O'Neil v. New Eng. Rd., Inc. (In re Neri Bros. Constr. Corp.)
| Decision Date | 27 September 2018 |
| Docket Number | Adv. Pro. No. 97-02012 (AMN),Case No.: 95-20169 (AMN) |
| Parties | IN RE: NERI BROS. CONSTRUCTION CORP., Debtor John J. O'Neil, Chapter 7 Trustee, Plaintiff v. New England Road, Inc., John Neri, Helen Neri, Helen Neri, in Her Capacity as Executrix of the Estate of Alan Neri, Sr., Alan Neri, Jr., Defendants New England Road, Inc., Counterclaim Plaintiff v. John J. O'Neil, Chapter 7 Trustee, Counterclaim Defendant |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — District of Connecticut |
Irve J. Goldman, Esq., Jessica Grossarth Kennedy, Esq., Pullman & Comley, 850 Main Street, P.O. Box 7006, Bridgeport, CT 06601, Counsel for the Plaintiff and Counterclaim Defendant.
Paul N. Gilmore, Esq., Thomas A. Gugliotti, Esq., Updike, Kelly & Spellacy, 100 Pearl Street, P.O. Box 231277, Hartford, CT 06123, Counsel for the Defendants and Counterclaim Plaintiff.
INTRODUCTION AND BACKGROUND ...110
JURISDICTION ...112
TRUSTEE'S CLAIMS AGAINST...112
THE DEFENDANTS AND DEFENDANT'S COUNTERCLAIMS ...112
FINDINGS OF FACT ...115
Neri Bros. Construction Corp: A Family Company ...115
Rival Companies Formed ...115
Condition of the Debtor from 1991 to Petition Date ...119
The Debtor's Financial Condition ...122
Johnson's Summary of the Debtor's ...124
Financial Condition Versus Increasing Caciopoli Debt ...124
Rental Agreements Between NE Road and the Debtor ...124
Equipment Use ...127
Calculating Reasonably Equivalent Value ...129
Comparative Rental Agreements ...132
Neri Corp.'s Rentals From The Debtor ...133
Other Evidence of Rental Rates ...134
The Debtor/C & A Development Default on Premises Rental from Shoreline ...137
The Auction ...138
EVIDENTIARY RULINGS ...139
The DeMaria Deposition ...139
Counts I and II: Overview of Constructive and Intentional Fraudulent Transfers ...141
Count I. Constructive Fraudulent Transfer ...143
Count II: Intentional Fraudulent Transfer ...148
Count III: Unauthorized Post-Petition Transfers ...151
Count IV: Unjust Enrichment ...153
Count V: Improper Diversion of Corporate Opportunities ...155
Count VI: Breach of Fiduciary Duty ...158
Count VII: Disregard of the Corporate Veil ...159
Count VIII: Participation in Breach of Fiduciary Duty ...160
Counterclaim for Administrative Expense ...162
Compensatory Damages ...164
Punitive Damages ...164
CONCLUSION ...164
After a trial held during the Summer of 2010, this Memorandum of Decision will enter more than twenty-one (21) years after this adversary proceeding commenced in 1997. The bankruptcy trustee's claims resolved through this decision have their roots in a bitter, decades-old dispute between members of the Neri family regarding the ownership and control of the bankruptcy debtor, Neri Bros. Construction Corp. ("Debtor"), its business opportunities, and its equipment assets.
By the late 1980s, the Debtor was run primarily by three brothers - Alan Neri, Sr., Carl Neri ("Carl") and John ("John") Neri. This litigation continues to ensnare the Neri family both through this adversary proceeding and through ongoing battles over the proofs of claim of various Neri family members in the underlying Chapter 7 case that form the vast majority of the debt in the Debtor's twenty-three year old bankruptcy case.
The underlying bankruptcy case was filed on January 17, 1995 (the "Petition Date"), and started as a Chapter 11 reorganization case, case number 95-20169 (the "Main Case"). Chapter 11 debtors are meant to use the breathing spell provided by the automatic stay to formulate and propose a plan of reorganization to resolve their prepetition debt. Here, the voluntary bankruptcy petition was signed by Alan Neri, Sr. Within two months after the Petition Date, Carl and his side of the Neri family challenged Alan Neri, Sr.'s control of the Chapter 11 process by filing a motion to appoint a Chapter 11 Trustee. On October 31, 1995, after several days of testimony spread over several months, the Bankruptcy Court Judge (Krechevsky, J.) appointed Alan Sibarium ("Trustee Sibarium") to be a Chapter 11 trustee - thus replacing the management authority of Alan Neri, Sr. - to run the Debtor's business.
Almost nine months later, on July 13, 1996, Trustee Sibarium conducted a court-authorized auction pursuant to 11 U.S.C. § 363 (the "Auction") that liquidated the Debtor's construction equipment and other personal property, generating $341,915.00 in proceeds. ECF No. 136; Exh. W. Several months after that, in January 1997, Trustee Sibarium commenced this adversary proceeding against four defendants: New England Road, Inc. ("NE Road"), Alan Neri, Sr., Alan Neri, Jr. ("Alan Jr."), and Helen Neri ("Helen"). John was added as a defendant later on, and Helen Neri was substituted for defendant Alan Neri, Sr. in her role as Executrix of his estate after his death ("Alan Sr."). The complaint sought damages for NE Road's use of the Debtor's equipment prior to and during the early stages of the Main Case and for damages due to NE Road's usurpation of the Debtor's corporate opportunities. On September 12, 1997, Trustee Sibarium filed a motion to convert the Main Case from one under Chapter 11 to a Chapter 7 case, which the Court granted on October 14, 1997. ECF Nos. 203, 211.
