In re Sicari, Bankruptcy No. 92-31419. Adv. No. 92-7096.

• Decision Date: 14 September 1994
• Docket Number: Bankruptcy No. 92-31419. Adv. No. 92-7096.
• Citation: 187 BR 861
• Parties: In re Anthony SICARI, a/k/a Sicari Salerno, a/k/a Anthony Salerno, Debtor. CONGRESS TALCOTT CORPORATION, Plaintiff, v. Anthony SICARI, Debtor-Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

187 B.R. 861 (1994)

In re Anthony SICARI, a/k/a Sicari Salerno, a/k/a Anthony Salerno, Debtor CONGRESS TALCOTT CORPORATION, Plaintiff, v. Anthony SICARI, Debtor-Defendant.

Bankruptcy No. 92-31419. Adv. No. 92-7096.

United States Bankruptcy Court, S.D. New York.

September 14, 1994.

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Todd Strassberg, Strassberg & Strassberg, P.C., New York City, for plaintiff.

Jeffrey L. Sapir, White Plains, NY, for debtor-defendant.

DECISION ON OBJECTION TO DISCHARGE PURSUANT TO 11 U.S.C. § 727(a)(2)(A) and § 727(a)(4)(A)

JEREMIAH E. BERK, Bankruptcy Judge.

Congress Talcott Corporation filed a complaint on November 5, 1992 seeking to bar debtor's discharge under 11 U.S.C. § 727(a)(2)(A) and § 727(a)(4)(A). Trial of this adversary proceeding commenced on June 28, 1993,¹ continued on September 27, 1993² and December 6, 1993³, and concluded on December 7, 1993.⁴

At the conclusion of Plaintiff's case, Defendant moved for dismissal on partial findings pursuant to Fed.R.Civ.P. 52(c) and Fed. R.Bankr.P. 7052. Opposition to the motion was filed by Plaintiff, and the motion was taken under advisement pending the submission of Defendant's case. This decision resolves that motion.

For the reasons set out herein, I am satisfied that Plaintiff has sustained its burden of proof on its objections to discharge under both § 727(a)(2)(A) and § 727(a)(4)(A) of the Bankruptcy Code.

FINDINGS OF FACT

Introduction.

Anthony Sicari (hereafter "Sicari"), filed an individual voluntary petition for relief under Chapter 11 of the Bankruptcy Code on June 9, 1992. On December 23, 1992 his case was converted to one under Chapter 7 liquidation.

Plaintiff, a creditor of Sicari and his now-defunct corporation, filed an unsecured Proof of Claim herein on July 27, 1992 in the amount of $315,246.75, plus interest. Plaintiff's claim is based on a judgment entered on November 6, 1991 against Sicari and others in the New York State Supreme Court, New York County, in an action entitled Congress Talcott Corporation v. Anthony Sicari, Inc., Anthony Sicari, Emanuel Sicari and Rallye Motors, Inc.⁵ The judgment, docketed in the Orange County Clerk's Office on November 14, 1991, arose from the sale of goods by Plaintiff to Anthony Sicari, Inc., and the personal guaranty thereof by Sicari individually.

Plaintiff alleges that at a time when Sicari was insolvent he initiated a series of fraudulent transfers of his personal assets, that these transfers were made without fair consideration, were gratuitous or for inadequate consideration, and were made with intent to hinder, delay or defraud creditors. Plaintiff further alleges that Sicari intentionally concealed these transfers, failed to disclose them in his bankruptcy petition, failed to disclose his equitable interest in transferred assets, and that such failure constitutes a false oath in his bankruptcy case. Plaintiff claims that Sicari's discharge in bankruptcy should, therefore, be denied pursuant to both 11 U.S.C. § 727(a)(2)(A) and § 727(a)(4)(A).

Background.

In 1985, Sicari began the now-defunct Anthony Sicari, Inc. to design and manufacture ladies' garments. He operated the business from three plants in Walden, New Paltz and Kingston, New York, and maintained a showroom in Manhattan. Sicari owned and operated the business from its inception until its bankruptcy liquidation in 1992. At its peak, the corporation employed more than 300 persons.

Plaintiff points to a number of prepetition asset transfers from Sicari to his relatives and to a friend. Esther Sicari is his wife, Diane Cagliuso is his sister-in-law, Santa Salerno is his mother and Emanuel Sicari is his uncle. All are "relatives" and "insiders" within the purview of 11 U.S.C. § 101(31)(A)(i). (V).⁶ Tonia Cara, is a long-time friend of the Sicari family.

Real property transfers were made by Sicari shortly before the entry of substantial judgments against him. Creditor Israel Discount Bank obtained a judgment for $4,110,882.55 against Sicari, his wife Esther and his uncle Emanuel on December 5, 1990 in the New York State Supreme Court. One week earlier, creditor Quaker Fabrics obtained a judgment for $515,552.07 against the same defendants.

Sicari's testimony throughout this trial was often unpersuasive, sometimes confusing, evasive or nonresponsive. His alleged lack of knowledge of the many suspect asset transfers, lack of documentation and records relating to them, and his explanation of "mistakes" by others, at times seemed incredible, particularly in light of his prior experience in business and financial matters.

