In re Eckert, Bankruptcy No. 05 B 54618.
| Decision Date | 03 June 2008 |
| Docket Number | Adversary No. 07 A 00450.,Bankruptcy No. 05 B 54618. |
| Citation | 388 B.R. 813 |
| Parties | In re Jeffery ECKERT, Debtor. David E. Grochocinski, Chapter 7 Trustee, Plaintiff, v. David Schlossberg, Gary Laliberte, Christine Eckert, and Marcelo Carlos, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Jane D. Yanovsky, Neal H. Levin, Freeborn & Peters LLP, Chicago, IL, for Plaintiff.
Mazyar M. Hedayat, M. Hedayat & Associates, Bolingbrook, IL, for Defendants.
This matter comes before the Court on the amended complaint filed by David E. Grochocinski, the Chapter 7 case trustee (the "Trustee") of the bankruptcy estate of Jeffery Eckert (the "Debtor") against David Schlossberg ("Schlossberg"), Gary Laliberte ("Laliberte"), Christine Eckert ("Christine")1, and Marcelo Carlos ("Carlos") (collectively the "Defendants") that seeks to avoid alleged fraudulent conveyances pursuant to 11 U.S.C. § 548(a)(1) and 740 ILL. COMP. STAT. 160/5 and 160/6. The matter involves the transfers of two parcels of real property that the Debtor allegedly orchestrated to hinder, delay, and defraud his creditors with the assistance and knowing participation of the Defendants.
For the reasons set forth herein, the Court grants judgment in favor of the Trustee and against Schlossberg pursuant to Count 1 of the amended complaint. The Court finds that the transfer of the Debtor's interest in real property located at 2072 Tunbridge Trail, Algonquin, Illinois to Schlossberg was a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(A) and (B). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1). Under 11 U.S.C. § 550(a)(1), the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sum of $109,000 for the fraudulent transfer of this real property, which represents the value of the Debtor's interest in that property received by Schlossberg.
In addition, the Court grants judgment in favor of the Trustee and against Schlossberg pursuant to Count II of the amended complaint. The Court finds that the transfers of the Debtor's interests in real property located at 1073 Union Court, Bartlett, Illinois and 2072 Tunbridge Trail, Algonquin, Illinois to Schlossberg were fraudulent conveyances under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfers are avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(1) and 740 ILL. COMP. STAT. 160/9(b), the Trustee may recover from Schlossberg, for the benefit of the Debtor's estate, the sums of $120,000 and $52,357.54 for the fraudulent transfer of the first property and $109,000 for the fraudulent transfer of the second property, which represent the value of the Debtor's interests in those properties received by Schlossberg. Under 11 U.S.C. § 550(d), the Trustee is limited to only a single satisfaction from Schlossberg pursuant to Counts I and II of the amended complaint.
With respect to Count III of the amended complaint, the Court grants judgment in favor of Laliberte and against the Trustee. The Court finds that the July 2003 transfer of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois to Laliberte was not made on or within two years before the date of the Debtor's bankruptcy filing under 11 U.S.C. § 548(a)(1)(A) and (B).
Under Count IV of the amended complaint, the Court grants judgment in favor of the Trustee and against Laliberte. The Court finds that the transfer of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois was a fraudulent conveyance under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(1) and 740 ILL. COMP. STAT. 160/9(b), the Trustee may recover from Laliberte, for the benefit of the Debtor's estate, the sums of $120,000 and $52357.54, which represent the value of the Debtor's interest in that property received by Laliberte.
With respect to Count V of the amended complaint, the Court enters judgment in favor of the Trustee and against Carlos. The Court finds that the transfer to Carlos of the Debtor's interest in real property located at 1073 Union Court, Bartlett, Illinois was a fraudulent conveyance under 11 U.S.C. § 548(a)(1)(A) and (B). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1). Pursuant to 11 U.S.C. § 550(a)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the real property.
