In re Casini, Bankruptcy No. 97-39420 RTL.

• Decision Date: 31 March 2004
• Docket Number: Adversary No. 01-5611.,Bankruptcy No. 97-39420 RTL.
• Citation: 307 B.R. 800
• Parties: In re Peter J. CASINI, Debtor. Peter J. Casini, Debtor/Plaintiff, v. Timothy Graustein, Defendant.
• Court: U.S. Bankruptcy Court — District of New Jersey

307 B.R. 800

In re Peter J. CASINI, Debtor Peter J. Casini, Debtor/Plaintiff, v. Timothy Graustein, Defendant.

Bankruptcy No. 97-39420 RTL.

Adversary No. 01-5611.

United States Bankruptcy Court, D. New Jersey.

March 31, 2004.

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Karl E. Meyer, Harbor City, NJ, for Debtor/Plaintiff.

Joseph M. Garemore, Mount Laurel, NJ, Stephanie Nolan Deviney, Brown & Connery, LLP, Westmont, NJ, for Defendant.

OPINION

RAYMOND T. LYONS, Bankruptcy Judge.

This is an adversary proceeding to determine dischargeability of a debt. Plaintiff, Peter J. Casini, filed a voluntary petition under chapter 7 of the Bankruptcy Code on August 19, 1997 and received a discharge on December 22, 1997. A final decree was entered and the case was closed on November 24, 1998. The case was reopened. Casini initiated this adversary proceeding on December 21, 2001 by filing a complaint to determine dischargeability. This court has jurisdiction under 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a) and the order of the United States District Court for the District of New Jersey dated July 23, 1984, referring all proceedings arising under Title 11 of the United States Code to the bankruptcy court. This is a core proceeding that may be heard and determined by a bankruptcy judge under 28 U.S.C. § 157(b)(1) and (2)(I) to determine dischargeability of a particular debt.

Casini denies any liability to Graustein. Alternatively, Casini asserts that any liability he may have to Graustein arose before his bankruptcy petition was filed on August 19, 1997 and was discharged. Defendant, Timothy Graustein, avers that his claim was not discharged under 11 U.S.C. § 523(a)(3) because he was not listed or scheduled in Casini's bankruptcy schedules and his debt was the result of fraud, defalcation while acting in a fiduciary capacity, or wilful and malicious injury under 11 U.S.C. § 523(a)(2),(4) or (6). Furthermore, Graustein maintains that his debt arose post petition and was not discharged.

FACTS

Peter Casini has been around boats his whole life. He is now 44 years old. In 1991, Casini started a business designing, manufacturing and selling power boats under the Cobra trade name. He utilized a catamaran hull design with kevlar and fiberglass which gave the Cobra boats unique qualities. Although his boats achieved some racing success and his fishing boats were featured with glowing praise in boating publications, his businesses all failed. Casini was the design talent behind several entities all of which are now defunct. He ended up in personal bankruptcy in 1997 and later filed an unsuccessful chapter 13 case. He has a foreclosure judgment against his residence and is behind in child support and taxes. He has relied on the generosity of family and friends for survival.

Timothy Graustein purchased a 30 foot Cobra Terminator power boat from Meucke's Marine in Texas in the summer of 1995. The hull of the boat had been manufactured by Cobra but the motors and other accessories were supplied by the dealer. Within a few weeks of acquiring the boat, Graustein had an accident severely damaging the boat. He entered into a written contract in September 1995 with Marine Investors, Inc.¹ of Lower Bank, New Jersey for repair of the boat. The total price for the work was $16,900 payable in installments of $8,450 on contract, $4,225 at "beginning of rigging" and $4,225 on completion. Graustein paid the deposit and arranged to ship the hull from Texas to New Jersey. Later, after being advised that the boat was ready for the motors and mechanicals, Graustein paid the second installment and shipped the motors, etc., to New Jersey.

The parties dispute what happened after the motors, etc. were shipped to New Jersey. Graustein says he inquired about the progress of the work and got the runaround from Marine Investors. Casini says the motors were too large for the boat and represented a safety hazard, so Marine Investors refused to install them. This factual dispute need not be resolved here since Graustein sued Marine Investors, Inc., in Texas and got a default judgment. For purposes of the adversary proceeding it may be assumed that Marine Investors, Inc. breached the contract with Graustein.² That breach occurred, at the latest, in the first half of 1996.

