In re Fill, Bankruptcy No. 85 B 11531 (TLB)

CourtUnited States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
Writing for the CourtTINA L. BROZMAN
Citation82 BR 200
PartiesIn re Dr. J. Herbert FILL, Debtor. Leon GRAY, Trustee in Bankruptcy of the Estate of Dr. J. Herbert Fill, Plaintiff, v. Antje Mullikas FILL and Kate Mullikas, Defendants.
Decision Date11 December 1987
Docket NumberAdv. No. 86-5127A.,Bankruptcy No. 85 B 11531 (TLB)

82 B.R. 200 (1987)

In re Dr. J. Herbert FILL, Debtor.
Leon GRAY, Trustee in Bankruptcy of the Estate of Dr. J. Herbert Fill, Plaintiff,
v.
Antje Mullikas FILL and Kate Mullikas, Defendants.

Bankruptcy No. 85 B 11531 (TLB), Adv. No. 86-5127A.

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

December 11, 1987.


82 BR 201
COPYRIGHT MATERIAL OMITTED
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Paul, Weiss, Rifkind, Wharton & Garrison by Leslie Gordon Fagen, Jeffrey B. Sklaroff, New York City, for trustee

Kensington, James & Ressler by Stuart M. Bernstein, New York City, for Antje Mullikas Fill.

Walter, Conston, Alexander & Green, P.C. by Gregory F. Hauser, New York City, for Kate Mullikas.

DECISION ON TRUSTEE'S COMPLAINT TO SET ASIDE FRAUDULENT TRANSFERS AND FOR OTHER RELIEF

TINA L. BROZMAN, Bankruptcy Judge.

Rarely have we wished for the freedom to craft a script instead of a decision, but this bizarre fraudulent transfer action tempted us sorely. It is laced with back-dated promissory notes, false financial statements, missing crucial records, admittedly false and patently incredible affidavits and testimony, outlandish professional conduct, a secret divorce and, not least, the discovery at the close of trial of a memorandum which confirmed much of what the trustee had already circumstantially proven. After reviewing the evidence amassed at the nine-day trial, we have determined that the challenged transfers were indeed fraudulent. Because fraudulent intent by its very nature is rarely susceptible to direct proof and must be established by inference from the circumstances surrounding the allegedly fraudulent act, we must delve into the facts.

I.

Dr. J. Herbert Fill ("Dr. Fill"), a practicing physician board certified in psychiatry and neurology, filed a chapter 7 petition on September 19, 1985. By order dated November 18, 1985, Leon Gray was appointed trustee ("Trustee") of Dr. Fill's estate. On February 18, 1986, Gray commenced this adversary proceeding against Antje Mullikas Fill ("Mrs. Fill"), Dr. Fill's former wife, and Kate Mullikas ("Mrs. Mullikas"), his former mother-in-law, alleging fraudulent

82 BR 203
transfers avoidable by virtue of 11 U.S.C. ? 548 and N.Y. Debtor & Creditor L. ?? 273, 273-a, and 276. At issue are two transfers made by Dr. Fill, one to Mrs. Mullikas and/or Mrs. Fill of the proceeds from the sale of a cooperative apartment in New York City ("Apartment 14E") and the other to Mrs. Fill of a condominium located in Bolongo Bay, Virgin Islands ("Condominium"). The Trustee pleads that the transfers are constructively and actually fraudulent in that they were made without fair consideration and with actual intent to hinder, delay and defraud Dr. Fill's creditors and that at the time the proceeds of Apartment 14E were transferred, Dr. Fill was a defendant in a lawsuit brought by Gray International Inc. ("Gray International"). Specifically, the Trustee requests judgment
1. Awarding actual damages in an amount exceeding $650,000;
2. Awarding punitive damages in the amount of $1,300,000;
3. Setting aside the conveyance by Dr. Fill to Mrs. Fill of the Condominium;
4. Declaring that Mrs. Fill holds the Condominium and a new cooperative apartment which she purchased in her name alone ("Apartment 6E") in trust for the Trustee;
5. Preliminarily and permanently enjoining Mrs. Fill from encumbering or transferring title to the Condominium and to Apartment 6E;
6. Directing Mrs. Fill to turn over to the Trustee all of her right, title and interest in and to Apartment 6E; and
7. Awarding the Trustee his costs and expenses, including attorneys\' fees pursuant to ? 276-a of New York Debtor & Creditor Law.

Mrs. Fill's defense is predicated upon her contention that Dr. Fill held the properties in trust for her. She argues that she always held equitable title to half of the Condominium and Apartment 14E as a result of which Dr. Fill's eventual conveyance to her of the Condominium and her receipt of approximately half the proceeds of Apartment 14E cannot be deemed fraudulent. She maintains that the divorce decree which left title to the properties with Dr. Fill is unenforceable. Finally, she denies any participation in the fraudulent scheme allegedly designed to hinder and delay Gray International or deprive it of a satisfaction of its judgment.

Mrs. Mullikas argues that any conveyance to her by Dr. Fill was made in good faith and without wrongful intent, in satisfaction of an antecedent debt established by a state court judgment not subject to collateral attack. Alternatively, Mrs. Mullikas argues that her maximum liability can only be $115,977.72, the amount she actually retained from the sale of Apartment 14E. Finally, she argues against any award of punitive damages and attorneys' fees to the Trustee. At trial, we reserved argument on the issue of attorneys' fees until after this decision was rendered.

