In re Tesmetges
| Citation | 85 BR 683 |
| Decision Date | 22 April 1988 |
| Docket Number | Bankruptcy No. 180-07354-260,Adv. No. 181-0473. |
| Parties | In re Harry TESMETGES, a/k/a Theoharis Tesmetges, a/k/a Harry Thomas, a/k/a Henry Best, Debtor. Robert J. MUSSO, Trustee, Plaintiff, v. Bernard HERMAN, Lelia Herman, Harry Tesmetges and Theresa Tesmetges, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
Robert J. Musso, Brooklyn, N.Y., Trustee, pro se.
Philip M. Kovitz, New York City, former Atty. for Trustee.
Sager & Gellerman, Forest Hills, N.Y., by Audrey Sager, for Bernard and Lelia Herman.
Barry M. Lasky, Garden City, N.Y., for Harry Tesmetges, debtor.
Theresa Tesmetges, pro se.
DECISION
Seven years after this adversary proceeding was commenced by the trustee to establish a fraudulent conveyance and impress an equitable lien, we finally come to the end of the long journey. As is the case where fraudulent intent requires proof of circumstantial evidence, it took the trustee that much time to try to put together the myriad tiles necessary to make up the mosaic. Equally important was the need to probe into the truthfulness of the testimony of the defendants, a factor which also contributed to the unusual length of time consumed by the trustee in attacking their credibility. Sixty hearings were held in which my predecessor, Honorable Manuel J. Price, presided over 10 and I over 50 after he retired in July of 1984. More than 5,500 pages of trial testimony were reviewed as were approximately 300 pages of transcripts of examinations under the Bankruptcy Rules, and about 700 pages of testimony in related issues both in this court and in state court actions initiated prior to this bankruptcy case involving the same defendants and in which the attorney for the plaintiff was the same as the attorney for the trustee in this case, for an overall total of about 6,500 pages of testimony. Eighty exhibits were examined including documents accepted during the trial subject to the ultimate determination as to their relevancy and admissibility.
For the reasons hereinafter set forth, this court concludes that there was no fraudulent conveyance, the trustee is not entitled to impress an equitable lien against property involved in this conveyance, and the complaint is dismissed as to all defendants.
I
In this adversary proceeding the trustee seeks to have the court adjudge that the transfer of a contract executed by the debtor's wife for the purchase of a dwelling house on Sawyer Avenue in Hollis, New York in which they had lived as tenants, was a fraudulent conveyance. It further seeks to have held that although the transfer was made to her sister and brother-in-law which enabled them to acquire the property in their names, it should be deemed an asset of the estate. Finally, it seeks to have the property impressed with an equitable lien in favor of the trustee. The relief which the trustee seeks is governed by Bankruptcy Code § 544 which enables a trustee to have deemed voidable a transfer under state law, in this instance, Article 10 of the Debtor and Creditor Law of the State of New York. The complaint also looks to Bankruptcy Code § 550 which proscribes the liability of a transferee under an avoided transfer, and §§ 541 and 542 which deal with the property of the estate and its turnover to the trustee.
As far back as July of 1974, the debtor, Harry Tesmetges and his wife Theresa, also known as Terry, both of whom are defendants in this action, were tenants of the Sawyer Avenue residence under a lease which was to expire on July 31, 1976. The landlords were Lachman and Lalita Das. Their attorney was David Brown, Esq. The lease provided for rent of $500 per month together with security of $1,000. It contained an option to purchase the property for $50,500. The option provided that every $100 of the monthly rent would be applied as a credit towards the purchase price in addition to the $1,000 security in the event the tenants exercised the option. If the tenants failed to exercise the option, the rent would continue at $500 a month without any deductions, and the $1,000 security would be returned to them at the expiration of the lease if all of its terms had otherwise been observed. The lease was not assignable without the consent of the landlords.
July 31, 1976, the date of the expiration of the lease, came and went and the option was not exercised. Thus, it too expired. Lazarus v. Flournoy, 28 A.D.2d 685, 280 N.Y.S.2d 745. (2d Dept.1967). However, both the debtor and Theresa remained in possession as hold-over tenants on a month-to-month basis pursuant to New York Real Prop.Law § 232-c (McKinney 1968).
