In re Fischer
| Decision Date | 28 January 2009 |
| Docket Number | Adversary No. 05-01011.,Bankruptcy No. 03-13704-TJC. |
| Citation | 411 B.R. 247 |
| Parties | In re Benson J. FISCHER, Debtor. Roger Schlossberg, Chapter 7 Trustee, Plaintiff, v. Benson J. Fischer, et al., Defendants. |
| Court | U.S. Bankruptcy Court — District of Maryland |
Brent C. Strickland, Carol L. Hoshall, Chengzhi Yu, Susan Jaffe Roberts, Whiteford, Taylor & Preston LLP, Baltimore, MD, Karen H. Moore, Moore Steele, LLC, Greenbelt, MD, Roger Schlossberg, Hagerstown, MD, for Plaintiff.
Richard B. Rosenblatt, Steven Marc Assaraf, The Law Offices of Richard B. Rosenblatt, PC, Rockville, MD, Richard E. Schimel, Budow and Noble, P.C., Bethesda, MD, Lella Amiss Pape, Ursula Anne Koenig, Rees Broome, PC, Vienna, VA, for Defendants.
Before the Court are a number of matters filed in the above-captioned bankruptcy case and adversary proceeding: the Amended Complaint filed by Roger Schlossberg, the Chapter 7 Trustee (the "Trustee" or "Plaintiff") for the bankruptcy estate of Benson J. Fischer ("Benson Fischer" or "Fischer") (Docket No. 141 in Adv. Pro. 05-01011); a Joint Objection to the Debtor's Claim of Exemptions (the "Joint Objection") (collectively, Docket Nos. 129 and 130 in Case No. 03-13704); two proofs of claim (Claim Nos. 15 and 16) filed by the Trustee on behalf of Sheldon Fischer (Claim No. 15), and on behalf of Lauren Brisky and Gary Posner, Fischer's sister-in-law and her husband (Claim No. 16), along with the objections filed thereto (Docket Nos. 383 and 385 in Case No. 03-13704); a motion to exclude Defendant's Exhibits (hereafter "DX") 57-59; and the Debtor's Renewed Motion to Dismiss Chapter 7 Case (the "Motion to Dismiss") (Docket No. 139).
On March 28, 2003, Benson Fischer filed his Chapter 7 bankruptcy petition. He filed the required schedules (Schedules A-J) on April 28, 2003. On Schedule C— Property Claimed as Exempt, Fischer claimed exemptions for, inter alia, his "Fifty percent (50%) tenants by the entirety interest in Montgomery Bakers, Inc." which he valued at $2 million. He also claimed as exempt a "Promissory Note executed by Montgomery Bakers, Inc. for the benefit of Benson and Mona Fischer" also as tenants by the entirety. The original complaint initiating this adversary proceeding was filed on January 7, 2005 and, on September 14, 2005, pursuant to an order granting the Trustee's motion, an amended complaint was filed.
In the Amended Complaint,1 the Trustee seeks relief on four counts.2 Count I, against Montgomery Bakers Inc. ("MBI"), seeks a judgment in the amount of $750,000 for alleged "unpaid compensation due and owing from [MBI] for services rendered by the Debtor during the period from January 1, 2001 through March 28, 2003." Amended Complaint, p. 8, ¶ 40. Count II, against MBI, Fischer and Mona Fischer, his wife ("Mona Fischer" or, in context, "his wife") seeks a declaratory judgment against Defendants that Fischer's ownership interest in MBI's stock is property of the bankruptcy estate and is not held in a tenancy by the entirety, or, even if held in a tenancy by the entirety, can still be administered by the Trustee because "there exist holders of undisputed joint debts among the Debtor's creditors." Amended Complaint, p. 9, ¶ 46. Count VII, against Fischer and his wife, requests that this Court set aside alleged transfers made by Fischer to himself and his wife as tenants by the entireties, which the Trustee alleges operated as a fraud on creditors, pursuant to Maryland Code, Family Law—Title 4: Spouses, § 4-301. Count VIII, against Fischer and his wife, also requests the setting aside of the same alleged transfers made by Fischer to himself and his wife as tenants by the entireties, which the Trustee alleges operated as a fraud on creditors, pursuant to Maryland Code, Commercial Law—Title 15, Subtitle 2: Fraudulent Conveyances, §§ 15-201-15-214. In response to the Amended Complaint, MBI, Mona Fischer and Fischer (collectively, "Defendants") filed Answers (Docket Nos. 143 and 144 in Adv. Pro. No. 05-01011).
