In re Reisner
| Decision Date | 21 November 2006 |
| Docket Number | Adversary No. 06-1256-608.,Bankruptcy No. 06-41184-608. |
| Citation | 357 B.R. 206 |
| Parties | In re Alan H. REISNER and Elisa K. Reisner, Debtors. Marc A. Pergament, Chapter 7 Trustee of the Estate of Alan H. Reisner and Elisa K. Reisner, Plaintiff, v. Muriel C. Reisner, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Marc A. Pergament, Marc J. Weingard, Weinberg, Gross & Pergament LLP, Garden City, NY, for Plaintiff Marc A. Pergament.
Lewis W. Siegel, Mark G. Peters, Sara Mandelbaum, Scarola Ellis LLP, New York, NY, Co-Counsel for Defendant Muriel C. Reisner.
DECISION
This matter comes before the Court on the motion of Defendant Muriel C. Reisner ("Mrs. Reisner") seeking summary judgment dismissing this adversary proceeding, which was commenced on January 5, 2005 by Marc A. Pergament (the "Trustee"), the Chapter 7 trustee of the estate of Alan H. Reisner ("Alan") and Elisa K. Reisner ("Elisa") (collectively the "Debtors"). The Trustee opposed Mrs. Reisner's summary judgment motion. The Court heard testimony from Mr. George Ord, Mrs. Reisner's former attorney, and Alan. For the reasons set forth below, Mrs. Reisner's motion for summary judgment is denied, except as to the claims asserted by the Trustee under the New York Debtor and Creditor Law.
This Court has jurisdiction over this core proceeding under 28 U.S.C. §§ 1334 and 157 and the Eastern District of New York standing order of reference dated August 28, 1986. This decision constitutes the Court's findings of fact, and conclusions of, law to the extent required by Fed. R. Bankr.P. 7052.
The following facts are undisputed.
In April 1995, Mrs. Reisner loaned $300,000.00 to the Debtors to enable them to purchase, as tenants by the entireties, real property located at 6460 Sargasso Way, Jupiter, Florida (the "Property"), for $428,295.00. The Debtors gave Mrs. Reisner a first mortgage on the Property, which was recorded in May 1995 (the "Reisner Mortgage"). Mrs. Reisner is the widow of Alan's father.
After the Reisner Mortgage was recorded, Alan embezzled approximately $1.5 million from Mrs. Reisner over the course of several years. After the embezzlement came to light, Mrs. Reisner commenced an action to foreclose the Reisner Mortgage on the basis of nonpayment and to recover the embezzled funds. In September 2003, the Debtors deeded the Property, which was worth $900,000.00, to Mrs. Reisner. Mrs. Reisner recorded the deed.
At the time of the transfer, the Property was also encumbered, by two other mortgages, one (the "Dorf Mortgage") held by the Yetta Dorf Trust and the Saul Dorf Trust (the "Dorf Trusts") in the amount of $300,000.00, and the other (the "Kaplan Mortgage") held by David and Leah Kaplan (the "Kaplans") in the amount of $239,773.55. At the time of the transfer, $295,000.00 was owed on the Dorf Mortgage and $214,100.00 was owed on the Kaplan Mortgage. (Def.'s Mem. Supp. Summ. J. at 5.)
On March 16, 2004, the Debtors filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On November 17, 2004 a default judgment was entered against Alan declaring his embezzlement debt to Mrs. Reisner in the amount of $1,569,063.00 nondischargeable.
The Trustee commenced this adversary proceeding in 2005 to avoid the transfer of the Property to Mrs. Reisner and recover it for the estate. The complaint initially alleged that the transfer to Mrs. Reisner was an intentional and constructive fraudulent transfer but the Trustee subsequently withdrew the intentional fraudulent transfer claims against Mrs. Reisner. The Trustee also commenced a separate adversary proceeding against the Dorf Trusts, claiming that the Dorf Mortgage is void ab initio under Florida law, and against the Kaplans, seeking to avoid the Kaplan Mortgage as a preferential transfer.
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Bankr.P. 7056(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court's function is not to resolve disputed issues of fact, but only to determine whether there is a genuine issue of material fact to be tried. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is considered material if it "might affect the outcome of the suit under the governing law." Id. at 248, 106 S.Ct. 2505. No genuine issue exists Id. at 249-50, 106 S.Ct. 2505 (internal citation omitted). On the other hand, if "there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper." Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994) (citation omitted). "The nonmoving party must show that there is more than a metaphysical doubt regarding the material fact and my not rely solely on self-serving conclusory statements." In re Jarrell, 251 B.R. 448, 450-451 (Bankr.S.D.N.Y.2000).
The Trustee argues that the Debtors did not receive reasonably equivalent value in exchange for the deed to the Property because Mrs. Reisner obtained the Debtors' equity in the Property for no consideration. Mrs. Reisner asserts that the Debtors received reasonably equivalent value in exchange for the Property because it was deeded in lieu of foreclosure and was fully encumbered and, accordingly, there was no equity in the Property. Mrs. Reisner further asserts that, even if the Debtors did have equity in the Property, the Debtors received reasonably equivalent value for that interest because of an agreement between herself and Alan whereby she would reduce the embezzlement debt by the amount of equity in the Property, if any, after sale of the Property and satisfaction of all valid mortgages. The Trustee contends that the parol evidence rule bars Mrs. Reisner from arguing that a contract existed. The Trustee also argues that no such contract existed, and that if it did, it is not enforceable due to Florida's Statute of Frauds.
