In re Barbieri

• Decision Date: 29 November 2007
• Docket Number: Adversary. No. 803-1131-478,Bankruptcy No. 800-22274-478,06-1427-478.
• Citation: 380 B.R. 284
• Parties: In re Nina Marie BARBIERI, Debtor. Louis Barbieri, Plaintiff, v. Nina Marie Barbieri, 189-30 Realty Corp. and John S. Pereira, Esq, as Case Trustee, Defendants. John S. Pereira, Esq. As Trustee for the Estate of Nina Marie Barbieri, Plaintiff, Louis Barbieri, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

380 B.R. 284

In re Nina Marie BARBIERI, Debtor Louis Barbieri, Plaintiff, v. Nina Marie Barbieri, 189-30 Realty Corp. and John S. Pereira, Esq, as Case Trustee, Defendants John S. Pereira, Esq. As Trustee for the Estate of Nina Marie Barbieri, Plaintiff Louis Barbieri, Defendant.

Bankruptcy No. 800-22274-478, Adversary. Nos. 803-1131-478, 06-1427-478.

United States Bankruptcy Court, E.D. New York.

November 29, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

R. David Marquez, P.C. by R. David Marquez, Esq., Great Neck, NY, for Plaintiff.

Jones & Schwartz, P.C. by Harold D. Jones, Esq., Carle Place, NY, for Trustee.

Memorandum Decision

DOROTHY EISENBERG, Bankruptcy Judge.

This matter is before the Court pursuant to two adversary complaints filed in connection with the bankruptcy cases of Nina Marie Barbieri ("Nina" or the "Debtor") and 189-30 Realty Corp. (the "Corporate Debtor"). The first adversary proceeding (adversary proceeding no. 03-1131-478) was commenced by Louis Barbieri ("Louis Barbieri" or the "Plaintiff"), seeking, inter alia, entry of a declaratory judgment finding that the Plaintiff is the true and beneficial owner of the shares of the Corporate Debtor. The second adversary proceeding (adversary proceeding no. 06-1427-478) was commenced by John S. Pereira, Esq., the Chapter 7 trustee (the "Trustee") against Louis Barbieri seeking certain relief in the event that the Plaintiff is successful in his adversary proceeding. If this Court finds that the Plaintiff is the true and beneficial owner of the shares of the Corporate Debtor, the Trustee seeks, inter alia, a declaratory judgment imposing an equitable lien on the stock of the Corporate Debtor for the benefit of the Debtor's estate. Based on the conduct of the parties in this case and the relevant law, the Court finds that the Plaintiff is not the true and beneficial owner of the shares of the Corporate Debtor, which shares shall remain in the name of Nina. As a result of this conclusion, there is no need for the Trustee to pursue adversary proceeding no. 06-1427-478. The following constitutes the Court's findings of fact and conclusions of law as mandated by Fed. R. Bankr.P. 7052.

BACKGROUND

On January 21, 2000, the Corporate Debtor filed a voluntary petition for reorganization under the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. On January 11, 2002, this Court entered an order converting this case from Chapter 11 to a case under Chapter 7 and the Trustee was appointed. As of the petition date, the Corporate Debtor was the record owner of real property located at 189-30 37th Avenue, Flushing, New York (the "Flushing Property"). The Flushing Property consists of nine homes, specifically, 189-30, 189-32, 189-34, 189-36, 189-38 and 189-40 37th Avenue and 37-08, 37-10 and 37-12 190th Street, Flushing, New York.

On November 17, 2000, Nina filed an individual voluntary petition for reorganization under Chapter 11 of Title 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of New York. In her schedules, Nina listed an ownership interest in the following parcels of real property:

1) 86 East 3rd Street, New York, New York (the "New York. Property"), consisting of approximately nineteen residential units — fee ownership;

2) 34-32 43 Street, Astoria, New York — one-half ownership; and

3) 770 Anderson Avenue, Unit 11L, Cliffside Park, New York (the "New Jersey Condominium") — fee ownership.

Louis Barbieri, the Plaintiff, is Nina's father. According to Nina, she purchased the New York Property in 1986 using $200,000 of the Plaintiff's funds for the down payment. The Plaintiff testified that he agreed to make the down payment on this property and have Nina assume ownership of it to introduce her to the real estate business. The Court finds this down payment to be a gift from the Plaintiff to Nina. Nina also testified that she obtained the $55,000.00 down payment to purchase the New Jersey Condominium from the Plaintiff. With respect to the Astoria, New York property, she was given a one-half interest from her grandmother, and her aunt held the other one-half interest. By virtue of her grandmother's gift, Nina is the actual owner of a one-half interest in this property.

Nina also listed in Schedule B of her petition her interest as sole shareholder of the Corporate Debtor, which held the Flushing Property as its asset. On January 11, 2002, this Court entered an order converting this case from Chapter 11 to a case under Chapter 7, and the Trustee was appointed.

