Lubin v. Markowitz (In re Markowitz)
| Decision Date | 22 March 2017 |
| Docket Number | ADVERSARY PROCEEDING NO. 16-5221-BEM,CASE NO. 14-68061-BEM |
| Parties | IN RE: STEVEN MARKOWITZ and MARILYN MARKOWITZ, Debtors. JORDAN E. LUBIN, Plaintiff, v. JASON MARKOWITZ and ADAM MARKOWITZ, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
IT IS ORDERED as set forth below:
This matter is before the Court on Jason Markowitz ("Jason") and Adam Markowitz's ("Adam" and together with Jason, "Defendants") Motion to Dismiss Plaintiff's Amended and Restated Complaint (the "Motion") [Doc. 17]. Jordan Lubin ("Plaintiff"), as Chapter 7 Trustee for the bankruptcy estates of Steven Markowitz ("Steven") and Marilyn Markowitz ("Marilyn" and together with Steven, "Debtors") filed a response to the Motion (the "Response") [Doc. 24]. Defendants are Debtors' sons. [Doc. 13 ¶ 8].
Plaintiff initiated this adversary proceeding by filing a Complaint on September 15, 2016 [Doc. 1]. On November 23, 2016 Plaintiff filed an Amended and Restated Complaint (the "Amended Complaint") in which Plaintiff sought to avoid transfers of funds from Debtors to Defendants [Doc. 13]. The Amended Complaint raised, in relevant part: (Count 1) Claim to Avoid the CD Account 1 Transfer under O.C.G.A. § 18-2-74, or Other Applicable Law, and 11 U.S.C. § 544; (Count 5) Claim to Avoid the CD Account 2 Transfer under O.C.G.A. § 18-2-74, or Other Applicable Law, and 11 U.S.C. § 544, (Count 9) Claim to Avoid the Jason Transfers under O.C.G.A. § 18-2-74, or Other Applicable Law, and 11 U.S.C. § 544; and (Count 12) Claim to Avoid the Adam Transfers under O.C.G.A. § 18-2-74, or Other Applicable Law, and 11 U.S.C. § 544.
In the Motion Defendants seek dismissal of Counts 1, 5, 9 and 12 because the transfers at issue in each of these counts were made more than four years prior to the 2014 bankruptcy filing by the Debtors. Defendants argue that the statute of limitations contained in O.C.G.A. § 18-2-79 causes Plaintiff to be unable to state a claim upon which relief can be granted such that the Amended Complaint should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6).
I. ALLEGED FACTS
On December 13, 2006, Steven submitted an unsigned personal financial statement to The Shoppes at Monarch ("Creditor") to open a retail coffee shop to be known as"It's A Grind." [Doc. 13, ¶¶ 15, 16]. On January 19, 2007, Debtors formed the corporate entity Alilyn & Jacklp, Inc. to operate "It's A Grind." [Id. ¶ 19]. On January 31, 2007, Alilyn & Jacklp, Inc. entered into a ten year lease with Creditor on which Debtors executed a personal guaranty (the "Lease"). [Id. ¶¶ 20, 21, Ex. B].
Marilyn's father, Ben Weisman, passed away on September 21, 2008 leaving assets in the amount of $1,569,087.00 (the "Weisman Estate"). [Id. ¶¶ 22, 24, Ex. C]. The majority of the Weisman Estate's assets were deposited into a single bank account identified as "Wachovia High Performance Money Market, Account Number XXX-1634, Account Holders, Steven Markowitz and Marilyn Markowitz" (the "Estate Account") which was opened on October 30, 2008. [Id. ¶¶ 32, 33]. The vast majority of the funds deposited in the Estate Account were distributed prior to July 8, 2009. [Id. ¶¶ 33, 34].
In December, 2008 Steven sent Creditor three emails in which he claimed that "It's A Grind" and Debtors were having financial difficulties and indicated that bankruptcy was a significant possibility, if not unavoidable. [Id. ¶ 30, Ex. D].
On December 11, 2008, Marilyn transferred $253,102.62 from two CD accounts belonging to the Weisman Estate to an account with Wells Fargo held in the name of Adam or Jason ( "CD Account 1 Transfer"). [Id. ¶ 37, Ex. F]. On December 12, 2008, Debtors transferred $150,000.00 from the Estate Account to a CD account held in the name of Adam or Jason at Wells Fargo Bank ("CD Account 2 Transfer" and collectively with the CD Account 1 Transfer, the "CD Account Transfers"). [Id. ¶ 38, Ex. G].
On March 4, 2009, Debtors transferred $190,000.00 from the Estate Account to an account for the benefit of the purchase of a home in Alpharetta, Georgia by Jason (the"$190,000.00 Jason Transfer"). [Id. ¶ 39, Ex. C]. Around the same time, Debtors transferred an additional $10,000.00, possibly from the Estate Account, to Jason (the "$10,000.00 Jason Transfer" and collectively with the $190,000.00 Jason Transfer, the "Jason Transfers"). The Jason Transfers total $200,000.00. [Id. ¶ 40, Ex. C]. Jason then purchased real property on March 31, 2009 for $273,000.00. [Id. ¶ 64]. Jason paid $147,000.00 in cash towards the purchase price and obtained a mortgage for $126,000.00. [Id. ¶ 65, Ex. J].
