In re Verdon, Bankruptcy No. 87-00480
| Citation | 95 BR 877 |
| Decision Date | 09 January 1989 |
| Docket Number | Adv. No. 87-0056.,Bankruptcy No. 87-00480 |
| Parties | In re Shirley Y. VERDON, f/d/b/a Surf & Turf Inn, Debtor. John PISANO, Plaintiff, v. Shirley Y. VERDON, f/d/b/a Surf & Turf Inn, Defendant. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Northern District of New York |
COPYRIGHT MATERIAL OMITTED
Gustave J. DeTraglia, Jr., Utica, N.Y., for plaintiff.
Geoffrey A. Hampton, Utica, N.Y., for defendant.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
This adversary proceeding was timely commenced by John Pisano ("Pisano") on June 26, 1987 in the bankruptcy case of Shirley Y. Verdon, f/d/b/a Surf & Turf Inn ("Debtor"). Pisano seeks to determine the nondischargeability of the sum of $215,000.00 for compensatory and punitive damages and for relief from the automatic stay to pursue a related pre-petition state court action, pursuant to §§ 523(a)(2)(A), 523(a)(6) and 362(d) of the Bankruptcy Code, 11 U.S.C.A. §§ 101-1330 (West 1979 & Supp.1988) ("Code").
The matter was tried in Utica, New York on June 1, 1988 and the Court reserved decision following the submittal of memoranda by the parties addressing the relief sought in the complaint as well as the Debtor's request for costs under Code § 523(d).
Jurisdiction of this core proceeding arising under Title 11 is vested in the Court by virtue of 28 U.S.C.A. §§ 1334(b) and 157(a), (b)(1) and (b)(2)(I). The within memorandum-decision is rendered in accordance with Rules 7001(6), 7052 and 9017 of the Bankruptcy Rules ("Bankr.R.").
The Debtor is currently employed as a cook and had formerly operated the Surf and Turf Inn in Kirkland, New York from May through October 1986. On April 8, 1987, she filed a voluntary petition under Chapter 7, listing $242,531.44 in debt and $4,147.00 in assets. Schedule A-3 of her petition indicated a disputed and contingent unsecured claim held by Pisano in the amount of $230,000.00 based upon his lawsuit against the Debtor and her daughter and son-in-law, Jeanne and Richard Sherman.
Pisano claims that in 1986 the Debtor, Jeanne Sherman ("Jeanne") and Richard Sherman ("Sherman"), conspired to defraud him of his savings of $15,000.00 which he transferred to the Debtor with the understanding that it would be used on his behalf for the down payment of a home in Clinton, New York for himself and Jeanne "in anticipation of their marriage." See COMPLAINT TO DENY DISCHARGEABILITY AND FOR RELIEF FROM STAY para. 7 (rec'd & filed June 26, 1987). He further asserts that he made the transfer in reliance upon false representations made by Jeanne to him sometime in February 1986 individually and as the agent of the Debtor and Sherman with regard to finding a house at 24 Concord Boulevard in Clinton "ideal for the marital residence he planned to purchase" and of her own ability, based upon her real estate knowledge, to conduct and conclude, with the Debtor's assistance, the transactions necessary to purchase it for his benefit. See id. at paras. 9, 10, 18. Pisano alleges that the Debtor used the $15,000.00 to purchase the Concord Boulevard house for the benefit of herself, her daughter and son-in-law. See id. at para. 14.
He also alleges that cause exists to lift the stay to allow the action he had initiated pre-petition in Oneida County Supreme Court against all three individuals to proceed since it is based upon the identical facts and involves the rights and liabilities of third parties. See id. at paras. 24-25. Pisano states that this would not prejudice or delay the Debtor's Chapter 7 case. See id. at para. 24.
In her timely filed answer, the Debtor generally denies most of the allegations in the complaint and asserted two defenses: 1) that the proceeding was unenforceable under New York Law as it was "in the nature of the breach of an implied marriage contract" and 2) that the complaint failed to state a cause of action because "neither defendant purchased any real estate for the benefit of Jeanne Sherman or otherwise." ANSWER paras. 6-8 (rec'd & filed Aug. 21, 1987). She claims that the February 10, 1986 transfer to her checking account was made solely for her daughter's use and involved monies "entirely owned and belonging to Jeanne Sherman" and held by Pisano in name alone. See id. at para. 3.
The Debtor states that she received the money "without any condition, reservation or promise to the plaintiff whatsoever" and accepted it "without any responsibility for its use with the express consent and approval of the plaintiff, who was then and there present." Id. Her answer also contained a counterclaim for $2,500.00 of costs for what she characterized as Pisano's meritless suit. See id. at para. 9.