Section 727(a)(2)(A)

The Kingston property.

On August 13, 1980 Sicari and his wife Esther acquired a commercial building, now known as 290-292 Fair Street, in the City of Kingston, New York (hereafter "Kingston property"), for approximately $47,000.00. (IV, Defendant's Exhibit I; III, 347). No significant improvements were made to the property prior to its transfer by them. (III, 347).

In February, 1983, Sicari and his wife established a "Clifford Shortterm Trust" for the benefit of their children. (V; Plaintiff's Exhibit 9).⁷ Esther Sicari served as trustee of the Trust from that time until about 1990, when Sicari's sister-in-law, Diane Cagliuso, replaced her as trustee. (III, 344-45; II, 293; Plaintiff's Exhibit 9).

Although Sicari testified that the Kingston property was conveyed to the Trust in 1983 (III, 336-37, 344, 347), the deed running from him and his wife to the Trust is dated August 24, 1990, and was recorded in the Ulster County Clerk's Office on October 22, 1990. (Plaintiff's Exhibit 1; II, 267). Edward Levine testified that based on his nine years of employment as Assessor for the City of Kingston and his examination of the City Assessment Roll, the market value of the Kingston property in either August or October, 1990, was $221,500.00. (I, 27-28). The tax stamps on the deed reflect a consideration of no more than $30,000.00.

Sicari testified that he and his wife divested themselves of all interest in the Kingston property at the time of its transfer to the Trust. (III, 345, 350, 356). Plaintiff, however, contends that despite the apparent transfer to the Trust in 1990, Sicari retained an equitable interest in, and continued to exercise control over and to receive rental income from, the Kingston property. It is claimed, therefore, that the transfer to the Trust was a sham transaction made with intent to hinder, delay or defraud creditors, and that Sicari failed to disclose an equitable interest in the property in his bankruptcy schedules.

Rental Income — Tenant, Fredi Kletter.

Fredi Kletter, a tenant of the Kingston property, testified that she had been conducting business there for nine years as Catskill Army Navy. Between May 10, 1991 and June 9, 1992, she paid $500.00 per month as rent for the premises.

Kletter produced an unsigned "Lease Agreement" setting forth a term from March 1, 1991 to March 31, 1996, as the written agreement memorializing the rental agreement she had negotiated with someone named Irene Lawrence. (Plaintiff's Exhibit 7; I, 39-40). Kletter was unable to state whether Irene Lawrence represented the landlord, but testified that Lawrence maintained the property. (I, 34, 52). The unsigned lease bears the heading: "Anthony Sicari, 521 Main Street, New Paltz, N.Y. 12561, (914) 255-4550," and shows "Anthony & Esther Sicari" as the landlords.

According to Kletter, this lease was not signed because changes were to be made to it and a new lease was to be drawn. (I, 51). Kletter did not know if the changes pertained to the name of the landlord(s). As far as she knew the new lease "was just going to be the same," and she acknowledged her own notation at the top of the lease agreement stating: "Spoke to Patty on 1-2-92 about not receiving lease — not to worry about rent — will honor this agreement." (I, 51-52). Kletter further testified that she never saw a new lease, that she could not recall whether she ever met the landlord, and that she made rent checks payable to whom required. (I, 52-53).

Sicari could not explain why the lease, albeit unsigned, would contain a heading bearing his name, address and telephone number, and show his wife and him as landlords. (II, 286). He acknowledged, however, that Irene McGovern managed buildings he owned in the early 1990's, and that his secretary/bookkeeper, Patty Jacobsen, managed the Kingston property after January 1, 1990. (II, 291-92).

Tenant Kletter further testified that she received a letter addressed "Dear Tenant," stating that "effective 5-11-92, all rental checks are payable to: Sicari-Clifford Trust, RD 1 box 611, Gardiner, N.Y. 12525. Thank You, Diane Cagliuso Trustee." (Plaintiff's Exhibit 8; I, 42). Thereafter, Kletter made her rent checks payable to the Sicari-Clifford Trust. (Plaintiff's Exhibit 6, Ck. # 4133, dated 6-6, 1992; I, 44, 47).

Twelve cancelled rent checks produced by Kletter cover the period from May, 1991 to April, 1992. (Plaintiff's Exhibit 6). Of those twelve checks, ten are payable to either "A. Sicari" or "Anthony Sicari," and two are payable to "A & E Sicari." Kletter testified that she made those checks payable as such pursuant to the provisions of the unsigned lease agreement. (I, 40). Thus, despite Sicari's testimony that the Kingston property had been transferred to the Trust in 1983, (1) its transfer is evidenced by a deed executed and recorded in 1990, and (2) after the deed transfer, Kletter continued to make rent checks payable to Sicari and his wife.

Plaintiff established that two rent checks never found their way into the Trust account. Rent check No. 341 of Catskill Army Navy, dated October 8, 1991 and payable to "Anthony Sicari," was endorsed by Sicari and deposited in his wife's personal bank account. (Plaintiff's Exhibit 6; Plaintiff's Exhibit 30, 41; Plaintiff's Exhibit 33; II, 239, 270-71). Rent check No. 4063 of Catskill Army Navy, dated ...