In re Verrazano Holding Corp.
| Decision Date | 01 June 1988 |
| Docket Number | Adv. No. 187-0121.,Bankruptcy No. 186-62428 |
| Parties | In re VERRAZANO HOLDING CORP., Debtor. Shulamith LEVOVITZ, Yitzchok Edeltuch, Hershel Kanarek, Osher Levovitz, Matis Pincus, Isaac Swiatycki, and Elimelech Bluth, Barry Botuck, Naomi Botuck, Shlomo Cweiber, Shmuel Gutfreund, Yaakoz Moshe Gutfreund, Rivka Levovitz, Henry Loebenberg, Reuven Mandel, Myrim Serebrowski, Ralph Shain and Ruth Wilamowsky, Plaintiffs, v. VERRAZANO HOLDING CORP., Yeshiva Beth Henoch, Inc., Uziel Frankel, Judith Potash Siegel, Henoch Potash and Sholom Potash, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
COPYRIGHT MATERIAL OMITTED
Richard H. Bliss, New York City, for Yeshiva Beth Henoch, Inc., Judith Potash Siegel, Henoch Potash and Sholom Potash.
Harvis & Zeichner by Nathan Schwed, New York City, for debtor.
Weil, Gotshal & Manges by George G. Love III, New York City, for plaintiffs.
On June 25, 1987 the plaintiffs filed a complaint in this bankruptcy case (Adv.Pro. 187-0121) setting forth the following four claims for relief respectively:
1) a declaratory judgment that they, together with other parties, are the owners of a certain parcel of property located at 2080 77th Street, Brooklyn, New York (hereinafter "premises");
2) damages for breach of contract against Yeshiva Beth Henoch, Inc. (hereinafter "The Yeshiva"), a third party;
3) damages for tortious interference with contract against the debtor and its principal; and
4) damages for the tort of fraudulent misrepresentation against The Yeshiva and its principals, Judith Potash Siegel and Henoch Potash (also third parties) in an amount equal to the value of the premises.
The third parties now seek dismissal of those claims asserted against them (claims two and four) on jurisdictional grounds, pursuant to Bankruptcy Rules 7012(a) and (h)(3).
This court has jurisdiction of the subject matter and the parties to this proceeding pursuant to 28 U.S.C. §§ 1334 and 157(a). Venue is properly placed pursuant to 28 U.S.C. § 1409(a).
Whether this court possesses jurisdiction pursuant to 28 U.S.C. §§ 157(c)(1) and 1334 over the second and fourth claims for relief outlined in the complaint.
This adversary proceeding arises out of a contract entered into on September 29, 1980 between Ruth Wilamowsky, as purchaser, and The Yeshiva, acting by and through Judith Potash, as seller of the premises. The contract called for payment of $22,000, $2,000 of which was to be paid on contract and for a conveyance subject to (i) a first mortgage on the premises amounting to approximately $47,000 as of September, 1980, and (ii) a second mortgage amounting to approximately $25,000 as of September, 1980. Thereafter, Ruth Wilamowsky assigned her contract rights to Myrim Serebrowski whose rights were, in turn, assigned to Shulamith Levovitz, the current nominee and one of the plaintiffs to this proceeding.
On October 13, 1980, The Yeshiva requested permission, pursuant to section 511 of New York's Not for Profit Law,1 to consummate the contract of sale entered into between Wilamowsky and The Yeshiva. Annexed to the petition was a resolution dated September 22, 1980, certified by The Yeshiva's secretary, Judith Potash, authorizing and directing the appropriate officers of the corporation to enter into and consummate the sale. On November 24, 1980 the petition requesting approval of the sale was granted by the Supreme Court of the State of New York (Kooper, J.).
On December 4, 1980 the original signatories to the contract entered into a letter agreement detailing their respective obligations and calling for payment of the balance of $20,000 on or before December 31, 1982. Within the time set forth, the purchasers tendered full payment of the balance due and demanded tender of the deed. The Yeshiva refused, claiming that the contract entered into between the parties had not been authorized by the Yeshiva's trustees and therefore invalid.
The non-signatory trustees submitted the validity of the Wilamowsky contract of sale to arbitration before a rabbinical tribunal ("Beth Din"). It is not clear from the record whether Ruth Wilamowsky received notice of the rabbinical arbitration. In any event, she did not participate. On April 22, 1983, that tribunal held the contract null and void since it had not been approved by the proper authorities of The Yeshiva.
The non-signatory trustees moved, without notice to the contract vendee, Ruth Wilamowsky, to confirm the Beth Din's decision. On July 27, 1983, the Supreme Court of the State of New York (Vaccaro, J.) entered an order confirming the Beth Din's decision.