Documents in evidence presented to the court for its consideration during the trial reveal that shortly after the lease expired, the Tesmetges expressed an interest in buying the house because of the possibility of getting the Dases to sell it to them under the same favorable terms as contained in the option. Their testimony underscored the fear that if they were unable to acquire the house, not only they, but Theresa's family — her brother, her cousin, and from time to time, her parents who were residing there, would be left without a place to live.
The first of the documents appears in the form of an unsigned Rider which refers to a contract of sale dated October 1976, without specific date. The Rider describes Harry Tesmetges and Theresa Tesmetges as the purchasers. The contract itself was not produced during the course of the trial.
The first evidence of a proposed written contract appears in December of 1976. Unsigned and undated, except for reference to the month and year, it runs between the landlords and Theresa Tesmetges as purchaser. Testimony of both Theresa and Harry indicates that they were convinced that because of his unsatisfactory credit standing and his inadequate income of less than $8,000 he would not qualify for a mortgage necessary to purchase the house. The record indicates that it was conceded by the attorney for the trustee during the trial that because of the many judgments against the debtor and Theresa, as well as their weak financial status, neither would have been able to obtain a mortgage. The purchase price was fixed at $50,500, the same as in the option. It provided for applying the $100 monthly credits towards the purchase price also as contained in the option. It required Theresa to obtain a mortgage commitment within a fixed time. Besides recognizing Theresa Tesmetges as the purchaser, it stated that she was in possession of the premises. It also called upon Harry to execute all documents in connection with the mortgage which Theresa was required to obtain. Although the contract was not signed by Theresa or the landlords, both of the Tesmetges remained on the premises and the landlords continued to accept their monthly rent.
Toward the middle of 1977, Theresa commenced taking steps necessary to a mortgage commitment, even though the testimony indicates that she was far from certain that one would be available in light of her own poor financial condition. She applied through a mortgage lender, Kadilac Funding Corp. ("Kadilac"), for a Certificate of Reasonable Value from the Veterans Administration. Her testimony as well as that of the debtor indicates that even though she was not a veteran and had no intention of obtaining a mortgage with the Veterans Administration guaranty, it was common practice for an application to be made to the Veterans Administration even by a non-veteran to obtain the Certificate which a mortgagee would look to in determining the value of the property on which the mortgage commitment was being sought. She also applied to Dale Funding Corp. ("Dale Funding"), another lender, for a mortgage commitment.
The testimony of Theresa's sister Lelia Herman, who is also a defendant, indicates that because Lelia believed that neither Theresa nor Harry would be able to obtain a mortgage, she, Lelia also became increasingly concerned about what would happen to her mother, her father, her brother, her cousin Alicia, and Theresa, as well as Harry, if the house were sold to someone else. As a result, Lelia and her husband Bernard, the last of the defendants, also began to take steps to purchase the house. Although they had testified that they had looked at other houses with the intention of purchasing one as their residence in place of the apartment they occupied in Forest Hills, New York, they further testified that the opportunity to buy the Sawyer Avenue house at fair market value with the advantage of applying the monthly rent credits against the purchase price made it more financially attractive while at the same time it would enable everyone to live there. Because of their familiarity with the real estate business, Theresa and Harry undertook to help them obtain a mortgage commitment. They assisted Bernard in preparing a mortgage application form which was submitted to Kadilac. Inasmuch as Bernard was a veteran, they also helped him in applying to the Veterans Administration early in March of 1978 for a guaranty of a mortgage in the sum of $49,500. Kadilac thereupon commenced processing the mortgage application by communicating with Bernard's employer for verification of his employment, his banks for verification of his bank balances, and with various department stores for credit information regarding his accounts. Eventually Kadilac committed itself to him for a mortgage loan for $49,500 payable over 30 years at 9% interest.
Notwithstanding all of the foregoing steps taken by the Hermans to buy the house, and prior to Kadilac's commitment to a mortgage, the testimony reveals that Theresa still continued in her efforts to enter into a contract with the Dases so as to tie them up to the sale of the house under the same favorable terms as were contained in the option which had since expired. With that purpose in...
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