In re Minton Group, Inc.
| Citation | 28 BR 774 |
| Decision Date | 15 March 1983 |
| Docket Number | Bankruptcy No. 82 B 20590,Adv. No. 6316. |
| Parties | In re MINTON GROUP, INC., Debtor. Sidney TURNER, as Trustee, Plaintiff, v. EMMONS & WILSON, INC., Jimmy F. Markham and Janine K. Markham, Beatrice Darsie, Robert B. Frederick, John D. Lethbridge, Realtech Professional Association, Inc., Town of New Canaan, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Sidney Turner, P.C., White Plains, N.Y., Trustee, pro se.
Slavitt, Connery & Vardamis, Norwalk, Conn., for Darsie, Frederick and Lethbridge.
Whitman & Ransom, Stamford, Conn., for Jimmy and Janine Markham.
Robert J. Eichelburg, White Plains, N.Y., for Martha Buckingham.
William C. Bieluch, Jr., Darien, Conn., for Emmons & Wilson, Inc.
Reich & Reich, White Plains, N.Y., for Town of New Canaan.
DECISION ON TRUSTEE'S COMPLAINT TO AVOID POST-PETITION ATTACHMENTS ENTERED AGAINST DEBTOR'S REAL PROPERTY
The trustee in bankruptcy of Minton Group, Inc. seeks to avoid four prejudgment attachments entered against real property owned by the debtor situated in New Canaan, Connecticut. The attachments were all entered against the property after the commencement of the debtor's Chapter 11 case. Thus, the trustee alleges that the recording of these liens pursuant to Connecticut law constituted a violation of the automatic stay under Code § 362 as well as a post-petition transfer of the debtor's property that is proscribed under Code § 549. Five of the defendants (the Markhams; Darsie, Frederick, Lethbridge) maintain that the trustee should not be permitted to set aside the attachments on either ground, because they have asserted an equitable ownership in the property under a resulting or constructive trust theory. They argue that the trustee has no avoiding powers as to the Connecticut property if it is not owned by the debtor, and that such property would not belong to the debtor's estate, nor be subject to administration within the context of the Chapter 11 proceeding. Alternatively, these defendants request the impression of an equitable lien on the property to the extent of their claims. Defendant Buckingham adopts the arguments made by the five aforementioned defendants, but has not filed any prejudgment attachment against the property.
Defendant Emmons & Wilson, Inc. does not assert an equitable ownership in the property, nor does it assert an equitable lien in its favor. However, it contends that the attachment it entered against the property is a statutory lien that relates back to the pre-petition state court order authorizing a prejudgment attachment, and is not a post-petition recording that would offend the spirit of Code § 362(a)(4).
Hence, the issue posed by the parties is whether these six defendants who assert equitable rights in the property can escape the reach of the automatic stay under Code § 362, or the trustee's avoiding powers.
1. An involuntary petition under Chapter 11 of the Bankruptcy Code was filed against the debtor, Minton Group, Inc., on September 28, 1982. The order for relief was entered on October 23, 1982.
2. On October 26, 1982, the plaintiff, Sidney Turner, was designated the trustee of Minton Group, Inc., pursuant to Bankruptcy Code § 1104.
3. The trustee commenced an adversary proceeding pursuant to Bankruptcy Rule 701 on December 17, 1982, seeking to avoid several post-petition writs of attachment entered against the debtor's property.
4. The trustee's complaint was dismissed as to the defendant Town of New Canaan. A default was entered against the defendant Realtech Professional Association, Inc.
5. Martha Buckingham, although not named as a defendant in the trustee's complaint, sought permission to intervene as a defendant, which the court granted.
6. The debtor holds title to real property situated in Fairfield County, Connecticut, known as units 1 & 2 of the Realtech Professional Condominium, located at 49 Pine Street, New Canaan.
7. The defendants Darsie, Frederick, Lethbridge, Markham and Buckingham assert an equitable ownership in the property under a resulting trust or constructive trust theory; alternatively they seek the impression of equitable liens on the property.
8. Emmons & Wilson, Inc. does not claim any equitable ownership in the property, nor does it request the establishment of an equitable lien in its favor. Instead, it defends its attachment on the theory that it is a statutory lien that relates back to a state court authorization of a prejudgment attachment, and does not violate the automatic stay with respect to post-petition perfection of liens.
