Ferrara v. Olga Lord Ferrara & Burns & Levinson, LLP (In re Ferrara)
| Decision Date | 23 June 2014 |
| Docket Number | Adv. P. No. 13-1351,Case No. 13-12945-JNF |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
| Parties | In re EGIDIO FERRARA, Debtor EGIDIO FERRARA, Plaintiff v. OLGA LORD FERRARA and BURNS & LEVINSON, LLP, Defendants |
The matters before the Court are Cross-Motions for Summary Judgment with respect to the Amended Complaint filed by Egidio Ferrara (the "Debtor") against his sister, Olga Lord Ferrara ("Ms. Ferrara"), and her counsel, the law firm of Burns & Levinson, LLP ("B & L"). B & L represented Ms. Ferrara in the Middlesex Probate and Family Court, Department of the Massachusetts Trial Court, in actions involving the Debtor, his spouse, Donna Ferrara ("Donna"), and Orsara, LLC, a limited liability company in which the Debtor and Donna hold interests. Ms. Ferrara received an award of legal fees from the Probate Court pursuant to Mass. Gen. Laws ch. 231, § 6F on June 23, 2011 in an action brought against her by the Debtor. Her attempts to collect the fee award from Donna and Orsara, LLC have generated the instant controversy. Through his Amended Complaint,the Debtor alleges that the Defendants violated both the automatic stay imposed by 11 U.S.C. § 362(a) and the codebtor stay imposed by 11 U.S.C. § 1301 in their collection attempts. The Defendants counter that the claims made against Orsara, LLC and Donna are their separate liabilities as a result of their participation in a scheme to assist the Debtor in avoiding the fee award and do not arise out of the Debtor's liability under the fee award itself. They contend the scheme gives rise to an independent cause of action against Orsara, LLC and Donna and seek damages in the amount of the fee award.
The Court heard the Cross-Motions on May 27, 2014 and directed the parties to file supplemental briefs. The material facts necessary to decide the matters are not in dispute and the Cross-Motions are ripe for summary judgment. The Debtor submitted his Affidavit, as well as the Affidavit of his counsel attesting to the truth and accuracy of exhibits in support of his Motion for Summary Judgment. The Defendants submitted the Affidavit of their counsel attesting to the truth and accuracy of numerous additional exhibits.
The Debtor filed a voluntary Chapter 13 petition on May 17, 2013. On Schedule A-Real Property, the Debtor listed an ownership interest in his principal residence as 150Cherry Street, Sheldonville, Massachusetts as a tenant by the entirety.2 He valued theproperty at $345,000 and disclosed that it was subject to two secured claims, held by Bank of America and Citizens Bank, totaling $377,611. The Debtor listed, on Schedule B-Personal Property, "stock and interests in incorporated and unincorporated businesses" in two entities, Ferrara Insurance Company and Orsara, LLC, valued at $5,000 and $1,000, respectively. He also listed a legal malpractice claim, which he valued at $600,000. On Schedule F-Creditors Holding Unsecured Nonpriority Claims, the Debtor listed Donna as the holder of a contingent, unliquidated claim "relating to money borrowed," in the sum of $100,0003 and Ms. Ferrara as the holder of an undisputed "Judgment - Legal Fees" in the sum of $76,000. The Debtor also listed Donna as a codebtor on Schedule H-Codebtors with respect to the creditors holding secured claims against the couple's residence, as well as claims held by the Massachusetts Department of Revenue and the Massachusetts Department of Unemployment Assistance.
In his Statement of Financial Affairs, the Debtor listed numerous lawsuits pending in the Middlesex Probate and Family Court, as well as the legal malpractice claim. On September 4, 2013, he commenced the adversary proceeding which is now before the Court. Following the filing of his Amended Complaint, the Debtor amended Schedule B, valuing his interests in Ferrara Insurance Company at $45,000 and his interest in Orsara,LLC at $100. He claimed those interests as exempt on an amended Schedule C-Property Claimed as Exempt.
The Debtor has filed multiple Chapter 13 plans since the commencement of his Chapter 13 case. In his Fourth Amended Chapter 13 plan, filed on May 12, 2014, the Debtor disclosed his intention to utilize the entire net proceeds of $91,000 arising from settlement of his legal malpractice claim to fund his Chapter 13 plan, as well as his intention to pay his creditors, including Ms. Ferrara, in full, with interest. In addition, he disclosed that he owned a .001% share of Orsara, LLC. and that he did not intend to pay Donna's separately classified claim through the plan.
On June 11, 2014, the Chapter 13 Trustee filed a Motion to Approve Consent Agreement Regarding the Waiving of Statute of Limitations with respect to a potential fraudulent transfer under 11 U.S.C. § 548 or Mass. Gen. Laws ch. 109A. The Court approved the Consent Agreement on June 16, 2014.