On April 22, 2009, Debtors transferred $100,000.00 via a cash withdrawal from the Estate Account to Adam (the "$100,000.00 Adam Transfer"). [Id. ¶ 41]. Debtors transferred an additional $65,000.00 to Adam in a series of transfers from the Estate Account to an account in the name of Adam and Jason (the "$65,000.00 Adam Transfer" and collectively with the $100,000.00 Adam Transfer, the "Adam Transfers"). [Id.]. On October 26, 2009, Adam purchased real property for $157,500.00, paid with cash. [Id. ¶¶ 67, 68]. Adam subsequently sold the real property, moved to Florida with the Debtors, and purchased a new house. [Id. ¶ 42].
In total, Debtors transferred $768,102.62 to Defendants through the CD Account Transfers, Jason Transfers and Adam Transfers (collectively, the "Transfers"). [Id. ¶ 36]. At the time of the Transfers, Debtors lived with Adam and as they had no clear source of income, they paid their living expenses with a credit card issued to Adam and paid by Defendants. [Id. ¶¶ 70, 71, 72, 78, Ex. H]. Defendants paid no consideration for the CD Account Transfers. [Id. ¶ 74]. Similarly, Debtors paid no consideration for living in the home purchased through the Adam Transfers. [Id. ¶ 76]. Debtors and Adam stated they never discussed Debtors' restrictions on, or repayment of the costs incurred through the credit card. [Id. ¶ 79].
In June 2010, Debtors closed Alilyn & Jacklp Inc. [Id. ¶ 95]. On June 21, 2011, Creditor initiated a lawsuit against Debtors for claims arising out of the Lease in the 17th Judicial Circuit in and for Broward County, Florida (Case No. CACE 11-14223). [Id. ¶ 96]. Creditor obtained a judgment against Debtors on August 2, 2011 which Creditor domesticated on July 24, 2014, in the Superior Court of Fulton County, State of Georgia (Civil Action File No. 2014CV247997). [Id. ¶¶ 97, 98]. Debtors failed to respond to post-judgment discovery requests propounded by Creditor. [Id. ¶ 102].
On September 15, 2014 (the "Petition Date"), Debtors filed a voluntary petition for relief under Chapter 7. [Id. ¶ 9]. The meeting of creditors (the "341") was held on October 21, 2014. [Id. ¶ 12]. Creditor examined Marilyn at the 341 and inquired into her father's estate, and the distribution of assets. [Id. ¶ 48]. In response to questions at the 341 Marilyn affirmed that Ben Weisman had a substantial estate and that he did not have a will [Id. ¶¶ 12, 26, 49, 50]. Plaintiff further alleges that "[t]he diversion of Debtor's [Marilyn's] assets first became known as a result of testimony at the 341". [Id. ¶ 92].
On January 29, 2015, Creditor conducted an examination of Debtors pursuant to Bankr. R. Civ. P. 2004 (the "Debtors' 2004") during which, Marilyn provided a copy of the Will. [Id. ¶¶ 13, 26, 55, and attached as Ex. H]. Marilyn has, at times, asserted she assisted her father to meet with a lawyer to make and execute a will (the "Will") leaving 50% of the Weisman Estate to Debtors' sons, Defendants. [Id. ¶¶ 57, 58]. "When questioned about the inconsistent statements regarding the existence of the Will, [Marilyn] stated she had forgotten about the existence of her father's Will." [Id. ¶ 54]. On March 4, 2015, Creditor examined Adam underBankr. R. Civ. P. 2004, who testified that he found the Will after Debtors asked him to look for it, and gave it to Debtors before Debtors' 2004. [Id. ¶¶ 14, 84].
Federal Rule of Civil Procedure 12(b)(6) provides that a defendant may file a motion to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "In ruling on a 12(b)(6) motion, the court accepts the factual allegations in the complaint as true and construes them in the light most favorable to the plaintiff." Speaker v. U.S. Dept. of Health and Human Servs. Ctrs. for Disease Control and Prevention, 623 F.3d 1371, 1379 (11th Cir. 2010). To survive a motion to dismiss for failure to state a claim, 'heightened fact pleading of specifics' is not required; instead, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937 (2009). Likewise, dismissal pursuant to Fed. R. Civ. P. 12(b)(6) based on the statute of limitations "is appropriate only if it is apparent from the face of the complaint that the claim is time-barred' because '[a] statute of limitations bar is an affirmative defense and plaintiff[s] [are] not required to negate an affirmative defense in their complaint." Lindley v. City of Birmingham, Ala., 515 Fed.Appx. 813, 815 (11th Cir. 2013) (quoting La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004)).
Plaintiff seeks, through the Amended Complaint, to avoid the Transfers under 11 U.S.C. § 544(b)(1) which allows a trustee to "'step into the shoes' of an unsecured creditor and void a transfer of an interest in the debtor's property that the unsecured creditor would have thepower to void under federal or state law." Kipperman v. Onex Corp., 411 B.R. 805, 830 (N.D. Ga. 2009) (quoting In re Int'l...
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