In re Cohen
| Citation | 422 B.R. 350 |
| Decision Date | 06 January 2010 |
| Docket Number | No. 09-CV-3724 (JFB).,09-CV-3724 (JFB). |
| Parties | In re Mitchell J. COHEN, Debtor. Mitchell J. Cohen, Lend America, Inc., Wells Fargo Bank, N.A., Saxon Mortgage Services, Inc., Mortgage Electronic Registration Systems, Inc. as nominee for Lend America, Inc., America's Servicing Company, Richard L. Stern, as Chapter 7 Trustee, Appellants, v. Treuhold Capital Group, LLC, Appellee. |
| Court | U.S. District Court — Eastern District of New York |
Gabriel Del Virginia, Law Office of Gabriel del Virginia, New York, NY, Leland S. Beck, Beck & Strauss P.L.L.C., Uniondale, NY, for Appellant Mitchell J. Cohen.
Frank J. Haupel, Del Bello Donnellan Weingarten Wise & Wiederkehr, LLP, White Plains, NY, for Appellants Saxon Mortgage Services, Inc., Wells Fargo Bank, N.A., America's Servicing Company, and Mortgage Electronic Registration Systems, Inc., as nominee for Lend America, Inc.
Alan E. Marder, Scarcella Rosen & Slome, LLP, Uniondale, NY, Leonard Alan Benowich, Benowich Law LLP, White Plains, NY, for Appellee.
The instant case is an appeal from the voluntary bankruptcy proceeding of Debtor Mitchell J. Cohen (hereinafter "Cohen" or "Debtor") pursuant to Chapter 7 of the Bankruptcy Code, in the United States Bankruptcy Court for the Eastern District of New York ("Bankruptcy Court"). The appeal arises out of the action of Appellee Treuhold Capital Group, LLC (hereinafter "Treuhold" or "Appellee") to avoid the transfer of property by Cohen, allegedly on behalf of Treuhold, to himself.
Appellant Cohen and mortgagee Lend America and its assignees, Wells Fargo Bank ("Wells Fargo") and Saxon Mortgage Services, Inc. ("Saxon") (collectively, "Appellants") appeal from the June 29, 2009 Memorandum Decision and Order of the Honorable Dorothy Eisenberg, United States Bankruptcy Judge, granting Appellee's motion for summary judgment and denying Appellants' joint motion for summary judgment. The Bankruptcy Court held that Treuhold was entitled to recover the Brookhaven Property and the Coursen Property (collectively, the "Properties"), which were the subject of the challenged transfers, free and clear of all existing liens, and further held that the secured claims of Wells Fargo and Saxon with respect to their mortgage liens against those Properties should be reclassified as unsecured claims against the Debtor's bankruptcy estate. Treuhold Cap. Group LLC v. Cohen (In re Cohen), 418 B.R. 785, 808-09 (Bankr.E.D.N.Y.2009).
Appellants bring their appeal on the following grounds: (1) the Bankruptcy Court erred in holding, as a matter of law, that the relationship between Treuhold and Metropolitan Housing LLC (hereinafter "Metropolitan"), a limited liability corporation founded by the Debtor and his former partner, Steve Wissak (hereinafter "Wissak"), was not a joint venture; (2) the Bankruptcy Court erred in holding, as a matter of law, that neither Metropolitan nor Cohen had actual and/or apparent authority, as the agent of Treuhold, to effectuate the transfer of the Brookhaven Property and the Coursen Property to Cohen; (3) the Bankruptcy Court erred in holding, as a matter of law, that the Settlement and Forbearance Agreement was an "executory accord," rather than a novation; (4) the Bankruptcy Court erred in awarding Treuhold titles of the Brookhaven and Coursen Properties free and clear of the mortgage liens of Wells Fargo and Saxon; (5) the Bankruptcy Court erred in determining that Cohen was liable for the entire debt owed to Treuhold as a joint and several obligor; (6) the Bankruptcy Court erred in failing to consider alleged payments in the sum of $976,705.00 that already had been received by Treuhold, reducing the individual obligation of Cohen at the time of filing to $302,281.00; (7) the Bankruptcy Court erred in holding that Treuhold did not ratify the challenged transfers or waive its right to object to the transfers; and (8) the Bankruptcy Court erred in dismissing Appellants' affirmative defenses of unclean hands, equitable estoppel, and laches.
As set forth below, this Court concludes that the Bankruptcy Court correctly determined, based upon the undisputed facts, that the transfers of the Brookhaven Property and the Coursen Property by Cohen were fraudulent, and properly set aside the transfers on summary judgment. However, this Court concludes that disputed issues of material fact exist with respect to the existence of a joint venture and Treuhold's proper recovery and, therefore, the Bankruptcy Court erred in granting summary judgment on those issues. Accordingly, the Court remands the case to the Bankruptcy Court for further proceedings consistent with this Memorandum and Order.
