In re Ideal Mortg. Bankers, Ltd.

• Decision Date: 14 October 2015
• Docket Number: Case No. 10–79280–las
• Citation: 539 B.R. 409
• Parties: In re: Ideal Mortgage Bankers, Ltd., a/k/a Lend America, a/k/a Consumer First Lending Key, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of New York

539 B.R. 409

In re: Ideal Mortgage Bankers, Ltd., a/k/a Lend America, a/k/a Consumer First Lending Key, Debtor.

Case No. 10–79280–las

United States Bankruptcy Court, E.D. New York.

Signed October 14, 2015

Global Appraisal Solutions, LLC, Pro Se, By: Laurence Holzer, Managing Member, 1497 Main Street, # 210, Dunedin, Florida 34698

SilvermanAcampora LLP, Attorneys for the Chapter 7 Trustee, R. Kenneth Barnard, By: Lon Seidman, Esq., Anthony Acampora, Esq., Justin Krell, Esq., 100 Jericho Quadrangle, Suite 300, Jericho, New York 11753

MEMORANDUM DECISION

HON. LOUIS A. SCARCELLA, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the motion filed on April 22, 2014 (the “Claims Allowance Motion ”) [dkt no. 351 ] by Laurence Holzer (“Holzer”), individually and as managing member of Global Appraisal Solutions, LLC (“Global ”), by which Global seeks, among other things, the allowance of its claims against Ideal Mortgage Bankers Ltd., a/k/a Lend America, and a/k/a Consumer First Lending Key (the “Debtor ”). In short, Global argues that its claims against the Debtor are secured and thus entitled to immediate payment in full or, in the alternative, constitute administrative expenses of this bankruptcy case, likewise mandating immediate payment in full. Also, before the Court is the objection dated June 4, 2014 of R. Kenneth Barnard, Esq., the chapter 7 Trustee (the “Trustee ”), to proof of claim numbers 4–1 (“Claim No. 4–1 ”), 4–2 (“Claim No. 4–2 ”), and 27 (“Claim No. 27 ”, together with Claim No. 4–1 and Claim No. 4–2, the “Global Proofs of Claim ”) filed by Global (the “Claims Objection Motion ” [dkt. no. 359 ], together with the Claims Allowance Motion, the “Claims Motions ”). The Trustee contends that Claim No. 27 amended and superseded Claim No. 4–1 and Claim No. 4–2, and that Claim No. 27 is nothing more than a general unsecured claim. At issue, therefore, is the allowance of Claim No. 4–1 and Claim No. 4–2 and the appropriate treatment of Claim No. 27. As the Claims Motions are essentially taking opposing positions on the same issue and arise out of a common set of facts, the Court considered and heard the Claims Motions simultaneously at two separate hearings. At the conclusion of the hearings, the Court took the matter under advisement. Having considered the Claims Motions, the responses and arguments of Holzer and counsel for the Trustee, and having reviewed the record in this case, the Court now issues this Memorandum Decision. The following constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure (“Fed. R. Civ. P. ”), made applicable by Rule 7052 of the Federal Rules of Bankruptcy Procedure (“Fed. R. Bankr. P. ” or the “Bankruptcy Rules”).¹

JURISDICTION

The Court has jurisdiction over this matter under 28 U.S.C. § 1334(b) and the Standing Order of Reference entered by the United States District Court for the Eastern District of New York pursuant to 28 U.S.C. § 157(a), dated August 28, 1986, as amended by Order dated December 5, 2012, effective nunc pro tunc as of June 23, 2011. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) and (B). It seeks to determine whether a creditor is entitled to a priority claim. Therefore, it “stems from the bankruptcy itself”, and may constitutionally be decided by a bankruptcy judge. Stern v. Marshall, –––U.S. ––––, 131 S.Ct. 2594, 2618, 180 L.Ed.2d 475 (2011).

BACKGROUND²

I. General.

A. Events Leading up to the Debtor's Bankruptcy.

The Debtor was a mortgage lender located in Suffolk County, New York that originated loans and participated in mortgage origination programs sponsored by the United States Department of Housing and Urban Development (“HUD ”). The Debtor was approved by HUD to do business in 48 states and the District of Columbia.

Apparently in the latter half of 2009, various transactions and events left the Debtor without sufficient funds to continue its business. On or about December 1, 2009, the Debtor lost its ability to originate loans backed by HUD. On December 4, 2009, the New York State Banking Department issued a cease and desist order that required the Debtor cease engaging in activities as a mortgage banker. Thereafter, New York State and Federal authorities appeared at the Debtor's offices and took possession of the Debtor's books, records, computers, files, and documents. Certain officers of the Debtor, including Michael Ashley (“Ashley”), its chief business strategist, and Helene DeCillis, its chief operating officer, were the subject of a criminal investigation. Allegations surfaced that the Debtor had misappropriated funds available under its warehouse line of credit by failing to use these funds for the purpose for which they were intended, i.e., to pay off, at closing, prior mortgages and liens purportedly refinanced through the Debtor.

