Metrou v. Kaczor-Mauriello (In re Mauriello)

In re: Kirk P. Mauriello, Debtor.

Peter N. Metrou, not individually but as the Chapter 7 Trustee of the estate of Kirk P. Mauriello, Plaintiff, v. Cami Kaczor-Mauriello f/k/a Cami Kaczor, Stephen R. Chura, David Kaczor, and Old Plank Trail Community Bank, N.A., Defendants.

No. 16bk34329

Adversary No. 18ap00290

United States Bankruptcy Court, N.D. Illinois, Eastern Division

April 27, 2022

Chapter 7

MEMORANDUM OPINION

Honorable LaShonda A. Hunt United States Bankruptcy Judge

Peter N. Metrou, chapter 7 trustee of the estate of Kirk Mauriello ("Debtor"), initiated this adversary proceeding against Cami Kaczor-Mauriello f/k/a Cami Kaczor ("Cami"), Stephen Chura ("Stephen") David Kaczor ("David), and Old Plank Trail Community Bank, N.A., ("Old Plank") (collectively "Defendants"). The Trustee seeks to avoid an indirect transfer of $85, 000 from Debtor to Old Plank under 11 U.S.C. § 544, and to recover the funds from Defendants under 11 U.S.C. § 550. The case proceeded to trial, where Debtor asserted his Fifth Amendment privilege and refused to testify. For the reasons that follow, the Court finds that the Trustee has not met his burden of establishing an avoidable transfer under section 544. Accordingly, judgment will be entered in favor of Defendants on all claims.

PROCEDURAL HISTORY

Debtor filed a voluntary petition for chapter 7 relief on October 27, 2016. The Trustee timely commenced this three-count adversary complaint against Defendants to avoid fraudulent transfer and related relief. According to the amended complaint, in June 2013, Debtor obtained an $85, 000 loan from his boss, Joe Aurelio ("Joe"), President and CEO of Aurelio's Pizza, Inc. and related business entities (collectively, "Aurelio's"). Debtor directed that the check, which was drawn on the bank account of an Aurelio's entity that did not employ him, be made payable to Old Plank to repay a second mortgage owed by Cami and David for a property owned by Cami and Stephen.

Old Plank subsequently moved for summary judgment on the grounds that the payment was not an actionable transfer from Debtor or alternatively, Old Plank was a subsequent transferee who took the funds in good faith. That motion was denied by the then-presiding judge who found disputed factual issues existed on both points.^[1]

Following discovery, the parties proceeded to a four-day Zoom trial at which multiple witnesses testified-Cami, Stephen, David, and Candi Pesavento ("Candi"), an Assistant Vice-President at Old Plank; Joe and his controller/assistant/secretary Dawn McCord ("Dawn"); and the Trustee and his expert witness on insolvency Michael Pakter ("Pakter").

Debtor was subpoenaed as a witness by the Trustee and appeared with counsel but refused to answer any questions. In August 2017, Debtor had been criminally indicted by a Cook County grand jury on five counts of financial crimes that his counsel believed were related to the facts of the instant proceeding. Given that the criminal case was still pending at the time of this trial, on the advice of counsel, Debtor invoked the Fifth Amendment in response to each question by Trustee counsel.^[2]

This decision constitutes the Court's findings of fact and conclusions of law under Fed.R.Civ.P. 52(a), made applicable by Fed.R.Bankr.P. 7052.

JURISDICTION

The court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(H) in which the Trustee seeks to avoid and recover a fraudulent conveyance.

FINDINGS OF FACT

The Court makes the following findings of fact based on the pretrial stipulations, testimony, and admissible evidence presented at trial. In addition, the Court takes judicial notice of the dockets in the bankruptcy case and adversary proceeding. See Inskeep v. Grosso (In re Fin Partners), 116 B.R. 629, 635 (Bankr. N.D.Ill. 1989). The relevant facts are largely undisputed.

I. Background

1. Cami was Debtor's non-filing spouse when he filed a bankruptcy petition in October 2016, and his fiancée at the time of the transfer to Old Plank in June 2013.

2. At all material times, Cami lived at 12426 Chiszar Drive, Mokena, Illinois 60448 ("Mokena Property"), and was listed on the title of the Mokena Property.

3. Debtor was never placed on the title to the Mokena Property or any loan secured by the Mokena Property, even after he and Cami were married in July 2013.^[3]

4. David is Cami's former spouse. David and Cami acquired title to the Mokena Property in March 2007. Although they divorced in January 2011, David remained on the title until April 2013.

5. Stephen is Cami's father. In April 2013, the Mokena Property was transferred from Cami and David to Cami and Stephen as joint tenants.

