In re Reilly
| Decision Date | 08 March 2000 |
| Docket Number | BAP No. 99-50064. Bankruptcy No. 96-20102. |
| Citation | 245 BR 768 |
| Parties | In re Patrick W. REILLY Betty-Ann D. Reilly, Debtors. James W. Sherman, Appellant, v. Anthony S. Novak, Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
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Law Offices of Martin W. Hoffman, Martin W. Hoffman, West Hartford, CT, for Appellant.
Boatman, Boscarino, Grasso & Twachtman, Patrick W. Boatman, Glastonbury, CT, for Trustee, Anthony Novak.
Before Hon. JOHN C. NINFO, II, Hon. JEFFRY H. GALLET & Hon. ROBERT E. LITTLEFIELD, Jr., Bankruptcy Judges.
This appeal is from the June 14, 1999 ruling of Judge Robert L. Krechevsky, United States Bankruptcy Judge, District of Connecticut on the Trustee's Objection To Proof of Claim Filed By James W. Sherman, Esq., a creditor. This ruling sustained the trustee's (hereinafter "Appellee") objection to the amended claim of James W. Sherman (hereinafter "Appellant") and denied said claim, concluding that the Appellant had not carried the burden of proof of the validity of his claim. For the reasons set forth below we AFFIRM the Bankruptcy Court's determination.
The facts based upon the pleadings and found by the Bankruptcy Court in its decision of June 14, 1999, are as follows:
In 1987, Patrick W. Riley (hereinafter "Debtor"), Thomas Tyler and Russell Tyler (hereinafter the "Tylers") and the Appellant entered into a loose arrangement whereby they would develop and sell various parcels of real estate. All of the parties except the Debtor were licensed attorneys, however, there was no written agreement with respect to this arrangement.
In 1991, a Roman Catholic religious order known as the Missionaries of Our Lady of LaSalette (hereinafter "the Order") formed a five person task force to study methods for utilizing a tract of land which the Order owned in Ipswich, Massachusetts. The Order's chief administrator between 1988 and 1997 was Father Thomas A. Reilly, the Debtor's brother.
On two occasions, in March 1991 and early 1993, the Tylers drafted proposed real estate purchase agreements for the property with potential buyers. However, neither of these agreements culminated in a sale of the subject property.
In June 1993, the Tylers, the Debtor, Father Reilly and Father Kuczynski (chairperson for the task force) met for a social dinner. Over dinner, the land was discussed. On July 3, 1993, Thomas Tyler wrote a letter to Father Reilly offering his assistance in marketing the property. On July 6, 1993, Father Reilly responded that the Order would be interested in proposals concerning the property's non-developed acreage. A meeting occurred between Father Reilly and Thomas Tyler but no agreement of any type resulted.
In late July 1993, the Debtor and the Tylers had a bitter disagreement with the Tylers accusing the Debtor of stealing money. On or about August 13, 1993, in an attempt to work out these differences, the Debtor executed a deed for a 30-acre parcel of land to the Appellant, as trustee, for the Tylers. The Debtor also executed a promissory note payable to the Tylers for $764,470.38. This note was assigned to the Appellant as trustee for the Tylers. In addition, the Tylers assigned to the Appellant, as trustee, a mortgage deed secured by the Debtor's summer home. On September 15, 1993, the Appellant, acting upon instructions from the Tylers, recorded the deed from the Debtor to himself.
On or about September 28, 1993, the Debtor advised the Appellant that he "would not be partners with Russ and Tom." In re Reilly, 235 B.R. 239, 241 (Bankr.D.Conn.1999) The Appellant then wrote two letters expressing his dismay at the termination of the relationship. On October 25, 1993, the Appellant conveyed the 30-acre parcel to a third person for the benefit of the Tylers.
Additionally, in the fall of 1993, the Appellant presented a proposal to the task force suggesting that the Order form a joint venture to develop the property. The task force's reaction was "unanimously negative." Id. The Appellant had no further contact with the task force after January 4, 1994, when he was notified by Father Kuczynski that the Order was not ready to consider selling or developing the property.
In early 1994, the Tylers started a proceeding to foreclose on the mortgage of the Debtor's Rhode Island property. On April 11, 1994, the Debtor initiated a Rhode Island state court action against the Tylers and the Appellant, as trustee, seeking to stop the foreclosure. The complaint alleged that the Tylers engaged in "fraud and deceit" and "fraudulent inducement" in causing the Debtor to sign the deeds and the promissory note.