The parties stipulated to this court's jurisdiction to hear and determine this matter as a core proceeding. See 28 U.S.C. ?? 1334(b) and 157(a), (b)(2)(A), (E) & (H); 11 U.S.C. ?? 548 and 544(b).

II.

A. BACKGROUND

Although the transfers which are attacked by the Trustee are of fairly recent vintage, the story uncovered at trial spans some twenty years, beginning back in 1964 when Dr. Fill was living and working in the Virgin Islands. That year he married Antje Mullikas (Mrs. Fill), a West German, with whom he soon after moved to New York. Two years later the Fills had their only child, a son named Eric Christian Fill ("Christian").

From 1964 through 1972, Dr. Fill was employed in the public sector, earning between $17,500 to $25,000 a year. Mrs. Fill was not employed, yet the Fills lived extraordinarily well. When they first moved to New York, they rented apartments at fashionable addresses and, in 1970, jointly bought Apartment 14E, a two-bedroom co-operative located at 1056 Fifth Avenue. In 1976 they jointly bought the Condominium. They also travelled extensively, both together and alone.

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The Mullikases, Mrs. Fill's parents, gave her her half of the $60,000 purchase price of Apartment 14E as well as her half of the $36,000 purchase price of the Condominium. Dr. Fill testified at trial that his share as well came from money given to him by the Mullikases.1

The uncontradicted testimony establishes that the Fills lived well above Dr. Fill's income through the largesse of the Mullikases. What was sharply contested, however, was the circumstances surrounding the subsidies, specifically, when money was given, how much was given, to whom it was given and whether it was given as gifts or loans. Both of the Fills testified as to these points. Mrs. Mullikas did not attend the trial and was never deposed.2 Mr. Mullikas died several years ago.

Our review of the evidence determinative of the factual disputes begins with Dr. Fill's testimony. He was one of the more incredible and untrustworthy witnesses we have encountered. On at least ten occasions his testimony was at a minimum inconsistent with but more often directly contradictory to his testimony during discovery and during his examination pursuant to 11 U.S.C. ? 341.3 His most polished version of the facts, offered at trial, runs as follows:

From the inception of the Fills' marriage and until at least 1980, the Mullikases were providing the Fills with cash. The money was used to pay expenses which Dr. Fill's salary could not cover, such as moving expenses, family expenses incurred during a two year period when Dr. Fill was not gainfully employed and Dr. Fill's extensive travel and medical training expenses. The cash was delivered in varying amounts when the Fills either alone or together were visiting with the Mullikases in West Germany and when Mr. Mullikas visited New York. Sometimes Dr. Fill alone would pass through West Germany, be given money, spend a portion and bring the remainder back to the United States. If Mrs. Fill was travelling alone she often returned with cash. At times the cash given to her was a "loan" to the family; at other times, the cash which she alone received was a gift to her. When the Fills travelled as a family, they would usually divide the cash among themselves (including their son) to bring back to New York. Dr. Fill first testified that he kept all the cash in their apartment and later testified that he deposited some money into the Fills' joint bank account.

Despite the fact that he did not repay his in-laws at any time between 1966 and 1983, Dr. Fill insists that the monies he and his family were receiving from the Mullikases were loans which he alone was responsible to repay. In other words, he was given loans, his wife was given gifts. Dr. Fill testified that the distinction was rooted in the traditional German notion that Dr. Fill, as head of the household, would be ultimately responsible for family and personal expenses. Although Dr. Fill attempted to distinguish money lent to him (but sometimes delivered to Mrs. Fill) from money given to Mrs. Fill, there was no clear set of rules by which the family played.

The supposed payment terms of Dr. Fill's "loans" never clearly emerged. Until at least 1976, repayment was never discussed. Dr. Fill testified that the Mullikases were hopeful that Dr. Fill would leave public service, enter private practice and earn more money. The amount lent was similarly vague; Dr. Fill testified it was over $300,000 between 1966 and 1980, a number which he derived solely from a notebook kept by Mrs. Mullikas. Unfortunately,

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that notebook seems to have vanished sometime prior to this trial

Mrs. Fill corroborated their receipt of cash subsidies from her parents; the deposit of some of the receipts into the Fills' joint checking account; and that the money was lent. She also testified that Dr. Fill told her several times he would repay her parents when he entered private practice. But Mrs. Fill admitted that she was not present at any discussions between Dr. Fill and her parents regarding...

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1 practice notes
  • In re Olmstead, Bankruptcy No. 87-20174
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Western District of New York
    • February 5, 1988
    ...asset which fits the language of the cash exemption statute. In the cases of In re Doyle, 42 B.R. 615, 616-17 (Bkrtcy.W.D.N.Y.1984), and In 82 BR 200 re Joiner, 52 B.R. 41, 42 (Bkrtcy.W.D.N.Y. 1985), the Court construed the exemption statute narrowly and concluded that only cash or one of i......
1 cases
  • In re Olmstead, Bankruptcy No. 87-20174
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Western District of New York
    • February 5, 1988
    ...asset which fits the language of the cash exemption statute. In the cases of In re Doyle, 42 B.R. 615, 616-17 (Bkrtcy.W.D.N.Y.1984), and In 82 BR 200 re Joiner, 52 B.R. 41, 42 (Bkrtcy.W.D.N.Y. 1985), the Court construed the exemption statute narrowly and concluded that only cash or one of i......

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