Welt v. Rafiee (In re Zargaran)

216 F.Supp.3d 1340

IN RE Ali Reza ZARGARAN, Debtor.

Kenneth A. Welt, as Chapter 7 Trustee for Ali Reza Zargaran, Plaintiff,

v.Ali Rafiee, et al., Defendants.

Case Nos. 15–cv–61654–GAYLES

Case No. 14–24390

Adv. Pro. No. 15–1083

United States District Court, S.D. Florida.

Signed October 28, 2016

Daniel Nattan Gonzalez, Zachary James, Meland Russin & Budwick PA, Miami, FL, for Plaintiff.

Jeffrey David Solomon, Hollywood, FL, Mark Bonacquisti, Law Offices of Moffa & Bonacquisti, P.A., Stephen Charles Breuer, Moffa & Breuer, PLLC, Plantation, FL, for Defendants.

FINAL JUDGMENT

DARRIN P. GAYLES, UNITED STATES DISTRICT JUDGE

THIS CAUSE came before the Court for a nonjury trial on October 4, 2016. After careful consideration of the arguments of counsel, the stipulations of the parties, and the evidence presented at trial, the Court makes the following findings of fact and conclusions of law, pursuant to Federal Rule of Civil Procedure 52(a)(1), and enters final judgment in this action in favor of the Plaintiff, pursuant to Federal Rule of Civil Procedure 58.

I. FINDINGS OF FACT

In this adversary action, Plaintiff Kenneth A. Welt, as Chapter 7 Trustee (the "Trustee") for the bankruptcy estate (the "Estate") of Ali Reza Zargaran (the "Debtor"), seeks to avoid an alleged unauthorized postpetition transfer of real property—located at 10431 Springcroft Court in Helotes, Bexar County, Texas (the "Property")—from the Estate to the Defendant, Ali Rafiee, pursuant to 11 U.S.C. § 549(a).

A. Procedural History

On June 24, 2014 (the "Petition Date"), the Debtor filed a voluntary petition (the "Petition") for relief under Chapter 11 of the Bankruptcy Code.¹ On October 2, 2014, the United States Trustee's Office filed its Motion to Convert or Dismiss Case. On October 23, 2014, Judge Raymond B. Ray of the U.S. Bankruptcy Court for the Southern District of Florida held a hearing on the Motion to Convert. On October 27, 2014, the Bankruptcy Court entered an order converting the Debtor's Chapter 11 case to Chapter 7 of the Bankruptcy Code (the "Conversion Order"). On October 30, 2014, Kenneth Welt was appointed as the Chapter 7 trustee.

On May 15, 2015, the Trustee filed his Amended Complaint (the "Complaint") in this adversary action against Ali Rafiee. Rafiee filed his Answer and Affirmative Defenses to that Complaint on June 3, 2015.

B. The Debtor Obtains the Property

On October 24, 2014, three days before the Bankruptcy Court entered the Conversion Order, the Debtor and his wife, Maryam Baker (the "Debtor's Wife" or "Wife"),² without Bankruptcy Court authority, acquired title to the Property from RH of Texas Limited Partnership (the builder) by a special warranty deed. The Debtor and his Wife paid approximately $460,000 for the Property.

The Defendant, Ali Rafiee, whose full name is Ali Rafiee Hanify,³ is a Spanish citizen of Iranian descent who was born in Tehran, Iran.⁴ Rafiee testified that, prior to the transaction at issue in this case, he had been interested purchasing a house in San Antonio, Texas, with the intention of perhaps retiring there, because of the apparent similarity between its climate and the climate he was used to in Spain.⁵ Rafiee testified that he called the builder of the Property in 2013 to inquire about purchasing it, but because it had not yet been constructed, Rafiee declined to purchase it at that time. Rafiee testified that he called the same phone number in October 2014 to inquire about purchasing it. He did not recall whether at that time he was connected with the builder or some other entity. He testified that during that phone call an individual told him that the house had been built and the Property sold but that the owner (i.e. , the Debtor) had fallen ill and wanted to sell the Property. Rafiee testified that he searched Bexar County's property search website, and by entering the Property's address he was able to obtain the Debtor's phone number, which he used to contact the Debtor to discuss purchasing the Property. However, the Property information page on the Bexar County's property search website, as that site was accessed on November 20, 2014, neither displayed nor otherwise provided the Debtor's phone number.

C. The Transfer to Rafiee

On November 12, 2014, approximately three weeks after the Debtor and his Wife purchased the Property, they (without Bankruptcy Court approval) contracted to sell the Property to Rafiee (the "Contract") for $375,000 (the "Purchase Price")—$85,000 less than what they paid for it. The Contract required, inter alia , no deposit, closing within fifteen days, and for the Debtor and his Wife to pay for and furnish title insurance to Rafiee.

