In re: 110 Beaver Street Partnership, et al v. Goffe, Inc., et al

Filing 920091217

Opinion

var gAgent = navigator.userAgent.toLowerCase()
var gWindows = ( (gAgent.indexOf( "win" ) != -1 ) || ( gAgent.indexOf( "16bit" ) != -1 ) )
var gIE = ( gAgent.indexOf( "msie" ) != -1 )
var bInlineFloats = ( gWindows && gIE && ( parseInt( navigator.appVersion ) >= 4 ) )
var floatwnd = 0

var WPFootnote1 = '  Of the Seventh Circuit, sitting by designation.\
'

var WPFootnote2 = '  In August 1996, Mr. Buster and three other individuals also\
filed an action in Superior Court in which they alleged that the\
Commission’s approval of the project violated the state’s open\
meeting law.\
'

var WPFootnote3 = '  The facts found by the Superior Court, in the proceeding\
that shall be discussed later in the text, provide a more complete\
picture of this episode. They reveal that in August 1996, the\
Duffys learned that the 110 Beaver Street property was “in\
trouble.” Buster v. George W. Moore, Inc., No. 97-637-F, 2000 WL\
576363, at *8 (Mass. Super. Apr. 28, 2000). They investigated the\
situation, discovering that Mr. Buster was in default on Moore’s\
note and that real estate taxes had not been paid for roughly two\
years. Id. At the end of October, one of the Duffys called Moore\
for the first time to discuss purchasing the note. Id. at *9. \
Later, the Duffys began to insist that Moore commence foreclosure\
proceedings before the sale. Id. Moore was resistant, but the\
disagreement became moot when the parties learned that Sherburne,\
Powers & Needham, the law firm that had represented both the Duffys\
and Moore but was not representing either of them in this\
transaction, had already filed a complaint to foreclose the\
mortgage in Moore’s name. Id. at *10. The Superior Court found\
that the Duffys had paid the law firm to prepare the foreclosure\
papers, but that the actual filing was the result of a\
miscommunication within the firm. Id. In any case, once the\
papers had been filed, nothing stood in the way of the transfer of\
the note to Goffe. The Superior Court found that the Duffys’s\
primary motivation in this purchase was to induce Mr. Buster to\
withdraw his DEP appeal and open meeting law action. Id. at *14.\
'

var WPFootnote4 = '  11 U.S.C. § 362(d) provides in pertinent part:\
\
              On request of a party in interest and after notice and a\
hearing, the court shall grant relief from the stay provided under\
subsection (a) of this section, such as by terminating, annulling,\
modifying, or conditioning such stay--\
              (1) for cause, including the lack of adequate protection of an\
interest in property of such party in interest;\
              (2) with respect to a stay of an act against property under\
subsection (a) of this section, if--\
                   (A) the debtor does not have an equity in such property;\
and\
                   (B) such property is not necessary to an effective\
reorganization[.]\
'

var WPFootnote5 = '  The Superior Court found that the primary motivation of the\
Duffys in their meeting with the Mayor was to “trigger\
administrative action by the City of Waltham that would strengthen\
their argument for lifting the automatic stay[.]” Buster, 2000 WL\
576363, at *17.\
'

var WPFootnote6 = '  The Partnership had claimed that the fair market value of\
the Property was $1.1 million. R.App. 364.\
'

var WPFootnote7 = '  Before recent amendments to the Bankruptcy Code, the\
relevant provision appeared as § 362(h).\
'

var WPFootnote8 = '  We also note that it would have been very difficult for the\
Principals to argue that this case is controlled by our decision in\
In re Lloyd, Carr & Co., 617 F.2d 882 (1st Cir. 1980). In Lloyd,\
Carr, we held that “where . . . a settlement rewards a bankrupt for\
his contumacious refusal to comply with the Bankruptcy Act itself,\
more is required than a simple showing of marginal benefit. Public\
policy forbids a settlement of this character without, at least, a\
powerful showing of such potential detriment to the estate that no\
other course is reasonably available.” Id. at 891. The debtor,\
who was being held on charges of fraud in the sale of stock\
options, had stashed $1.75 million in banks in Bermuda. The\
bankruptcy court ordered him to have those funds transferred to an\
American bank and placed under the control of a receiver. The\
debtor refused to comply with the court’s order and in fact\
strenuously resisted attempts in Bermudan courts to have the funds\
transferred to the United States. After its attempts to obtain the\
money by other means were thwarted, the receiver reached a\
settlement with the debtor. The agreement called for the debtor to\
transfer $207,000 from Bermuda to the United States. Half of that\
money would go to the receiver; the debtor would retain the other\
half and would use it to post bail. All of the major creditors\
opposed this proposed settlement. The district court nevertheless\
approved the settlement, but we reversed. We noted that the debtor\
was required by law to transfer the money even in the absence of\
the agreement; thus, he provided no consideration for the\
agreement. Id. at 890. We further concluded that the bankruptcy\
code did not permit the disbursement of funds from the bankruptcy\
estate to allow a debtor to post bail. Id. at 889. We also noted\
that the compromise had been actively opposed by the major\
creditors and affirmatively approved by none. Id. at 892. In sum,\
we held that the agreement was contrary to public policy because\
the debtor would give up nothing and would get a benefit to which\
he was not legally entitled. \
              Here, by contrast, the allegations involve alleged wrongdoing\
by a third party and, as we have shown, it may well be that a trier\
of fact would not decide that there was a showing of bad faith. \
'

