Berman v. Smith

510 B.R. 387

Sylvia BERMAN, Appellant,

v. Margaret J. SMITH, Appellee.In re Ilene Isadora Goldschmidt, Debtor.

No. 13–81150–CIV.

United States District Court, S.D. Florida.

Signed April 30, 2014.

Entered May 1, 2014.

Jeffrey Andrew Sarrow, Jeffrey A. Sarrow, P.A., Coral Springs, FL, for Appellant.

Michael Richard Bakst, Rilyn Anne Carnahan, Greenspoon Marder, P.A., Morris Gary Miller, Adorno & Yoss, West Palm Beach, FL, for Appellee.

OPINION AND ORDER

ROBIN S. ROSENBAUM, District Judge.

This matter is before the Court upon the Brief of Appellant Sylvia Berman [ECF No. 12]. The Court has considered the brief, all supporting and opposing filings, and the record in this case. For the reasonsset forth below, the Court vacates and remands the Bankruptcy Court's Order Approving Stipulation to Compromise Controversy Between Trustee and APW Holdings, LLC; and Granting Bar Order for a determination about whether settlement credit should be awarded to nonsettling creditors whose claims are enjoined by the Bar Order.

BACKGROUND

Ilene Isadora Goldschmidt and her mother are co-owners and co-managers of APW Holdings, LLC (“APW”), a Florida company that owns and operates retail stores in airports across the United States. ECF No. 12 at 3. Goldschmidt was previously married to Lance Berman until their divorce in 2012. Id.

On October 25, 2007, Lance Berman's mother, Appellant Sylvia Berman, deposited $245,000.00 into her son and daughter-in-law's joint account, and the couple signed a promissory note in exchange for this sum. Id. at 3–4. Sylvia Berman raised the money by taking out a mortgage on her residence. Id. The couple represented to Sylvia Berman that the money was needed for APW's business purposes, but the promissory note was neither signed nor guaranteed by APW. Id. This differed from at least two previous instances in which Sylvia Berman had made loans directly to APW, and those loans were evidenced by written promissory notes from APW and written guarantees from Goldschmidt's mother. ECF No. 17 at 7. Nevertheless, within days of Sylvia Berman's deposit of the funds into the couple's joint account, $245,000.00 was transferred from the joint account to an APW account. ECF No. 12 at 4. Goldschmidt and Lance Berman then made monthly mortgage payments to Sylvia Berman's mortgagee from their joint account, using funds provided by APW. Id.

But the couple ceased making these mortgage payments during the pendency of their divorce proceedings. Id. Sylvia Berman thereafter filed a one-count Complaint in Florida state court for breach of the promissory note, and final judgment was entered in her favor in the amount of $265,000.00 on February 11, 2011. Id. After collection of this judgment presumably proved unsuccessful, on January 20, 2012, Sylvia Berman filed supplementary proceedings against APW and others to collect on the judgment pursuant to § 56.29, Fla. Stat. ¹Id. at 4–5. Sylvia Berman's Complaint brought counts against APW for unjust enrichment, fraudulent transfer, and money lent, among others. Id.

Goldschmidt filed a voluntary petition for Chapter 7 bankruptcy on February 24, 2012. In re Ilene Isadora Goldschmidt, No. 12–14430, ECF No. 1 (Bankr.S.D.Fla. Feb. 24, 2012). Sylvia Berman moved the Bankruptcy Court to determine the extent of the automatic stay and whether it would affect her state-court proceeding against APW. Goldschmidt, No. 12–14430, ECF No. 20 (Bankr.S.D.Fla. Mar. 30, 2012). The Bankruptcy Court determined that the counts against APW for unjust enrichment and money lent were not subject to the automatic stay because they were “independent, direct claims asserted against a nondebtor, APW .... [and] do not seek relief against Debtor or Debtor's estate.” Goldschmidt, No. 12–14430, ECF No. 48 (Bankr.S.D.Fla. May 12, 2012). But the Bankruptcy Court noted that the Order was “without prejudice, and the Trustee shall be permitted to seek a later determination that such claims seek recovery against assets of the estate.” Id.

Subsequent to the Bankruptcy Court's determination about the extent of the automatic stay, the state court dismissed Sylvia Berman's supplementary proceeding. ECF No. 12 at 6. Sylvia Berman thereafter filed a new, independent action against APW, asserting claims of unjust enrichment, money lent, and promissory estoppel. See Goldschmidt, No. 12–14430, ECF No. 118 at 16–20 (Bankr.S.D.Fla. Dec. 19, 2012).

