In re Jacobs, Bankruptcy No. 03-84455-ESS.
| Decision Date | 26 August 2008 |
| Docket Number | Adversary No. 05-8813-ESS.,Bankruptcy No. 03-84455-ESS. |
| Citation | 394 B.R. 646 |
| Parties | In re Herman JACOBS, Victor Jacobs and Jacob Jacobs, Debtors. Allan B. Mendelsohn as Chapter 7 Trustee of Herman Jacobs, Victor Jacobs and Jacob Jacobs, Plaintiff, v. Eva Jacobowitz a/k/a Eva Silberstein and Chanie Jacobowitz, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
David A. Blansky, LaMonica Herbst & Maniscalco, LLP, Wantagh, NY, for Chapter 7 Trustee.
Scott A. Krinsky, Backenroth, Frankel & Krinsky, LLP, New York, NY, for Defendants.
This adversary proceeding was commenced by the filing of a complaint (the "Complaint") by Allan B. Mendelsohn as Chapter 7 Trustee (the "Trustee") of the estates of Herman Jacobs, Victor Jacobs a/k/a Victor Jacobowitz ("Victor Jacobs"), and Jacob Jacobs (collectively, the "Debtors"), against defendants Eva Jacobowitz a/k/a Eva Silberstein ("Eva Jacobowitz") and Chanie Jacobowitz (collectively, the "Defendants").
Before the Court is the Trustee's motion for summary judgment on the First through Ninth and Nineteenth through Twenty-Fourth Claims for Relief, which seek to avoid and recover certain alleged fraudulent transfers made by Victor Jacobs to his wife Eva Jacobowitz under New York's Debtor and Creditor Law ("DCL") Sections 273, 274, 275, and 276, and Bankruptcy Code Sections 548(a)(1)(A) and 548(a)(1)(B); the turnover and an accounting of the alleged fraudulent transfers under Bankruptcy Code Sections 541 and 542; and an accounting.1
This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(1). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(H). The following are the Court's findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure, as made applicable herein by Bankruptcy Rule 7052.
On September 6, 2005, the Trustee filed the Complaint against the Defendants. Adv. Pro. Docket No. 1. In the Complaint, the Trustee seeks to avoid and recover alleged fraudulent transfers of money made by Victor Jacobs and Jacob Jacobs to the Defendants. Id. The Defendants filed an Answer to the Complaint on October 31, 2005, in which they deny a majority of the Trustee's allegations and assert certain affirmative defenses. Adv. Pro. Docket No. 5.
On February 8, 2008, the Trustee filed a motion under Rule 37 of the Federal Rules of Civil Procedure for an order striking the Answer as it relates to Chanie Jacobowitz and entering judgment against her for the amount set forth in the Complaint, and under Rule 56 of the Federal Rules of Civil Procedure for an order granting summary judgment against Eva Jacobowitz (the "Trustee's Motion for Summary Judgment"). The Trustee's Motion for Summary Judgment is supported by the affirmation of David A. Blansky, attorney for the Trustee (the "Blansky Affirm."). The Trustee also filed Plaintiff's Statement of Material Facts Pursuant to Rule 7056-1 of the Local Bankruptcy Rules for the Eastern District of New York (the "Plaintiff's Statement of Material Facts"), in which he states that there are no issues of material fact to be tried. Adv. Pro. Docket No. 22.
On March 31, 2008, Eva Jacobowitz filed an objection to the portion of the Trustee's Motion for Summary Judgment seeking summary judgment against her (the "Eva Jacobowitz Objection"). Adv. Pro. Docket No. 25. The Eva Jacobowitz Objection is not sworn to or affirmed by Eva Jacobowitz, but is signed by Abraham Backenroth on behalf of Backenroth, Frankel & Krinsky, LLP, the attorneys for the Defendants. Eva Jacobowitz did not file a response to the Plaintiff's Statement of Material Facts. On April 15, 2008, the Trustee filed a Reply Affirmation by David A. Blansky in further support of the Trustee's Motion for Summary Judgment (the "Blansky Reply Affirm."). Adv. Pro. Docket No. 26.
No response to the Trustee's Motion for Summary Judgment was filed by or on behalf of Chanie Jacobowitz.
A hearing on the Trustee's Motion for Summary Judgment was held on April 17, 2008, at which counsel for the Trustee and counsel for the Defendants appeared and were heard. As reflected in the record, Chanie Jacobowitz, by her attorney, stated that she does not oppose the relief requested by the Trustee in the Trustee's Motion for Summary Judgment. The Trustee's Motion for Summary Judgment was granted as to Chanie Jacobowitz, and that portion of the Trustee's Motion for Summary Judgment seeking summary judgment against Eva Jacobowitz was adjourned to May 28, 2008. Adv. Pro. Docket Entry dated April 17, 2008.
On May 8, 2008, an Order and Judgment was entered by the Court which, among other things, granted judgment to the Trustee against Chanie Jacobowitz for the relief sought in the Tenth through Eighteenth Claims for Relief in the Complaint. Adv. Pro. Docket No. 30.
