-MGM |
| Parties | John O. Desmond, Chapter 7 Trustee in Bankruptcy for William C. Martin, Elizabeth Martin, and In-Island Development, LLC, Plaintiff, v. Jenny Ng, individually and d/b/a Network Group and d/b/a Primesite Business Brokers, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Mark W. Corner, Riemer & Braunstein LLP, Boston, MA, for Plaintiff.
John J.E. Markham, II, Markham & Read, Boston, MA, for Defendant.
MEMORANDUM AND ORDER REGARDING DEFENDANT'S RENEWED MOTION TO WITHDRAW REFERENCE TO THE BANKRUPTCY COURT (Dkt. No. 1)
, U.S.D.J.
John O. Desmond (“Plaintiff” or “Trustee”), in his capacity as the Chapter 7 Trustee for debtors William C. Martin, Elizabeth Martin, and In-Island Development, LLC (“In-Island”), brought this adversary proceeding against Jenny Ng, individually and doing business as Network Group and Primesite Business Brokers (“Defendant”), seeking damages as well as declaratory relief on behalf of the bankruptcy estate. Presently before the court is Defendant's renewed motion to withdraw the reference to the Bankruptcy Court pursuant to 28 U.S.C. § 157(d)
. (Dkt. No. 1.) Defendant primarily argues the reference should be withdrawn because she has a constitutional right to a jury trial in District Court. For the following reasons, the court will grant Defendant's motion.
On September 14, 2012, William Martin and Elizabeth Martin filed a voluntary petition for bankruptcy pursuant to Chapter 7 of the United States Bankruptcy Code. ( In re William C. Martin and Elizabeth A. Martin , Case No. 12–17514 (“In re Mar tin ”), Dkt. No. 1.)1 On January 30, 2013, the Bankruptcy Court granted the Trustee's motion to substantively consolidate In-Island with William and Elizabeth Martin as debtors in the bankruptcy case.2 (Id. , Dkt. No. 123.)
According to the Trustee's complaint in the adversary proceeding, the bankruptcy largely arose from a failed real estate development in which William Martin sought to convert a former nursing home at 437 Nokomis South Avenue, Venice, Florida (“Florida Property”), into a 26-unit condominium (“In-Island Project”). (Desmond v. Ng , Case No. 13–01348 (“Adversary Proceeding”), Dkt. No. 1 (“Compl.”).) On February 17, 2005, In-Island took title to the Florida Property for $1,800,000. The purchase price was partially funded by a $1,200,000 loan (“Loan”) from People's Federal Savings Bank to William Martin and Defendant, individually and in her capacity as trustee of the Smith Realty Trust and the Shepard Realty Trust. The Loan was secured by the Florida Property and two parcels of real estate owned by Defendant in trust and of which she was the sole trustee: 555 Bridge Street, Weymouth, Massachusetts, and 18 Shepard Street, Brighton, Massachusetts (“Trust Properties”). Despite outside investments of approximately $2,700,000, the In-Island Project never proceeded beyond the initial permitting phase and, by August of 2008, all of the In-Island funds had been depleted. In 2010, People's Federal Savings Bank foreclosed on the Florida Property and applied the net proceeds to the balance due on the Loan. In addition, as a result of the In-Island Project's failure, Defendant sold the Trust Properties and paid People's Federal Savings Bank the proceeds in exchange for a release of her indebtedness for the balance of the Loan deficiency.
On December 5, 2012, Defendant filed a proof of claim as a creditor in In re Martin , asserting that William Martin owed her $1,650,000 based on a “[w]ritten agreement of guarantee and payments” (“Agreement”) in which William Martin allegedly agreed to cover any losses regarding the Trust Properties Defendant pledged as collateral for the Loan from People's Federal Savings Bank for the purchase of the Florida Property. The Agreement, which Defendant attached to her proof of claim, specifically provides:
It is hereby agreed that should Jenny W.Y. Ng's equity value in the properties known as and numbered 18 Shepard Street, Brighton, and 555 Bridge Street, Weymouth, diminishes [sic] due to the security by Peoples' Federal Savings for the real estate at 437 Nokomis Avenue, Venice Island, Florida, William C. Martin shall make up said diminish [sic] by the sale of his personal assets.