As mentioned, Graustein sued Marine Investors, Inc. in Texas state court by complaint filed on August 25, 1997, nearly 2 years after the repair contract. After judgment by default, Graustein domesticated the Texas judgment against Marine Investors, Inc. in New Jersey on December 23, 1998 (16 months later) for $265,615.72 plus costs of $215.00. Graustein then subpoenaed Casini for a deposition to discover if Marine Investors, Inc. had assets to satisfy the judgment. At his deposition on July 21, 1999, Casini testified that Marine Investors, Inc. had ceased doing business, that it never made a profit, that it had numerous warranty claims and judgments, and that its only assets were some obsolete molds which were available.³

Following this, Graustein retreated to Texas and filed a second amended complaint in Texas state court on August 25, 1999 naming Casini and others as additional defendants. The second amended complaint alleged breach of warranty, negligence and breach of contract. Furthermore, Casini and the other defendants were alleged to be alter egos of one another "and for purpose of liability they are one and the same."

Once again a default judgment was entered on July 20, 2000 in Texas state court and domesticated in New Jersey state court on December 27, 2000, more than five years after the boat repair contract. Another year passed before this adversary proceeding was commenced. In the meantime, Graustein retrieved his boat in September 2000.

Peter Casini has been associated with a number of failed business ventures, including the following:

Cobra Marine Industries, Inc. — incorporated in New Jersey on December 3, 1992 — this was Casini's original entry into the business of designing, manufacturing and selling Cobra power boats. Peter Casini was the only principal of this corporation which faded out of business in 1995.

Marine Investors, Inc. — incorporated in New Jersey on May 4, 1995. Craig K. Smith (President) and Peter Casini (Vice President) were the principal shareholders. This company seems to have been the successor to Cobra Marine Industries, Inc. — its letterhead proclaimed Marine Investors, Inc. as "Builder of `Cobra' World Champion Power Boats". This company had the written boat repair contract with Graustein dated September 11, 1995. It became defunct in 1997 when Smith left and moved to Florida. Subsequently, Marine Investors, Inc. filed for bankruptcy in 1999.

Cobra Sport Fishing Boats, Inc. — incorporated in New Jersey on May 15, 1997 — this company controlled by Casini, designed and built fishing boats, whereas the prior companies did racing and pleasure boats. In June 2000, Cobra Sport Fishing Boats, Inc. shut its doors. It filed for bankruptcy on April 24, 2001.

Cobra World Champion Power Boat Corp. — incorporated in New Jersey on February 2, 2000 along with 2 other corporations. Casini's plan was to have 3 entities — a design company, a manufacturing company and a sales company. Cobra World Champion Power Boat Corp. was to be the sales company controlled by employees. Cobra World Champion Power Boat Corp. filed bankruptcy on July 6, 2001.

Top Cat Design Co. — also formed February 2, 2000. This was the design company controlled by Casini and his friends and family.

Tsunami Marine Manufacturing Corp — the third entity formed on February 2, 2000. This was the manufacturing company controlled by the employees. Tsunami Marine Manufacturing Corp. also filed bankruptcy on July 6, 2001.

Top Cat Marine Security, Inc. — incorporated approximately 2002. To design boats for the U.S. Government for coastal security.

None of the corporate bankruptcies was completely administered. Each case was dismissed for failure to file schedules, except for Marine Investors, Inc.'s second case which was dismissed for failure to cooperate with the trustee. Despite numerous discovery requests and orders in this adversary proceeding, no books and records of any of these corporations were produced. There are numerous judgments against these corporations and Peter Casini. Laura Casini, a lawyer and cousin of Peter Casini, who did some minor legal work for his businesses summed it up well, "[F]rom what I could see and from what I was told, it was like pathetic, horrible, mismanagement."

DISCUSSION

I. Burden of Proof

Although Casini is the plaintiff in this adversary proceeding to determine dischargeability, he denies any liability to Graustein. Indeed, the contract for boat repair giving rise to the dispute was between Graustein and Marine Investors, Inc., not Casini. In pretrial proceedings, the court directed that Graustein, though nominally the defendant, should proceed first to present evidence that his claim arose post petition or that his claim, if prepetition, was the kind described in 11 U.S.C. § 523(a)(2), (4) or (6). At trial, Graustein argued that Casini, as plaintiff, should be required to present his evidence first. The court rejected this argument and required the defendant, Graustein, to put his evidence in first. He did. As it turned out Graustein called Casini as a witness and offered Casini's deposition transcripts in evidence. After Graustein rested, Casini offered no evidence,⁴ so the record consists solely of evidence offered by Graustein.

A creditor bears the burden of proving an exception to discharge under Section 523 of the Bankruptcy Code by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991); In re Graham, 973 F.2d 1089, 1098-1102 (3rd Cir.1992). There is no reason to shift the burden in an adversary proceeding to determine...