In re Martin, Bankruptcy No. 92-11520
| Decision Date | 08 October 1996 |
| Docket Number | Bankruptcy No. 92-11520,Adversary No. 95-91272. |
| Parties | In re Thomas A. MARTIN, Debtor. Thomas A. MARTIN, Plaintiff, v. Michael J. O'CONNOR, Chapter 7 Trustee, Key Bank of New York, N.A., Elias Cadan and John B. Warner II, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Northern District of New York |
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Thomas A. Martin, Saratoga Springs, NY, pro se.
Deily, Testa & Dautel, L.L.P. by Jonathan D. Deily, Albany, NY, for Defendant Michael J. O'Connor, Chapter 7 Trustee.
Philip J. Danaher, Albany, NY, for Defendants Elias Cadan and John B. Warner II.
Hiscock & Barclay, L.L.P. by Michael J. Smith, Albany, NY, for Defendant Key Bank of New York, N.A.
Thomas A. Martin ("Martin" or Debtor") filed on October 16, 1995, an adversary proceeding against Michael J. O'Connor, Chapter 7 Trustee ("Trustee"), Key Bank of New York, N.A. ("Key Bank"), Elias Cadan ("Cadan") and John B. Warner II ("Warner") (collectively, "Defendants"). Key Bank, the Trustee, Cadan and Warner have all filed motions to dismiss the Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.") (as made applicable herein pursuant to Rule 7012(b) of the Federal Rules of Bankruptcy Procedure). The Trustee, Cadan and Warner have also requested sanctions. This matter came before the Court for a hearing originally on December 12, 1995. However, due to the lateness of the hour, this Court adjourned the balance of the hearing to January 24, 1996.
At the December 12 hearing, the Court recited into the record the standard for evaluating motions to dismiss pursuant to Fed. R.Civ.P. 12(b)(6). Moreover, at that hearing, the Court made findings as to the motion to dismiss the Complaint's first cause of action wherein Debtor sought an order denying fees to the Trustee. The Court noted that the Trustee had not yet filed an application for compensation in this case. Accordingly, that portion of the first cause of action seeking the denial of the Trustee's fees was dismissed as being premature, the matter not being ripe for adjudication by the Court. The first cause of action also sought a rehearing on the prior reconversion of the Debtor's bankruptcy case to a Chapter 7. A previous request by the Debtor for reconversion to Chapter 11 having been heard by the Court was also denied. That order has been appealed. As such, Martin failed to state a claim upon which the relief requested could be granted. Thus the Court dismissed the Complaint's first cause of action in its entirety.
The Court notes that, in the time between the December 12 hearing and the adjourned hearing date of January 24, 1996, Martin filed two additional motions with respect to the main bankruptcy case, one to remove the Trustee, Michael J. O'Connor pursuant to 11 U.S.C. § 324(a) and the second motion to seek relief from judgment or order pursuant to Fed.R.Civ.P. 60(b)(2), (3) and (6).
At the January 24, 1996 adjourned hearing date, this Court rendered a decision denying the Fed.R.Civ.P. 60(b)(2), (3) and (6) motion and reserved for decision the balance of the causes of actions in the adversary proceeding and the motion by Martin to remove the Trustee. Furthermore, this Court granted Martin's request to treat the motions to dismiss as motions for summary judgment pursuant to Fed.R.Civ.P. 56. This Court will address the balance of Martin's causes of actions filed in the adversary proceeding in seriatim. The Court will then address Martin's request to remove the Trustee.
The procedural history of the Debtor through the various state and federal courts is rather long and involved. Suffice it to say, this Court will recite only those events and decisions that are relevant to the determination of the present motions for summary judgment. Martin filed for protection pursuant to Chapter 11 of the United States Bankruptcy Code ("Code")1 on April 6, 1992. The Debtor was the principal of an entity entitled Kinderhill Corporation which also filed Chapter 11 at about the same time as the Debtor's filing. Generally, Debtor and his related corporations and partnership interests are engaged in various aspects of the thoroughbred industry, including breeding, racing and selling interests in horses. The Debtor's case was converted to a case pursuant to Chapter 7 of the Code on October 19, 1992 by the late Honorable Justin J. Mahoney, Chief United States Bankruptcy Judge for the Northern District of New York. See Exhibit 4 attached to the Notice of Key Bank of New York's Motion to Dismiss. ("Key Bank's Motion to Dismiss"). Michael J. O'Connor was appointed the interim trustee for this case on October 19, 1992. According to the papers, Judge Mahoney denied a motion by the Debtor to reconvert the case to one under Chapter 11 on January 13, 1993. This order was apparently not appealed.
