Rosen v. Dahan

484 B.R. 87
CourtDistrict Court, D. Maryland
DecidedNovember 29, 2012
DocketCivil Action No. DKC 11-2320
StatusPublished
Cited by2 cases

This text of 484 B.R. 87 (Rosen v. Dahan) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rosen v. Dahan, 484 B.R. 87 (D. Md. 2012).

Opinion

MEMORANDUM OPINION

DEBORAH K. CHASANOW, District Judge.

Presently pending and ready for resolution in this bankruptcy appeal is a motion to alter or amend judgment filed by Appellant Gary A. Rosen (ECF No. 13); a motion to strike filed by Appellees David Dahan, Sarit Dahan, Karin Dahan, Maia, LLC, Rokama, LLC, and Raymonde, LLC (ECF No. 16); and Appellant’s motion for retroactive extension of time in which to file a motion for rehearing (ECF No. 19). The relevant issues have been briefed, and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, Appellees’ motion to strike will be denied; Appellant’s motion for extension will be granted; and Appellant’s motion for rehearing will be denied.

1. Background

On March 10, 2011, Appellant Gary A. Rosen, the chapter 7 trustee for the jointly administered bankruptcy estates of Minh Vu Hoang and Thanh Hoang, commenced the adversary proceeding from which this appeal arises against Appellees David Da-han, Sarit Dahan, Karin Dahan, Maia, LLC, Rokama, LLC, and Raymonde, LLC.1 As relevant here, the complaint relates to six parcels of real property that were purchased, post-petition, by sham business entities under the control of Minh Vu Hoang (“Debtor”) with assets fraudulently concealed from the bankruptcy estate.2 The properties were then either sold or refinanced—in some cases, with the assistance of Appellees—and the proceeds were distributed to Appellees, among others. Appellant’s amended complaint sought, inter alia, turnover pursuant to 11 [90]*90U.S.C. § 542 and, in the alternative, avoidance of post-petition transfers pursuant to 11 U.S.C. § 549.3

Appellees filed a motion to dismiss all claims with respect to the six properties, arguing that “Section 542 is only available [to] obtain turnover of assets that were in the hands of a defendant pre-petition ... [and] does not apply to assets that came into the hands of [Appellees] post-petition.” (ECF No. 6-2, at 2 (emphasis removed)).4 Appellees relied principally on Deckelbaum v. Cooter, Mangold, Tompert & Chapman, PLLC, 275 B.R. 737 (D.Md.2001). In that case, Judge Nickerson held, in relevant part, that § 542 was “an inappropriate means” for a bankruptcy trustee to recover post-petition transfers, which could only be avoided pursuant to § 549, reasoning that “if both section 542 and 549 were available to avoid post-petition transfers, the statute of limitations contained within § 549(d) would be rendered meaningless[.]” Deckelbaum, 275 B.R. at 741. Appellees argued that because the property in question was transferred post-petition, the turnover provision was unavailable to the trustee, and because the two-year statute of limitations under § 549(d) had expired, Appellant could not state a claim for relief.

In opposing the motion, Appellant conceded that his § 549 claims were time-barred, but urged that the plain language and legislative history of § 542 supported that “any entity, other than a custodian, is required to deliver property of the estate to the trustee or debtor in possession whenever such property is acquired by the entity during the case.” (ECF No. 6-5, at 13). Arguing that Appellees were in possession of estate property during the case, Appellant maintained that he had a right to turnover of the proceeds in question and that, to the extent it held otherwise, Deckelbaum was wrongly decided. Notably, for present purposes, Appellant asserted an alternative theory in a footnote within his opposition papers: “the Dahan Defendants obtained possession of estate property as conduits.... By definition, therefore, they are not transferees ... [and] there are no postpetition transfers that would need to be avoided under § 549 as a prerequisite of imposing liability under § 542(a).” {Id. at 14, n. 25).

A hearing was held before United States Bankruptcy Judge Thomas J. Catliota on June 15, 2011. In response to a question by the court regarding the interplay between § 542 and the statute of limitations of § 549(d), Appellant’s counsel stated:

If one is merely a conduit, meaning that one is holding [property] for the benefit of the debtor and is just a straw party or nominee or, you know, in the extreme case, the Federal Express messenger or merely the bank account into which money is deposited, you know, in that case the bank. The ... bank typically is not a transferee.
So, 542 covers the case where an in-termediar[y] or conduit has possession of the property and that is the case that [91]*91would not come within 549. Judge [Easterbrook] made that distinction in the Seventh Circuit case. I believe it is the one we cited ... in our brief in [flootnote 25, [Bonded Financial Services, Inc. v. European American Bank, 838 F.2d 890 (7th Cir.1988) ], if I am not mistaken.
We have alleged in the complaint that the Dahan Defendants were conduits and intermediaries, [and] the sufficiency of that allegation has not been chal-lengedf,] so ... on that theory, that is why we do not need to go under 549 and that is why this is property that the Trustee is entitled to use, sell or lease.

(ECF No. 6-13, at 33-34).

At the conclusion of the hearing, Judge Catliota granted Appellees’ motion to dismiss, indicating that he would separately issue a memorandum and order. In his subsequent opinion, he expressed reservations with regard to the outcome:

This Court will follow Deckelbaum and dismiss Plaintiffs § 542 claims. However, if the Court were writing on a clean slate, it might well reach a different result. The Deckelbaum court focused on the structure of the Bankruptcy Code, and in particular, the interplay between § 542 and § 549. But the plain language of § 542 does not limit its application to recovery of property that is in a defendant’s possession only as of the petition date. See United States v. Ron Pair Enters., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (courts should interpret a statute in accordance with its plain meaning). To the contrary, § 542 recovery can be sought from “an entity ... in possession, custody, or control during the case of property-” 11 U.S.C. § 542 (emphasis added). The specific application of the section to property that is in the possession, custody or control of a defendant “during the case” would seem contrary to a determination that it only applies to pre-petition transfers.

In re Minh Vu Hoang, 452 B.R. 902, 906-07 (Bankr.D.Md.2011) (internal footnote omitted; emphasis in original). In the factual recitation of the decision, the bankruptcy court appeared to accept that Ap-pellees were Debtor’s “conduits or intermediaries” with respect to the proceeds from the sale or refinancing of the properties at issue, id. at 905, but it did not specifically address the implications of this finding with respect to whether the money could be subject to turnover pursuant to § 542(a).

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Cite This Page — Counsel Stack

Bluebook (online)
484 B.R. 87, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rosen-v-dahan-mdd-2012.