After the filing of this new action against APW, Appellee Margaret J. Smith, the Trustee in bankruptcy for Goldschmidt, engaged in settlement discussions with APW relating to the Trustee's potential claims against APW. ECF No. 17 at 5. On January 17, 2013, the Trustee moved the Bankruptcy Court to approve a Settlement Agreement between the Trustee and APW that provided for APW's payment of $175,000.00 to the Trustee, subject to entry of a bar order that would permanently enjoin Sylvia Berman from asserting any claims against APW or the Debtor related to the $245,000.00 loan, the Final Judgment against Debtor in favor of Sylvia Berman, or Sylvia Berman's Complaint against APW. Goldschmidt, No. 12–14430, ECF No. 121 at 19–20 (Bankr.S.D.Fla. Jan. 17, 2013). The Trustee testified that she was settling three distinct claims against APW: the value of Goldschmidt's equity interest in APW, Goldschmidt's transfer of her Internal Revenue Service (“IRS”) tax refund to APW in 2009, and Goldschmidt and Lance Berman's transfer of the $245,000.00 loan to APW in 2007. ECF No. 4 at 27:18–28:4.

After an evidentiary hearing, on August 29, 2013, the Bankruptcy Court entered its Order Approving Stipulation to Compromise Controversy Between Trustee and APW Holdings, LLC; and Granting Bar Order. Goldschmidt, No. 12–14430, ECF No. 204 (Bankr.S.D.Fla. Aug. 29, 2013). Sylvia Berman now appeals the Bankruptcy Court's approval of the Settlement Agreement and entry of the Bar Order to this Court. ECF No. 1.

JURISDICTION

Federal courts are courts of limited jurisdiction. Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d 805, 807 (11th Cir.2003). With regard to appeals from bankruptcy courts, district courts enjoy jurisdiction over only three types of orders: (1) final orders, as described in 28 U.S.C. § 158(a)(1); (2) interlocutory appeals issued under 11 U.S.C. § 1121(d), as described in 28 U.S.C. § 158(a)(2); and, (3) with leave of the court, other interlocutory orders, as described in 28 U.S.C. § 158(a)(3) and Fed. R. Bankr.Pro. 8001(b). Tobkin v. Calderin, 2012 WL 3609867, at *1 (S.D.Fla. Aug. 22, 2012). As this Court has explained, district courts have jurisdiction to hear appeals “from final judgments, orders, and decrees.” Id. at *1–*2;28 U.S.C. § 158(a)(1).

“[A] final order in a bankruptcy proceeding is one that ends the litigation on the merits and leaves nothing for the court to do but execute its judgment.” In re Culton, 111 F.3d 92, 93 (11th Cir.1997) (citing In re Tidewater Group, Inc., 734 F.2d 794, 795–96 (11th Cir.1984)). While a bankruptcy-court order that denies approval of a settlement agreement does not resolve the litigation and is not a final order, see In re Tidewater Group, Inc., 734 F.2d 794, 796 (11th Cir.1984), an order that affirms a settlement agreement does resolve the litigation and leaves nothing more for the bankruptcy court to do. In re Martin, 490 F.3d 1272, 1275 (11th Cir.2007) (quoting In re Charter Co., 778 F.2d 617, 621 (11th Cir.1985)). Orders approving settlement agreements are therefore final and reviewable.

STANDARD OF REVIEW

Bankruptcy courts are governed by the Federal Rules of Bankruptcy Procedure. Under Rule 8013, Fed. R. Bankr.P., a district court reviews the factual findings of a bankruptcy court for clear error. As for the conclusions of law of the bankruptcy court and the application of the law to the particular facts of the case, a district court must conduct a de novo review. See In re Feingold, 474 B.R. 293, 294 (S.D.Fla.2012) (citing In re Globe Mfg. Corp., 567 F.3d 1291, 1296 (11th Cir.2009); In re Club Assocs., 951 F.2d 1223, 1228–29 (11th Cir.1992)) (“The Court reviews the Bankruptcy Court's factual findings for clear error and its legal conclusions de novo” ).

In addition, “approval of a settlement in a bankruptcy proceeding is within the sound discretion of the Court, and will not be disturbed or modified on appeal unless approval or disapproval is an abuse of discretion.” In re Arrow Air, Inc., 85 B.R. 886, 891 (Bankr.S.D.Fla.1988) (collecting cases).

DISCUSSION

Sylvia Berman challenges on this appeal both the Trustee's standing to settle the claim for the transfer of $245,000.00 to APW and the Bankruptcy Court's entry of the Bar Order enjoining the continued prosecution of her claims against APW in state court.

A. The Trustee's Settlement of the Claim Against APW

Sylvia Berman first argues that the Trustee lacked standing to settle the fraudulent-transfer claim for the transfer of the $245,000.00 loan monies to APW, which, according to Sylvia Berman, are not property of the bankruptcy estate. See ECF No. 12 at 8–14.

Section 548 of the Bankruptcy Code provides,

The trustee may avoid any transfer ... of an interest of the debtor in property, or any obligation ... incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—

(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any [creditor]....

11 U.S.C. § 548(a). Notwithstanding § 548's limitation on avoidable claims to those incurred up to two years before the date of the bankruptcy filing, § 544(b) provides, with respect to those claims that are allowable unsecured claims,

the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an [allowable] unsecured claim ...

11 U.S.C. § 544(b). Thus, under § 544, “a trustee in bankruptcy...