In re Goldberg

• Decision Date: 01 May 2002
• Docket Number: Bankruptcy No. 94-10885.,Adversary No. 95-1020.
• Citation: 277 B.R. 251
• Parties: In re Lawrence D. GOLDBERG, Debtor. Dwayne M. Murray, Trustee, Plaintiff, v. Mae M. Stacy Trust and F. Eugene Richardson, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Louisiana

277 B.R. 251

In re Lawrence D. GOLDBERG, Debtor Dwayne M. Murray, Trustee, Plaintiff, v. Mae M. Stacy Trust and F. Eugene Richardson, Defendants.

Bankruptcy No. 94-10885.

Adversary No. 95-1020.

United States Bankruptcy Court, M.D. Louisiana.

May 1, 2002.

COPYRIGHT MATERIAL OMITTED

Dale R. Baringer, Baton Rouge, LA, for plaintiff.

Laura C. Poche, John Housan Fenner, III, Baton Rouge, LA, for F. Eugene Richardson.

David S. Rubin, for Boatmen's Trust Company.

RULING

LOUIS M. PHILLIPS, Bankruptcy Judge.

Background

This adversary proceeding, brought by the Chapter 7 trustee of the Lawrence D. Goldberg (Goldberg) bankruptcy estate, seeks avoidance of a prepetition purchase of a house from the Mae M. Stacy Trust (the Stacy Trust), pursuant to 11 U.S.C. § 548 and § 544(b), and recovery, under 11 U.S.C. § 550, of a $45,000 non-refundable deposit or down payment. The Goldberg trustee alleges that the transfer should be avoided under 11 U.S.C. § 548(a)(2) because it was made while Goldberg was insolvent and provided Goldberg with less than reasonably equivalent value for what was paid. Alternatively, the Goldberg trustee asserts that by use of the Louisiana revocatory action, pursuant to the power provided by 11 U.S.C. § 544(b), the transfer should be avoided, and the $45,000 payment recovered because the transfer and payment "caused or increased the obligor's (Goldberg's) insolvency."

Before the Court is the Request by the Stacy Trust for reconsideration of a judgment rendered against it and F. Eugene Richardson. For reasons set forth herein, the Court denies the reconsideration and reaffirms its prior judgment.

Jurisdiction

The Court has original jurisdiction over this proceeding and had original jurisdiction of the adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a), and the blanket referral by the Honorable District Court for this district of all cases under Title 11 and all proceedings arising in a case under Title 11, arising under Title 11 or related to a case under Title 11.

Before moving on to completion of the jurisdictional discussion, some background concerning this and other adversary proceedings is warranted. By the original complaint the defendants named were the Stacy Trust and Richardson, with the complaint being somewhat vague about the capacity in which Richardson was named. Prior to the initial scheduling conference, an answer was filed on behalf of the Stacy Trust and Richardson by Crawford & Lewis, acting as counsel for the Stacy Trust by virtue of being retained by Richardson, who was the co-trustee. In the original answer, the jurisdictional allegations (which did not comply with Rule 7008(a) but did allege jurisdiction under Sec. 1334(b); 157(b)(2)(H); 11 U.S.C. Sections 548, 550(a); and Bankruptcy Rule 7001), were admitted.

By the scheduling conference, the trustee had retained special counsel who advised of the intention to amend the complaint to specify jurisdiction, to add an action under 11 U.S.C. § 544(b), to clarify the capacity in which Richardson was named,¹ and to add the co-trustee of the Stacy Trust (Boatman's Trust Company of Arkansas, f/k/a Worthern National Bank of Arkansas) as a party defendant.

Pursuant to Rule 7008(a), Federal Rules of Bankruptcy Procedure, the Goldberg trustee, within its amended and restated complaint, consented to the entry, by this Court, of a final judgment.

After the filing of the Amended and Restated Complaint, it came to light that Boatman's Trust Company of Arkansas (Boatman's) and Richardson had fallen out and were involved in long-standing litigation in Arkansas State Court over, inter alia, breach of fiduciary duty by Richardson, whether Boatman's could remain as co-trustee, whether Richardson should be forced to resign as co-trustee, whether Richardson was liable to the Stacy Trust for damages, etc.

Primarily as a result of the Arkansas litigation, Richardson, individually, had filed a Chapter 11 petition in this Court, after the filing of the Amended and Restated Complaint herein. As a result of the filing of Richardson's own bankruptcy case, this adversary proceeding hit a momentary snag, made more snagged (or is it snaggedly) by the addition of Boatman's (the co-trustee) as a party defendant.

