In re Simon TAUB

• Decision Date: 28 October 2010
• Docket Number: No. 10-49215.,10-49215.
• Citation: 438 B.R. 761
• Parties: In re Simon TAUB, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of New York

438 B.R. 761

In re Simon TAUB, Debtor.

No. 10-49215.

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

Oct. 28, 2010.

COPYRIGHT MATERIAL OMITTED.

Katalin Pota, Petitioning Creditor, pro se.

Leo Fox, Esq., Law Office of Leo Fox, New York, NY, for Simon Taub.

Chana Taub, Chapter 11 Debtor in In re Chana Taub, Case No. 08-44210.

Christine Quigley, Esq., SilvermanAcampora LLP, Jericho, NY, for Chapter 11 Trustee Lori Lapin Jones.

Alicia Leonhard, Esq., Office of the United States Trustee, Brooklyn, NY, Office of the United States Trustee.

MEMORANDUM DECISION ON MOTION TO DISMISS INVOLUNTARY BANKRUPTCY PETITION

ELIZABETH S. STONG, Bankruptcy Judge.

Before the Court is the motion of the alleged Debtor, Simon Taub, brought on by order to show cause, to dismiss this involuntary Chapter 7 case pursuant to Bankruptcy Code Section 303(b) (the “Motion to Dismiss”). Docket No. 10. Mr. Taub also seeks attorney's fees and sanctions under Bankruptcy Code Section 303(i).

Jurisdiction

The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(1).

Background

This is not the first involuntary petition to which the petitioning creditor Katalin Pota has subscribed, and this Court does not write on a blank slate.

On August 30, 2010, Chana Taub, her sister Esther Newhouse, and Ms. Pota, a former tenant at 10 Grand Avenue, Brooklyn, New York, commenced an involuntary Chapter 7 bankruptcy case against Mr. Taub. According to that petition, Ms. Taub, Ms. Newhouse, and Ms. Pota held claims against Mr. Taub in the amounts of $700,000, $500,000, and $200,000, respectively. See In re Simon Taub, Case No. 10-48155, 2010 WL 3504097 (“ Simon Taub I ”), Docket No. 1 (Petition) (the “First Petition”), at 2. That petition characterizes Mr. Taub's debts as “primarily business debts.” First Petition at 1. Ms. Pota and the other petitioners did not complete the sections of the First Petition that call for each petitioner to identify the nature of her claim.

At the same time, Ms. Pota and the other petitioners filed a statement pursuant to Local Bankruptcy Rule 1073-2(b) stating that “no related case is pending or has been pending at any time.” First Petition, E.D.N.Y. LBR 1073-2(b) Statement, at 3-4. The petitioning creditors did not disclose that Ms. Taub's Chapter 11 bankruptcy case, which she commenced on July 1, 2008, is pending before this Court.

On August 31, 2010, Mr. Taub moved to dismiss the First Petition. Following an evidentiary hearing on September 2, 2010, before Chief Judge Carla E. Craig, the First Petition was dismissed by Decision and Order entered on September 7, 2010. Simon Taub I, 2010 WL 3504097 (Bankr.E.D.N.Y. Sept.7, 2010).

As noted by Chief Judge Craig in her decision, these matters have a long history before this Court. As one illustration of this, the docket of Ms. Taub's Chapter 11 bankruptcy case shows almost 800 entries. As also noted by Chief Judge Craig, Mr. Taub and Ms. Newhouse are creditors of Ms. Taub's estate and have appeared before this Court on many occasions. And Ms. Pota, one of the petitioning creditors in the First Petition, is the sole petitioning creditor here.

Accordingly, the circumstances of these other bankruptcy cases have some bearing on the matters to be determined on Mr. Taub's Motion to Dismiss. Familiarity with these proceedings is assumed, and some background is set forth below.

Ms. Taub's Chapter 11 Bankruptcy and the Pending State Court Actions

Mr. Taub and Ms. Taub have been parties to two divorce actions in New York Supreme Court. One of these actions (the “Second Divorce Action”), is presently pending in New York State Supreme Court, Kings County (the “Supreme Court, Kings County”). That action was stayed by the July 1, 2008 filing of Ms. Taub's Chapter 11 petition. On August 14, 2009, this Court entered an order granting relief from the automatic stay pursuant to Bankruptcy Code Section 362(d)(1), to allow the Second Divorce Action to proceed to conclusion and entry of judgment, with enforcement to take place in this Court.

Ms. Taub filed a Notice of Appeal from that order on December 18, 2009, and later withdrew her appeal. By order entered on July 1, 2010, U.S. District Judge Carol B. Amon dismissed the appeal.

The Appointment of a Chapter 11 Trustee and the District Court Appeal

On April 9, 2010, this Court entered a memorandum decision and order (the “Trustee Order”) directing the appointment of a Chapter 11 trustee to operate Ms. Taub's estate. In re Chana Taub, 427 B.R. 208(Bankr.E.D.N.Y.2010). The Court found by clear and convincing evidence that there was cause to appoint a trustee under Bankruptcy Code Sections 1104(a)(2) and (3), and noted, among other matters, that Ms. Taub's estate was not current on administrative expenses, that Ms. Taub had negative relationships with certain estate professionals, which had impeded progress towards reorganization, that substantial acrimony existed between Ms. Taub and her creditors, and that conflicts of interest impaired Ms. Taub's ability to fulfill her fiduciary duties to creditors. In re Chana Taub, 427 B.R. at 227-32.

