Teixeira v. McDermott

• Decision Date: 31 March 2020
• Docket Number: Case No. 1:19cv866
• Parties: Joao Teixeira, Appellant, v. Daniel McDermott, United States Trustee for Region 9, et al., Appellees
• Court: U.S. District Court — Northern District of Ohio

Joao Teixeira, Appellant, v. Daniel McDermott, United States Trustee for Region 9, et al., Appellees

Case No. 1:19cv866

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO

March 31, 2020

JUDGE PAMELA A. BARKER

MEMORANDUM OPINION AND ORDER

This is an appeal from the April 5, 2019 decision of the United States Bankruptcy Court, Northern District of Ohio denying the Appellant/Debtor Joao Teixeira's "Second Motion to Vacate Order Overruling Debtor's Objection to Trustee's Notice of Intent to Sell Personal Property and Approving Trustee's Sale of Personal Property." For the following reasons, the decision of the Bankruptcy Court is AFFIRMED.

I. Facts

This matter relates to the Chapter 7 trustee's sale of the Appellant/Debtor Joao Teixeira's (hereinafter "Teixeira") purported interest in a trust that includes an alleged sixteenth century painting by Michelangelo Merisi da Caravaggio, and the bankruptcy court's denials of Teixeira's objections thereto.

A. Initial Bankruptcy Proceedings

On September 6, 2017, Teixeira filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. See In re Teixeira, Bankruptcy Petition # 17-15280 (U.S. Bank. Ct., N.D. Ohio) (Bankr. No. 1.)¹ Therein, Teixeira estimated that his assets were worth between $0 - $50,000, and his liabilities were between $100,001 - $500,000. (Id. at p. 6.) In Schedule B of his Petition, Teixeira answered "no" to the question of whether he had an interest in any "trusts, equitable or future interests in property . . . and rights or powers exercisable to your benefit." (Id. at p. 13.) In addition, he answered "no" to the question of whether he had an interest in any "claims against third parties, whether or not you have filed a lawsuit or made a demand for payment." (Id.) He also indicated that he had no other financial assets, or any property of any kind, that he did not already list. (Id. at p. 14.) Finally, in his Statement of Financial Affairs, Teixeira answered "no" to the question of whether he was a party in any lawsuit, court action, or administrative proceeding within 1 year before filing for bankruptcy. (Id. at p. 35.)

The United States Trustee appointed David O. Simon to serve as the Chapter 7 Trustee for Teixeira's case. On September 18, 2017, the United States Trustee sent information to Mr. Simon regarding Teixeira's potential interest in a Florida trust. The corpus of the trust consists exclusively of a sixteenth-century oil painting "David Killing Goliath" that is sometimes attributed to Michelangelo Merisi de Caravaggio (the "Trust"). It is undisputed that the Trust is the subject of litigation in the Circuit Court of the Seventh Judicial Circuit in Volusia County, Florida, which has been pending for many years. See In re Caravaggio Trust, Case No.: 2001-30696-CICI-32; Joao Teixeira-Nascimiento et al. v. Martin C. Boire P.A. et al., Case No: 2013-31477-CICI-32 (collectively, the "Florida Litigation").

On September 20, 2017, Mr. Simon sent a letter to an attorney representing the Trust beneficiaries in the Florida litigation, Cesar J. Dominguez, requesting confirmation that Teixeira was in fact a party to that litigation, as follows:

In the course of our review of the bankruptcy filing, we have discovered various proceedings relating to The Caravaggio Trust. Correspondence issued on April 5, 2017, by the trustee of the Trust is directed to, inter alia, John Teixeira Gueits a/k/a/ Joao Teixeira, Jr., at the same address as the debtor in the referenced bankruptcy case. Further, pleadings filed in litigation pending in the Circuit Court of the Seventh Judicial Circuit in and for Volusia County, Florida, indicate that your Firm represents the trust beneficiaries.

In light of your representation of the trust beneficiaries in the pending litigation, it would greatly assist in the administration of the bankruptcy case if you could confirm to me that the debtor in the bankruptcy case and the trust beneficiary identified above are one and the same person. If they are not, I would appreciate your explanation as to how they differ.

(Bankr. Doc. No. 52, Exh. A.) Mr. Dominguez failed to respond to this letter.

On October 12, 2017, Mr. Simon held the § 341 meeting of creditors.² During this meeting, Mr. Simon expressly asked Teixeira about the Caravaggio Trust and pending Florida litigation. Teixeira responded that the "Florida trustee took all" the money and that there was "nothing for [him; i.e, Teixeira] in there." (Bankr. Doc. No. 52, Exh. B. at Tr. 9-11.) Specifically, the transcript of the meeting reflects the following exchange:

Q: What do you know about some litigation pending in Florida dealing with something called the Caravaggio Trust?

