Pereira v. Omansky (In re Omansky)

• Decision Date: 15 September 2022
• Docket Number: 18-13809 (LGB),Adv. Pro. 20-01091 (LGB)
• Parties: In re: LAWRENCE OMANSKY, Debtor. v. NICOLENA NATOLI OMANSKY, ROBERT OMANSKY, AND SALLY OMANSKY, Defendants. JOHN S. PEREIRA, CHAPTER 7 TRUSTEE FOR THE ESTATE OF LAWRENCE OMANSKY, Plaintiff.
• Court: U.S. Bankruptcy Court — Southern District of New York

In re: LAWRENCE OMANSKY, Debtor.

JOHN S. PEREIRA, CHAPTER 7 TRUSTEE FOR THE ESTATE OF LAWRENCE OMANSKY, Plaintiff.
v.
NICOLENA NATOLI OMANSKY, ROBERT OMANSKY, AND SALLY OMANSKY, Defendants.

No. 18-13809 (LGB)

Adv. Pro. No. 20-01091 (LGB)

United States Bankruptcy Court, S.D. New York

September 15, 2022

Chapter 7

Akerman LLP Counsel for the Plaintiff/Trustee John P. Campo Michael Napoli

Reed Smith LLP Counsel for the Defendant Derek M. Osei-Bonsu Derek Baker

MEMORANDUM OPINION AND ORDER

Hon. Lisa G. Beckerman, United States Bankruptcy Judge

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I. Procedural Background and Findings of Fact

On November 27, 2018 (the "Petition Date"), Lawrence Omansky (the "Debtor") commenced this case (the "Case") by filing a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York. On November 28, 2018, John S. Pereira (the "Trustee" or "Pereira") was appointed as Trustee of the Debtor's estate.

On May 22, 2020, the Trustee commenced this adversary proceeding against Nicolena Natoli Omansky (the "Defendant" or "Natoli"), the former wife of the Debtor, with the filing of a complaint [ECF 1], later superseded by an amended complaint [ECF 10] (the "Complaint") filed on July 7, 2020.^[1] By the filing of the Complaint, the Trustee sought entry of a judgment avoiding and preserving for the benefit of the Debtor's estate a $900,000 secured claim asserted by Natoli against the estate under Bankruptcy Code §§ 544, 548, 550, and 551 and New York Debtor & Creditor Law ("NYDCL") §§ 273, 274, 275, and 276; the equitable subordination of claims held by Natoli to all other claims of the Debtor's estate under Bankruptcy Code § 510; a declaratory judgment in favor of the Trustee that Natoli is not a secured creditor due to her failure to properly perfect her claim; and a declaratory judgment in favor of the Trustee determining that Natoli's secured claim is void, or, in the alternative, determining that Natoli is not entitled to interest on her claim for her failure to take any action to enforce it. The claims raised in the Complaint involve a prepetition mortgage note held by Natoli in the principal amount of $900,000 secured by a third lien (the "160 Chambers Lien") on the cooperative shares (the "160 Chambers Shares") and proprietary lease (the "Proprietary Lease," and together with the 160 Chambers Shares, the "160 Chambers Collateral") owned by the Debtor's estate relating to a residential cooperative property located at 160 Chambers Street (the "160 Chambers Co-Op") in Manhattan. Pre-Trial Order (defined below) at 3. Natoli timely filed a proof of claim asserting her secured claim against the Debtor's estate in the amount of $900,000 on March 9, 2019. Plaintiff's Exhibit 4, generally.

On June 23, 2020, Natoli filed an answer [ECF 4] to the Complaint. On April 21, 2022, the parties filed a joint pre-trial order [ECF 42] (the "Pre-Trial Order") adopting a series of agreements and directions as to the stipulated facts, parties' contentions, and evidence to be presented at trial. On May 17, 2022, counsel for the Defendant filed the declaration of Natoli [ECF 48]. On the same day, counsel for the Trustee filed the declarations of Pereira [ECF 49] and the Debtor [ECF 50].

On May 23 and 24, 2022, this Court held a two-day trial on the claims asserted in the Complaint, wherein 21 exhibits, including the various declarations, were moved by the parties and entered into evidence as part of the trial record. In addition, the Trustee, the Debtor and Natoli each testified at the trial.

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At trial, the Court determined that Counts I and II of the Complaint, brought under Bankruptcy Code § 548, were inapplicable to the Defendant because the alleged fraudulent transfers did not occur within two years of the Petition Date. Transcript of Trial on May 23, 2022 ("May 23 Tr.") at 14:5-15:17. At the culmination of the trial, the Defendant requested a directed verdict on the remaining counts. Transcript of Trial on May 24, 2022 ("May 24 Tr.") at 74:4-5. The Court granted Defendant's request for a directed verdict as to Count VII of the Complaint for Equitable Subordination under Bankruptcy Code § 510(c), and denied the directed verdict as to the remaining counts in the Complaint. See Order Granting Directed Verdict on Equitable Subordination [ECF 51] (the "Directed Verdict Order"), at ¶ 1. On May 26, 2022, the Court entered the Directed Verdict Order. Counts III-VI remain and are analyzed below.

