In re Harry Levin, Inc.
| Citation | 175 BR 560 |
| Decision Date | 05 December 1994 |
| Docket Number | Bankruptcy No. 92-10517F. Adv. No. 94-0451F,94-0452F. |
| Parties | In re HARRY LEVIN, INC. t/a Levin's Furniture, Debtor. Andrew N. SCHWARTZ, Trustee, Plaintiff, v. Peter J. KURSMAN, Defendant. Andrew N. SCHWARTZ, Trustee, Plaintiff, v. JETRONIC INDUSTRIES, INC., Defendant. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Leonard P. Goldberger, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, PA, for trustee.
Alan C. Kessler, Stuart M. Brown, Mark A. Polemeni, Robert Eyre, Buchanan Ingersoll P.C., Philadelphia, PA, for defendants Peter J. Kursman and Jetronic Industries, Inc.
Andrew Schwartz, the chapter 7 trustee of Harry Levin, Inc., t/a Levin's Furniture, has commenced two separate adversary proceedings. The first, Adv. No. 94-0451, has named Peter J. Kursman as the sole defendant, while the second, Adv. No. 94-0452, names Jetronic Industries, Inc. as the sole defendant. Both proceedings were filed on June 3, 1994.
As will be discussed below, the complaints in both proceedings assert somewhat similar causes of action. In addition, Mr. Kursman is alleged to be an officer and director of Jetronic as well as the former president of the debtor. Mr. Kursman and Jetronic have retained the same counsel to defend them.
Before me now are almost identical motions in both proceedings, seeking to dismiss each proceeding or seeking more detailed complaints. A joint hearing has been held, and the parties were afforded the opportunity to argue their respective positions and submit memoranda. Given the overlap of issues, I shall resolve these two motions with separate orders accompanying this single memorandum opinion.
This bankruptcy case originally began as an involuntary chapter 7 bankruptcy filing on January 29, 1992. 11 U.S.C. § 303. On March 5, 1992, I entered an uncontested order for relief, and at the debtor's request converted this case to one under chapter 11. On June 11, 1992, this case was converted back to one proceeding under chapter 7.
Pursuant to 11 U.S.C. § 701(a)(1), the United States trustee then appointed Stephen Raslavich, Esq. (now a bankruptcy judge) as the interim chapter 7 trustee. A meeting of creditors was thereafter held on July 16, 1992, and no trustee was elected. As a result, Mr. Raslavich then became the permanent chapter 7 trustee under section 702(d).
The law firm of Silberman, Markovitz & Raslavich was approved as counsel to the permanent chapter 7 trustee by order dated August 13, 1992. On November 4, 1993, Andrew Schwartz, Esq. was appointed successor chapter 7 trustee. He has retained the same counsel. (However, he received permission to employ special counsel to prosecute this particular litigation.)
On June 3, 1994, the successor trustee, through his special counsel, commenced the two above-captioned adversary proceedings. These two complaints, with the factual averments, may be summarized as follows.
The lawsuit against Mr. Kursman alleges that he was the president of the debtor prior to the involuntary bankruptcy filing. The trustee also asserts that the debtor is a wholly owned subsidiary of Jetronic. In his capacity as president of the debtor, the trustee asserts that Mr. Kursman "manipulated, used and enjoyed Levin's assets for his personal benefit," "charged various personal expenses to Levin's" and received an "excessive" salary from Levin's in light of "management fees" charged to the debtor by Jetronic. Complaint, ¶¶ 4-6.
In count I of the complaint, the trustee asserts that Mr. Kursman received, within two years of the debtor's bankruptcy filing, a transfer of the debtor's interest in property, which transfer constituted a fraudulent conveyance under section 548 of the Bankruptcy Code and also under Pennsylvania law, 39 Pa.S.A. §§ 351 et seq. In count II of the complaint, the trustee asserts that Mr. Kursman "intentionally and willfully breached his fiduciary duties to Levin's and its creditors." Complaint, ¶ 15. In Count III, the trustee asserts that "Kursman received a benefit from the use and transfer of Levin's assets for which it would be unconscionable, inequitable and unjust for it to retain." Count IV asserts that Kursman is obligated under section 542 of the Code to return to the trustee all property of the debtor in Kursman's possession. In Count V, the trustee alleges that Kursman "converted" the debtor's property for his own use and enjoyment.
As the relief sought in all of these counts, the trustee demands monetary damages, and/or a return of the property allegedly transferred, and/or an accounting, along with attorney's fees and costs. And finally, in Count VI, the trustee maintains that "Kursman's acts and conduct were outrageous, willful, malicious, vexation sic and fraudulent," thereby entitling the debtor's estate to recover punitive damages.
