In re Thrifty Dutchman, Inc.

Decision Date17 August 1988
Docket NumberAdv. No. 87-0406-BKC-AJC-A.,Bankruptcy No. 87-02702-BKC-AJC
Citation97 BR 101
PartiesIn re THRIFTY DUTCHMAN, INC., Debtor. THRIFTY DUTCHMAN, INC., a Florida corporation, Plaintiff, v. FLORIDA SUPERMARKETS, INC., a Florida corporation, Defendant.
CourtU.S. Bankruptcy Court — Southern District of Florida

Irving M. Wolff, Rodolfo Pittaluga, Jr., Holland & Knight, Miami, Fla., for plaintiff.

Francis L. Carter, Coll, Davidson, Carter, Smith, Salter & Barkett, Lawrence Metsch, McDermott, Will & Emery, Miami, Fla., for defendant.


A. JAY CRISTOL, Bankruptcy Judge.

THIS CAUSE came to be tried on February 4, 5, and 12, 1988, upon an adversary proceeding pursuant to Part VII of the Rules of Bankruptcy Procedure and 11 U.S.C. §§ 101(50) and 548(a)(2)(A), and the Court having heard the testimony and examined the evidence presented, observed the candor and demeanor of the witnesses, considered the arguments of counsel, and being otherwise fully advised in the premises, does hereby make the following Findings of Fact and Conclusions of Law.

This Court has jurisdiction pursuant to 11 U.S.C. §§ 101(50) and 548(a), 28 U.S.C. §§ 151, 157, 1334, 2201, and 2202, and Rule 7001, Rules of Bankruptcy Procedure. Moreover, this matter is a core proceeding pursuant to 11 U.S.C. §§ 101(50) and 548(a) and 28 U.S.C. § 157(b)(2)(A) and (H).


1. The Plaintiff, Thrifty Dutchman, Inc. (the "Plaintiff") and the Defendant, Florida Supermarkets, Inc. (the "Defendant"), are corporations organized and existing under the laws of the State of Florida.

2. On December 4, 1956, Alan B. Kessler and his wife, Esther Kessler (collectively, the "Kesslers'), as landlord, and the Irene Corporation, a Florida corporation, as tenant, entered into a Lease whereby the Irene Corporation leased from the Kesslers certain real property located at 3814 Curtiss Parkway, Virginia Gardens, Florida (the "Lease"). See Plaintiff's Exhibit No. 1.

3. The Plaintiff is the successor in interest to the Kesslers' interest in the Lease by virtue of the execution and delivery of a Warranty Deed dated June 15, 1979.

4. The Defendant is the successor to the Irene Corporation's leasehold interest in the Lease having acquired same from a third party.

5. The Defendant is operating a supermarket known as Pantry Pride Store No. 239 on said premises.

6. The property involved herein consists of 19,792 square feet of building and 65,769 square feet of adjacent land.

7. At all times material hereto, the Defendant has attorned to the Plaintiff as its landlord of said premises and at no time has questioned the Plaintiff's status as the landlord.

8. Paragraph 9 of the Lease provides as follows:

"Tenant is herewith given the further option to extend the term of this lease for an additional period of five (5) years commencing upon the expiration of the first renewal period under the same terms and conditions as are herein set forth for the original term hereof, except that the annual minimum net basic rental for such five (5) year period shall be $16,401.00; if tenant decides to exercise this option, it shall give landlord written notice of its said intention not later than six months preceding the termination of the First Renewal Period. This five (5) year period is sometimes hereinafter referred to as the `Second Renewal Period\'."

9. The First Renewal Period of the Lease commenced on December 1, 1981 and expired on November 30, 1986.

10. Pursuant to the terms of the Lease, the Defendant was reserved the option to extend the Lease for a Second Renewal Period commencing December 1, 1986 and expiring on November 30, 1991.

11. The provisions of the Lease required the Defendant to provide the Plaintiff with written notification of its exercise of the option to extend the Lease for the Second Renewal Period by not later than May 31, 1986.

12. On May 31, 1986, the Defendant was in default of the monthly rental payments for the months of February through May, 1986, and for all months thereafter (June through November, 1986) continued to be in default of the monthly rental payments.

13. The Defendant's default in making the monthly rental payments required under the Lease was never cured, but the Defendant did attempt to cure said default only after it had commenced the State Court action.

14. The Defendant failed to timely exercise the option to extend the Lease for the Second Renewal Period.

15. The Defendant's failure to timely exercise the option and cure the defaults in rental payments terminated the Lease and the enforceability of the Lease's provision, including any and all options contained therein.

16. On September 23, 1986, the Plaintiff sent the Defendant a letter notifying the Defendant that the Lease was terminated as of December 1, 1986, on the grounds that the Defendant had failed to exercise its option to renew and extend the Lease for the Second Renewal Period. See Plaintiff's Exhibit No. 2.

