In re Kanterman, Bankruptcy No. 87 B 12318 (HCB)

• Decision Date: 18 May 1989
• Docket Number: Bankruptcy No. 87 B 12318 (HCB),Adv. No. 88-5235A.
• Citation: 97 BR 768
• Parties: In re Perri KANTERMAN, Debtor. Alvin GALLANT and Joan Gallant, Plaintiffs, v. Perri KANTERMAN, Donald Kanterman, First Inter-County Bank of New York, Arnold I. Biegen, Marchi Jaffe Steinberg Crystal Katz & Burke, and Joseph G. Blum, in his capacity as temporary receiver of Gallant Securities, Inc. and Gallant Intercapital Corp., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

97 B.R. 768 (1989)

In re Perri KANTERMAN, Debtor Alvin GALLANT and Joan Gallant, Plaintiffs, v. Perri KANTERMAN, Donald Kanterman, First Inter-County Bank of New York, Arnold I. Biegen, Marchi Jaffe Steinberg Crystal Katz & Burke, and Joseph G. Blum, in his capacity as temporary receiver of Gallant Securities, Inc. and Gallant Intercapital Corp., Defendants.

Bankruptcy No. 87 B 12318 (HCB), Adv. No. 88-5235A.

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

March 13, 1989.

Leave to Appeal Granted May 18, 1989.^*

Gross & Novak, P.A. by Timothy O'Neill, East Brunswick, N.J., for defendant Federal Deposit Ins. Corp.

Shaw, Licitra, Eisenberg, Esernio & Schwartz, P.C., by Peter T. Neill, Garden City, N.Y., for defendant trustee.

Richard W. Meirowitz, New York City, for plaintiffs Gallant.

Parker Chapin Flattau & Klimpl, by Joel Lewittes, Ross Rhodes, New York City, for defendant Arnold I. Biegen.

DECISION

HOWARD C. BUSCHMAN, III, Bankruptcy Judge.

The Federal Deposit Insurance Corporation (the "FDIC") seeks summary judgment on the fourth, sixth and seventh cross-claims contained in the Chapter 7 Trustee's third amended answer to the complaint in this adversary proceeding alleging fraudulent conveyances. Those cross-claims assert that a conveyance by the Debtor, Perri Kanterman, of a mortgage and her entering into a mortgage note are avoidable as fraudulent transfers pursuant to § 544(b) of the Bankruptcy Code and N.Y. Debtor and Creditor Law § 270 et seq. (McKinney's 1988). Since there are genuine issues of material fact to be tried, summary judgment is denied.

I

The undisputed factual circumstances involved in this adversary proceeding involve interrelated parties and transactions among them. A brief description of the parties involved is necessary to an understanding of the web of activities which have led to the dispute before us.

We begin with the Debtor, Perri Kanterman, a housewife and the owner of real property, including a house and land in the Hamlet of Remsenburg in the Town of Southampton in Suffolk County, New York (the "Remsenburg Property"). It was this realty that was later mortgaged. The mortgage and mortgage note are the subject of the dispute before us in this adversary proceeding.

Perri Kanterman's husband, Donald Kanterman, was Chairman of the Board of Gallant Securities, Inc. ("G.S.I."), a non-clearing securities broker and underwriter located in Manhattan. Donald Kanterman was one of two stockholders in G.S.I., the other being Alvin Gallant, President of G.S.I. Affidavit of Susan Schutz, Assistant to the Chairman of the Board, Bookkeeper and Controller ("Susan Schutz Affidavit"). Apparently, Perri Kanterman was also employed by G.S.I. Id. ¶ 2.

Gallant was a principal and served as president of G.S.I. until September 19, 1986 when he resigned. Affidavit of Alvin Gallant ¶ 4 ("Gallant Affidavit"). He instituted an action against G.S.I. and the Kantermans on or about October 14, 1986 asserting claims for, inter alia money lent, account stated, breach of contract, unjust enrichment and the appointment of a temporary receiver. Alvin Gallant v. Donald Kanterman, et al., Supreme Court of the State of New York, County of New York, Index No. 23740/86. As a result of that action, on January 27, 1987, a temporary receiver was appointed for G.S.I. Gallant Affidavit ¶¶ 4, 6.

In or about June of 1986, G.S.I. required temporary funds as a result of certain delays in receiving revenues which were to be generated from some of its underwritings. Susan Schutz Affidavit ¶ 2. Donald Kanterman and Alvin Gallant asked Arnold J. Biegen, an attorney and friend of Donald Kanterman's, to facilitate Gallant's obtaining a loan from First Inter-County Bank of New York ("FICB"), a bank with whom G.S.I. had previously done business. Ibid.

In the summer of 1986, Biegen, acting as counsel for G.S.I., entered into an arrangement with FICB whereby Biegen would borrow $265,000 from FICB, re-lend those funds to G.S.I. and use the remainder to pay an antecedent debt owed by G.S.I. to Biegen. Affidavit of Arnold Biegen, dated Nov. 25, 1988 ¶¶ 10-23. Apparently in view of G.S.I.'s financial condition, Memorandum to FICB's Credit Committee by James Hurtig dated October 20, 1986 (the "Hurtig Memorandum"), FICB was willing to extend a loan only directly to Biegen, the cash proceeds of which would go to G.S.I. Biegen Affidavit of 10/14/88 ¶ 12.

