In re Flanagan

• Decision Date: 09 August 2007
• Docket Number: Bankruptcy No. 99-30565 (ASD).,Adversary No. 04-3146.
• Citation: 373 B.R. 216
• Court: U.S. Bankruptcy Court — District of Connecticut
• Parties: In re Charles Atwood FLANAGAN, Debtor. Titan Real Estate Ventures, LLC, Plaintiff, v. M.J.C.C. Realty L.P., et al., Defendants.

Page 216

373 B.R. 216

In re Charles Atwood FLANAGAN, Debtor Titan Real Estate Ventures, LLC, Plaintiff, v. M.J.C.C. Realty L.P., et al., Defendants.

Bankruptcy No. 99-30565 (ASD).

Adversary No. 04-3146.

United States Bankruptcy Court, D. Connecticut.

August 9, 2007.

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Stephen P. Wright, Esq., Harlow, Adams & Friedman, Milford, CT, for Titan Real Estate Ventures, LLC.

Edward C. Taiman, Jr., Esq., Sabia & Hartley, LLC, Hartford, CT, for M.J.C.C. Realty L.P.

FINDINGS OF FACT AND CONCLUSIONS OF LAW ON MOTION FOR SUMMARY JUDGMENT

ALBERT S. DABROWSKI, Chief Judge.

I. INTRODUCTION

Before the Court at this time is the motion of the Defendant, M.J.C.C. Realty L.P. (hereafter, "MJCC"), for summary judgment on the First, Second, Third, Fourth, Sixth, Seventh, Eighth, Ninth and Eleventh Counts of the Plaintiff's Complaint. On the record as a whole, and for the reasons stated more fully below, this Court concludes that summary judgment should be granted in favor of MJCC.

II. JURISDICTION

The United States District Court for the District of Connecticut has jurisdiction over the instant proceeding by virtue of 28 U.S.C. § 1334(b); and this Court derives its authority to hear this matter on reference from the District Court pursuant to 28 U.S.C. §§ 157(a) and (c). This proceeding is not a "core proceeding," but is "related to" a case under Title 11 within the contemplation of 28 U.S.C. § 157(c). Nonetheless, the parties have expressly consented to this Court entering final orders and judgments.¹

III. FINDINGS OF MATERIAL FACT NOT IN GENUINE ISSUE

The Court finds the following facts not to be in genuine issue based upon (i) a review of the files and records of this case and adversary proceeding; (ii) prior evidentiary hearings in this adversary proceeding;² and (iii) a comparison of MJCC's Local Rule 56(a)1 Statement with the Plaintiff-Respondent's Local Rule 56(a)2 Statement.

1. Prior to the commencement of the underlying bankruptcy case, the Cadle Company and/or D.A.N. Joint Venture (hereafter collectively referred to as "Cadle") purchased one or more delinquent debt instrument(s) on which Charles A. Flanagan (hereafter, "Flanagan") was an obligor.

2. Cadle obtained a judgment against Flanagan, and aggressively pursued collection of the same for several years.

3. Flanagan prevented Cadle from satisfying its judgment by engaging in an evasive course of conduct designed to insulate his property from execution.

4. Flanagan's evasive conduct included the creation and funding of MJCC, which purchased and/or held legal title to at least two parcels of Connecticut real property in which Flanagan arguably held equitable interests, namely (i) 230 Millbrook Road in the Town of North Haven (hereafter, the "Millbrook Property"), and (ii) 25 Queach Road in the Town of Branford (hereafter, the "Queach Property").

5. The principal of MJCC was Angela Cimino Burr (hereafter, "Burr") — Flanagan's mother-in-law.

6. It is clear to this Court from Burr's own testimony that her role with MJCC was merely that of a figurehead. While she was nominally the general partner of MJCC, and owned at least 95% of its equity, in reality Flanagan supplied all of the capital for its activities, and solely directed its management. Burr undertook her nominal role with MJCC solely out of love and concern for her daughter and grandchildren.

7. On February 17, 1999 (hereafter, the "Petition Date"), Flanagan commenced the underlying bankruptcy case through the filing of a voluntary petition under Chapter 11.

8. The Petition, Schedules and Statements filed by Flanagan in connection with his bankruptcy case make no mention of any interest he may have had in MJCC and/or the Millbrook and Queach Properties (hereafter, collectively, the "Properties").

9. Although the facts and circumstances of Flanagan's alleged equitable interest in MJCC and its real estate holdings were known to Flanagan, his attorney, and the Official Unsecured Creditors' Committee (hereafter, the "Committee") during the pendency of Flanagan's Chapter 11 case, neither the Committee nor Flanagan, as debtor-in-possession, ever pursued an action to recover MJCC and/or the Properties for the benefit of Flanagan's Chapter 11 bankruptcy estate.