An involuntary chapter 7 petition was filed against the Debtor by EAM Land Services, PSS Settlement Services, LLC, Evans National Leasing, Inc., and Michael and Kimberly McLean (the “Petitioning Creditors ”) on November 30, 2010 (the “Petition Date ”). The case was assigned to Bankruptcy Judge Dorothy T. Eisenberg. On December 2, 2010, the Petitioning Creditors filed a motion seeking the appointment of an interim trustee. After a hearing, Judge Eisenberg granted the motion and entered an order on December 13, 2010 directing the Office of the United States Trustee to immediately appoint an interim trustee. R. Kenneth Barnard was appointed as the interim trustee on December 15, 2010, and he subsequently became the permanent trustee pursuant to 11 U.S.C. § 702(d). The order of relief was entered on December 29, 2010. Shortly thereafter, in furtherance of his investigation of the Debtor's financial affairs, pre-bankruptcy activities and assets and liabilities, the Trustee sought and obtained several orders pursuant to Bankruptcy Rule 2004 authorizing him to issue third party subpoenas to various financial institutions and certain officers, employees and legal counsel of the Debtor. To assist in his investigation, the Trustee retained the firm of SilvermanAcampora LLP as special litigation counsel pursuant to an order dated June 30, 2011.

B. Debtor's Prepetition Relationship with Global.

As part of the Debtor's loan origination process, either the Debtor or the potential borrower would engage the services of an appraisal management company on the Debtor's approved vendor list to conduct an appraisal of the real property for which the Debtor served as the originating lender. Global, an appraisal management company, was one of five appraisal management companies on the Debtor's approved vendor list. Global is wholly owned by Holzer. Global did not directly perform the appraisals, rather it served as a central source from which appraisals could be ordered nationally, and managed the appraisal process.

There was no written contract between the Debtor and Global specifying the terms of Global's appraisal services. In those instances where the Debtor ordered an appraisal through Global, the Debtor would simply contact Global, provide the location of the real property that was the subject of the appraisal and Global would then direct one of its local appraisers to conduct the appraisal. Global would invoice the Debtor for the cost of the appraisal upon the completion or cancellation of each appraisal order. The cost to the Debtor included the appraiser's fee and Global's fee for managing the appraisal process. If the Debtor cancelled an appraisal order, Global would nevertheless charge the Debtor its appraisal management fee.

During their relationship, Global claimed that the Debtor failed to pay for certain earned and unearned appraisal fees. On or about November 19, 2009, Global, by its then attorneys, Fellheimer & Eichen, LLP (the “Fellheimer Firm ”), filed an action against the Debtor in the United States District Court for the Eastern District of New York, Case No. 09–cv–05078 (JFB)(WDW) (the “Global Action ”), seeking to recover from the Debtor amounts allegedly due for unpaid appraisals. The Debtor defaulted in the Global Action. As a result, on April 6, 2010, prior to the Petition Date, Global obtained a default judgment (the “Default Judgment ”) against the Debtor in the sum of $763,157.00, plus interest. The amount of the Default Judgment was based upon a February 19, 2010 affidavit by Holzer which asserted that the Debtor owed (a) $45,417 for 158 completed but unpaid appraisal reports ordered by the Debtor and (b) $717,740 for 1594 appraisals ordered by the Debtor, but subsequently cancelled. Attached to the Holzer affidavit were two lists prepared by Holzer, one setting forth appraisals that were completed, the other listing those appraisals that were cancelled. The Default Judgment was docketed on May 17, 2010 with the Clerk of Suffolk County, New York (the “Suffolk County Clerk ”). Global did not docket the Default Judgment in any other county in New York or in any other location in which the Debtor may have had assets.

On May 17, 2010, Global obtained an execution judgment (the “Execution Judgment ”) from the Suffolk County Clerk which directed the Sheriff of Suffolk County to satisfy the Default Judgment from any of the Debtor's real or personal property within Suffolk County. The writ of execution was returned unsatisfied.

Continuing its efforts to collect upon the Default Judgment, on November 29, 2010, Global, by the Fellheimer Firm, filed an action in the U.S. District Court for the Eastern District of New York (the “District Court ”), Case No. 10–cv–05490 (JFB)(ETB) (the “Global Fraudulent Conveyance Action ”), seeking to recover certain alleged fraudulent transfers made by the Debtor to Ashley and several of Ashley's relatives and Ashley affiliated entities. As discussed above, the involuntary bankruptcy petition was filed the next day, and the Global Fraudulent Conveyance Action as against the Debtor was stayed pursuant to the automatic...