The loan transactions between FICB and Biegen progressed as follows. On August 6, 1986, FICB approved an unsecured loan to Biegen in the amount of $65,000 and issued a cashier's check payable to Biegen in that amount. Affidavit of David M. Cohen In Support of Motion for Summary Judgment, Exhibits 5 and 6. ("Cohen Affidavit"). On August 13, 1986, FICB approved an unsecured loan to Biegen in the amount of $165,000. Cohen Affidavit, Exhibit 8. In order to pay off the August 6 loan, plus interest, FICB issued an advice of charge in the amount of $65,338.54. Cohen Affidavit, Exhibit 9. Biegen, therefore, was indebted to FICB in the amount of $165,000 in August of 1986. On October 22, 1986, FICB approved a $265,000 loan to Biegen, as a cap and inclusive of the prior two loans. Cohen Affidavit, Exhibits 12 and 13.

Although Biegen apparently thought that FICB had agreed to make the loan without security, FICB demanded collateral in October 1986. Biegen Affidavit of Nov. 25, 1988 ¶ 18, Affidavit of James Hurtig ¶ 2 ("Hurtig Affidavit"). Biegen then offerred to obtain a mortgage on the Debtor's Remsenburg Property and assign it to FICB. Accordingly, the loan was conditioned on (i) Biegen's obtaining a life insurance policy for the amount of his indebtedness to FICB with FICB named as beneficiary, (ii) his assignment to FICB of a second mortgage on the Debtor's Remsenburg Property and (iii) a letter acknowledging his direct responsibility for the debt. Cohen Affidavit Exhibit 12. FICB's vice president recommended that FICB lend Biegen an additional $100,000, and it was stated:

Mr. Biegen has asked to borrow an additional $100M on a personal basis to help Gallant\'s interim working capital needs . . . To secure his position, Mr. Biegen is taking a second mortgage on Peri sic Kanterman\'s $800M East sic Hampton home. He will assign it to us as support for his debts.

Hurtig Memorandum. The FICB Credit Committee approved the loan on October 22, 1986. The minutes of that date recorded:

# 147 Arnold Biegen

Approved: $100M increase in unsecured loan to new total $265M. Rate: prime + 2-½%. Life insurance policy on him naming FICB as beneficiary for $300M, assignment of a second mortgage on a residence and a letter of understanding to be given as additional support. Documents to be reviewed by counsel. Proceeds to be re-loaned to Gallant Securities. Repayment to come as Gallant repays or from Biegen\'s cash flow. J. Hurtig Memo 10/20.

FICB issued an Advice of Credit to Biegen in the amount of $265,000, Cohen Affidavit, Exhibit 14, and an advice of charge in the amount of $167,048.75 to pay off the August 15, 1986 loan plus interest on November 5, 1986. Cohen Affidavit, Exhibits 16, 17, 18. Biegen, therefore, ended up being indebted to FICB in the amount of $265,000 on November 5, 1986. He executed a note on that day in favor of FICB in the amount of $265,000. Cohen Affidavit, Exhibit 1.

Seven days prior to Biegen's execution of his note to FICB, a mortgage on the Remsenburg Property and mortgage note, both dated October 29, 1986, were executed by Perri Kanterman in favor of Biegen in the amount of $265,000. These documents were assigned from Biegen to FICB on November 3, 1986, Cohen Affidavit, Exhibit 4. The mortgage was not recorded prior to its being assigned.

It further appears that FICB was initially requested to loan $350,000. Susan Schutz Affidavit ¶ 6. A mortgage, mortgage note and assignment reflecting those amounts were prepared only to be changed when FICB refused to loan more than $265,000. Biegen Affidavit of Jan. 12, 1989 ¶ 1.

In January 1987, G.S.I.'s check in the amount of $2,870.83 for interest plus late charges on the $265,000 loan was returned twice for insufficient funds. Affidavit of Arnold I. Biegen dated Oct. 14, 1988, Exhibit I. On or about March 11, 1987, FICB made demand on Biegen for payment of the $265,000 principal of his note plus accrued interest. Biegen Affidavit of 10/14/88, Exhibit J. He then made demand on Perri Kanterman for payment of the $265,000 principal of the mortgage and mortgage note plus accrued interest. Biegen Affidavit of 10/14/88, Exhibit K. No payment was made pursuant to such demand. Biegen Affidavit of 10/14/88 ¶ 9.

FICB instituted foreclosure proceedings against the Remsenburg Property on or about May 5, 1987. FICB annexed to its foreclosure complaint a copy of a purported mortgage note in the amount of $350,000, which was the amount of the loan originally contemplated by G.S.I. Apparently, no one at the bank questioned why a $265,000 mortgage was accompanied by a $350,000 mortgage note, when the mortgage itself plainly stated that payment should be made according to the terms of the note which cross-referenced the mortgage. As a result, Perri Kanterman answered FICB's complaint by denying liability on the loan and asserting as an affirmative defense that the mortgage was usurious. Biegen Affidavit of 11/25/88 ¶ 31. FICB admitted its error in October 1987 and indicated that it intended to amend its complaint to correct the mistaken allegation in regard to the $350,000 mortgage note. Affirmation of Suzanne Antippas, counsel for FICB, ¶¶ 7, 8 (the "Antippas Affirmation").

An action was also commenced by FICB against Biegen personally on Nov. 23 1987 to recover the $265,000 based upon the promissory note signed by Biegen. See Cohen Affidavit, Exhibit 2. That action was subsequently consolidated with the foreclosure action. The consolidated action has been stayed upon the filing of the Debtor's bankruptcy petition.

Perri Kanterman filed...