Section 548(a)(1)(B) of the Bankruptcy Code provides that a trustee can avoid a transfer of a debtor's interest in property when the transfer was made within one year before the bankruptcy filing and conveyed the debtor's interest in property in exchange for less than "a reasonably equivalent value." 11 U.S.C. § 548(a)(1)(B)(i).1 To be avoidable, the transfer must have occurred when the debtor was insolvent or was rendered insolvent as a result of the transfer; "was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital"; or intended to incur, or believed that he would incur, debts beyond his ability to pay them as they matured. 11 U.S.C. § 548(a)(1)(B)(ii). "The time at which `reasonably equivalent value' is determined is the time of the transaction." Krommenhoek v. Natural Resources Recovery, Inc. (In re Treasure Valley Opportunities), 166 B.R. 701, 704 (Bankr.D.Idaho 1994). The purpose of Section 548 "is to recover for the estate assets that could be distributed to unsecured creditors...." Brasby v. Joseph C. Perry, Inc. (In re Brasby), 109 B.R. 113, 121 (Bankr.E.D.Pa.1990).
1. Reasonably Equivalent Value.
For purposes of Section 548, "value" is defined as "property, or satisfaction or securing of a present or antecedent debtor of the debtor, but does not include an unperformed promise to furnish support to the debtor or to a relative of the debtor." 11 U.S.C. § 548(d)(2). The determination of whether the debtor received reasonably equivalent value for his interest "requires the court to compare what was given with what was received." Coan v. Fleet Credit Card Servs., Inc. (In re Guerrera), 225 B.R. 32, 36 (Bankr.D.Conn. 1998). "[I]t is not necessary that there be `mathematical precision' or a `penny-for-penny' exchange in order to establish reasonably equivalent value." Id. The court must determine whether reasonably equivalent value was exchanged based on the facts and circumstances of each case. See Davis v. Suderov (In re Davis), 148 B.R. 165, 175 (Bankr.E.D.N.Y.1992), aff'd. 169 B.R. 285 (E.D.N.Y.1994)(citing In re Pruitt, 72 B.R. 436 (Bankr.E.D.N.Y.1987) and In re Adwar, 55 B.R. 111 (Bankr. E.D.N.Y.1985)). "Relevant considerations include the fair market value of the property at the time of the transfer, the nature of the property, and its relative marketability ..." Davis, 169 B.R. at 299.
To determine whether the Debtors received reasonably equivalent value in exchange for the deed in lieu of foreclosure, the Court must determine how much equity, if any, the Debtors had in the Property at the time of the transfer. Mrs. Reisner asserts that the Debtors never made any payments on the Reisner Mortgage and owed $476,820.00, including interest, at the time of the transfer. Approximately $295,000.00 was owed on the Dorf Mortgage and $214,100.00 was owed on the Kaplan Mortgage at the time of the transfer as well. (Def. Mem. Supp. Summ. J. at 5.) The Trustee relies on Alan's deposition testimony and contends that the Debtors made payments until January 1999 and that only $358,576.00 was owed on the Mrs. Reisner Mortgage, giving the Debtors at least $32,324.00 in equity. At the hearing, Alan testified that payments were made on the Reisner Mortgage through December 1998. (Tr.2 at 43.) No documentary...
To continue reading
Request your trial
-
In re Inc.
...whether reasonably equivalent value was exchanged based on the facts and circumstances of each case.Pergament v. Reisner (In re Reisner), 357 B.R. 206, 211 (Bankr.E.D.N.Y.2006) (internal quotation marks, citations, and alterations omitted). “The ‘reasonably equivalent value’ standard of Sec......
-
Silverman v. A-Z RX LLC (In re Allou Distribs. Inc.)
...whether reasonably equivalent value was exchanged based on the facts and circumstances of each case.Pergament v. Reisner (In re Reisner), 357 B.R. 206, 211 (Bankr. E.D.N.Y. 2006) (quotation and alterations omitted). And under Bankruptcy Code Section 548(a)(1)(B), "when the plaintiff demonst......
-
In re Marketxt Holdings Corp.
...number of cases that have held that value does not include executory promises of future consideration. See Pergament v. Reisner (In re Reisner), 357 B.R. 206, 214 (Bankr.E.D.N.Y.2006), quoting 5 Collier on Bankruptcy, ¶ 548.05[1][b], where the Court said, "The language of Section 548(d)(2)(......
-
McCord v. Ally Fin., Inc. (In re USA United Fleet, Inc.)
...whether reasonably equivalent value was exchanged based on the facts and circumstances of each case.Pergament v. Reisner (In re Reisner) , 357 B.R. 206, 211 (Bankr. E.D.N.Y. 2006) (quotation and alterations omitted).E. The Trustee's Fourth, Fifth, and Sixth Claims: Recovery of a Fraudulent ......