var WPFootnote9 = '  See In re Seven Seas Petroleum, Inc., 522 F.3d 575, 584\
(5th Cir. 2008) (“If a claim belongs to the estate, then the\
bankruptcy trustee has exclusive standing to assert it.”); DiMaio\
Family Pizza & Luncheonette, Inc. v. Charter Oak Fire Ins. Co., 448\
F.3d 460, 463 (1st Cir. 2006) (“‘[A]ll legal or equitable\
interests...in property as of the commencement of the case’ and\
‘any interest in property that the estate acquire[d] after the\
commencement of the case’ became the property of their respective\
bankruptcy estates” and “their bankruptcy trustees acquired\
exclusive standing to assert those claims.”) (quoting 11 U.S.C. §\
541(a)(1),(7)); In re Pentell, 777 F.2d 1281, 1285 (7th Cir. 1985)\
(stating that partnerships are “separate ‘persons’ for purposes of\
the Bankruptcy Code”); Turner v. Cent. Nat’l Bank of Mattoon, Ill.,\
468 F.2d 590, 591 (7th Cir. 1972) (per curiam) (noting that “for\
bankruptcy purposes partnership property is to be distinguished\
from property of the individual partners”); Thomasson v. Mfrs.\
Hanover Trust Co., 657 F.Supp. 448, 452 (S.D. Tex. 1987) (“If the\
claims do in fact remain partnership claims, when the partnership\
is also, as it is here, the debtor in bankruptcy, those claims\
would be property of the estate, and Plaintiffs would be unable to\
assert them.”); In re Hopkins, 346 B.R. 294, 304 (Bankr. E.D. N.Y.\
2006) (“Moreover, courts have consistently held that only the\
trustee and not a debtor has standing to pursue causes of action\
that belong to the bankruptcy estate.”); In re Gainesville Venture,\
Ltd., 159 B.R. 810, 811 (Bankr. S.D. Ohio 1993) (“When the limited\
partnership is a chapter 11 debtor, however, any causes of action\
or defenses of the limited partnership...are property of the\
partnership’s bankruptcy estate[.]”); In re Equidyne Props., Inc.,\
60 B.R. 245, 248 (Bankr. S.D. N.Y. 1986) (“Thus the Partnerships,\
not the [limited partners], appear to be the holders of the claims\
the [partners] assert. Accordingly, it would appear to be the\
province of the trustee or someone authorized to act on the\
estate’s behalf to pursue the claims against the general\
partner.”); see also 4 William L. Norton, Jr. & William L. Norton\
III, Norton Bankr. L. & Prac. 3d § 61:4 (2009) (“Code § 541(a)(1)\
includes every conceivable interest of the debtor in the\
estate[.]”); id. § 61:1 (“[T]he estate includes all property of the\
debtor[.]”).\
'

var WPFootnote10 = '  We are aware that the Court of Appeals for the Fifth\
Circuit has held explicitly that a creditor has standing to bring\
an action for damages under 11 U.S.C. § 362(k) for a violation of\
the automatic stay provision. See St. Paul Fire & Marine Ins. Co.\
v. Labuzan, 579 F.3d 533 (5th Cir. 2009). However, as that case\
makes clear, the creditor must be able to allege an injury as a\
creditor from the violation of the automatic stay. Here, the\
plaintiffs can allege no injury to themselves; they simply allege\
an injury to the partnership estate. \
'

function WPShow( WPid, WPtext )
{
if( bInlineFloats )
eval( "document.all." + WPid + ".style.visibility = 'visible'" );
else
{
if( floatwnd == 0 || floatwnd.closed )
floatwnd = window.open( "", "comment", "toolbars=0,width=600,height=200,resizable=1,scrollbars=1,dependent=1" );
floatwnd.document.open( "text/html", "replace" );
floatwnd.document.write( "\r\n" );
floatwnd.document.write( " p { margin-top:0px; margin-bottom:1px; } \r\n" );
floatwnd.document.write( "\r\n" );
floatwnd.document.write( WPtext );
floatwnd.document.write( 'Close');
floatwnd.document.write( "