In re Kupperstein
| Decision Date | 22 April 2020 |
| Docket Number | Civil No. 18-11851-LTS,Civil No. 18-11772-LTS |
| Parties | In re DONALD C. KUPPERSTEIN, Appellant. |
| Court | U.S. District Court — District of Massachusetts |
ORDER ON BANKRUPTCY APPEALS
Donald C. Kupperstein has appealed two decisions by the United States Bankruptcy Court for the District of Massachusetts: one granting relief from the automatic stay with respect to certain actions pending in state courts, and another denying Kupperstein's request for contempt sanctions against a creditor he alleged had violated the automatic stay. The two appeals were consolidated. For the reasons that follow, both Bankruptcy Court orders are AFFIRMED.
The sordid and convoluted path to the rulings at issue here began in November 2014, when Kupperstein and Thomas Sheedy visited Carol Thibodeau in Rhode Island. They persuaded Thibodeau to sell Sheedy a home in Norton, Massachusetts that had belonged to her deceased father. The "price" they negotiated was something less than $100, plus a promise to resolve a local tax lien just shy of $3,400. The deal was struck without consulting Thibodeau's lawyer, who was assisting her in her role as the personal representative of her father's estate, andwithout regard for a second lien on the home—about which Kupperstein knew—securing a debt of more than $191,000 that the Estate owed the Massachusetts Executive Office of Health and Human Services ("MassHealth" or "EOHHS").
When Thibodeau's lawyer learned of the "sale" shortly after it occurred, he promptly contacted Kupperstein to inform him that any sale of the property without satisfying the MassHealth lien, and without approval from the Bristol County Probate Court, was invalid. Kupperstein ignored this admonishment, renovated and leased the Norton home, and kept the rent, all while EOHHS and the Estate embarked on an arduous campaign to reclaim what was rightfully theirs—a campaign which Kupperstein sought to frustrate at every turn.
The seeds of this dispute, planted by Kupperstein in Thibodeau's living room, bloomed into a number of separate lawsuits in various Massachusetts courts and, ultimately, into federal bankruptcy proceedings. The state proceedings relevant here are: 1) an action filed in Suffolk County Superior Court by EOHHS against Kupperstein, Sheedy, and Thibodeau in July 2015 challenging the sale of the Norton home, Doc. No. 112 at 137-51; 2) the reopening of Bristol County Probate Court proceedings regarding the Estate via a petition by EOHHS for authorization to sell the Norton home to satisfy the MassHealth lien, id. at 187-95; and 3) an action Kupperstein filed in Land Court to try title to the Norton home, id. at 31-39.3
The Superior Court dismissed EOHHS's fraud claim, finding that the complaint alleged misrepresentations made only to Thibodeau, not to EOHHS itself.4 Id. at 184. Later, the Superior Court entered summary judgment in favor of the defendants (including Kupperstein) on all but two of EOHHS's remaining claims. Id. at 168-78. Though the Superior Court concluded it could not invalidate or rescind the sale to Sheedy by Thibodeau, who had received title to the home by operation of her father's will, it noted that the home likely remained subject to the MassHealth lien under state law, "Thibodeau's sale to Sheedy notwithstanding," and it suggested EOHHS could file "a petition in Probate Court seeking a license to sell the Property to satisfy the Estate's debt." Id. at 172-73. After Kupperstein filed for bankruptcy, the Superior Court stayed its proceedings as to the remaining claims for unjust enrichment and statutory treble damages. Id. at 69-74.
Taking the Superior Court's advice, EOHHS went to the Probate Court.5 The Probate Court invalidated the transfer of the Norton home from Thibodeau to Sheedy, ruled the home remained an asset of the Estate, directed Thibodeau to sell the home to satisfy the MassHealth lien, and ordered Kupperstein and Sheedy to provide an accounting for, and pay to EOHHS, any rents received by leasing the home. Id. at 25-29. Kupperstein did not appeal the Probate Court's decision, nor did he comply with it. Thereafter, proceedings in the Probate Court devolved into a series of contempt hearings and orders arising from Kupperstein's refusal to relinquish control over the Norton home. EOHHS filed a complaint for contempt in June 2017, and the ProbateCourt entered its first judgment finding Kupperstein in civil contempt of its prior order in August 2017 for refusing to return more than $33,000 in rents—money Kupperstein collected after having leased a property he did not rightly own. Id. at 41-42.