On or about May 12, 1992, Judge Mahoney granted Key Bank's motion for relief from the automatic stay pursuant to § 362(d)(1) to eject Martin from real property allegedly owned by Key Bank. On March 10, 1993, Martin was evicted from the real property purportedly owned by Key Bank. Additionally, Key Bank arranged to remove and store certain items of the Debtor's personal property. Key Bank was enforcing a security agreement entered into by the Debtor on March 11, 1988 granting Key Bank a security interest in certain art, art works, antiques, furniture and other items (collectively, "Collateral") in return for loans and advances. See Exhibit 9 attached to Key Bank's Motion to Dismiss. Defendants Cadan and Warner were retained by the Trustee to inventory and appraise the Debtor's personal property. Cadan and Warner determined the total value of the personal property on which Key Bank asserted a security interest was approximately $160,315.00. These facts were outlined in the notice of motion seeking relief from the automatic stay provision of § 362 by Key Bank on March 22, 1993. The Trustee in the case also filed a motion returnable on the same date seeking clarification of disputed claims on the Debtor's personal property. The Debtor responded to both motions by filing an affidavit dated May 11, 1993. The Debtor was represented by counsel, Thomas Dussault, Esq., at this hearing. Key Bank, the Trustee and the Debtor entered into a settlement agreement on that date. However, the Trustee noticed a hearing, and an evidentiary hearing was held on June 30, 1993 with respect to the disposition of the Debtor's personal property. Martin apparently refused to execute a stipulation of settlement and a further hearing was held on this matter. On November 16, 1993, Judge Mahoney entered an order approving the stipulation of settlement's disposition of the Debtor's personal property over the absence of Martin's signature.
On December 7, 1993, the Trustee noticed a motion to auction the Debtor's non-exempt personal property to be held on January 8, 1994 and approving the terms of a stipulation entered into by the Trustee and Key Bank with respect to an action filed in Albany County Superior Court by Martin, Kinderhill Corporation and Kinderhill Investment Company against Key Bank, essentially a lender liability suit. The Trustee agreed to assign his rights and interests in that litigation to Key Bank for a sum of $2,000 and the payment of all fees and charges incurred in inventorying, categorizing and storage of the Debtor's personal property since March, 1993. See Exhibit 15 attached to Key Bank's Motion to Dismiss. The Trustee's counsel stated that the assignment of the lender liability suit was based on the Trustee's review of the pleadings and papers in the action, and his determination that the action was meritless. See Exhibit 14 attached to Key Bank's Motion to Dismiss. Martin filed a cross-motion objecting to the inclusion of certain property in the sale. Judge Mahoney granted the Trustee's motion in its entirety and denied Martin's cross-motion in all respects on January 10, 1994. Key Bank in April, 1993 filed an adversary proceeding against Martin seeking the denial of dischargeability of certain debt pursuant to § 523(a)(6) and the denial of the Debtor's discharge pursuant to § 727(A)(2), (3), (4) and (5). The Honorable David T. Stosberg, United States Bankruptcy Judge sitting by special designation presided over a six day trial. The Debtor was again represented by counsel, Thomas Dussault, Esq. Defendant Warner was one of the witnesses at this trial. Judge Stosberg rendered a decision on December 20, 1994 denying the Debtor's discharge and granting Key Bank a judgment against the Debtor in the amount of $189,956.00. This decision has been appealed by the Debtor and is sub judice before the Honorable Frederick J. Scullin, Jr., United States District Court Judge, oral argument having been heard on July 27, 1995.
The Court is cognizant of the arguments raised by both the Trustee and Key Bank as to Martin's lack of standing to initiate this adversary proceeding since he can recite no injury to himself. Martin is not a creditor of the estate and has no pecuniary interest in the estate. Martin's main bankruptcy case was converted from a case in Chapter 11 to one under Chapter 7. Accordingly, pursuant to 11 U.S.C. § 323(a), the trustee is the sole representative of the estate. Martin is not the representative of the estate, and it is within the Trustee's powers to institute any actions related to the disposition of property and the general administration of the estate.
Only the trustee has the authority and the discretion to prosecute, defend and/or settle, if appropriate in its judgment, causes of action which existed at the time the order for relief was entered. See, 2 Collier on Bankruptcy ¶ 323.023 at 323-9 (15th ed. 1995). It is the trustee's duty to dispose of all the assets of the estate so as to...
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