In August, 1983, The Yeshiva entered into a second contract for the sale of the premises, this time to the debtor. On October 5, 1983, the Supreme Court for the State of New York (Pizzuto, J.), approved the contract authorizing that sale. A deed was executed on October 31, 1983, and recorded on February 27, 1984. In the interim however, on January 31, 1984, Ruth Wilamowski, the original contract vendee, had assigned her rights to Serebrowski. On or about February 6, 1984, Serebrowski commenced an action against The Yeshiva for specific performance on the September 29, 1980 contract and filed a lis pendens. On March 5, 1984, Serebrowski further assigned his rights under the contract to Levovitz who then commenced a separate action against The Yeshiva for specific performance and also filed a lis pendens. The Yeshiva, pursuant to New York's Civil Practice Law and Rules §§ 3211(a)(1), (3) and (7), moved to dismiss Levovitz' action.
By order dated September 7, 1984, Special Term (Vaccaro, J.) granted The Yeshiva's motion to dismiss. Thereafter, on January 18, 1985, a motion for renewal and reargument was made and denied by order of the Supreme Court (Krasman, J.). An appeal was taken and on November 17, 1986, the Appellate Division in Levovitz v. Yeshiva Beth Henoch, Inc., 120 A.D.2d 289, 508 N.Y.S.2d 196 (1986) reversed Justice Vaccaro's order dated September 7, 1984, remanding for further proceedings in accordance with its instructions.
The Appellate Division instructed the Supreme Court to determine whether The Yeshiva had authorized the September 29, 1980 contract of sale. If unauthorized, an appropriate order should be entered dismissing the complaint for specific performance and the judgment of Justice Vaccaro dated July 27, 1983 setting aside the order of Justice Kooper dated November 24, 1980 may stand. If, on the other hand, The Yeshiva had authorized the contract of sale mentioned above, then an appropriate order should be entered (1) vacating the judgment of Special Term (Vaccaro, J.) dated July 27, 1983 and reinstating the order of Special Term (Kooper, J.) dated November 24, 1980, (2) vacating the order of Special Term (Pizzuto, J.) dated October 5, 1983, and (3) granting specific performance to either plaintiff Levovitz or Wilamowsky, depending on a resolution of a dispute regarding the assignment from Wilamowsky to Serebrowski, and directing Verrazano Holding Corp. to convey the subject realty.
After the Appellate Division's order of remand, but prior to the commencement of the remanded proceedings, Verrazano Holding Corp., on December 19, 1986, filed its petition herein.
The assignee of the original purchaser thereupon filed this proceeding alleging an entitlement of title to, and ownership of, the premises.
During the course of this proceeding an application was granted pursuant to 11 U.S.C. § 363(b) authorizing the debtor to sell the subject premises, free and clear of all liens and claims, such liens and claims, if any, to attach to the proceeds. An appeal was taken, stay was denied, and the sale consummated. The premises are no longer property of the estate.
The complaint alleges plaintiffs' entitlement to the premises upon the following grounds:
A) The contract had been duly authorized by The Yeshiva's trustees. Assuming arguendo that the trustees did not formally approve the contract, "their knowledge and tacit approval thereof was adequate to constitute it a due and enforceable obligation of the Yeshiva." Complaint at 9.
B) Henoch Potash and Judith Potash, as officers and trustees of The Yeshiva, had apparent authority to enter into and consummate the contract and the purchasers relied upon that authority. Id.
C) The subsequent conduct of the Yeshiva, the Potashes and The Yeshiva's trustees operated to ratify and confirm such contract. Id.; and
D) The purchasers reasonably and detrimentally relied upon the enforceability of the contract of sale by performing thereunder, hence The Yeshiva is equitably estopped from denying the validity thereof. Id.
Mr. Bliss, counsel to the third parties, asserts in his original answer that this court lacks subject matter jurisdiction to entertain those claims asserted against The Yeshiva and the Potashes. His amended answer asserts that the second and fourth claims outlined in the complaint are "non-core" claims, between the two sets of strangers to this bankruptcy case, pointing out that "such claims are within the jurisdiction of this court only if they are `related to' the bankruptcy case under 28 U.S.C. § 1334(b)." Movant's notice of motion at 3. Since "the outcome of these claims, whatever it may be, cannot affect the estate of the debtor" id., jurisdiction is lacking and dismissal is mandated.
In order to analyze these jurisdictional defenses, a brief discussion of the recent history of the jurisdiction of the bankruptcy court is in order.
As a part of the 1978 Bankruptcy Reform Act which created the current Bankruptcy Code Congress enacted 28 U.S.C. § 1471(b) which gave the district court "original but not exclusive jurisdiction of all civil proceedings arising under Title 11 or arising in or related to cases under Title 11", and further provided in § 1471(c) that...
To continue reading
Request your trial