When the Probate Court refused to vacate its finding of contempt, id. at 107, Kupperstein turned to the Land Court. He fared no better there, though. His October 2017 complaint seeking to try title to the Norton home—in which he conveniently omitted any reference to the Probate Court's decision on that very subject—was promptly dismissed by the Land Court after EOHHS intervened and provided the information Kupperstein had withheld. Id. at 31-39. In addition to dismissing the action, the Land Court's December 21, 2017 order found Kupperstein's claims were frivolous and brought in bad faith, and that his willful failure to disclose the Probate Court's ruling and EOHHS's status as a lienholder was aimed at interfering with the Probate Court proceedings. The Land Court imposed sanctions of more than $9,000, reflecting attorney fees incurred by EOHHS and the Estate to intervene and respond to the Land Court action. Unsurprisingly, Kupperstein never paid the sanctions. Like the Superior Court, the Land Court stayed its own contempt proceedings when Kupperstein filed for bankruptcy, pending a determination by the Bankruptcy Court about the application of the automatic stay. Id. at 95-97.
While the Land Court case was pending, the Probate Court issued an order that, among other things, prohibited Kupperstein from executing or recording any documents regarding the Norton home without leave of court, nullified a deed purporting to convey the property from Sheedy to a trust controlled by Kupperstein, and prohibited Sheedy and Kupperstein from entering the property. Id. at 30. Upon dismissal of the Land Court action, the Probate Court again held Kupperstein in contempt, this time imposing a thirty-day sentence, which it suspended, and ordering Kupperstein to close all bank accounts associated with the property,provide written confirmation and pay over all sums from those accounts to EOHHS, surrender any keys to the property, and provide any leases or other documents regarding the property to the Estate's lawyer. Id. at 43. When Kupperstein failed to comply with that order, the Probate Court ordered him to show cause why the thirty-day sentence should not be imposed and set a contempt hearing for January 12, 2018. Id. at 43-44.
On the eve of that hearing, Kupperstein filed for bankruptcy. He listed the Norton home as an asset.6
The Probate Court went forward with its contempt hearing, sent Kupperstein to jail for the afternoon, but then released him and reiterated its order to surrender keys and leases and pay back past rent for the property. Doc. No. 55-14. At the next contempt hearing, Kupperstein apparently made a cash payment toward the amount owed in past rent to avoid imprisonment, though he otherwise continued to defy the Probate Court's orders.7 He did not ask theBankruptcy Court at that time to enforce the automatic stay with respect to the Probate Court proceedings or to hold EOHHS or the Estate in contempt for continuing to participate in those proceedings.
On April 12 and May 10, 2018, the Probate Court issued orders finding Kupperstein in contempt for willfully violating its prior orders by continuing to execute documents regarding the property, entering and exercising control over the property, changing the locks, installing a new tenant, failing to pay the amounts due as prior contempt sanctions, and claiming the property as an asset in his bankruptcy petition. Doc. No. 11 at 45-50. The Probate Court imposed sanctions of $54,750 as restitution of funds stolen from the Estate (rent collected while unlawfully leasing the property), $10,485 in attorney fees incurred by EOHHS and the Estate as a result of Kupperstein's contempt, and statutory interest of $70,289.65. All three amounts were described by the Probate Court as contempt sanctions it believed were exempt from the Bankruptcy Court's automatic stay. The order of statutory interest was held in abeyance pending review of Kupperstein's compliance with the other aspects of the order, and the thirty-day sentence remained in play but was again suspended.
Thereafter, Kupperstein attempted to remove the various state court actions to the Bankruptcy Court, triggering motions by EOHHS and the Estate—both of whom had expressed their intent to file adversary complaints in the bankruptcy case—seeking to remand the actions to state court and requesting an order lifting the automatic stay or finding it inapplicable as to those state actions. While these motions were pending before the Bankruptcy Court, Kupperstein failed to appear for a continuation of his contempt hearing in Probate Court. Id. at 116. At aMay 30, 2018 hearing, the Bankruptcy Court remanded the removed actions to their respective state courts and requested further briefing on the nature of the stay relief sought by the Estate and EOHHS. During that hearing, Kupperstein (through counsel) agreed that the Norton home was not his property, was not an asset of the bankruptcy estate, and should be sold to satisfy the MassHealth lien. The Bankruptcy Court granted limited relief from the automatic stay to permit the house to be sold.
In July 2018, Kupperstein filed a motion asking the Bankruptcy Court to hold EOHHS in contempt, arguing it had violated the automatic stay by continuing to participate in the Probate Court contempt hearings after learning Kupperstein had...
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