6. Old Plank is a national banking association. As of June 2013, David and Cami held a revolving line of credit with Old Plank not to exceed $87, 000 and secured by a mortgage against the Mokena Property (the "Loan"). In addition, David, and Cami were obligated on a first mortgage against the Mokena Property held by MBLO Lending, Inc. ("MBLO").

II. Debtor's Pre-Loan Financial and Employment History

7. In July 2010, Debtor and his first wife Anne Mauriello ("Anne") were granted a judgment of dissolution of marriage.

8. Under their marital settlement agreement, Debtor was required to pay Anne spousal support of $6, 700 per year based on gross income of $96, 000, and then 10% on gross income in excess of $96, 000, including bonuses, for 48 months thereafter. As for child support for their four children, Debtor was required to pay Anne $28, 355 per year based on gross income of $96, 000, and 40% of gross income in excess of $96, 000 including bonuses. Debtor also had to maintain medical, dental, and vision insurance coverage for the children.

9. Sometime in 2010, Debtor took up residence at a second home owned by he and Anne at 6015 Osprey Dr, Watervliet, Michigan 49098 (the "Michigan Home"). Their marital settlement agreement provided for the sale of the Michigan Home with 40% of the proceeds awarded to Debtor and 60% to Anne. The Michigan Home was eventually sold in January 2013.

10. Previously in 2008, Debtor had met Joe at his Michigan Home. Joe and his wife were visiting friends who lived next door to Debtor and Anne. Debtor and Joe developed a friendship over the years. Debtor invited Joe to stay in the Michigan Home a few times.

11. Joe knew that Debtor had worked long-term for another company and was impressed by the fact that Debtor was a numbers guy. When they talked, Debtor would often ask Joe how the pizza business was doing. Around 2010, Debtor mentioned to Joe that he was losing his job and asked if Joe needed anyone at Aurelio's.

12. In February 2010, Joe hired Debtor as Director of Franchising for Aurelio's is Pizza Franchise, Ltd. ("Aurelio's Franchise"). Debtor served as the direct contact and point person for all franchisees. He was one of the highest paid corporate staff workers at Aurelio's because Joe believed Debtor had more value as a numbers guy.

13. Debtor proposed an Employment Term Sheet with an annual salary of $96, 000 and certain incentives to be paid if Debtor opened up seven new stores a year. Joe agreed and signed the term sheet in February 2010. Debtor never received any of those incentives, though, as Aurelio's closed several stores in his first year.

14. In December 2010, Debtor approached Joe and told him that Debtor was not meeting his goals. Debtor proposed that they dissolve the term sheet and Joe would pay for Debtor's Cubs season tickets. Joe concurred and they tore up the contract. Debtor never proposed and Joe never signed another term sheet. Thereafter, Debtor was paid annually his salary of $96, 000. 15. Sometime in 2011, Joe required surgery and treatment that necessitated him stepping away from the business for several months. Debtor ran Aurelio's operations in Joe's absence. Joe trusted Debtor and believed he would do a good job and would be an honest employee.

16. In 2013, Debtor proposed that Joe name him chief operating officer of Aurelio's Franchise and Joe agreed.^[4]

III. The $85, 000 Payment

17. In 2010, Debtor and Cami met and began dating.

18. In January 2011, Cami and David entered into a marital settlement agreement that provided for Cami to retain possession of the Mokena Property and be solely responsible for payment of the mortgages. She was also entitled to 100% of the net proceeds from any sale.

19. Cami agreed that if she remarried or chose to cohabitate with an unrelated member of the opposite sex at the Mokena Property, she was required to remove David's name from the primary mortgage and the Old Plank mortgage within six months of her remarriage or cohabitation. If not, Cami was obligated to sell the Mokena Property.

20. By February 2013, Cami and Debtor were engaged and he had moved into the Mokena Property with her.

21. Upon learning of their cohabitation, David filed a motion before the divorce court to force Cami to remove his name from the mortgages. At that time, there was enough equity in the Mokena Property to pay off the mortgages if the house was sold.

22. In April 2013, the Mokena Property was transferred from Cami and David to Cami and her father Stephen. However, Cami and David were still obligated under the Loan with Old Plank.

23. In June 2013, David and Cami reached a settlement giving her an additional 30-45 days to take his name off the mortgages or else he would petition to force the sale of the Mokena Property.

24. Cami and Stephen tried to refinance the mortgages encumbering the Mokena Property to remove David but were told they could not refinance the first mortgage to MBLO without first satisfying the Old Plank loan.

25. When Cami shared this...