Hassett v. Goetzmann
| Decision Date | 26 January 1998 |
| Docket Number | Misc. No. 3368 (NPM). |
| Parties | James P. HASSETT, as Trustee of the Liquidating Estate of Continental Information Systems Corporation, et al. Judgment Creditor, v. Harry E. GOETZMANN, Jr. Judgment Debtor. James P. HASSETT, as Trustee of the Liquidating Estate of Continental Information Systems Corporation, et al. Petitioner, v. Sylvia R. GOETZMANN and Eric Goetzmann, Respondents. |
| Court | U.S. District Court — Northern District of New York |
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Hancock & Estabrook, LLP, Syracuse, NY, (Stephen A. Donato, Daniel B. Berman, of counsel), for Judgment Creditor and Petitioner.
Poushter, Marshall & Leberman, P.C., Syracuse, NY, (William J. Leberman, of counsel), for Judgment Debtor and Respondents.
James P. Hassett, as Trustee of the Liquidating Estate of Continental Information Systems Corporation ("Trustee"), initially commenced this proceeding pursuant to Rule 69(a) of the Federal Rules of Civil Procedure and Article 52 of the New York Civil Practice Law and Rules to enforce a money judgment obtained against Harry E. Goetzmann, Jr. (the "Judgment Debtor") in the amount of $51,700. The Trustee's petition, dated Mach 13, 1995 (the "Petition"), contains three causes of action, each of which seeks to set aside certain transfers made by the Judgment Debtor to Sylvia R. Goetzmann, his wife ("S. Goetzmann"), and to Eric Goetzmann, his son ("E. Goetzmann") (collectively "Respondents") (the Judgment Debtor and the Respondents are collectively referred to as "Defendants"). Subsequent to the commencement of this proceeding, the Trustee obtained another judgment against the Judgment Debtor in the amount of $364,791 and has consolidated the enforcement of that judgment with the enforcement of the $51,700 judgment in this proceeding (collectively the two judgments are referred to as the "Judgments"). After the filing of the Petition, this court issued restraining orders on June 13, 1995 against each of the Respondents preventing them from selling, assigning, transferring, or otherwise disposing of assets transferred to them by the Judgment Debtor. In this proceeding, the Trustee seeks an order setting aside various conveyances made by the Judgment Debtor to the Respondents, for judgment against each of the Respondents personally, and an award of attorneys' fees to be set by a subsequent order.
On January 13, 1989, Continental Information Systems Corporation ("CIS") filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York under Chapter 11 of the United States Bankruptcy Code. See Petition at ¶ 12. The Judgment Debtor founded CIS and prior to the appointment of the Trustee he was Chairman and Chief Executive Officer of CIS. See Affidavit of Harry E. Goetzmann, Jr. ("Goetzmann Aff.") at ¶ 4.
On June 11, 1990, the Trustee commenced an adversary proceeding in the Bankruptcy Court against the Judgment Debtor seeking to recover $364,781 in bonuses paid to the Judgment Debtor by CIS ("Adversary Proceeding I"). See Hassett v. Goetzmann (In re CIS Corp.), 195 B.R. 251, 252 (Bankr. S.D.N.Y.1996). The bonuses were paid just two weeks before the Judgment Debtor caused the Chapter 11 petitions to be filed by CIS and at a time when CIS was insolvent. Id. at 252, 262. Adversary Proceeding I was brought on the ground that such bonus payments were voidable preferences under 11 U.S.C. § 547, or in the alternative, that they were fraudulent conveyances under 11 U.S.C. § 548. See id. at 252; Trustee's Memorandum of Law ("Trustee's Mem.") at 24. The Trustee moved for summary judgment and on September 13, 1991, the Bankruptcy Court issued an order directing the entry of judgment against the Judgment Debtor in the amount of $364,781. See Hassett, 195 B.R. at 252-53. The Judgment Debtor appealed this order and the United States District Court for the Southern District of New York vacated the September 13, 1991 order and remanded the case to the Bankruptcy Court for a factual determination. See id. at 253; See Hassett v. Goetzmann, No. 91 Civ. 7689, 1992 WL 404320 (S.D.N.Y. Dec. 22, 1992). The Trustee and the Judgment Debtor proceeded to a bench trial on February 25 and 26, 1993. See Hassett, 195 B.R. at 253. On April 15, 1996 the Bankruptcy Court issued its decision ordering that the Trustee may recover the entire $364,781 payment to the Judgment Debtor plus interest dating from March 22, 1990.1 The Judgment Debtor did not appeal this decision and the time for him to do so has expired. See Docket Document No. 23. On July 1, 1996, the Trustee registered this judgment in this district pursuant to 28 U.S.C. § 1963. See id.
