In re Balzano
Decision Date | 21 May 1991 |
Docket Number | Adv. No. 190-1051-353.,Bankruptcy No. 190-10058-353 |
Citation | 127 BR 524 |
Parties | In re Gerald BALZANO, Debtor. Elizabeth FARINA, Plaintiff, v. Gerald BALZANO, Defendant. |
Court | U.S. Bankruptcy Court — Eastern District of New York |
Andrew E. Gutman, Gutman & Gutman, Mineola, N.Y., for plaintiff.
Wayne J. Price, Brooklyn, N.Y., for defendant-debtor.
DECISION ON COMPLAINT OBJECTING TO DISCHARGEABILITY OF DEBT
This is an adversary proceeding brought by Elizabeth Farina ("Farina" or "Plaintiff") against Gerald Balzano ("Balzano" or "Defendant") to have her claim declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) or, in the alternative, under 11 U.S.C. § 523(a)(4). Having reviewed, weighed and considered the amended pleadings, amended pre-trial memoranda, trial testimony, documentary evidence, credibility of the witnesses, post-trial submissions and Balzano's Chapter 7 case file, the Court finds that Farina has failed to sustain her burden of proof under both 11 U.S.C. § 523(a)(2)(A) and 11 U.S.C. § 523(a)(4). Accordingly, and for the reasons discussed below, the Court dismisses the instant adversary proceeding. This decision constitutes the Court's findings of fact and conclusions of law as required by Bankruptcy Rule 7052.
1. On January 8, 1990, Balzano, a veteran policeman and lieutenant on the force of the New York City Housing Police filed a petition for relief under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. Balzano lists Farina as a $100,000 unsecured creditor for a personal loan. The remainder of Balzano's debt is comprised of unpaid tax obligations and unsecured credit card debt.
2. Farina is a divorced woman around 48 years of age who suffers from a disabling degenerative spinal and/or back condition, making it difficult for her to work. She resides at 2696 Magee Place in Oceanside, New York, a two family house which she owns. Balzano is a divorced male approximately three years younger than Farina.
3. Farina and Balzano have known each other for most of their lives. They are cousins of sort. More than forty years ago, Farina's uncle (her mother's brother) married Balzano's mother. Farina's uncle was thus also Balzano's stepfather. Until the death of Farina's maternal grandmother in the late 1950's or early 1960's, Farina and Balzano would see each other at family occasions and around the holidays. The next time they saw each other subsequent to the death of Farina's maternal grandmother was at the funeral of Farina's mother in 1973. Thereafter, there was little or no contact between the two for a period of about 15 years.
4. On February 4, 1988, after learning that her uncle was critically ill and in the hospital, Farina called her aunt, i.e., Balzano's mother, and also spoke to Balzano at that time. They spoke for three hours and Balzano asked her out to dinner for the following evening. There was a second extended telephone conversation of around two hours on February 4, 1988 between the two and Farina went to visit Balzano at one of his jobs where he moonlighted as a security officer. They spoke in the car from about 10:00 p.m. to 2:00 a.m. The following evening, February 5, 1988, they went for dinner, arriving at the restaurant at about 7:15 p.m., enjoying each other's company and leaving around 10:30 p.m.
5. The seeds of a close, personal relationship between Balzano and Farina were planted. Following the concentrated reacquaintanceship on February 4 and 5, 1988, Balzano and Farina mutually nurtured and encouraged the development of their relationship. They spoke to each other regularly over the telephone. They would call each other, although most of the calls Balzano would initiate because, as Farina testified, he would call from work since it was "cheaper". (Transcript of 11/13/90 at 32). Balzano would come to Farina's house and Farina would visit Balzano at work. They saw each other between February and July 1988 about 10 or 12 times. The relative modest number of personal meetings was due to Balzano's working at the Coast Guard, at a gas station and as a security officer in addition to his regular work as a housing policeman.
6. Notwithstanding Balzano's extraordinary work regimen, the relationship between Farina and Balzano ripened swiftly. Although they now dispute the nature and extent of mutual disclosures, Farina and Balzano did confide in each other. They both had major problems and their lives seemed to be falling apart. She was sick, with limited financial resources, and poor prospects for future security. Balzano was working all hours of the day and night. He was saddled with a substantial tax burden, owing the Internal Revenue Service between $35,000 and $40,000, and credit card debt. In addition, he was a heavy gambler. Despite his decent paying and secure job with a good pension as a New York City housing policeman, Balzano was laboring under severe financial strains. Virtually his entire regular salary was being garnished by the Internal Revenue Service. He was netting close to $4,000 per month and was taking home only $300 per month.
7. One early morning in late March or April 1988, after completion of his regular 4:00 p.m.-12:00 a.m. policeman's shift, Balzano came over to Farina's house. She knew he was coming. He arrived at 1:00 a.m. and they spoke to 5:00 a.m. Farina gave an account as follows:
8. Subsequent to the early morning conversation in late March or April 1988, Farina and Balzano spoke further about his jobs and commenced discussions to resolve the problems. There was no possibility of Balzano borrowing money. He had no savings, no collateral and his wages were being garnished. Eventually, they discussed taking out a loan secured by Farina's house. These discussions, according to Farina, took place in July 1988 and were triggered by her fear of losing him. Farina testified as follows:
Balzano testified that the idea of taking a loan on Farina's house was around May 1988, after the death of his stepfather who, as indicated above, was also Farina's uncle. According to Balzano, he did not ask; it was Farina who offered to help him from the monies obtained through a refinancing of her house. (Transcript of 11/13/90 at 132). Balzano testified that he did not immediately accept the offer.
No, I told her that I needed time to think about it. She said that she would do it because if it was reversed I would do the same for her. Anybody in my family would have done the same thing. We were cousins through a stepfather and she was willing to help me out and I said to her, if I took this money that there is no promise for marriage or anything and there was nothing about a marriage or anything involved. I wanted to make sure that was secured sic and she said no. (Transcript of 11/13/90 at 92).
9. They got in touch with a finance company, but were refused. Farina called the Greenpoint Savings Bank ("Greenpoint Savings"), holder of an existing $25,000 mortgage on her house. Her monthly mortgage payments to Greenpoint Savings was then $262.00. She procured the appropriate refinancing or loan applications and, with the assistance of Balzano, filled out the necessary papers. After discussions with Balzano, she sought and obtained approval of a $125,000 loan from Greenpoint Savings on her house. Like virtually everything else in this record, there is confusion as to the closing date on the loan. The records of Greenpoint Savings, however, indicate that the closing was on October 21, 1988. Farina attended the closing alone with her attorney. After payment of $24,929.72 in satisfaction of the existing mortgage and payment of certain bank charges, Farina received net proceeds of...
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