Finally, the Court grants judgment in favor of the Trustee and against Carlos pursuant to Count VI of the amended complaint. The Court finds that the transfer of the real property located at 1073 Union Court, Bartlett, Illinois to Carlos was also a fraudulent conveyance under 740 ILL. COMP. STAT. 160/5(a)(1) and (2) and 160/6(a). As such, the transfer is avoidable under 11 U.S.C. § 544(b)(1) and 740 ILL. COMP. STAT. 160/8(a)(1). Pursuant to 11 U.S.C. § 550(a)(2) and 740 ILL. COMP. STAT. 160/9(b)(2), the Trustee may recover from Carlos, for the benefit of the Debtor's estate, the sum of $76,207, which represents the value of the Debtor's interest in the proceeds distributed to Carlos from the sale of the real property. Under 11 U.S.C. § 550(d), the Trustee is entitled to only a single satisfaction from Carlos pursuant to Counts V and VI of the amended complaint.
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (H), and (O).
Most of the facts and background are undisputed. The Debtor filed a voluntary Chapter 7 bankruptcy petition on October 14, 2005. Thereafter, the Trustee was appointed in the underlying bankruptcy case. The Trustee is the plaintiff in the instant adversary proceeding.
On August 4, 2002, the Debtor entered into a sales contract with Bartlett One L.L.C. for the construction of a new home at 1073 Union Court, Bartlett, Illinois (the "Union Court Property"), (Trustee Ex. No. 6.) Over the next twelve months, prior to the completion of the house, the Debtor made cash payments pursuant to the sales contract totaling $120,000 against the adjusted purchase price of $804,674.50. (Trustee Ex. Nos. 7, 17, & 62 at 49:6-49:19.) By the lime the house was finished, however, the Debtor had been experiencing financial difficulties. The Debtor testified that despite repeated attempts, he was unable to obtain a mortgage on the Union Court Property to pay the balance due on the construction contract.
On July 8, 2003, two business associates of the Debtor, Schlossberg and Laliberte, entered into a partnership agreement whereby they agreed to purchase the Union Court Property for the purpose of reselling such Property to the Debtor under a contract for deed. (Trustee Ex. Nos. 13, 62 at 50:12-51:9, & 66 at 52:6-52:19.) Pursuant to the unwritten portion of the agreement, Schlossberg and Laliberte would purchase the Union Court Property and apply the $120,000 down payment provided by the Debtor, and would secure a mortgage for the balance of the purchase price, which would be paid on a monthly basis by the Debtor. (Trustee Ex. Nos. 16, 18, 19, 20, 21, 62 at 51:13-51:20, & 66 at 54:6-54:13.) Only Schlossberg and Laliberte, however, would be listed as purchasers on the deed. As an inducement to Schlossberg and Laliberte to purchase the Union Court Property with the intention to resell it to the Debtor, the Debtor agreed to pay a premium on the underlying obligation undertaken by Schlossberg and Laliberte. This premium was paid monthly, over and above the mortgage obligation, and created a "spread" that would amount to Schlossberg and Laliberte's profit on the transaction. (Trustee Ex. Nos. 62 at 51:13-51:20 & 65 at 13:1-13:20.)
On July 23, 2003, the closing date of the sale of the Union Court Property, Schlossberg, Laliberte, and the Debtor signed an assignment of real estate contract wherein the Debtor assigned to Schlossberg and Laliberte his interest in the Union Court Property in exchange for entering into articles of agreement for deed. (Trustee Ex. No. 16.) The articles of agreement for deed provided that the Debtor could repurchase the Union Court Property from Schlossberg and Laliberte if he made monthly payments to Schlossberg and Laliberte and a final balloon payment due on an unspecified date. (Trustee Ex. No. 19.) The contract for deed also preserved the Debtor's $120,000 equity in the Union Court Property. (Id.) At the closing, Schlossberg and Laliberte purchased the Union Court Property using the equity invested by the Debtor and two mortgages that they obtained from American Chartered Bank, (Trustee Ex. Nos. 17, 21, & 22.) Schlossberg and Laliberte were the only parties named as purchasers on the warranty deed issued by the seller, Bartlett One L.L.C. (Trustee Ex. No. 20.) The Debtor's name did not appear on the deed, despite his continuing equity interest in the Union Court Property. (Id.) This sum of $120,000 is part of the focus of Counts I and II against Schlossberg and Counts III and IV against Laliberte.
Following the closing of the Union Court Property sale and pursuant to the articles of agreement for deed, the Debtor made the monthly...
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