On April 29, 1991, the Trustee commenced an adversary proceeding against the Judgment Debtor in the Bankruptcy Court seeking recovery of $51,700 in alleged fringe benefits that CIS paid to the Judgment Debtor ("Adversary Proceeding II"). See Petition at ¶ 14. The Trustee moved for summary judgment and on November 18, 1993, the Bankruptcy Court issued an order directing the entry of a judgment against the Judgment Debtor for the sum of $51,700 plus pre- and post-judgment interest. See Id. at ¶ 15. The Judgment Debtor appealed the judgment to the United States District Court for the Southern District of New York. See id. at 16. That court, in a Memorandum-Opinion dated June 10, 1994, affirmed the judgment of the Bankruptcy Court. See Hassett v. Goetzmann, No. 93 Civ. 8929, 1994 WL 263436 (S.D.N.Y. June 10, 1994). The Judgment Debtor appealed this decision to the Second Circuit which affirmed the judgment on December 9, 1994, and issued its mandate on January 3, 1995. See Petition at ¶ 17. The Judgment Debtor took no further appeal from the Second Circuit's decision, and the time for him to do so has expired. See id. at ¶ 18. On March 10, 1995, the Trustee registered this judgment in this district pursuant to 28 U.S.C. § 1963. See id. at ¶ 10; Docket Document No. 1.
The Judgment Debtor maintains that he lacks assets to satisfy the judgments against him. See Goetzmann Aff. at ¶ 9. Pursuant to an oral agreement entered into in March of 1989 ("Oral Agreement"), the Judgment Debtor transferred a significant number of assets to S. Goetzmann in return for S. Goetzmann's pledge of her interests in their residence, a nearby parcel of undeveloped lakefront property, and their camp, to secure the Judgment Debtor's indebtedness to Merchants National Bank and Trust Company of Syracuse ("MNB") and Chase Lincoln Bank. See id. at ¶ 14; Petition at ¶ 39. The Judgment Debtor subsequently drafted and executed a written acknowledgment of the Oral Agreement designated as the Sale and Assignment agreement ("Assignment Agreement"). See Goetzmann Aff. at ¶ 17; Petition at ¶ 39; Affidavit of Jeffrey E. McFadden ("McFadden Aff."), Exhibit "6" (Assignment Agreement). Although this Assignment Agreement is dated "as of" March 15, 1989, the Trustee alleges, and the Judgment Debtor concedes, that it was not actually executed until sometime after that date. See Goetzmann Aff. at ¶ 17; Petition at ¶ 39.
The total estimated value of the assets transferred to S. Goetzmann exceeded $5 Million.2 Among the assets conveyed to S. Goetzmann by the Judgment Debtor pursuant to the Oral Agreement as memorialized by the Assignment Agreement were the Judgment Debtor's interest in his marital residence and 19.42 acres of adjacent land on Skanealetes Lake in Skanealetes, New York, valued at $1,800,000; the Judgment Debtor's interest in his camp located on Heron Lake in Upper St. Regis, New York valued at $400,000; the Schomann Entertainment Companies (which included Chesterfield Cablevision, Inc., Hamilton County Cable T.V., Inc., Area Telecable Corporation, Galeton TV Antenna, Inc., Mansfield Video Systems, Inc., and Communicable, Inc.) valued at $3,000,000; the Schomann Entertainment Corporation Note in the amount of $576,000; 547,547 shares of CIS common stock valued at $342,217; the Judgment Debtor's interest in Onondaga Venture Capital Fund, Inc. valued at $35,000; the Hickey Properties' Note in the amount of $105,000; the Judgment Debtor's interest in Hickey Management, Inc.; the Judgment Debtor's interest in Continental Realty Fund of New York, Inc. valued at $12,500; the Judgment Debtor's interest in Sytel Ltd. Partnership valued at $550,000; the Judgment Debtor's interest in Ares-Serono Research; the Judgment Debtor's interest in his automobiles valued at $20,000; and antiques, boats, and jewelry valued at $200,000.3
The Trustee maintains that the Assignment Agreement was ineffective to convey the assets it purported to convey because the transfers were not properly effectuated as of the date of the Assignment Agreement. See Trustee's Mem. at 18-23. The Trustee asserts that the Judgment Debtor and S. Goetzmann did not record the transfer of any of these assets made pursuant to the Assignment Agreement until after the Trustee initiated Adversary Proceeding II in April 1991. See id.; Petition at ¶ 47. Moreover, the Trustee contends that even after the entry of the $51,700 judgment from Adversary Proceeding 11, the Judgment Debtor continued to record transfers of assets to S. Goetzmann or attempted to do so, allegedly pursuant to the Assignment Agreement. See Petition at ¶ 48. The Trustee also asserts that notwithstanding the purported conveyances, the Judgment Debtor retains the possession, benefit, and use of all or substantially all of the assets he transferred to S. Goetzmann pursuant to the Assignment Agreement. Id. at 50. For those assets that have been sold, the Trustee asserts that the Judgment Debtor retains the possession, benefit, and use of the proceeds from the sales. See id. at ¶ 50. In addition to the assets purportedly transferred pursuant to the Assignment Agreement, the Trustee claims that the Judgment Debtor also transferred a substantial amount of other assets to S. Goetzmann, including from ...
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