A: I have an attorney down there *** dealing with that. *** Basically what happened with that was an incredible case of a property that belonged to my dad.

Q: Yeah.

A: And the attorney that was the Trustee --

Q: Now, what's your dad's name?

A: Joao, the same as mine.

Q: Okay.

A: And basically the Trustee ended up suing that property.

Q: Mm-hmm.

A: And he took it, so it's his.

Q: Well, are you in the lawsuit or is it your dad that's in the lawsuit?

A: My dad is in the lawsuit.

Q: Yeah.

A: And I'm in the lawsuit.

Q: And you're in the lawsuit too? And you're represented by an attorney by the name of Cesar Dominguez.

A: Yep.

Q: Okay.

A: That property basically --

Q: And what's Dominguez trying to do for you?

A: Dominguez as of right now, I had to hire him in order to see what's going to happen, because the Trustee ended up suing the Trust, sold the property and took all the money for himself. So we had to end up getting some kind of representation. As of right now the Courts in Volusia County have said that it belongs to the Trustee, but the attorney that we got is still litigating it. But asfar as we know, he took all the money and the Court hasn't said anything other than it's all his.

Q: And why didn't you tell your lawyer about this?

A: Because I've never had any -- any even wanting on that, because as far as I know there's nothing there.

Q: I mean, they're talking about big numbers like $14 million, $300,000, $9,106,000, and you have no idea what this is all about?

A: Like I said, the Trustee took all of that.

Q: Okay.

A: There's nothing for me in there, other than my name stuck on that thing.

Q: Well --

A: I hate that I even got involved. It belonged to my dad and my dad doesn't speak English and he got me involved with that, and that's why my name is really attached to that.

Q: So are you saying you didn't have any claims to this property?

A: Oh, as far as my name is in there, my father said I could have 25 percent if I help him out, but there's really nothing I can do. The Trustee took everything.

(Id. at Tr. 9-11.)

On December 13, 2017, Teixeira received a discharge. (Bankr. Doc. No. 11.) Shortly thereafter, on December 23, 2017, Mr. Simon filed a Report of No Distribution, in which he stated as follows: "I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and [report] that there is no property available for distribution from the estate over and above that exempted by law." The Report further indicates the value of the "claims scheduled to be discharged without payment (without deducting the value of collateral ordebts excepted from discharge)" was $161,605.90. The docket reflects a final decree was entered on January 2, 2018 and the case was closed. (Bankr. Doc. No. 14.)

B. Reopening of Bankruptcy Case

Several months later, Mr. Simon received an unsolicited inquiry regarding a sale of Teixeira's alleged interest in the Caravaggio Trust ("Trust"). (Bankr. Doc. No. 55.) According to Mr. Simon, on March 2, 2018, he received a call from Patrick Scott, an attorney from Fort Lauderdale, Florida. (Id.) Mr. Scott represented himself to be the attorney for Martin Boire, P.A., the trustee of the Caravaggio Trust. (Id.) Mr. Scott requested that Mr. Simon write a letter for Mr. Boire's use in a show cause hearing that was scheduled to go forward against Teixeira several days later in the Florida litigation. (Id.)

On March 6, 2018, Mr. Simon sent the requested letter to Mr. Boire. (Bankr. Doc. No. 44, Exh. 1.) This letter states as follows:

I am the Chapter 7 panel bankruptcy trustee who administered the bankruptcy of Joao Teixeira ("Debtor"), Case. No. 17-15280, Northern District of Ohio. Regarding that bankruptcy:

I learned about the potential interest in the Caravaggio Trust, not from the Debtor, but from an investigative report from an analyst in the Office of the U.S. Trustee in my region, the information from which conflicted with the later testimony of the Debtor at the meeting of creditors held in his bankruptcy case when I confronted him with my discovery of your trust.

When I questioned the debtor about who owned the beneficial interest in the Caravaggio Trust, he testified that his father owns the interest and that he has been promised a 25% interest if he helps his father recover something in the trust.

I then wrote to Mr. Cesar Dominguez, a lawyer in Florida whose name appeared in a pleading entitled "Beneficiaries' Response in Opposition to Trustee's Motion for Clerk's Sale of Trust Estate" inquiring about the Debtor's interest in the Caravaggio Trust. Mr. Dominguez did not respond to my inquiry.

Although the bankruptcy case has been closed, I have never abandoned from the bankruptcy estate whatever interest the Debtor may have in the Caravaggio Trust. Property not listed in the Debtor's Schedules remains the property of the bankruptcy estate after closing. 11 USC sec. 554(c) and (d).

I am very interested in finding a buyer for whatever interest the Debtor really owns and I would seek an order of the Bankruptcy Court reopening the case to administer assets if it is subsequently determined that the Debtor has an interest in the Trust.

(Bankr. Doc. No. 44, Exh. 1.) It was Mr. Simon's understanding that Mr. Boire wanted the letter for use in the...