At the trial on June 1, 1988, the following facts were established:
1. On February 10, 1986, Pisano withdrew $15,000.00 from his bank account. See Plaintiff's Exhibit A (copy of withdrawal slip from The Savings Bank of Utica ("SBU") account # XXXXXXXX-X bearing Pisano's signature).
2. On February 10, 1986, the Debtor deposited the same $15,000.00 into her bank account. See Plaintiff's Exhibit B (copy of deposit ticket from SBU account # XXX-XX-XX-XX).
3. The Debtor's checking account was used to disburse the $15,000.00. From February 11 to April 25, 1986, the Debtor signed twenty-two checks totalling $12,821.76 for items identified in the memo portion on the face of each check as furniture, appliances, security for house, heating oil, a 1981 automobile, insurance, clothing, wedding dress, and household furnishings. See Plaintiff's Exhibit D (copies of check #'s 93, 95, 96, 98-116, stamped "paid" on Debtor's SBU checking account # XXXXXXX).
4. On May 19, 1986, the Debtor wrote a check to Sherman in the amount of $2,249.57, on which was written "washer and dryer, rugs, curtains, lamps, blankets and pillows" in the memo portion and "CLOSE ACCOUNT" on the top of the check. See id. (check # 118 from SBU account # XXXXXXX).
5. Pisano received nothing in exchange for the $15,000.00 and the money was not returned to him.
6. At the time of the transfer, Pisano and Jeanne had been cohabiting for twelve years with three children they had raised on Pellettieri Avenue in Utica, New York and had never married.
7. On March 1, 1986, Jeanne was receiving public assistance and had moved herself and the children out of the house they had been living in with Pisano to a residence at 24 Concord Boulevard, Clinton, New York.
8. Jeanne and Sherman were married in August 1986 and currently live in the house on 24 Concord Boulevard.
Pisano testified that Jeanne had showed him the Clinton residence and that as a result he had transferred the $15,000.00 to the Debtor's account for its down payment and furniture. He stated that the $15,000.00 was not a loan to the Debtor and that he had tried unsuccessfully to get it back from the Debtor and Sherman. Pisano was not sure that he was the biological father of the three children he had raised with Jeanne in the twelve years they lived together.
Jeanne testified that she told Pisano at Christmas in 1985 that she planned to move and was looking for a place to live. She conceded that no money was discussed between her and her mother but insisted that the $15,000.00 was for her benefit even though not put in her name. Jeanne stated that the money was kept in her mother's checking account until she "used it up" on, among other things, furniture for the house on Concord Boulevard. She recalled personally writing some of the checks on the Debtor's checking account, but that generally she would explain to her mother what she needed money for and the Debtor would write the check.
Jeanne testified that she did not discuss with the Debtor the purchase of real estate or the reason why Pisano gave her the $15,000.00. She further stated that Pisano gave her the money for her own use without any condition or promise because of the three children. Jeanne asserted that she had used all of her resources for the family over the past eleven years and that Pisano had continuously refused her marriage proposals made a number of times each year. She stated that "everyone knew" that Pisano gave her the $15,000.00 because she was leaving him.
The Debtor maintains that her daughter had asked to meet her at the bank on February 10, 1986 and when she arrived she transferred the funds from Pisano's account to her own, asking no questions. She testified that she had no knowledge of why the transaction occurred and did not discuss the $15,000.00 with Jeanne prior to or on February 10, 1986.
The Debtor further stated that she held the funds in her checking account for six to seven weeks and wrote checks on it for her daughter. While she knew that Jeanne was on public assistance on February 10, 1986, she did not know that her daughter was on the verge of breaking up with Pisano and planned to move out on March 1, 1986. The Debtor also attested that on the way out of the bank, Pisano said to her daughter, "See, Jeanne, I told you I was keeping this for you." She stated that she had no use of the money and that all of it went to her daughter and grandchildren.
The Debtor's counsel asserts that this was "an affair of a broken heart" and that the Debtor had accepted the money the plaintiff gave to her for Jeanne without making any promises. At the close of the evidence, he moved for dismissal on the grounds that the proof was insufficient with regard to Code § 523(a)(2)(A) and that any loss or conversion under Code § 523(a)(6) required willfulness, which was absent here.
In response, counsel for the plaintiff argued that the Debtor's participation in the fraud could be inferred from the checks and the overall circumstances. Counsel charged that the Debtor had to have known on the date of the transfer that the $15,000.00 belonged to Pisano and that her daughter was planning to move out of the house she had been sharing with him twenty days...
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