In re Taubman, Bankruptcy No. 3-89-01642
| Decision Date | 16 November 1993 |
| Docket Number | 3-92-0057,3-92-0098,Bankruptcy No. 3-89-01642,3-92-0082,3-92-0093,3-92-0097,3-92-0061,3-92-0029,3-92-0065,3-92-0092,3-92-0096,3-92-0050,3-92-0054,Adv. No. 3-92-0022,3-92-0070,3-92-0100 and 3-92-0102.,3-92-0094 |
| Citation | 160 BR 964 |
| Parties | In re Naomi M. TAUBMAN, d/b/a Taubman Realty Co., d/b/a Certified Realty Co., d/b/a Naomi M. Taubman, P.A., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
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John Paul Rieser, pro se.
Deborah D. Hunt, Peter Donahue, Dayton, OH, for William and Barbara Niswonger, Eva Shane, Thomas Peterson and Sarah Jane Peterson, James and Mary Leach and J & M Management.
Donald F. Harker, III, Dayton, OH, for Jerald Lieber and Dorothy Stefandis.
Ronald S. Pretekin, Mary E. Ming, Dayton, OH, for John and Donna Venema.
Thomas Whiteside, Nashville, TN, for Mary Peelle.
Frank Thermes, Miamisburg, OH, Donald Burton, David Shough, Dayton, OH, for Diane Frey.
Michael J. Long, Kettering, OH, for Henry Gottwald, Belva Estes, Frima and Samuel Abramowitz and Daniel Taubman.
Robert L. Moore, Dayton, OH, for Winfred L. Smith and Nellie Jo Smith.
Ira Rubin, Dayton, OH, for Don Frisby.
Daryl R. Douple, Dayton, OH, for Phyllis Stout.
Theodore Gudorf, Dayton, OH, for Martin Taubman, Brenda Taubman, and Stanley Taubman.
John Squires, Dayton, OH, for Harold Taubman.
Paul H. Spaeth, Dayton, OH, for James and Matilde Taguchi.
Bradley C. Smith, Dayton, OH, for J.R. Gunter and Aileen Gunter.
Dalma C. Grandjean, Dayton, OH, for Dale E. Holycross.
DECISION ON ORDER GRANTING MOTION OF TRUSTEE FOR PARTIAL SUMMARY JUDGMENT AS TO COMMON ISSUES IN THE ESTATE CASE CONCERNING ALL PROOFS OF CLAIM AND THE ADVERSARY PROCEEDINGS LISTED ABOVE AND DETERMINING THIS ORDER IS A FINAL ORDER PURSUANT TO FED.R.BANKR.P. 7054
TABLE OF CONTENTS
Page
I. PRELIMINARY STATEMENT .......................................................... 969
II. BACKGROUND ..................................................................... 969
III. FACTS .......................................................................... 972
IV. DISCUSSION ..................................................................... 974
A. Summary Judgment ............................................................ 974
B. Common Issues ............................................................... 978
1. Ponzi Scheme ............................................................. 978
2. Insolvency ............................................................... 979
3. Separation of All Individual Investor/Lender Proofs of Claim Into A/B
Claims ................................................................. 980
4. Avoidance of False Profits ............................................... 982
a. Transfer/Conveyance of Property of the Debtor ......................... 982
b. Actual Intent to Defraud .............................................. 983
(1) 11 U.S.C. § 548(a)(1) ........................................ 983
(2) O.R.C. § 1336.07 ............................................. 984
c. Constructive Fraud .................................................... 984
(1) 11 U.S.C. § 548(a)(2)(A)-(B)(i)-(iii) ........................ 984
(a) Reasonably Equivalent Value ................................... 985
(i) Insolvent ................................................. 986
(ii) Unreasonably Small Capital ............................... 986
(iii) Intent to Incur Debts Beyond Ability to Pay ............. 986
(b) 11 U.S.C. § 548(c) ....................................... 987
(2) Uniform Fraudulent Conveyance Act — O.R.C. §§ 1336.04
1336.05, and 1336.06 ............................................. 987
(a) Fair Consideration ............................................ 988
(i) Insolvent ................................................. 988
(ii) Unreasonably Small Capital ............................... 988
(iii) Intent to Incur Debts Beyond Ability to Pay ............. 988
5. Uniform Fraudulent Conveyance Act and Not the Uniform Fraudulent
Transfer Act is the Applicable Law and a Specific Statute of Limitations
is Not a Bar ............................................................ 989
a. Applicable Law ........................................................ 989
b. A Specific Statute of Limitations Does Not Bar the Trustee's
Claims ............................................................... 989
6. The Ordinary Course of Business Defense is Not Applicable to 547
Preference Claims ....................................................... 990
V. DETERMINATION PURSUANT TO FED.R.BANKR.P. 7054 .................................. 991
VI. CONCLUSION ..................................................................... 992
This proceeding, which arises under 28 U.S.C. § 1334(b) in a case referred to this court by the Standing Order of Reference entered in this district on July 30, 1984, is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (F), (H), and (O).