On or around August 30, 2006, the Debtor filed an Affidavit of Objections to the probate of the last will and testament of his father, Michele Ferrara, who passed away in August of 2002, and commenced two other actions in the Middlesex Probate and Family Court challenging the validity of estate planning documents executed by his father, which had the effect of disinheriting him in favor of Ms. Ferrara. On October 1, 2009, the Probate Court entered an order striking the Debtor's Objections to the allowance of the last will and testament of his father. It also entered a decree allowing the will and entered judgmentsdismissing the Debtor's equity complaints to set aside the conveyance of 107 Irving Street, Waltham, Massachusetts (the "Irving Street property") to the Ferrara Realty Trust. On October 30, 2009, the Debtor filed a Notice of Appeal from the Probate Court's decree and judgments. As noted below, Appeals Court affirmed the Probate Court's decision. Approximately one year after the filing of the Notice of Appeal, Ms. Ferrara filed an Application for Attorneys' Fees and Costs pursuant to Mass. Gen. Laws ch. 231, § 6F, which is discussed below.
With respect to the Irving Street property, Orsara, LLC held a note in the original sum of $59,300 and a mortgage, encumbering the Irving Street property, which note and mortgage were executed by Ms. Ferrara in favor of Home Loan and Investment Bank, F.S.B. Orsara, LLC obtained the mortgage by virtue of an assignment, dated March 18, 2009. Home Loan and Investment Bank assigned the mortgage to Gibralter Savings Bank, F.S.B. in March of 2004. Gibralter Savings Bank then assigned the mortgage to Orsara, LLC. The date of the Assignment was set forth as March 18, 2009, for a stated consideration of $10 "and other good and valuable consideration," although the Assignment was executed by Gibralter Savings Bank on March 23, 2009. The Assignment was not recorded until January 27, 2010, however. In conjunction with Orsara, LLC's acquisition of the mortgage, on January 26, 2010, it executed a Loan Purchase and Sale Agreement and paid a purchase price of $85,802.33 to Gibralter Savings Bank by means of a Rockland Trust Treasurer'sCheck.4 The Debtor avers that the money utilized to buy Ms. Ferrara's defaulted obligation was borrowed against his residence, which, as noted above, he owns with Donna through a tenancy by the entirety.5
The Debtor stated in his Affidavit that he owns .001% of Orsara, LLC, which he valued at $100, and that Donna has owned the remaining interest since the formation of the limited liability company in March of 2009.6 The Debtor supported this assertion withreference to Internal Revenue Service Form 1065, namely Schedule K-1, "Partner's Share of Income, Deductions, Credits, etc.," for the years from 2009 through 2012. Although the Debtor owned a small fraction of the limited liability company, he was named the Resident Agent and Manager until Donna replaced him as Manager as set forth in Annual Reports for 2011 and 2012 which were filed on April 18, 2012. In his Affidavit filed in support of his Motion for Summary Judgment, the Debtor expressly stated that "[s]ince its formation, my wife, Donna Ferrara has continually been the 99.999% owner of Orsara, LLC."
On June 23, 2011, the Probate Court entered an order requiring the Debtor to pay legal fees and expenses to Ms. Ferrara in the total sum of $78,202.80 within 30 days (the "Sanctions Order"). In awarding fees, the Probate Court stated: "The Court finds that Egidio was represented by counsel, and that the contentions 'were wholly insubstantial, frivolous and not advanced in good faith.'"Ferrara v. Ferrara (In re Estate of Michelle [sic] Ferrara), Nos. 02P549EP1, 05B0104-GC, 06E0150-GC, Slip op. at 7 (Probate and Family Court June 23, 2011) (citations omitted). It also stated: "The Court finds that there is noevidence that the actions of Egidio were not advanced in good faith." Id.7
On March 7, 2013, the Appeals Court of Massachusetts affirmed the decision of the Probate Court. See Ferrara v. Ferrara, 83 Mass. App. Ct. 1117, 984 N.E.2d 314 (2013).8
On April 8, 2013, approximately four weeks before the Debtor filed his Chapter 13 case on May 17, 2013, Ms. Ferrara filed a Verified Complaint for Civil Contempt in the Probate Court due to the Debtor's failure to pay the legal fees in the sum of $78,202.80.
On or around August 16, 2013, after the Debtor filed his Chapter 13 petition and without seeking relief from the automatic stay or codebtor stay, Ms. Ferrara, through her counsel B & L, filed a Verified Complaint in Equity in the Probate Court against Donna, Orsara, LLC, and Kenneth Busa,9 seeking to set aside an alleged fraudulent transfer of the Debtor's interest in Orsara, LLC to Donna. Ms. Ferrara amended that complaint on or around August 20, 2013. She filed the complaints at a time when a closing was scheduledfor July 31, 2013 for the sale of the Irving Street, property, stating that the buyer would be paying the amount needed to satisfy the mortgage and obtain...
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