The following facts are derived from the parties' briefs and the bankruptcy record on appeal. Unless otherwise noted, the facts are undisputed.
Alan Sarter is the sole principal and member of Treuhold. Cohen and Wissak were the principals and members of Metropolitan. (Appellants' Joint Brief (hereinafter "Joint Brief") at 4; Appellee's Opposition Brief (hereinafter "Opp. Brief") at 3.) In December 2001, Treuhold and Metropolitan entered into a business arrangement, the terms of which are not memorialized in a written agreement. (Joint Brief at 4.) Under the agreement, Metropolitan and Treuhold would purchase, refurbish, and sell homes and property in New York State. (Id. at 5.)
For each property, Metropolitan would first locate real estate for purchase. (Id.) Once Metropolitan located potential real estate, it would then approach Treuhold about purchasing the property. In re Cohen, 418 B.R. at 793. If Treuhold expressed interest in purchasing the property, Treuhold would provide the financing for the purchase of the property, and title to the property would be held in Treuhold's name. (Joint Brief at 5; Opp. Brief at 4.) Treuhold would purchase the property using its own funds and, if necessary, would obtain money for the purchase from a line of credit from Medallion Business Credit LLC ("Medallion"). (Joint Brief at 6.) Medallion required Treuhold "(1) to furnish a copy of the deed to the properties in [Treuhold's] name before Medallion would fund its loans and (2) to pledge the properties to Medallion upon closing." 418 B.R. at 793. Collateral for the line of credit was in the form of the properties. Treuhold would acquire these properties free and clear of all mortgages and liens so that title could be transferred to purchasers without Treuhold having to pay off a mortgage. Id. (See also Joint Brief at 6.)
Once the property was purchased, Metropolitan would make necessary repairs and improvements on the property. (Joint Brief at 5.) Metropolitan would then find purchasers for the property and assist those prospective buyers in finding financing for the purchase of the property. (Id.) According to Treuhold, at that point, Metropolitan would notify Treuhold that it had a buyer for the property. (Opp. Brief at 4.) Cohen disputes that fact and asserts that "Metropolitan, including its employees (including Cohen), was given discretion and authority to prepare the properties for sale, make necessary alterations to the properties, find purchasers, and sell the properties." (Joint Local Rule 7056.1 Statement ¶ 9.) The papers for the sale would typically be executed by employees of Metropolitan, including Cohen. (Joint Brief at 6.) Sarter generally did not attend the closings on behalf of Treuhold. (Joint Brief at 6; Opp. Brief at 5-6.)
Once a property sale had closed, Treuhold would initially receive back the funds it expended to acquire the property, plus interest and the cost of obtaining insurance for the property. (Joint Brief at 5; Opp. Brief at 4.) Metropolitan would receive back the funds it expended to make improvements on the property. (Opp. Brief at 4.) Any profits remaining thereafter would be split between Treuhold and Metropolitan. (Id.) The parties executed around 120 purchases, improvements, and sales of property in this manner. (Joint Brief at 5.)
Treuhold acquired the property at 22-25 Brookhaven Ave., Far Rockaway, New York (the "Brookhaven Property") on October 11, 2006 for $405,000. (Joint Brief at 7; Opp. Brief at 10.) On November 7, 2006, a contract of sale was signed, conveying the Brookhaven Property from Treuhold to Cohen for $550,000. (Opp. Brief at 10.) On November 9, 2006, title to the property was conveyed from Treuhold to Cohen. (Pl.'s Motion Ex. 13 at 2.1) Cohen signed Sarter's name (in Sarter's capacity as a member of Treuhold) to these papers; Sarter claims that he did not authorize Cohen to do so, and that he was not aware of these transactions. (Opp. Brief at 10-11.) The notary public who acknowledged the signatures at the closing was Ceil Calisto, Cohen's sister. (Id.)
At the time of the conveyance, Cohen obtained two mortgages from Lend America, valued at $341,250.00 and $131,250 respectively, for which Lend America received a security interest in the property. (Pl.'s Motion Exs. 15, 16.) Cohen presented to Lend America a letter, allegedly signed by Sarter, indicating that $30,000 in renovations had been made on the property since its purchase. (Pl.'s Motion Ex. 17.) These mortgages were thereafter assigned to Wells Fargo and Saxon, respectively.2 (Joint Brief at 7.)
On August 25, 2006, Treuhold acquired the property located at 39 Coursen Place, Staten Island, New York (the "Coursen Property") for approximately $265,000. (Opp. Brief at 12.) On November 14, 2006, a contract of sale was signed, selling the property from Treuhold to Cohen. (Pl.'s Motion Ex. 19.) Title to the Coursen Property was conveyed to Cohen on ...
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