Rafiee testified that on November 19, 2014, he brought 322,500 Euros⁶ in cash in a duffel bag to a hostel in Barcelona, Spain, and gave that bag of cash to a man named Juan Morano, who represented that he was a partner of the Debtor. Rafiee testified that he never previously met or spoke to Morano.⁷ At trial, Rafiee submitted a letter dated November 19, 2014, that he contends was written by Morano and signed by both men (the "Morano Letter"), in which Morano attests that he received 322,500 Euros from Rafiee, the interested buyer of the Property listed (in translation) as "10431 Springcroft Ct., Helotes, Texas 78023, Lot 20, Block 8, Bridgepoint Unit 8 and 15 CB 4557, Bexar County." Def.'s Ex. B. Rafiee produced no banking or other financial records at trial that evidenced that he, in fact, paid the Purchase Price for the Property, nor did he produce any evidence to support the contention that he had the necessary funds to pay the Purchase price or sufficient income from his work as a freelance personal trainer to pay the Purchase Price.⁸ Indeed, the Trustee's First Request for Production No. 9 asked Rafiee to produce "[a]ny document reflecting the source of payment for [his] purchase of the [Property]." Rafiee's response was "None."

Rafiee did not hire a property inspector to conduct an inspection of the Property prior to his purchase. He did not obtain an appraisal of the Property. He did not visit the Property. He did not have a title underwriter conduct a title search on the Property. He did not receive title insurance from the Debtor and his Wife as required under the terms of the Contract.

On the same date as Rafiee's alleged meeting with Morano—November 19, 2014—and seven days after execution of the Contract, the Debtor and his Wife transferred the Property (without Bankruptcy Court approval) to Rafiee by special warranty deed (the "Transfer"). At the time of the recording of the special warranty deed, no copy of the Petition was filed or recorded in the Official Public Records of Bexar County, Texas. Rafiee then entered into a lease agreement with the Debtor and his Wife to lease the Property back to them for a period of approximately one year, which either party could terminate with sixty days' written notice.

Rafiee testified that he did not know the Debtor prior to contacting him to express interest in the Property, and that he did not know the Debtor's Wife. He also testified that he did not know that the Debtor was in a bankruptcy case when he purchased the Property, nor did he know that the Trustee could have an interest in the Property. And he testified that he would not have purchased the Property had he known the Debtor was in bankruptcy.

II. CONCLUSIONS OF LAW

A. The Trustee Is Entitled to Avoid the Transfer Under 11 U.S.C. § 549(a)

The Trustee seeks to avoid the Transfer as an unauthorized post-petition transfer pursuant to 11 U.S.C. § 549(a). This Section provides:

Except as provided in [11 U.S.C. § 549(b)⁹ or (c) ], the trustee may avoid a transfer of property of the estate —

(1) that occurs after the commencement of the case; and

(2)(A) that is authorized only under [11 U.S.C. §§ 303(f) or 542(c) ]; or(B) that is not authorized under this title or by the court.

11 U.S.C. § 549(a) (emphasis added). "[P]roperty of the estate," in an individual case that is converted from Chapter 11 of the Bankruptcy Code to Chapter 7 (as in the Debtor's case here), includes "all property of the kind specified in section 541 that the debtor acquires after the commencement of the case but before the case is ... converted to a case under chapter 7." 11 U.S.C. § 1115(a)(1). Section 541 includes "[a]ll interest of the debtor and the debtor's spouse in community property as of the commencement of the case that is under the sole, equal, or joint management and control of the debtor." Id. § 541(a)(2)(A).

"Property interests are created and defined by state law." Butner v. United States , 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Therefore, because the Property is located in Texas, Texas law applies to the determination of whether the Property is "property of the estate" for present purposes. "In Texas, property possessed by either spouse during or on dissolution of marriage is presumed to be community property, absent clear and convincing evidence to the contrary." Richardson v. Richardson , 424 S.W.3d 691, 697 (Tex. Ct. App. 2014) (citing Tex. Fam. Code § 3.002 ). Given that no party has provided clear and convincing evidence to the contrary, the Court concludes that the Property was community property when the Debtor acquired it. Moreover, the Property was acquired on October 24, 2014, three days prior to the Bankruptcy Court's entry of the Conversion Order, which converted the Debtor's bankruptcy case to a Chapter 7 case. Accordingly, the Court concludes that the Property is "property of the estate" for purposes of a Section 549(a) avoidance analysis.

Having made this determination, the Court next concludes, based on the undisputed evidence presented, that the Transfer is avoidable under Section 549(a). The Debtor and his Wife acquired the Property on October 24, 2014, four months after the Debtor filed his Bankruptcy Petition. And the Transfer was not authorized under the Bankruptcy Code, nor was it authorized by the Bankruptcy Court.

B. Rafiee Is...