17. At a time when the rent required under the terms and conditions of the Lease had been in default, and with no legal tender thereof, on November 20, 1986, the Defendant filed a Complaint for Declaratory and Injunctive Relief (the "Complaint") with the Circuit Court for the Eleventh Judicial Circuit in and for Dade County, Florida (the "State Court") Case No. 86-50066-28, and in said Complaint, as amended, the Defendant requested the State Trial Court to determine the Defendant's rights, title, and interest in and to said Lease.

18. On July 16, 1987, the State Court entered a Final Judgment granting the Defendant's request for declaratory relief (the "Final Judgment") and made the following findings

"The Court finds that although the Defendant Plaintiff failed to timely renew the subject lease within the time prescribed in the lease, equity will excuse the delay in giving actual notice on the grounds that the actual notice of renewal was not unreasonably late, there was no prejudice to the landlord resulting from the delay, and it is uncontroverted the Defendant would suffer unconscionable hardship in the event that the premises are forfeited. Accordingly, pursuant to the authority of Dugan v. Haige, 54 So. 2d 201 (Fla.1951) and Friendship Park Property Corp. v. Shaw, 505 So.2d 456 (Fla. 1st DCA 1987) the Court declares that the subject lease was and is renewed by the Defendant commencing December 1, 1986 and continuing through November 11, 1991 and the Defendant is entitled to all rights vested in it as tenant upon renewal of the lease.
It is further adjudged that the Plaintiff be awarded its attorney\'s fees in the amount of $12,500 and its costs in the amount of $250. These amounts are awarded pursuant to this Court\'s equity powers and the parties\' stipulation.
It is further adjudged that the Defendant shall tendal all rent due and owing with interest calculated up to the date of tender, January 7, 1987 and tender any excess rent payable pursuant to the term of the lease."

Plaintiff's Exhibit No. 4, pp. 1-2.

19. On July 29, 1987, the Plaintiff filed with the United States Bankruptcy Court for the Southern District of Florida, a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code, and since that time has been operating the Debtor's business as a Debtor in Possession.

20. On August 14, 1987, the Plaintiff timely filed its Notice of Appeal with the State Court. Plaintiff's Exhibit No. 5.

21. On September 1, 1987, the Plaintiff filed the Adversary Complaint for Declaratory Relief to Avoid a Fraudulent Transfer and for Damages in accordance with 11 U.S.C. § 548(a)(2)(A) and Rule 7001, Rules of Bankruptcy Procedure.

22. The entry of the Final Judgment constituted a "transfer" as that term is defined in 11 U.S.C. § 101(50), for which the Plaintiff received less than "reasonably equivalent value," and which also rendered the Plaintiff "insolvent" as said term is defined in 11 U.S.C. § 101(31). Because this finding is both factual and legal, the Court's reasoning in reaching said finding is more fully discussed in the text of this decision.


The facts in this Adversary Proceeding raise questions of law invoking res judicata, collateral estoppel, and whether a judicial decree can constitue an involuntary fraudulent transfer of property which is avoidable under 11 U.S.C. § 548(a)(2)(A).

1. Res Judicata and Collateral Estoppel

Throughout these proceedings, the Defendant has claimed that the State Court already dealt with the issues which are presently before this Court and that therefore, the Plaintiff is barred under the doctrine of res judicata and collateral estoppel from instituting this proceeding. This Court does not agree.

In a recent decision, the Eleventh Circuit summarized the law concerning the doctrine of res judicata and collateral estoppel to be as follows:

"Res judicata or claim preclusion refers to the preclusive effect of a judgment in foreclosing relitigation of matters that were litigated or could have been litigated in an earlier suit. See, e.g., Migra v. Warren City School District Board of Education, 465 U.S. 75, 77 n. 1, 104 S.Ct. 892, 894 n. 1, 79 L.Ed.2d 56 (1984); Interstate Pipe Maintenance, Inc. v. FMC Corp., 775 F.2d 1495, 1497 (11th Cir. 1985). In order for the doctrine of res judicata to bar a subsequent suit, four elements must be present: (1) there must be a final judgment on the merits, (2) the decision must be rendered by a court of competent jurisdiction, (3) the parties, or those in privity with them, must be identical in both suits; and (4) the same cause of action must be involved in both cases. See, e.g., Hart v. Yamaha-Parts Distributors, Inc., 787 F.2d 1468, 1470 (11th Cir.1986); Ray v. Tennessee Valley Authority, 677 F.2d 818, 821 (11th Cir. 1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983).
Collateral estoppel or issue preclusion forecloses relitigtion of

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    • December 22, 2019 the time of sale." Id. at 561 n.13. (22) See. e.g., Thrifty Dutchman, Inc. v. Florida Supermarkets, Inc. (in re Thrifty Dutchman, Inc.), 97 B.R.101, 108 (Bankr. S.D. Fla.1988); Cole v. Sovran Mortgage Corp. (In re Cole), 81 B.R. 326 (Bankr. E.D. Pa. 1988); IPI Liberty Village Assoc, v. S......

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