On June 15, 1994, the Appellant filed an answer and counterclaim to the Debtor's state court complaint. Paragraph 11 of this answer acknowledged that the Debtor had terminated the joint venture. On June 17, 1994, the Debtor filed a complaint in Connecticut, alleging charges similar to those brought in the Rhode Island action.
In June 1994, the Order's task force decided to pursue a proposal to sell the excess acreage of the property to Dr. Arcidi. Father Reilly contacted the Debtor and requested that he advise the Order with respect to the sale of the excess acreage. The Debtor agreed to act as an unpaid consultant. In April 1995, the Order and Dr. Arcidi jointly executed an "Offer to Purchase" agreement. Dr. Arcidi did not exercise his rights under this agreement.
When the agreement with Dr. Arcidi did not yield any results, the Order and the Debtor entered into an agreement entitled "Agreement To Purchase." In this agreement, the Debtor, doing business as Aequus Enterprises, was granted a one-year option to acquire the entire property, not just the excess acreage, for $3,200,000.00. The parties did not believe that the Debtor would exercise the option for his own benefit.
On January 16, 1996, the Debtor, with his wife, filed a joint Chapter 11 petition and listed the option as an executory contract on Schedule G. The Debtor did not exercise the option, however, he did locate an entity which purchased the property. On June 2, 1997, the Order sold the property to Turner Hill Preservation Associates, LLC for $4,511,000.00. The Order then paid the Debtor $1,311,000.00. Father Kuczynski testified that he paid the Debtor for services rendered to the Order, and the community, and for his assistance in preparing the property for sale. Father Kuczynski also acknowledged that the Debtor cured certain water and sewer problems on the property.
On June 5, 1996, the Appellant filed an original Proof of Claim, based upon the joint venture, for an undetermined amount. On December 1, 1998, the Appellant amended the claim to reflect the amount owed as $377,750.00
The Appellant alleges numerous deficiencies in the Bankruptcy Court's decision, however, the ultimate issue raised is: Whether the Bankruptcy Court erred in sustaining the Trustee's objection to James W. Sherman's claim and denying it. Since the Bankruptcy Court's determination that the burden of proof to establish the validity of the claim had shifted to the Appellant and its finding, based upon the evidence presented, that the Appellant did not meet this burden were not in error, this Panel affirms.
Pursuant to Bankruptcy Rule 8013 and the case law thereunder, questions of law are subject to de novo review. This standard affords no deference to a trial court's determination. In re Miner, 229 B.R. 561, 565 (2d Cir. BAP 1999).
In contrast, findings of fact are subject to a clearly erroneous standard. This standard affords great deference to a trial court's determination.
A finding of fact is clearly erroneous within the meaning of Rule 8013 . . . when "although there is evidence to support it, the reviewing court on the entire record is left with the definite and firm conviction that a mistake has been made." (citation omitted) While the trial court's findings of fact are not conclusive on appeal, the party that seeks to overturn them bears a heavy burden. (citation omitted). "To be clearly erroneous, a decision must strike us as more than just maybe or probably wrong; it must . . . strike us as wrong with the force of a five-week-old, unrefrigerated dead fish." (citation omitted). Id.
The issues raised by the Appellant include legal and factual components. When mixed questions are raised on appeal, they are presumptively subject to de novo review. In re Bammer, 131 F.3d 788 (9th Cir.1997). Due to the hybrid nature of the issues presently raised each of these standards are implicated.
The Bankruptcy Court\'s determinations, that the burden of proof had shifted to the Appellant and finding that he did not meet his burden, thereby denying the claim were not in error.
In its decision, the Bankruptcy Court found that the burden of proof shifted to the Appellant to establish the validity of his claim and that he simply did not meet his burden. The Appellant contends that this finding is in error. This Panel disagrees.
A properly executed and filed proof of claim constitutes prima facie evidence of the validity of the claim. See Fed. R. Bankr.P. 3001(f). To overcome this prima facie evidence, the objecting party must come forth with evidence which, if believed, would refute at least one of the allegations essential to the claim. In re Allegheny Int'l, Inc., 954 F.2d 167 (3d Cir.1992). See also In re Giordano, 234 B.R. 645, 650 (Bankr.E.D.Pa.1999).
To refute the allegations of the Appellant that a joint venture existed and continued until the time the property was sold, the Appellee presented testimony of the Debtor, Father Kuczynski and Father Reilly. The Bankruptcy Court after trial, found as a...
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