A. Background

Although the Debtor and Natoli have slightly different recollections as to the timeline of their relationship, it is clear from the testimony that they married in 1983, separated sometime in the mid-to-late 1990s, and were divorced by 2008. Declaration of Natoli ("Natoli Decl.") at ¶ 5-6; May 23 Tr. 115:4-7; 255: 20-24. Natoli reports that since their divorce, she and the Debtor have maintained an amicable relationship for the benefit of their three (now-adult) children. Natoli Decl. ¶ 7; May 23 Tr. 213:23-214:1-9. Together, Natoli and the Debtor, a Manhattan criminal defense attorney and real estate investor formerly licensed as a real estate broker, have been involved in at least three real estate projects over the course of their nearly forty-year relationship. May 23 Tr. 116:5-8; 212:17-24; 225:14-19.

According to the Debtor's testimony, the first of these projects took place in the late-1980s and involved two ground floor units at 49-51 Warren Street, New York, NY. Declaration of the Debtor ("Debtor Decl.") at ¶ 4; May 23 Tr. 116:18-19. In order to pursue this project, the Debtor and Natoli formed Tribeca Realty LLC, with Natoli investing $50,000 in exchange for an ownership interest. Debtor Decl. ¶ 4; May 23 Tr. 118:2-13. Natoli also loaned Tribeca Realty LLC $650,000 toward renovating the building and converting it into a condominium. Debtor Decl. ¶ 4. Natoli testified that, in exchange for this loan, she was given the option to either be paid back or receive as consideration two ground floor units, 1E and 1F, which later became a combined condominium unit (the "49 Warren Condo"). May 23 Tr. 25:12-14; 118:19-24. A few years after making her initial investment, Natoli exercised the option to forgive her loan in exchange for ownership of the 49 Warren Condo, which served as her family home until she sold it for $3.125 million in 2019. May 23 Tr. 118:22-119:2; 120:21-23. At some point, Natoli also invested approximately $10,000 in a project involving the Debtor concerning a property on 89th Street in New York, NY. Debtor Decl. at ¶ 5.

B. The Warren Penthouse Transaction

The third real estate project, and the project that gave rise to the transaction at issue in this adversary proceeding, took root in March 2008, when the Debtor and Natoli, together also with Robert Omansky and Leona Hollar, a former girlfriend of the Debtor, created another real estate limited liability company, 6 W 37 St Realty LLC ("Realty"), for the purpose of acquiring units 5W and 6W at 49-51 Warren Street (the "49 Warren Penthouse"). Natoli Decl. ¶ 12,14; Debtor

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Decl. ¶ 6. Natoli testified that when the Debtor approached her with this investment opportunity, he told her that he "needed the help" to complete the project and feared that he would otherwise "lose" out on the 49 Warren Penthouse without her as a co-guarantor. Natoli Decl. ¶ 13; May 23 Tr. 122:9-19. Thus, as she testified, Natoli received a 30% ownership interest in Realty in exchange for pledging the 49 Warren Condo as collateral and for agreeing to personally guarantee a loan that would be taken out to purchase and refurbish the 49 Warren Penthouse. May 23 Tr. 125:24-126:5; 229:19-22; Plaintiff's Exhibit 1/Defendant's Exhibit A, at Schedule A; Defendant's Exhibit C, generally. Shortly thereafter, the Debtor bought the ownership interests of Robert Omansky and Leona Hollar, resulting in him holding the remaining 70% ownership interest in Realty. Debtor Decl. ¶ 6.

i. The Realty Loan Agreement

On March 18, 2008, Realty entered into a $3.385 million Loan Agreement (the "Realty Loan Agreement") with Hudson Valley Bank N.A. ("Hudson") with the Debtor and Natoli as co-guarantors. Natoli Decl. ¶ 17; Debtor Decl. ¶ 7; Defendant's Exhibit B, generally; Defendant's Exhibit C, generally; Defendant's Exhibit D, generally. Under the Realty Loan Agreement, the Debtor and Natoli each separately provided a guarantee (each a "Guarantee" and together, the "Guarantees") to pay back the entire loan obligation (the "Realty Loan"), if called upon. Natoli Decl. ¶ 17; Debtor Decl. ¶7; May 23 Tr. 52:4-14; May 24 Tr. 24:1-3. The Realty Loan was evidenced by a promissory note executed by Realty in favor of Hudson (the "Realty Note"). Natoli Decl. ¶ 17. As mentioned above, this Realty Note was collateralized not only by a mortgage granted by Realty on the 49 Warren Penthouse (the "49 Warren Penthouse Mortgage"), but also, as additional security for the Realty Loan, a mortgage granted personally by Natoli on the 49 Warren Condo (the "49 Warren Condo Mortgage," and together with the 49 Warren Penthouse Mortgage, the "49 Warren Mortgages") that she owned and occupied. Natoli Decl. ¶ 17; May 23 Tr. 125:24-126:5; 229:19-22. Proceeds of the Realty Loan Agreement were used both to purchase the 49 Warren Penthouse for $2.65 million, and to pay off the pre-existing mortgage encumbering the 49 Warren Condo in an amount "around" $360,000, by Natoli's testimony. Debtor Decl. ¶ 7; May 23 Tr. 123:18-22; 128:25-129:1-20.

ii. The Realty Operating Agreement

In agreeing to enter into the Realty Loan Agreement in exchange for a membership interest in Realty, Natoli avers that she acted in reliance on the alleged indemnification provisions of the Operating Agreement of 6 W 37 St Realty LLC drafted by the Debtor (the "Realty Operating Agreement"). Natoli Decl. ¶ 19...