On April 13, 2010, the Court entered an order appointing Lori Lapin Jones as Chapter 11 Trustee. On April 28, 2010, after a contested hearing, the Court entered an order appointing SilvermanAcampora LLP as attorneys for the Chapter 11 Trustee.

By Notices of Appeal dated April 16, 2010, and April 23, 2010, Ms. Taub and Ms. Newhouse appealed the Trustee Order to the District Court. On May 13, 2010, this Court denied Ms. Taub's motion to stay the Trustee Order pending those appeals. And on August 30, 2010, Judge Amon issued a Memorandum Decision and Order affirming both orders. Taub v. Adams, 2010 U.S. Dist. LEXIS 104805 (E.D.N.Y. Aug. 30, 2010). As a result, the Trustee Order continues in effect, and vests the Chapter 11 Trustee with all of the rights, duties, and powers of a trustee under the Bankruptcy Code, including the authority to take possession of Ms. Taub's property, to operate and manage Ms. Taub's business, and to perform all of the duties of a trustee set forth in Bankruptcy Code Section 1106(a).

The First Involuntary Petition and Related Proceedings

As noted above, on August 30, 2010, the same day that trial was set to commence in the Second Divorce Action in Supreme Court, Kings County, petitioning creditors Ms. Taub, Ms. Newhouse and Ms. Pota filed the First Petition commencing an involuntary Chapter 7 bankruptcy case against Mr. Taub. The next day, Mr. Taub moved by application for an order to show cause to dismiss the First Petition. ¹ This Court, by Chief Judge Craig, scheduled the motion to dismiss to be heard on September 2, 2010. Ms. Taub filed opposition to the motion to dismiss the First Petition on September 1, 2010, and Mr. Taub filed a reply on September 2, 2010.

The Court held an evidentiary hearing on September 2, 2010, at which Mr. Taub, by counsel, Ms. Taub, by counsel, Ms. Newhouse, pro se, the Chapter 11 Trustee, by counsel, and the United States Trustee, by counsel, appeared and were heard. Petitioning creditor Ms. Pota did not appear at the hearing or present documentary evidence to support her claim.

As the Court observed:

During the course of the hearing, the Court heard the testimony of Ms. Taub, Mr. Taub, and Ms. Newhouse, and received multiple exhibits in evidence. The Court heard the arguments of Mr. Taub and the Chapter 11 trustee in support of the Motion to Dismiss, and the arguments of Ms. Taub and Ms. Newhouse in opposition.

Simon Taub I, 2010 WL 3504097, at *4.

Ms. Pota did not appear at the hearing, but the other petitioning creditors and Mr. Taub addressed her claim. Ms. Newhouse asserted that Mr. Taub had stolen valuable property from Ms. Pota, and that these thefts were documented by police reports.

Simon Taub I, 2010 WL 3504097, at *5. Mr. Taub contended that he owed nothing to Ms. Pota, and disputed that he had stolen her property. Mr. Taub asserted that Ms. Pota owed him rent arrears from the time she was a tenant in one of his properties, and offered evidence to show that he paid fees to a storage company to store her personal belongings. Ms. Newhouse disputed the authenticity of the evidence and the assertions. Id.

The Court found that the claims asserted by Ms. Taub and Ms. Newhouse were subject to bona fide disputes, and contingent as to amount. Simon Taub I, 2010 WL 3504097, at *10, *11, * 12. As a consequence, the Court also found that Ms. Taub and Ms. Newhouse were not eligible to be petitioning creditors under Bankruptcy Code Section 303(b). Simon Taub I, 2010 WL 3504097, at *11, *12. As to Ms. Pota's claim, the Court found that the petitioning creditors did not meet their burden to come forward with persuasive evidence that Ms. Pota's claim was not subject to a bona fide dispute as to liability, or was not contingent as to amount. Id. As a result, the Court concluded that Ms. Pota was ineligible to be a petitioning creditor for purposes of Bankruptcy Code Section 303(b). Id. Based on the entire record, the Court concluded that none of the Petitioning Creditors was eligible to file the first involuntary petition, and entered a memorandum decision and order dismissing the First Petition on September 7, 2010. Id.

The Second Involuntary Petition

On September 29, 2010, Ms. Pota commenced this bankruptcy case by filing an involuntary petition (the “Second Petition”) against Mr. Taub. According to the petition, Ms. Pota holds a claim against Mr. Taub in the amount of $200,000. The Second Petition describes the debts owed by Mr. Taub as “primarily consumer debts,” and describes his assets as “multi-asset real estate.” Second Petition at 1. Ms. Pota did not complete the section of the Petition that calls for a description of the nature of her claim. And she did not provide any documentation in support of her claim.

Ms. Pota does not identify any “pending bankruptcy case filed by or against any partner or...