In re Euro-Swiss Intern. Corp.

• Citation: 33 BR 872
• Decision Date: 18 October 1983
• Docket Number: Adv. No. 81-5735-A.,80 B 10177(JL),Bankruptcy No. 79 B 10245(JL)
• Parties: In re EURO-SWISS INTERNATIONAL CORPORATION, Debtor. Harry Robert VARON, as Trustee of the Estate of Euro-Swiss International Corporation, Debtor, Plaintiff, v. TRIMBLE, MARSHALL & GOLDMAN, P.C., et al., Defendants.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

33 B.R. 872 (1983)

In re EURO-SWISS INTERNATIONAL CORPORATION, Debtor Harry Robert VARON, as Trustee of the Estate of Euro-Swiss International Corporation, Debtor, Plaintiff, v. TRIMBLE, MARSHALL & GOLDMAN, P.C., et al., Defendants.

Bankruptcy Nos. 79 B 10245(JL), 80 B 10177(JL), Adv. No. 81-5735-A.

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

September 26, 1983.

As Corrected October 18, 1983.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kronish, Lieb, Shainswit, Weiner & Hellman, New York City, for trustee; Richard Lieb, and Igor Krol, New York City, of counsel.

Dorfman & Jacobson, Jericho, N.Y., for Sovereign Commodities Group; Jerome Dorfman, New York City, of counsel.

Ira B. Marshall, New York City, for Trimble, Marshall & Goldman and the individual defendants.

Gerald S. Crowley, New York City, for the Port Authority of N.Y. & N.J.

HOWARD C. BUSCHMAN III, Bankruptcy Judge.

Harry Robert Varon, Trustee of the Estate of Euro-Swiss International Corporation, ("Plaintiff/trustee"), the debtor herein ("Euro-Swiss"), moves for summary judgment under Bankruptcy Rule 756 on the ground that as a matter of law the trustee is entitled to sole ownership of a cash fund of $485,000, representing the proceeds of his assignment and sale of Euro-Swiss' lease with The Port Authority of New York and New Jersey (the "Port Authority") for office space at One World Trade Center, New York, New York (the "Lease"). The Port Authority moves for summary judgment on its cross-claim and counterclaim against the plaintiff for past due post-petition rent and charges in the amount of $60,757.34.

I FACTUAL BACKGROUND AND PRIOR PROCEEDINGS

Euro-Swiss sold "deferred delivery" commodities contracts to retail operations which, in turn, sold commodities contracts to the public. The current adversary proceeding stems from a pre-bankruptcy sublease of space and an assignment by Euro-Swiss of the Lease.

From the submissions of the parties in support of and in opposition to the various motions, it appears undisputed that on May 7, 1979, Euro-Swiss entered into the Lease whereby it rented approximately 5,600 square feet on the 102nd Floor of One World Trade Center. The Lease was for a ten-year term commencing October 1, 1979; annual base rent was approximately $65,000, subject to customary escalations. Simultaneously with the signing of the Lease, Euro-Swiss subleased, with the subsequent written consent of the Port Authority, the most desirable portion of the office to Trimble, Coven & Goldman, P.C. ("Trimble Coven") for an annual rental of $1,200 (the "Sublease"). Neither the Lease nor the Sublease were ever recorded.

Prior to the commencement of the Lease term on October 1, 1979, Euro-Swiss was a subtenant in Trimble Coven's offices at 777 Third Avenue, in New York City. Trimble Coven was general counsel to Euro-Swiss; a partner, Bernard Coven, owned shares in Euro-Swiss.

Approximately one month after its tenancy in One World Trade Center began, Euro-Swiss was sued by a court-appointed receiver for two of the debtor's major customers. The receiver sought $2.5 million on a breach of contract claim and confirmation of an ex parte order of attachment of Euro-Swiss' assets. See United States v. Coven, 662 F.2d 162 (2d Cir.1981); In re Euro-Swiss International Corp., 80 Civ. 2559 (R.O.) (S.D.N.Y. October 27, 1980) at 2-3. Levies against the debtor's property, issued pursuant to the ex parte order of attachment, were executed on November 9 and 13, 1979. Shortly thereafter, on November 26, 1979, the debtor assigned the Lease with the Port Authority to Trimble Coven for a stated consideration of $10 (the "Assignment"). On the same date, Mr. Coven and the President of Euro-Swiss visited the offices of the Port Authority and prepaid the rent in the amount of $36,000 in an unsuccessful attempt to obtain the Port Authority's consent to the assignment. The source of these funds is not clear. Trimble Coven never recorded the Assignment, its name, however, was affixed to the office door and listed in the building directory.