The Trustee's Motion for Summary Judgment against Eva Jacobowitz came before the Court on May 28, 2008, at which counsel for the Trustee and counsel for Eva Jacobowitz appeared and were heard. After consideration of the submissions, the arguments of counsel, and the record before the Court, for the reasons set forth below, the Trustee's Motion for Summary Judgment is granted in part and denied in part.
On September 4, 2001, Victor Jacobs, Herman Jacobs, and Jacob Jacobs executed a $10 million personal guaranty in favor of Congress Financial Corporation ("Congress") and certain other lenders (the "Limited Guarantee"). Plaintiff's Statement of Material Facts, Exh. O (Limited Guarantee dated September 4, 2001). On April 9, 2003, involuntary Chapter 11 petitions were filed against Allou Distributors, Inc. and certain of its affiliates ("Allou") by Congress and LaSalle Business Credit, Inc. Case No. 03-82321 (), Docket No. 1. By letter dated April 14, 2003, Congress demanded payment from the Debtors pursuant to the Limited Guarantee. Plaintiff's Statement of Material Facts, Exh. P (Letter dated April 14, 2003, from Congress to the Debtors). On April 15, 2003, the Debtors confessed judgment in the amount of $3.2 million to another entity, Eurofactors International, and that judgment was recorded in the Office of the County Clerk of Kings County (the "Confession of Judgment"). Plaintiff's Statement of Material Facts, Exh. Q (Affidavit of Confession of Judgment by Jacob Jacobowitz, Herman Jacobowitz, and Victor Jacobowitz, sworn to on April 15, 2003).
On June 30, 2003, involuntary Chapter 7 petitions were filed against each of the Debtors by Congress and two other lenders. Case No. 03-84455 (In re Herman Jacobs), Docket No. 1; Case No. 03-84456 (In re Victor Jacobs), Docket No. 1; Case No. 03-84457 (In re Jacob Jacobs), Docket No. 1. On July 11, 2003, Congress filed a motion under Bankruptcy Code Section 303(g) for an expedited hearing for the appointment of an interim trustee to preserve and protect the assets of the Debtors' estates ("Congress' Motion for Appointment of Interim Trustee"). Case No. 03-84455, Docket Nos. 4, 5, 7. The Debtors challenged the involuntary petitions filed against them, and objected to Congress' Motion for Appointment of Interim Trustee. Case No. 03-84455, Docket Nos. 10, 12, 13. After hearings before former Judge Melanie L. Cyganowski, the Court entered an order dated August 7, 2003, directing the United States Trustee to appoint an interim Chapter 7 trustee in the Debtors' bankruptcy cases. Case No. 03-84455, Docket No. 37.
On August 12, 2003, Victor Jacobs, Herman Jacobs, Jacob Jacobs, and others, were arrested for, among other charges, bank fraud. Plaintiff's Statement of Material Facts, Exh. AA (U.S. District Court, Eastern District of New York, Criminal Docket for Case No. 03-MJ-01254, Docket Entry dated August 12, 2003).
On September 4, 2003, the Debtors' Chapter 7 cases were directed to be jointly administered and procedurally consolidated by Order Directing Joint Administration of Chapter 7 Cases. Case No. 03-84455 (In re Herman Jacobs), Docket No. 63; Case No. 03-84456 (In re Victor Jacobs), Docket No. 59; Case No. 03-84457 (In re Jacob Jacobs), Docket No. 59. Orders for relief were entered in each of the Debtors' cases on September 9, 2003. Case No. 03-84455 (In re Herman Jacobs), Docket No. 70; Case No. 03-84456 (In re Victor Jacobs), Docket No. 62; Case No. 03-84457 (In re Jacob Jacobs), Docket No. 62. On September 10, 2003, Allan B. Mendelsohn was appointed as the permanent Chapter 7 trustee in these cases. Case No. 03-84455, Docket No. 72.
On June 9, 2004, an indictment was filed against Herman Jacobs, Victor Jacobs, Jacob Jacobs, and others. Plaintiff's Statement of Material Facts Exh. BB (U.S. District Court, Eastern District of New York, Criminal Docket for Case No. 04-CR-00558-JG, Docket Entry dated June 9, 2004). The Debtors were indicted on charges including bank fraud, violations of rules and regulations of the Securities and Exchange Commission, and bribery of a public official in connection with certain businesses of which they were officers, directors, and shareholders. Id.
The Trustee states that "[d]uring the pendency of the criminal proceedings and the Debtors' bankruptcy case, Victor [Jacobs] passed away." Blansky Reply Affirm. ¶ 30. The Trustee notes that "[s]ome years earlier [Victor Jacobs] had negotiated a plea bargain, but significant medical problems prevented him from entering his plea before his demise." Id.
On November 22, 2005, the United States Attorney filed a superseding information against Herman Jacobs. Plaintiff's Statement of Material Facts, Exh. CC (U.S. District Court, Eastern District of New York, Superseding Information). Herman...
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