In re Riso, Bankruptcy No. 84-340

• Court: U.S. Bankruptcy Court — District of New Hampshire
• Citation: In re Riso, 102 B.R. 280 (Bankr. N.H. 1989)
• Decision Date: 30 June 1989
• Docket Number: Adv. No. 84-104.,Bankruptcy No. 84-340
• Parties: In re R. Richard RISO, Debtor. Victor DAHAR, Trustee, Plaintiff, v. Beatrice RISO, Defendant.

102 B.R. 280 (1989)

In re R. Richard RISO, Debtor Victor DAHAR, Trustee, Plaintiff, v. Beatrice RISO, Defendant.

Bankruptcy No. 84-340, Adv. No. 84-104.

United States Bankruptcy Court, D. New Hampshire.

June 30, 1989.

Victor Dahar, Manchester, N.H., trustee.

John L. Britton, Britton & Kantner, P.A., Ft. Lauderdale, Fla., for Victor Dahar.

Wayne C. Beyer, Cleveland, Waters and Bass, Concord, N.H., for Beatrice Riso.

MEMORANDUM OPINION

JAMES E. YACOS, Bankruptcy Judge.

Plaintiff in this adversary proceeding is seeking either recovery of assets or judgment in the amount of $327,147.00 from the defendant as a result of the asserted lack of reasonably equivalent value in the property division reached by the debtor and his wife in conjunction with a pre-bankruptcy divorce proceeding. The plaintiff trustee has attacked as voidable under § 548(a)(2) of the Bankruptcy Code certain transfers included in a property settlement agreement executed on January 9, 1984 by the debtor and his wife prior to the voluntary chapter 7 bankruptcy petition filed by the debtor on June 7, 1984.

The trustee also attacks the transfers in question under § 544(b) of the Bankruptcy Code, incorporating in this instance his rights under Florida Statutes Annotated § 726.01, but inasmuch as the requisite elements for voidability raised on the facts in this case are identical under both the Federal and Florida Statute this decision will refer only to the Bankruptcy Code provision.

Under § 548(a)(2)(A) it is necessary that the trustee establish that the transfers attacked resulted in the debtor receiving "less than a reasonably equivalent value" in exchange for the transfers. It is also necessary, under § 548(a)(2)(B), that it be established that the debtor was insolvent on the date of the transfers or became insolvent as a result of the transfers. As to the latter requirement, there is no dispute in the present case regarding insolvency as a factor. Accordingly, the issue before the court is a determination of reasonably equivalent value.

It should be emphasized at the outset that an actual intent to defraud is not an element in the present adversary proceeding. In a prior adversary proceeding in this case the major creditor in this estate, Donald H. Francis, brought a complaint seeking a general denial of the debtor's discharge under § 727(a)(2)(A) alleging that these transfers occurred with the actual intent to defraud. That adversary proceeding resulted in a final judgment by this court denying the objection to discharge and determining that the debtor, R. Richard Riso, did not have an actual intent to defraud with regard to these same transfers in conjunction with the divorce proceeding. See In re Riso, 74 B.R. 750 (Bankr.D.N.H.1987).¹

The circumstances surrounding the divorce property settlement in question were set forth in my prior opinion dealing with the discharge objection; are incorporated herein by reference; and will not be set forth at length again in this opinion. Briefly, however, the salient facts involve a property settlement agreement entered into by the debtor and his then-wife on January 9, 1984, following the filing of a divorce proceeding by the wife (here the defendant), in Florida on December 27, 1983.² Donald Francis had previously, on October 20, 1983 received an arbitration award in certain litigation pending in New Jersey between himself and Richard Riso, in an amount of $1,913,404.00, which was ultimately affirmed by the U.S. District Court for the District of New Jersey on March 22, 1984. The conjunction of these two events, and certain other circumstances, indicated the possibility of a sham divorce and attempt at evasion of Francis' judgment by the divorce property settlement, but it was determined in the prior adversary proceeding that the divorce between Richard Riso and the present defendant was in fact a true divorce and that no sham or actual fraud was involved. See In re Riso, 74 B.R. at 758.³

The application of § 548 of the Bankruptcy Code in a divorce property settlement context raises certain unique questions relating to the inchoate nature of a husband's and wife's property rights in an "equitable distribution" state — as is Florida — that this court has previously addressed in some length in its decision in In re Sorlucco, 68 B.R. 748 (Bankr.D.N.H.1986). As indicated, Florida is an "equitable distribution" jurisdiction. Canakaris v. Canakaris, 382 So.2d 1197 (Fla.1980).