FACTS

The Plaintiff has been incarcerated at the Greenhaven correctional facility located in Stormville, New York since February of 1992. As of the date the Plaintiff, was incarcerated, the Plaintiff individually was the record owner in fee simple of the Flushing Property. The Plaintiff owned other investment properties as well. In late December 1996, or in the beginning of January 1997, the Plaintiff contacted Hector Marichal, Esq. ("Marichal"), a real estate lawyer, to assist him in obtaining a mortgage loan to pay off a tax lien encumbering the Flushing Property which unpaid lien could have resulted in foreclosure of the Property. Marichal had previously represented the Plaintiff with respect to a number of matters including preparation of deeds, refinancing, and real estate closings.

The Plaintiff himself, from prison, attempted to solicit a loan to enable him to avoid foreclosure on the Flushing Property, but due to the Plaintiffs incarceration for the commission of a felony, mortgage lenders which were contacted regarding the loan were not interested in lending to the Plaintiff. The Plaintiff did negotiate with Madison Home Equities, Inc. ("Madison"), which agreed to provide a secured loan. According to the Plaintiff, Madison was only willing to loan at very high interest rates, and in order to avoid the issue of usury, the Plaintiff agreed to transfer the Flushing Property to a corporation, which would then obtain the loan. The Plaintiff asked Marichal to form a corporation, and the Corporate Debtor was formed by Marichal in February 1997. According to the Plaintiff, only a portion of the Flushing Property units were to be pledged as collateral for the loan, but there is no documentary evidence to support the Plaintiff's testimony. The Plaintiff also testified that he advised Marichal that the shares of the Corporate Debtor were to be issued in the Plaintiffs name. Nina was to attend the closing, along with Marichal, to sign any documents and to represent the Plaintiffs interests at the closing, as the Plaintiff was still incarcerated. In support of his assertion that he never intended to have Nina own the shares of the Corporate Debtor, the Plaintiff produced a letter dated April 20, 1997 from the Plaintiff to Marichal wherein some of the proposed terms of the refinance are set forth and the Plaintiff writes that Nina is not to be involved with the Corporate Debtor "in any manner." (Plaintiff's Ex. E, page R-12).

The closing took place on July 8, 1997. Nina was present at the closing, along with Marichal, who acted as attorney for both the Corporate Debtor and Nina. Nina had a continuing power of attorney on behalf of the Plaintiff which was executed in 1992, but she did not sign any documents at the closing as the Plaintiff's attorney-in-fact. Despite the fact that Nina and Louis Barbieri had been negotiating the mortgage with Madison during the period prior, to the closing, a different lender by the name of Bridge Funding, Inc. provided the funding at the closing. According to Nina's testimony, she was surprised that Bridge Funding, Inc. was being substituted as the lender in place of Madison. Furthermore, according to Nina, Bridge Funding, Inc. required that the Flushing Property be pledged in its entirety, and that the New York Property be pledged as collateral for the loan as well. In addition, according to Nina, Bridge Funding, Inc. advised her that all of the stock of the Corporate Debtor must be held by Nina, not the Plaintiff, and the interest rate on the loan was increased by several percentage points. Nina testified that she was concerned about these changes to the terms of the loan, and requested that she be given time to consult with the Plaintiff about the changes to the loan terms. According to her, she was advised by Bridge Funding, Inc. that the closing had to take place without any delay or Bridge Funding, Inc. would refuse to provide the funds. Despite Nina's reservations, she agreed to go forward with the closing. She made this choice. She could have terminated the closing of the loan, but she chose to close the transaction and obtain the loan proceeds for the benefit of the Corporate Debtor.

At the closing, Nina signed the following documents:

1) Resolution by the Board of Directors of the Corporate Debtor dated July 8, 1997, authorizing the Corporate Debtor to borrow $350,000 from Bridge Funding, Inc. ("Resolution"). (Trustee's. Ex. 1-B). The Resolution is signed by Nina Barbieri as President and Secretary of the Corporate Debtor, and Nina Barbieri also provided her signature as 100% owner of the shares of the Corporate Debtor.

2) Affidavit for Confession of Judgment dated July 8, 1997, signed by Nina Barbieri as the President and sole shareholder of the Corporate Debtor, in favor of Bridge Funding. (Trustee's Ex. 1-B).

3) Hypothecation Agreement dated July 8, 1997 between Lawrence Linksman, President of Bridge Funding, Inc., and Nina Barbieri as "stockholder" of the Corporate Debtor (Trustee's Ex. 1-B).

4) Blank Stock Power signed by Nina Barbieri as the 100% shareholder of the Corporate Debtor (Trustee's Ex. 1-B).

The terms of the loan by Bridge Funding, Inc. were as follows:

1) Amount of loan — $350,000

2) Term — one year

3) Interest rate — 16%, plus five points at closing

4) Collateral pledged — Bridge Funding, Inc. was granted a first mortgage on

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