Merrill Cohen, the initial trustee of Fischer's bankruptcy estate, and two of Fischer's creditors—Paley, Rothman, Goldstein, Rosenberg & Cooper, Chartered ("Paley Rothman") and Alan Mark, Esquire, an attorney at Paley Rothman ("Mark")—filed the Joint Objection (Docket No. 129 in Case No. 03-13704). Jill Flax, personal representative of the estate of Harold Flax ("Flax"), another creditor, joined in and adopted the Joint Objection (Docket No. 130 in Case No. 03-13704). Fischer filed an Opposition to the Joint Objection (Docket No. 137 in Case No. 03-13704). The Trustee, standing in the shoes of the initial trustee, has continued to prosecute the Joint Objection. The relief sought in the Joint Objection is substantially the same as the relief sought by the Trustee in Count II of the Amended Complaint.3
On September 1, 2004, Fischer filed the Motion to Dismiss. In it, he argues that dismissal of his bankruptcy case will not prejudice any creditors because all of his assets are held by him and his wife as tenants by the entirety and thus are not available for distribution to his individual unsecured creditors. Leslie Atkins (another creditor), Paley Rothman, Flax, and the initial Chapter 7 Trustee filed objections to the Motion to Dismiss (Docket Nos. 145, 151, 152, and 155 in Case No. 03-13704).
On January 7, 2007, the Trustee filed a proof of claim (Claim No. 16) on behalf of Gary Posner and Lauren Brisky (collectively, the "Posners"). The claim alleges that Fischer and his wife are jointly obligated to the Posners on a note in the amount of $250,000. On January 13, 2007, Fischer filed an Objection to Allowance of Claims (Docket No. 367 in Case No. 03-13704) and on August 2, 2008 the Posners filed their Reply to Proof of Claim Filed by Trustee (Docket No. 385 in Case No. 03-13704), in which they stated that they did not ask the Trustee to file a claim in their names and that they do not want the Trustee to administer this claim on their behalf.
The Court conducted trial proceedings on numerous days throughout 2007: the parties presented their cases on January 23-24, February 5 and 23, April 13 and June 20; the Court heard closing arguments on September 10. Both the Trustee and Defendants filed post-trial briefs and reply briefs.
Having now considered the proofs presented at trial, the closing arguments, the post-trial memoranda, and other relevant papers, the Court, for the reasons set forth below, will (1) deny the relief sought in the Amended Complaint and enter judgment in favor of Defendants; (2) disallow Claim No. 16; (3) overrule the Joint Objection; and (4) deny the Motion to Dismiss.
The Court has jurisdiction over these matters pursuant to 28 U.S.C. §§ 1334 and 157(a), and Local Rule 402 of the United States District Court for the District of Maryland. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A),(B),(H) and (O).
In 1997, Fischer, acting through The Fischer Brewing Co., Inc., initiated a civil action against Flax, Mark, and Paley Rothman in the Superior Court for the District of Columbia (the "Superior Court"). Fischer's claims in that litigation were based on a letter agreement between him and Flax which provided for Fischer to pay Flax fifteen percent (15%) of future company stock as compensation for introducing Fischer to an underwriter who could raise financing for Fischer Brewing. At that time, Mark and Paley Rothman represented Flax. Flax, Mark and Paley Rothman filed counterclaims against Fischer, which included a claim for bad faith litigation.
On February 25, 2000, the Superior Court held a bench trial on the bad faith litigation counterclaims. The Court determined that Fischer was properly notified of the trial date but chose not to appear by counsel or otherwise. The plaintiffs' case was therefore dismissed.
On May 3, 2000, the Superior Court, per Judge Steffen Graae, entered judgment in favor of Flax, Mark and Paley Rothman on the bad faith litigation claims "and [ultimately] awarded them collectively some $930,000 in attorney's fees and costs, together with $40,000 in punitive damages." Fischer et al. v. Estate of Flax et al., 816 A.2d 1, 3 (D.C.App.2003); see also Goldschmidt et al. v. Paley Rothman et al., 935 A.2d 362, 367 (D.C.App.2007) (same). In reviewing Judge Graae's award of attorney's fees and costs, the D.C. Court of Appeals found no reason to overturn his findings that "throughout the litigation Fischer had orchestrated a continuing cover-up of his involvement in the preparation of letters fraudulently documenting" his alleged causes of action. 816 A.2d at 13 (). Indeed, the appellate court held that these findings were "tantamount to a determination that Fischer had perpetrated a fraud upon the court" and that "[b]y themselves they lend strong support to the judge's conclusion that Fischer's entire suit was filed and maintained in bad faith." Id. Further, acknowledging that Judge Graae's award of fees and costs also relied on another basis, the Court of Appeals went on to note, with regard to another of the claims Fischer made in his complaint, not only that it was false, but that "Fischer always knew it to be false." Id. "All told," the appellate court held, Judge Graae did not abuse his discretion by concluding that "Fischer's conduct in pursuing claims of wrongdoing by Flax and Paley Rothman ... was so egregious that fee shifting is warranted as a matter of equity." Id. at 14 (internal quotations and citation omitted).
The judgments were entered against Fischer individually, and not against Mona Fischer.
MBI was...
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