Accordingly, there are two key issues presented for decision in the present case: (1) What were the actual values of the various assets retained by Richard Riso and Beatrice Riso as a result of the divorce property settlement; and (2) Was the agreed division of properties pursuant to that agreement, and the actual values here determined, within the range of expectable results in a contested Florida divorce proceeding on the history and circumstances of their marriage?⁴

THE ACTUAL VALUES (OTHER THAN MAYBROOK)

The property division pursuant to the January 9, 1984 agreement is well summarized in an Annex to Plaintiff's Initial Post-Trial Brief, which will also be an Annex to this opinion. This summary indicates concisely the differing values for the assets in question as listed first by the Risos and then as asserted by the plaintiff. The agreement of January 9, 1984, as executed by the Risos, listed properties totalling assigned values of $1,300,465.00. Of this amount, items totalling $635,414.00 were transferred to Beatrice Riso, and items totalling $665,051.00 were transferred to Richard Riso.

With regard to the items held by Beatrice Riso following the divorce settlement agreement, the plaintiff asserts that the actual value of those items, together with some omitted items, is $668,414.00. I agree with the plaintiff in this regard and find and conclude that the value of the items retained by Beatrice Riso did in fact total $668,414.00 in actual value, as of the January 9, 1984 agreement, and also as of the date of the Final Judgment of Divorce on April 12, 1984. It is clearly established by the evidence that there must be added to the listing on the agreement certain shares of Diamond Shamrock Stock worth $3,000.00; and that a property located in Goodland, Florida that had been inherited by Beatrice Riso from her father was also omitted and should be added (for equitable distribution purposes), which property has an actual value of $30,000.00. These corrections therefore add $33,000.00 to the total listed for Beatrice Riso in the January 9, 1984 agreement.

With regard to the items retained by Richard Riso under the divorce agreement, the plaintiff contends that their total value is only $25,221.00 rather than the $665,051.00 total value listed. The major difference is the plaintiff's contention that the $500,000.00 in value assigned to the corporate stock held by the debtor in Maybrook, Inc. was actually worthless during the relevant time period. Richard Riso held 100 shares in Maybrook, Inc., which at the time represented a 50 percent interest in the corporation. The other 50 percent interest was owned by Ivar W. Malstrom.⁵ The question of the valuation of the Maybrook, Inc. stock will be considered at some length below.

The plaintiff asserts that notes receivable held by Richard Riso from Malstrom and Francis in the amounts of $26,500.00 and $59,551.00 respectively, were in fact worthless during the relevant time periods and should not have been listed as having any actual value on Richard Riso's side of the property distribution. In view of the $1.9 million judgment obtained by Francis against Malstrom and Riso, jointly and severally, and in view of the fact that both Riso and Malstrom filed bankruptcy petitions in June of 1984 as a direct result of the final affirmance of that judgment, I find and conclude that the plaintiff is correct in this regard and that those items should be valued at zero for present purposes. Neither bankruptcy estate has assets remotely sufficient to cover the Francis claim, and thus neither debtor could give any realistic value to what in effect was simply an offset to the claim of Francis following the obtaining of his judgment.

With regard to Richard Riso's interest in a pension plan from his former employment with the Stepan Company, the plaintiff contends that that interest should only be valued at $13,066.92 rather than the $75,000.00 listed by Richard Riso and his wife on the January 9, 1984 agreement. The trustee's position is to the effect that only the amount vested and reachable for the bankruptcy estate should be listed. In fact the plaintiff did recover the sum of $13,066.92 on that ground. See Dahar v. Harris Trust and Savings Bank, 79 B.R. 138 (Bankr.D.N.H.1987). However, I do not find any legal or factual reason to support the trustee's contention in this regard. Riso valued his pension rights in terms of the minimum number of years guaranteed that he could select as an option under his pension plan. Under that option it is clear that he would be entitled to a total sum of $75,000.00. In fact under another option, Riso could elect a fixed sum per month for the balance of his life, and considering his life expectancy as his age of 70 in 1984, the actual value of his pension rights to him based on that life expectancy would be $106,296.00. I conclude for present purposes that his pension plan rights should in fact be valued at $106,296.00 notwithstanding his lower listing of a value for those rights on the January 9, 1984 agreement.⁶

The defendant contends that there should also be added to Richard Riso's side of the ledger the sum of $39,400.00 attributable to a joint liability owned by Beatrice and Richard Riso to the BayBank of Boston, Massachusetts, which was secured by the shares of Stepan Chemical Company stock retained by Beatrice Riso under the divorce settlement. Beatrice Riso did in fact pay off the BayBank loan out of her own funds to protect her interest...