9. The debtor purchased the Pine Street property on January 18, 1982 from The King-Casey, Incorporated Profit Sharing Trust for a total price of $345,000, paid for with $95,000 cash and a $250,000 mortgage executed in favor of the grantor.
10. Walter E. Wlodarski, President of the debtor Minton Group, Inc., approached the defendants Markham (Jimmy & Janine), Darsie, Lethbridge, Frederick, and Buckingham seeking capital for the formation of a limited partnership that was to be known as Darwood Associates. These six defendants were to be the limited partners and Minton Group was to be the general partner. Minton Group was to convey the property to the limited partnership when it became effective.
11. Defendant Darsie tendered a check in the amount of $25,000 to Wlodarski, dated June 26, 1981, payable to the order of "W.E. Wlodarski P.C. Trustee." Her check predates Minton Group's purchase of the property by approximately six and one-half months. The other defendants tendered checks to Wlodarski dated as indicated below and for the following amounts:
(a) The Markhams: 1/25/82 $25,000
(b) Frederick: 2/ 8/82 $25,000
(c) Lethbridge: 1/29/82 $10,000
(d) Buckingham: 1/29/82 $10,000
These four checks were all made payable to the order of Minton Group, Inc. As reflected by the dates, all of these checks were tendered after the debtor had already purchased the property on January 18, 1982.
12. Exhibit # 4 in evidence at the February 8, 1983 hearing held in this court is a letter dated January 28, 1982 addressed to Richard Buckingham, husband of the defendant Martha Buckingham. It acknowledges receipt of their check for $10,000 "for investment in Darwood Associates limited partnership." Emphasis added. The letter is signed "Walter Wlodarski, President, the Minton Group, Inc., General Partner, Darwood Associates." Copies of two other letters, identical in content except for the amounts stated, dated January 28, 1982 and February 9, 1982, and addressed to defendants Lethbridge and Frederick, respectively, were filed with the court on February 1, 1983. Additionally, there is a December 28, 1981 letter addressed to Frederick setting forth a financial summary pertaining to the proposed limited partnership, Darwood Associates. Testimony elicited from Darsie and Markham indicated their own familiarity with the proposed limited partnership venture. Therefore, the four letters and the testimony support the finding that these six defendants understood that their investments related to the organization of a limited partnership in which they were to be the investing limited partners.
13. Notwithstanding this evidence, all of the defendants maintain that Wlodarski told them that their investments were to be used to purchase a part ownership interest in the 49 Pine Street property, and the percentage owned by each investor would correspond proportionally to the amount of their individual investments.
14. Markham and Buckingham testified that they did not know that Minton Group had purchased the Pine Street property prior to the time their checks were tendered. Markham stated that Wlodarski had urged her to furnish her share of the funds immediately, telling her that the property "had just come on the market" and that the investment opportunity might easily be lost without quick action.
15. The parties have agreed that all of their actions were to be governed by the laws of the State of Connecticut and that the limited partnership was to be formed under the Limited Partnership Act as adopted in that state and set forth in Conn. Gen.Stat. § 34-9 et seq. Each of the defendants is a resident of the State of Connecticut.
16. The limited partnership was never formed because one of the prospective limited partners, Jimmy F. Markham, did not execute the limited partnership agreement when it was first presented for the Markhams' signature in July, 1982. The Markhams objected to certain language in the agreement which did not limit the property to be owned by the partnership to the 49 Pine Street property, and which provided that the general partner was allowed to make assessments beyond their original investment. Since the partnership was never formed, Minton Group retained title to the property. Subsequent to the filing of the involuntary petition on September 28, 1982, several pre-judgment attachments were entered against the Pine Street property in favor of the following defendants, pursuant to Connecticut law, as indicated:
(a) Darsie, Frederick
Lethbridge 10/1/82 $60,000.00
(b) Jimmy & Janine
Markham 9/30/82 $50,000.00
(c) Emmons & Wilson
Inc. 9/29/82 $10,000.00
(d) Realtech
Professional
Assn., Inc. 10/26/81 $ 383.23
Martha Buckingham did not cause any attachment to be filed against the property in her favor.
18. The trustee seeks to avoid all of the liens set forth above that were entered against the Pine Street property, on the grounds that their entry after the filing of the petition constituted a violation of the Bankruptcy Code § 362 automatic stay, as well as a proscribed post-petition transfer under Code § 549.
Bankruptcy Code § 362 operates as an automatic stay upon the commencement...
To continue reading
Request your trial