In re Galerie Des Monnaies of Geneva, Ltd.

• Decision Date: 27 May 1986
• Docket Number: No. 86 Civ. 397 (JMW).,86 Civ. 397 (JMW).
• Citation: 62 BR 224
• Parties: In re GALERIE DES MONNAIES OF GENEVA, LTD., Debtor. GALERIE DES MONNAIES OF GENEVA, LTD., Appellant, v. DEUTSCHE BANK, A.G., NEW YORK BRANCH, Appellee.
• Court: U.S. District Court — Southern District of New York

62 B.R. 224 (1986)

In re GALERIE DES MONNAIES OF GENEVA, LTD., Debtor GALERIE DES MONNAIES OF GENEVA, LTD., Appellant, v. DEUTSCHE BANK, A.G., NEW YORK BRANCH, Appellee.

No. 86 Civ. 397 (JMW).

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

May 27, 1986.

Edward Sivin, Mark V. Asdourian, Ganz, Hollinger & Towe, New York City, for appellant.

Andrew D. Gottfried, Henry C. Collins, Zalkin, Rodin & Goodman, New York City, for appellee.

OPINION AND ORDER

WALKER, District Judge:

Introduction

This action is before the Court on an appeal from the Bankruptcy Court's dismissal of an adversary proceeding brought by the debtor Galerie Des Monnaies of Geneva, Ltd. ("Galerie") to recover alleged preferential transfers in favor of Deutsche Bank, A.G., New York Branch ("Bank"). By decision and order dated November 22, 1985, 55 B.R. 253, Bankruptcy Judge Howard C. Buschman, III dismissed Galerie's claims against the Bank. The Bank, joined by the United States Trustee for the Southern District of New York as amicus curiae, opposes the appeal and urges the Court to affirm.

Facts

The facts are not in dispute and are stated fully in Judge Buschman's decision. As part of a voluntary reorganization under Chapter 11, Galerie filed a Disclosure Statement which was approved by the Bankruptcy Court on December 13, 1984. The approval allowed Galerie to solicit creditor support for its reorganization plan. The Disclosure Statement contained language which is at the heart of this appeal:

The Debtor Galerie has discussed the nature of preferential payments and fraudulent conveyances with its counsel and accountants. The Debtor\'s management does not believe any preferences or fraudulent transfers have occurred.

Significantly, the Plan offered to the creditors provided for the debtor to receive the benefit of preference claims. The creditors approved the plan and the Bankruptcy Court confirmed the reorganization on April 25, 1985. That same day, Galerie commenced an adversary proceeding against the Bank to collect alleged preferential transfers that had occurred when the Bank debited Galerie's bank account for interest due on prior loan agreements between the two. It was established below that Galerie's management knew of at least some of these alleged preferential transfers prior to the Bankruptcy Court's confirmation of its reorganization plan. At no time did Galerie move to correct its Disclosure Statement.

Discussion

On the basis of these facts, the court below applied the doctrine of judicial estoppel to bar Galerie's attempt to recover preferential transfers. The United States Trustee joins the Bank in urging affirmance in the interest of smooth operation of the bankruptcy system. The Court agrees with the Bank and Trustee. The bankruptcy court properly dismissed Galerie's attempt to recover preferential transfers after the debtor had previously told creditors voting on the reorganization plan that it knew of no such transfers.

The equitable doctrine of judicial estoppel has traditionally been used by courts to prevent a party from assuming inconsistent positions in subsequent legal proceedings:

It may be laid down as a general proposition that, where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.

Davis v. Wakelee, 156 U.S. 680, 689, 15 S.Ct. 555, 558, 39 L.Ed. 578 (1895).

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