Upon conversion of the case to Chapter 7, John J. O'Neil was appointed as the Chapter 7 Trustee (the "Trustee") in the Main Case and he then became the plaintiff in this adversary proceeding. This adversary proceeding was initiated before Bankruptcy Judge Robert L. Krechevsky, tried before Bankruptcy Judge Albert S. Dabrowski, and is now decided by a third bankruptcy judge.
While there were sporadic efforts to resolve this case -- including requests that the Court defer its decision from time to time while settlement discussions were proceeding -- delays also occurred because of the change of judicial officers over time and efforts starting in late 2017 by new counsel for the defendants to the reopen the evidentiary record.1 One of the company's founding brothers and a defendant here -- Alan Neri, Sr. -- passed away in 2008, before trial, as did the original Bankruptcy Judge, the Honorable Robert L. Krechevsky.
For the Trustee John J. O'Neil and the remaining Neri family members - particularly the families of Alan Sr. and Carl - there is little doubt this decision will be unsatisfactory to some or all of the parties, in no small part because of the extraordinary amount of time that has passed.
The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(b), and the District Court's Order of referral of bankruptcy matters, dated September 21, 1984. This adversary proceeding is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A) () and (H)(proceedings to determine or recover fraudulent conveyances) regarding Counts I, II and III, seeking recovery of fraudulent conveyances and unauthorized post-petition transfers, and is a non-core proceeding related to a case under Title 11, United States Code, pursuant to 28 U.S.C. § 157(c) regarding Counts IV, V, VI, VII, and VIII. The parties are aware they may seek a final judgment from a United States District Judge regarding Counts IV, V, VI, VII, and VIII. However, the parties have consented to the entry of final orders or judgment by a United States Bankruptcy Judge, subject to traditional appeal rights.2 See Fed.R.Bankr.P. 7008 and 7012(b) ; 28 U.S.C. § 157 ; Wellness Intern. Network, Ltd. v. Sharif, ––– U.S. ––––, 135 S.Ct. 1932, 1947-48, 191 L.Ed.2d 911 (2015) ; AP-ECF No. 317; AP-ECF3 No. 339, June 1, 2016 Tr., pp. 4-5.
This adversary proceeding arose under the Main Case pending in this District; therefore, venue is proper in this District pursuant to 28 U.S.C. § 1409. The plaintiff has standing to seek the relief sought in the complaint because, as the duly appointed Chapter 7 Trustee, pursuant to 11 U.S.C. § 323, he may "prosecute any action or proceeding in behalf of the estate before any tribunal." Fed.R.Bankr.P. 6009.
Pursuant to Fed.R.Civ.P. 63, made applicable here through Fed.R.Bankr.P. 9028, the undersigned United States Bankruptcy Judge has certified4 that she fully reviewed the record of the trial, of the adversary proceeding and the underlying bankruptcy case, and has determined that the case may be completed without prejudice to the parties.5 Pursuant to Fed.R.Civ.P. 63, the parties were provided with an opportunity to request that any witness be recalled, and no such request was made.
The Trustee sought to recover damages from NE Road based on two basic theories:
The Trustee's Third Amended Complaint, AP-ECF No. 164, included nine counts, of which eight remain pending, that are generally summarized in the following table.6
Count Defendant Cause of Action
I NE Road Constructive fraudulent transfer pursuant to 11 U.S.C. §
544(b), Conn. Gen. Stat. §§ 52-552e(2) and 52-552f(a)
II NE Road Intentional fraudulent transfer pursuant to 11 U.S.C. §...To continue reading
Request your trial
-
Katz v. Anderson (In re Anderson)
...2013) (declining to dismiss a Chapter 7 trustee's unjust enrichment claim); see also , O'Neil v. N. England Road, Inc. (In re Neri Bros. Constr. Corp.) , 593 B.R. 100, 155 (Bankr. D. Conn. 2018) (finding the Chapter 7 trustee had established unjust enrichment, meriting a $686,241.61 award).......
-
Geriatrics, Inc. v. McGee
...and creation of a lien or other encumbrance." (Emphasis added.) General Statutes § 52-552b (12) ; see In re Neri Bros. Construction Corp. , 593 B.R. 100, 141 (Bankr. D. Conn. 2018) (describing identical definition of transfer in federal Bankruptcy Code being "as broad as possible" [internal......
-
Berman v. Pavano (In re Michael S. Goldberg, LLC), Case No. 09-23370
...transferee must prove both good faith and reasonably equivalent value by a preponderance of the evidence. In re Neri Bros. Construction Corp. , 593 B.R. 100, 141 (Bankr. D. Conn. 2018).For the same reasons that Roland LaBonte failed to show that he took the LaBonte Transfer for value and in......
-
Mangan v. People's United Bank, N.A. (In re Integrity Graphics, Inc.)
...in the Debtor becoming insolvent, makes plausible the inference that fraudulent intent was present. See In re Neri Bros. Constr. Corp. , 593 B.R. 100, 149 (Bankr. D. Conn. 2018) (quoting The Cadle Co. v. White , No. 3:02-CV-00030 TPS, 2006 WL 798900, at *7 (D. Conn. Mar. 21, 2006) ("[i]ndee......