(Id. )
On August 27, 2013, the Trustee initiated the Adversary Proceeding against Defendant. (Adversary Proceeding, Compl.) The complaint alleges that, before the In-Island Project, William Martin and Defendant had previously worked together on various business ventures, with Defendant often handling the finances and business operations. In particular, Defendant had access to and signatory authority over William Martin's personal bank accounts and the accounts for his various business entities. She wrote checks for William Martin's businesses, managed his employees' work schedules, and assisted his accountants in preparing tax returns, among other roles. Defendant played a similar role regarding the In-Island Project, depositing investments and issuing checks. The complaint alleges that Defendant transferred over $1,365,000 of In-Island funds into accounts she owned or controlled, including accounts in the names of Primesite Business Brokers and/or Network Group (entities she was doing business as). The complaint asserts claims against Defendant for: Accounting (Count I), a Declaration that Martin and Defendant were Partners or De Facto Partners (Count II), a Declaration that Martin and Defendant were Partners by Estoppel (Count III), a Declaration that Martin and Defendant were Joint Venturers with regard to In-Island (Count IV), Breach of Contract (Count V), Breach of Fiduciary Duty (Count VI), Conversion (Count VII), Breach of Express and Implied Trust (Count VIII), Breach of Constructive Trust (Count IX), Unjust Enrichment (Count X), and Money Had and Received (Count XI).3
On October 3, 2013, in the Adversary Proceeding, Defendant filed an answer and demand for a jury trial, as well as an initial motion to withdraw the reference to the Bankruptcy Court. (Adversary Proceeding, Dkt. Nos. 11, 12.) Meanwhile, on October 22, 2013, in In re Martin , the Trustee filed an objection to Defendant's proof of claim. (In re Martin , Dkt. No. 177.)4 On April 28, 2014, District Judge George O'Toole denied Defendant's initial motion to withdraw the reference “without prejudice to renewal when, and if, the adversary proceeding is ready for trial.” (Desmond v. Ng , 13-cv-13005-GAO, Dkt. No. 12; Adversary Proceeding, Dkt. No. 23.) Thereafter, the Bankruptcy Court issued a scheduling order in the Adversary Proceeding, the parties completed discovery, and a trial date of April 1, 2015 was scheduled. (Adversary Proceeding, Dkt. Nos. 27, 38.) In addition, an evidentiary hearing on the Trustee's objection to Defendant's proof of claim in In re Martin was also scheduled for April 1, 2015. (In re Martin , Dkt. No. 228.) On March 9, 2015, Defendant filed in the Adversary Proceeding the instant renewed motion to withdraw the reference, which motion was transmitted to this court on March 24, 2015.5 (Adversary Proceeding, Dkt. Nos. 40, 43.)
Federal district courts have original jurisdiction over “all civil proceedings arising under title 11, or arising in or related to title 11” of the Bankruptcy Code. 28 U.S.C. § 1334(b)
; see
In re Middlesex Power Equip. & Marine, Inc. , 292 F.3d 61, 68 (1st Cir.2002) (). Under 28 U.S.C. § 157(a), district courts may refer such cases to bankruptcy court, and in this District, pursuant to Local Rule 201, they are automatically referred there. However, under 28 U.S.C. § 157(d), a “district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown.” Although bankruptcy courts may conduct jury trials “if specially designated to exercise such jurisdiction” and if the parties expressly consent, 28 U.S.C. § 157(e), Defendant has not consented to the Bankruptcy Court conducting a jury trial. Accordingly, as the Adversary Proceeding is now ready for trial, the reference should be withdrawn if Defendant is entitled to a jury trial so it can be held in the District Court. See
In re Wolverine, Proctor & Schwartz, LLC , 404 B.R. 1, 2 (D.Mass.2009) ().
Defendant asserts the court should withdraw the reference to the Bankruptcy Court because she has a Seventh Amendment right to a jury trial. In particular, Defendant argues many of the Trustee's claims or the remedies sought are legal in nature, rather than equitable, and thus carry a right to a jury trial. Defendant also argues that because the legal and equitable claims involve common facts, she has a right to a jury trial on all of the Trustee's claims. Moreover, Defendant contends, she has not waived her right to a jury trial by filing the proof of claim in In re Martin because the Trustee's claims against her are much broader, and ruling on the proof of claim would not dispose of the Trustee's claims in the Adversary Proceeding.6 In response, the Trustee argues Defendant has waived any jury trial rights by filing the proof of claim because the Adversary Proceeding bears directly on the allowance of Defendant's claim against the estate. The Trustee also argues the claims asserted in the Adversary Proceeding are equitable claims “for a determinate...
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