The complaint against Jetronic alleges that the debtor was a wholly owned subsidiary of the defendant and that the debtor "was controlled by Jetronic through their common officers and directors." Complaint, ¶ 3. Further, Jetronic allegedly "used its position of control over Levin's to manipulate, use and enjoy Levin's assets." Complaint, ¶ 5.
The trustee maintains that Jetronic borrowed "at least $880,000.00" which was unpaid, and charged the debtor an excessive "management fee" of $1,030,200.00. Complaint, ¶¶ 7-8. Count I of the complaint asserts a fraudulent conveyance claim under both bankruptcy law, section 548, and Pennsylvania law, 39 Pa.S.A. §§ 351 et seq., involving the alleged transfer of the debtor's interest in property. Count II asserts that the debtor made preferential payments to Jetronic within the meaning of section 547. Count III asserts a breach of contract action with respect to the allegedly unpaid loans owed to the debtor. Count IV asserts an unjust enrichment in connection with the alleged transfer of assets from the debtor to Jetronic. In count V, the trustee demands the return of all of the debtor's property transferred to Jetronic, pursuant to section 542. In count VI, the trustee claims that Jetronic converted "various property of Levin's and the proceeds therefrom."
As with the complaint against Mr. Kursman, the relief sought in these six counts includes monetary damages, and/or a return of the property allegedly transferred, and/or an accounting, along with attorney's fees and costs. In count VII, the trustee demands punitive damages for actions taken by the defendant which he considers "outrageous, willful, malicious, vexation sic and fraudulent."
In response to these two complaints, the defendants have filed the instant motions.
Defendant Jetronic requests that the claims against it found in counts I, II, and VI—for fraudulent conveyance, preference and conversion—be dismissed due to the bar of the statute of limitations. Similarly, defendant Kursman seeks dismissal for limitations reasons as to counts I and V — viz., fraudulent conveyance and conversion. The defendants seek dismissal as to all counts in both complaints for their alleged failure to state a cause of action. Fed.R.Civ.P. 12(b)(6) (incorporated by Fed.R.Bankr.P. 7012).
Both defendants further assert that count I of their respective complaints — the fraudulent conveyance claim — must be dismissed due to the trustee's failure to provide the specificity of pleading required by Fed. R.Bankr.P. 7009 — which incorporates Fed. R.Civ.P. 9(b). They also maintain that the trustee has failed to state any entitlement to counsel fees.
Alternatively, both defendants contend that, if the complaints are not dismissed, then the trustee should be directed to file a more definite statement of allegations and claims against them, pursuant to Fed. R.Bankr.P. 7012, incorporating Fed.R.Civ.P. 12(e), because the allegations are too "vague and ambiguous" to enable them to answer the trustee's complaints.
I turn first to defendants' request under Rule 12(b)(6) for dismissal for failure to state a claim or, alternatively, under Rule 12(e) for a more definite statement.
In considering a Rule 12(b)(6) motion, a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). I must also accept as true all of the well-pleaded facts alleged in the complaint and any reasonable inferences therefrom. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Conley v. Gibson; Colburn v. Upper Darby Twp., 838 F.2d 663, 665 (3d Cir.1988), cert. denied, 489 U.S. 1065, 109 S.Ct. 1338, 103 L.Ed.2d 808 (1989); In re Marceca, 129 B.R. 371 (Bankr.S.D.N.Y.1991); J. Moore, 2A Moore's Federal Practice, ¶ 12.072.-5, at 12-84 (2d ed. 1994). The movant bears the burden of demonstrating that no claim has been stated. See Johnsrud v. Carter, 620 F.2d 29 (3d Cir.1980).
A court's discretion to dismiss a complaint without leave to amend is restricted by Fed.R.Civ.P. 15(a), which directs that leave to amend shall be freely given when justice so requires. Bank v. Pitt, 928 F.2d 1108, 1112 (11th Cir.1991). See also J. Moore, 3 Moore's Federal Practice, ¶ 15.084 (2d ed. 1994). And, as stated by that treatise:
If a motion under Rule 12(b)(6) is granted, ordinarily an opportunity to amend should be fully granted if the deficiencies in the complaint can be corrected by amendment.
J. Moore, 2A Moore's Federal Practice, ¶ 12.072.-5, at 12-99 (2d ed. 1994) (footnote omitted).
Where repleading could not correct the defects in a party's claim, a court should not grant leave to amend. Accord, e.g., Peterson v. Philadelphia Stock Exchange, 717 F.Supp. 332, 337 (E.D.Pa.1989). See generally Mosler v. M/K Ventures Intern. Inc., 103 F.R.D. 385 (N.D.Ill.1984). See also Massarsky v. General...
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