10. On January 16, 2003, Flanagan's Chapter 11 case was converted to a case under Chapter 7.

11. Upon the conversion of Flanagan's bankruptcy case, Bonnie Mangan (hereafter, the "Trustee") was appointed Chapter 7 trustee of his estate.

12. Almost immediately upon her appointment, the Trustee became aware of Flanagan's putative interest in MJCC and the Properties.

13. The Trustee declined to initiate an adversary proceeding in pursuit of MJCC or the Properties for the benefit of the bankruptcy estate. Instead, on August 4, 2004, she sold "any and all interest ... which [she] ... may have [had] ... in and to MJCC ... together with any and all interest which ... [she] may have [had] ... in [the Properties]" to Titan Real Estate Ventures, LLC — the Plaintiff-Respondent here (hereafter, "Titan") — for the sum of $15,000.00 cash and 2.5% of "any net recovery ... [Titan] receives as a direct result of its purchase of the subject rights and interests."

14. On or about April 4, 2001, Cadle commenced litigation in the District Court, in which it sued approximately 13 defendants on civil RICO claims, alleging that the defendants were co-conspirators in an effort to assist Flanagan in evading Cadle's judgment execution activity (hereafter, the "RICO Litigation"). One of the defendants in the RICO Litigation was Burr.

15. In or about January 2003, Cadle settled its RICO Litigation claims against Burr in the following manner: Cadle agreed to release of any and all claims it had against Burr in exchange for an assignment from Burr to Cadle of Burr's interest in MJCC.³

16. By virtue of its settlement with Burr, Cadle achieved control over MJCC and the Properties; and through MJCC, Cadle began a process of marketing the Properties to compensate for its losses vis-a-vis Flanagan.

17. On or about March 30, 2004, Cadle, through MJCC, sold the Millbrook Property to Steven and Amy Sullivan for approximately $485,000.00.

18. With respect to the Queach Property, Cadle, through MJCC, has attempted to evict a tenant there in a preliminary step toward its intended marketing and sale of that property. The Queach Property tenant is one William Nygard (hereafter, "Nygard"), who is the former owner of that property. Flanagan and/or MJCC (while under Flanagan's control) purchased the Queach Property from Nygard but granted a 15-year lease to allow him to remain in possession of the property.

19. As assignee of the Trustee's supposed rights, Titan now seeks to recover the Millbrook and Queach Properties, or their value, for its own benefit. As Plaintiff here, Titan is prosecuting claims against MJCC, inter alia, via a Second Amended Complaint filed March 21, 2005 (Doc. I.D. No. 86) (heretofore and hereafter, the "Complaint").

IV. CONCLUSIONS OF LAW

Summary Judgment Standards.

1. Federal Rule of Civil Procedure 56(c), made applicable to these proceedings by Federal Rule of Bankruptcy Procedure 7056, directs that summary judgment enter when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."

2. When ruling on motions for summary judgment "the judge's function is not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

3. The moving party has the burden of showing that there are no material facts in dispute and all reasonable inferences are to be drawn, and all ambiguities resolved, in favor of the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

4. Rule 56(a) of the Local Civil Rules of the United States District Court for the District of Connecticut (heretofore and hereafter, "Local Rule(s)") supplements Fed.R.Civ.P. 56(c) by requiring statements of material fact from each party to a summary judgment motion. In the present matter, both of the parties are in material compliance with the requirements of Local Rule 56.

The Merits.

5. Titan's Complaint states five types of claims against MJCC: (i) "piercing the corporate veil", (ii) turnover, (iii) conversion, (iv) unjust enrichment, and (v) constructive trust (hereafter, collectively, the "Titan Claims").

6. As noted in the Findings of Fact above, the Titan Claims are wholly derivative of the rights of the Trustee. Thus Titan can prevail on its Claims only if, and to the extent that, the Trustee would have prevailed on identical claims at a point in time immediately prior to her assignment of rights and interests to Titan.

7. A bankruptcy trustee's powers are necessarily delimited by federal statutory law, namely the United States Bankruptcy Code.

8. The only statutory sources identified by Titan for the trustee rights and standing asserted by it here are Bankruptcy Code Sections 541(a)(1) and 542.⁴

9. It is thus the job of this Court to determine whether, in fact, any of the Titan Claims are viable when viewed through the prism of the available statutory sources of trustee authority.

Analysis of Titan's Claims under Section 541(a)(1).

10. Bankruptcy Code Section 541(a) describes the range of property of a bankruptcy estate. Subsection (1) of Section 541(a) comprises the most substantial component of that property for most all bankruptcy estates. Specifically, with exceptions not relevant here, Section 541(a)(1) provides that property of an estate includes "all legal or equitable interests of the debtor in property as of the commencement of the [...