Presently before the court is a motion for partial summary judgment filed by the chapter 7 trustee ("Trustee"). The Trustee requests that the court determine, as a matter of law, common issues in all adversary proceedings pending before the court and with respect to each creditor who filed a proof of claim.
On May 3, 1989, Naomi M. Taubman (the "Debtor") filed for relief under chapter 11 of the Bankruptcy Code. On January 18, 1990, this case was converted to one under chapter 7. John Paul Rieser was appointed as the chapter 7 Trustee. On or about January 17, 1992, the Trustee initiated approximately eighty adversary proceedings alleging similar, but not identical, claims against a large number of defendants. In general, these complaints seek recovery of amounts arising out of prepetition investments with the Debtor in which these defendants received amounts in excess of the amounts originally invested. The Trustee has alleged alternate theories of recovery pursuant to 11 U.S.C. §§ 544, 547, 548, and 550, as well as under various provisions of state law. The gravamen of the Trustee's complaints is that the Debtor was engaged in a "ponzi" scheme. Additionally, the Trustee seeks to bifurcate all proofs of claim, including those of investors not named as defendants in any of the pending adversary proceedings. The Trustee proposes to separate the proofs of claim into an "A" claim and a "B" claim. The "A" claim would represent, on a cash-in/cash-out basis, the difference, if any, between what an investor actually invested, lent, or gave to the Debtor, minus the total he or she received back at any time. The "B" portion would consist of all profit, interest, return of principal, punitive damages, multiple damages, or any amount in excess of actual pecuniary loss.
To facilitate the determination of issues present in many of these adversaries and in the estate case concerning proofs of claim, the Trustee filed a Motion And Report Of Trustee Re Proposed Consolidation Of Adversaries For Determination Of Common Issues Of Law And Fact. Some, but not all, of the defendants filed responses to the Trustee's motion. Pursuant to an order entered in the adversary proceedings, the court held a hearing in connection with the Trustee's motion concerning "common issues" and, thereafter, considered individual issues in connection with each specific adversary proceeding. Upon consideration of all responses filed and all oral arguments presented, the court granted the Trustee's motion. In accordance with this determination, the court fixed filing dates for the Trustee to file a motion and accompanying memorandum in support of his positions concerning common issues and for any responses to be filed, and to hear oral argument.
With respect to the issues involving parties who filed proofs of claim, the court entered an Order Establishing Procedures And Filing Requirements Governing Partial Determination Of Proofs Of Claim Issues, Setting Pretrial Conference, And Requiring Notice (Doc. 499-1). This order noted that although the Trustee filed his motion regarding the proposed consolidation of adversaries for determination of common issues of law and fact in the estate case, it was served only upon defendants in various adversary proceedings. Therefore, to allow parties who filed a proof of claim to receive notice of the Trustee's positions and requests for determinations in connection with all proofs of claim, the Trustee was ordered to file with the court and serve upon all parties filing a proof of claim in which the Trustee asserted there were common issues of law and fact, a motion and accompanying memorandum in support of the Trustee's positions. Response and reply dates were also established, and a date for oral argument and for a pretrial conference was set.
In order to allow all parties an extended period for discovery and research, the dates in each of these orders were subsequently vacated and new dates were established. The entry of these orders as to all "common issues" was a necessary step as part of the special procedures adopted to manage these potentially difficult and protracted actions involving complex issues, multiple parties, difficult legal questions, and unusual proof problems. Fed.R.Bankr.P. 7016.
On August 5, 1993, ...
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