Friedman v. Local 144 Nursing Home Pension Fund (In re Greenwald)

114 B.R. 410, 1990 Bankr. LEXIS 1047
CourtDistrict Court, S.D. New York
DecidedMay 16, 1990
DocketBankruptcy No. 81 B 20401; Adv. No. 86 Adv. 6015
StatusPublished
Cited by2 cases

This text of 114 B.R. 410 (Friedman v. Local 144 Nursing Home Pension Fund (In re Greenwald)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Friedman v. Local 144 Nursing Home Pension Fund (In re Greenwald), 114 B.R. 410, 1990 Bankr. LEXIS 1047 (S.D.N.Y. 1990).

Opinion

DECISION ON MOTION AND CROSS-MOTION FOR SUMMARY JUDGMENT OR DISMISSAL OF THE COMPLAINT

HOWARD SCHWARTZBERG, Bankruptcy Judge.

This is an adversary proceeding brought by Jack Friedman, a former partner of the debtor, Maple Leaf Nursing Home, against the defendants, collectively referred to as the “Funds”, who are multi-employer employment benefit plans within the meaning of Section 3 of ERISA, 29 U.S.C. § 1002. Both sides seek summary judgment pursuant to F.R.C.P. 56(d) made applicable by Bankruptcy Rule 7056. The plaintiff paid a Confession of Judgment to the Funds in the sum of $362,374.22 with respect to an obligation originally incurred by the debtor, Maple Leaf Nursing Home, and seeks to be subrogated to the Funds’ claim against the debtor to the extent of his payment.

FACTUAL BACKGROUND

On July 1, 1981 an involuntary petition for Chapter 7 relief under the Bankruptcy Code was filed against the debtor, Sidney Greenwald d/b/a Maple Leaf Nursing Home. The case was subsequently converted by the debtor for reorganizational relief under Chapter 11 of the Bankruptcy Code and was thereafter reconverted to a Chapter 7 case.

Between October 15, 1976 and March 31, 1978, four judgments were entered in the New York Supreme Court, Rockland County, based on arbitration awards in favor of the Funds arising out of payment obligations under collective bargaining agreements between Maple Leaf Nursing Home with respect to the employees of the Nursing Home.

On January 1, 1978, plaintiff Friedman and his partner, Sidney Greenwald, agreed to dissolve their partnership in the Nursing Home, leaving Greenwald with complete ownership and control of the debtor. Thereafter, on December 5, 1978, Friedman signed a Confession of Judgment in favor of the Funds in the amount of $257,035.29. From December 6, 1978 to July 17, 1981, [411]*411the Funds took no formal action against Friedman to collect on the Confession of Judgment. During the same period, the debtor Nursing Home paid to the Funds approximately $91,723.29. On July 17, 1981, after the Nursing Home ceased making payments to the Funds, the Funds entered the Confession of Judgment in the New York Supreme Court, Rockland County. On June 11, 1984, Friedman paid the Confession of Judgment, together with interest, in the sum of $362,734.22.

In December of 1984, Friedman filed an action in the state court against the Funds, which was removed to the United States District Court for the Southern District of New York. The basic issue in the District Court action was whether or not Friedman was entitled to a credit for all payments made to the Funds by or on behalf of the Maple Leaf Nursing Home for periods after December 5, 1978, when Friedman executed his Confession of Judgment. Friedman sought a refund for all amounts paid by the debtor, Maple Leaf Nursing Home, for periods following the Confession of Judgment which he paid. It was Friedman’s position that he was not to be the prime payor and that his obligation to the Funds was secondary to the debtor’s primary obligation, so that any payments made by the debtor, Maple Leaf Nursing Home, should be in reduction of Friedman’s obligation under his Confession of Judgment.

Both parties moved for summary judgment in the United States District Court for the Southern District of New York. In a decision dated September 19, 1988, District Court Judge Kenneth Conboy denied both motions for summary judgment on the ground that there was no evidence of any agreement whereby Friedman would be credited by the Funds for any payments made by Maple Leaf Nursing Home after the date of Friedman’s Confession of Judgment. In arriving at this determination, Judge Conboy cited various authorities, including Snide v. Larrow, 62 N.Y.2d 633, 634, 476 N.Y.S.2d 112, 113, 464 N.E.2d 480, 481 (1984) (“The general rule is that the debtor may direct the application of his payments, but if he fails to do so, then the creditor is permitted to apply the payments as he sees fit.”)

After a bench trial, Judge Conboy ruled on December 30,1988, that Friedman failed to sustain his burden of establishing that he was entitled to a credit for payments made by Maple Leaf Nursing Home to the Funds for periods after December 5, 1978, when Friedman issued his Confession of Judgment to the Funds.

ARBITRATION AWARD

On April 4, 1981, more than three years after Friedman executed his Confession of Judgment, an arbitration award was made in a dispute between a nursing home owners’ association, of which Maple Leaf Nursing Home was a member, known as the Greater New York Health Care Facilities Association (“Greater New York”), and the Funds. The arbitration award related to certain allowances that had been granted by New York State Department of Health to specific nursing homes who were members of Greater New York in order to assist and subsidize the operations of the nursing homes. The debtor, Maple Leaf Nursing Home, was entitled to receive approximately $500,000.00 under this arbitration award. However, the Commissioner of the New York State Department of Taxation and Finance has also asserted a claim to these funds, as well as the defendant unions in this case, referred to as the Funds. In May of 1982, this court ordered that the fund of approximately $500,000.00 be held in escrow by the New York State Department of Health (“the escrow fund”), subject to a determination by this court as to the respective rights of the claimants.

Friedman, as plaintiff in this adversary proceeding, has asserted against the Funds, as defendants, his right to be subro-gated to all the defendants’ rights in the escrow fund, as well as, the other sums which the Funds claim are due from the debtor, Maple Leaf Nursing Home, including periods after December 5, 1978, when Friedman executed his Confession of Judgment.

[412]*412THE FUNDS’ PROOFS OF CLAIMS

The Funds filed with this court five proofs of claim. On February 1, 1982, the Funds filed a proof of claim against the debtor in the sum of $543,667.23; representing wage claims based upon an arbitration award dated July 31, 1982, for specifically named employees, covering the years 1980 and 1981. On October 29, 1982, the Funds filed four other proofs of claims: Claim # 33 by Local 144 Welfare Fund was for . $333,064.55 with respect to collective bargaining agreement contributions due for the period April 1, 1979 through June 30, 1981. Claim # 34 by Local 144 Health Facilities Training and Upgrading Fund was for $25,501.16 regarding contributions due for the period April 1, 1979 through June 30, 1981. Claim # 35 by Local 144 Welfare Fund was for $44,680.72 covering contributions due from April 1, 1979 through June 30, 1981. Claim # 36 by Local 144 Nursing Home Pension Fund was for $148,099.83 for contributions due between April 1, 1979 and June 30, 1981. In their papers submitted with respect to the motions for summary judgment, the Funds assert that the actual unpaid claims total $574,744.75. Included in these claims are amounts due to employees of the debtor during the 180 days before the date of the cessation of the debtor’s business on May 1, 1981, for which priority is claimed under 11 U.S.C. § 507(a)(4) in the amount of $67,390.64.

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Bluebook (online)
114 B.R. 410, 1990 Bankr. LEXIS 1047, Counsel Stack Legal Research, https://law.counselstack.com/opinion/friedman-v-local-144-nursing-home-pension-fund-in-re-greenwald-nysd-1990.