As a result of the aforementioned falling out, Boatman's disputed the capacity of Richardson to act (solely) for the Stacy Trust through counsel of his choosing, and moved to substitute counsel, at least as far as Boatman's, in its capacity as co-trustee, was concerned. Notwithstanding Richardson's assertion that he had the right (as tie-breaking co-trustee) to determine what lawyer could represent Boatman's, this Court granted Boatman's request to retain its own lawyer.

In addition to granting Boatman's the right to retain its own lawyer, the Court issued an Order granting the Goldberg trustee relief from the § 362 automatic stay to proceed with the adversary proceeding, as filed, as opposed to instituting a separate proceeding within the Richardson bankruptcy case. Once this smoke cleared, Richardson had two sets of lawyers (one in his capacity as co-trustee and one individually) and Boatman's had separate lawyers.

In his answer to the Amended and Restated Complaint, Richardson, in is capacity as co-trustee of the Stacy Trust, admitted the trustee's amended jurisdictional assertions, thereby consenting to the issuance of a final judgment by this Court. Boatman's, however, in its answer (in the capacity as co-trustee) asserted that "Boatman's denies that this Court has jurisdiction over Boatman's". Though this assertion appeared to deny personal jurisdiction, this Court concluded that counsel for Boatman's was far too experienced and expert to make such a wayward suggestion, and therefore treated the denial as not consenting to the issuance of a final judgment by this Court (which, as this Court understands it, is a matter of subject matter jurisdiction). Richardson, in his individual capacity, consented to the issuance by this Court of a final judgment.

Subsequently, Boatman's jurisdictional concerns dissolved, as it consented to this Court issuing a final judgment in all matters raised against Richardson within the Arkansas litigation. The actions against Richardson, individually and as co-trustee, initially arose within this adversary proceeding by means of cross-claims and answers thereto which were severed, given separate adversary proceeding numbers within the Richardson bankruptcy case (which, by the way, was fairly quickly converted to a Chapter 7 case). These other proceedings have been tried, with consent of Boatman's to issuance by this Court of final judgments.²

Back to this adversary proceeding. The Court concludes, after reviewing the proceedings leading up to this opinion, including argument of the motions for summary judgment, that the objection to this Court's exercise of final authority jurisdiction was waived by Boatman's. Additionally, however, the Court notes that the Stacy Trust filed a proof of claim in the Goldberg case and, as well, moved for relief from stay on account of its second mortgage position upon the house at issue. The filing of the proof of claim converts this adversary proceeding to an equitable proceeding. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989); Langenkamp v. Culp, 498 U.S. 42, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990). While the Supreme Court has determined that absence of right to jury trial without addressing the question of this Court's final authority jurisdiction in absence of a jury trial right, this Court concludes that it has final authority jurisdiction by virtue of the fallout from the Stacy Trust having filed a proof of claim (converts the proceeding to one in equity) and having moved for relief from stay (waiver, possibly), and by virtue of practically waiving any jurisdictional constraint to moving forward on all issues involving Richardson's actions, individually and as co-trustee, with respect to the Goldberg house business.

At hearing on the cross-motions for summary judgment, the Court ruled that the portion of the Goldberg trustee's complaint asserting avoidance and recovery under 11 U.S.C. § 548(a)(2) should be dismissed, but reserved ruling upon the § 544(b) action. The trustee has mounted no assertion of actual fraud or intent to hinder or delay on the part of any of the defendants, and the parties agreed that no material issues of fact remained which required trial. While the Court found that the transfer could not be avoided under § 548(a)(2), Goldberg having received "reasonably equivalent value" as the phrase is construed within § 548, the Court requested briefs from the parties as to the possibility of recovery under § 544(b) through utilization of the Louisiana Revocatory Action.

Article 2036 of the Louisiana Civil Code sets forth the Louisiana Revocatory Action, and provides:

Art. 2036. Act of the obligor that causes or increases his insolvency

An obligee has a right to annul an act of the obligor, or the result of a failure to act of the obligor, made or effected after the right of the obligee arose, that causes or increases the obligor's insolvency.

As will be shown, there was stipulation by the parties of insolvency on the part of Goldberg at the time of the complained-of transfer, and, as well, a stipulation for purposes of the § 544(b) action, of the value of the property purchased by Goldberg. Though the defendants raise various defenses to the § 544(b) action of which the Court will initially and quickly dispose, the true contest concerns whether the Louisiana Revocatory Action, as opposed to all other states' laws regarding avoidance of fraudulent transfers, allows avoidance of a transfer and recovery on a dollar-for-dollar basis, corresponding to the amount by which the debtor's insolvency was increased (as the trustee argues), or whether (as the defendants argue) the phrase "increases the...