Eight days after the Assignment to Trimble Coven, certain creditors of Euro-Swiss filed an involuntary bankruptcy proceeding against it under Chapter 7. On February 7, 1980, the debtor filed its own Chapter 11 petition and moved to convert the Chapter 7 proceeding to Chapter 11. This Court dismissed the debtor's voluntary bankruptcy proceeding. Applying the doctrine of collateral estoppel to a prior finding in the attachment case, Glusband v. Euro-Swiss International Corp., 85 F.R.D. 597 (S.D.N.Y. 1979), this Court concluded that Euro-Swiss was a commodities broker and thereby prohibited under § 109(d) of the Bankruptcy Code (the "Code") from filing a Chapter 11 petition. On appeal, the United States District Court for the Southern District of New York reversed. In re Euro-Swiss International Corp., 80 Civ. 2559 (RO) (S.D.N.Y. October 27, 1980). On September 8, 1981, this Court ordered debtor's Chapter 11 proceeding to be converted to Chapter 7. Administration of the debtor's two Chapter 11 proceedings has continued under Chapter 7 and the debtor's assets are in the process of being liquidated.

During these proceedings, the debtor failed to pay rent or even reasonable use and occupancy charges to the Port Authority. Substantial sums were due by December of 1980. The Port Authority then orally consented to the Assignment in exchange for Trimble Coven's agreement to pay rent. The parties entered into a stipulation affirming that Euro-Swiss remained jointly and severally liable on the lease with Trimble Coven, stating:

WHEREAS, Euro-Swiss International Corporation, the Debtor herein is occupying certain premises at One World Trade Center 10237 New York, New York, pursuant to a certain lease dated May 7, 1979 made by the Debtor with the Port Authority of New York and New Jersey, which lease was assigned to Trimble Coven & Goldman P.C. but which assignment provides that the Debtor and assignee shall both be liable to the landlord;

(Emphasis added.) Stipulation dated December 12, 1980, signed by Euro-Swiss and the Port Authority, so ordered by this Court ("Stipulation").

Shortly thereafter, in March of 1981, Trimble Coven assigned the Lease to Sovereign Commodities Group, Ltd. ("Sovereign"). Once again, the Port Authority did not consent to this assignment, nor was it ever recorded. At about the same time of this assignment, both Mr. Coven and the President of Euro-Swiss were convicted of conspiracy, mail fraud, wire fraud and obstruction of justice for their activities in connection with the attachment proceedings in the fall of 1979. See United States v. Coven, 662 F.2d 162 (2d Cir.1981). While the plaintiff has made many references to these proceedings, he conceded at the hearing on these motions that he did not claim any collateral estoppel effect from the findings in the criminal action or any of the other proceedings.

Although Sovereign, the proposed assignee, did make several payments to the Port Authority, by July 4, 1981, the debtor and Trimble Coven were again in arrears to the Port Authority. Consequently, the Port Authority commenced a proceeding against the debtor in this Court seeking relief from the automatic stay contained in § 362 of the Code so that it could proceed against the debtor for the amount owed. This proceeding was adjourned sine die upon the commencement of an adversary proceeding by the interim trustee, plaintiff's predecessor, to set aside the Assignment and Sublease and to authorize the trustee to assume the Lease free and clear of the interests of the various defendants except the interests of the Port Authority.

On the motion of the plaintiff/trustee herein and with the consent of Trimble Coven, the Port Authority and Sovereign, this Court, by order dated May 21, 1982, authorized the assumption and sale of the Lease to Telerate Systems, Inc. ("Telerate") pursuant to § 365 of the Code, for $485,000 cash. In so consenting, the parties fully reserved any rights they may be determined to have in the Lease and transferred those rights to the proceeds from the Assignment.

The interim trustee's complaint was superseded by an amended complaint filed by the plaintiff herein on July 22, 1982. The essence of the amended complaint is that the Trimble Coven Assignment and Sublease are all void or voidable pursuant to §§ 544 and 548 of the Bankruptcy Code and that the plaintiff, as trustee, be declared the sole owner of the $485,000 cash fund.

In answering the plaintiff's amended complaint, the Port Authority asserted a counterclaim seeking $60,757.34, representing the past due rent and charges, from the $485,000 cash fund. Both the trustee and the Port Authority have moved for summary judgment on their claims.

II SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56(c), made applicable to bankruptcy proceedings by Rule of Bankruptcy Procedure 7056, states, in pertinent part, that a judgment in favor of the moving party "shall be rendered if there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The test on a motion for summary judgment is whether the facts set forth in detail in the papers presented on the motion, such as in affidavits, depositions, answers to interrogatories, and admissions on file, show that there are no genuine issues of material fact to be tried. Burtnieks, City of New York, 716 F.2d 982, 985, (2d Cir.1983); Engl v. Aetna Life Insurance Co., 139 F.2d 469 (2d Cir.1943); 6 J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice ¶ 56.04 (2d Ed.1981).

No longer in the Second Circuit, as in Arnstein v. Porter, 154 F.2d 464 (2d Cir. 1946), does the slightest chance that there may exist a genuine issue of fact preclude the granting of a motion for summary judgment. Still, the court does give pause before granting summary judgment because, in doing so, it denies a litigant a trial. United States v....