Hirsch v. Hirsch

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re: 	Case No.: 1-02-17966-dem
BENJAMIN HIRSCH, 	Chapter 7
Debtor.
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NACHAMA HIRSCH,
Plaintiff, 	Adv. Proc. No.: 1-07-01139-dem
-against-
BENJAMIN HIRSCH,
Defendant.
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Appearances:
Gary M. Kushner, Esq.
Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn, LLP
Attorneys for Plaintiff
330 Old Country Road
P.O. Box 31
Mineola, New York 11501
Joseph J. Haspel, Esq.
Attorney for Defendant
40 Matthews Street, Suite 201
Goshen, New York 10924
DECISION AND ORDER ON MOTION TO DISMISS
DENNIS E. MILTON
United States Bankruptcy Judge
The matter is before the Court on the Court-issued Order to Show Cause directing
the plaintiff Nachama Hirsch (“Mrs. Hirsch” or the “plaintiff”) to show cause why the Complaint
should not be dismissed for failure to state a claim on which relief may be granted, and on the
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motion for an Order granting leave to amend the Complaint and other relief which counsel for
the plaintiff filed on December 22, 2007 (the “Motion to Amend”). On January 25, 2008,
counsel for debtor and defendant Benjamin Hirsch (“Hirsch” or the “defendant”) filed a
Memorandum of Law in support of the Order to Show Cause. On February 28, 2008, counsel for
the plaintiff filed a reply to this Memorandum of Law. On March 11, 2008, counsel for the
defendant filed an Opposition to the Motion to Amend. On April 1, 2008, the Court conducted a
hearing on the Order to Show Cause, the Motion to Amend, and on applications for other relief1
,
and took the matter under advisement. 	On September 30, 2009, this Court issued an Order in
connection with the Order to Show Cause and the Motion, in which the Court stated it would
issue a separate written decision.
Based on the review of the Complaint and the Amended Complaint, the Court
found that the plaintiff had failed to set forth allegations sufficient to state a cause of action
under Bankruptcy Code Sections 523(a)(2), 523(a)(4), 523(a)(6), and 727(a). The Court found
that the plaintiff set forth allegations sufficient to state a cause of action under Sections 523(a)(5)
and 523(a)(15) of the Bankruptcy Code. The Court further found, as set forth below, that the
Amended Complaint failed to cure the defects of the Original Complaint. The Court granted the
plaintiff’s Motion to Amend. As stated in the Order, as an aid to counsel for plaintiff with regard
to the Amended Complaint, the Court issues this Memorandum Decision.
JURISDICTION
The Court has jurisdiction over this core proceeding under 28 U.S.C. §§ 1334 and
1 Counsel for Jack Mark Rubin and Kensington Terrace Apartments and counsel for defendant had filed
motions for an Order pursuant to Rules 26(c) and 45(c), Fed. R. Civ. P., quashing subpoenas which counsel for
plaintiff had served upon them. The Court granted that portion of the motion.
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157(b)(2) and the Eastern District of New York standing order of reference dated August 28,
1986. This Decision and Order constitutes the Court's findings of facts and conclusions of law
required by Fed. R. Bankr. P. 7052.
FACTUAL AND PROCEDURAL BACKGROUND
A. 	Prior Proceedings
On June 12, 1997, Nachama Hirsch (“Mrs. Hirsch”) commenced divorce
proceedings (the “matrimonial action”) against the debtor in the Supreme Court of New York
(the “state court”). On October 30, 2000, the Honorable Virginia E. Yancey (“Justice Yancey”)
rendered a decision granting the divorce. 	Justice Yancey stayed entry of the judgment of
divorce pending resolution of ancillary issues, including the equitable distribution of marital
property. On May 22, 2001, Justice Yancey found the debtor in contempt of court for repeated
violations of court orders to preserve the marital properties (the “properties”). By Order dated
May 31, 2001, the state court appointed Jeffery Goldstein as temporary receiver for the
properties. On December 21, 2001, the temporary receivership ended and the state court
appointed a successor temporary receiver, Douglas Rosenberg. On May 10, 2002, the state court
issued a Decision After Trial (“state court decision”) in the matrimonial action. The state court
directed the parties to settle judgment consistent with the state court decision.
On June 21, 2002, before the state court entered judgment based on the state court
decision, the debtor and Coney Island Land Company, LLC, Fiduciary Holdings, LLC, Digby
Apartments, Inc., and Sheldrake Holding Company, LP (the “Entity Debtors”) filed separate
Chapter 11 petitions.
Familiarity with the facts of the main case is assumed. This case, which is now
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more than seven years old, has been the subject of numerous applications which have resulted in
written decisions and orders. Among those are the decision of this Court keeping Douglas
Rosenberg, the state court appointed Receiver, in place; a decision in March 2003 that the state
court’s post-petition entry of judgment, occurring while the automatic stay was in place, did not
transfer certain properties to Mrs. Hirsch; the Decision and Order fixing the claim of Mrs.
Hirsch; the determination of two adversary proceedings which Mrs. Hirsch brought and which
sought a determination that certain properties were not part of the debtor’s or the Entity Debtors’
estates; denial of the separate applications of secured creditors Wells Fargo, Tsatkis and Maspeth
Federal Savings & Loan Association for relief from the automatic stay; the decision granting
relief from the automatic stay in February 2004 to enable the parties to pursue entry of judgment
in the matrimonial action; a decision expunging claims of Mrs. Hirsch against the entity debtors’
estates; and the Decision and Order (1) denying the debtor’s application for an order permitting
the sale of certain real estate to go forward outside of the debtor’s Plan of Reorganization, (2)
granting approval of the debtor’s Fifth Amended Disclosure Statement and Third Amended Plan
of Reorganization and (3) converting the debtor’s Chapter 11 case to a case under Chapter 7
of the Bankruptcy Code in January 2007.
B. The Order to Show Cause and Motion to Amend the Complaint
On April 16, 2007, the plaintiff initiated this adversary proceeding. On May 31,
2007, the defendant filed an answer. On November 27, 2007, the Court issued an Order to Show
Cause why the Court should not dismiss the Complaint for failure to state a claim on which relief
may be granted. On December 22, 2007, as set forth above, counsel for the plaintiff filed the
Motion to Amend. On January 25, 2008, counsel for defendant filed a Memorandum of Law in
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support of the Order to Show Cause. On February 8, 2008, counsel for the plaintiff filed a reply
to this Memorandum of Law. On March 11, 2008, counsel for the defendant filed an Opposition
to the Motion to Amend. On April 1, 2008, the Court conducted a hearing on the Order to Show
Cause and the Motion to Amend and took the matter under advisement.
DISCUSSION
A. 	Rules Establishing and Governing Standards of Review
Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, which makes Rule
12(b) of the Federal Rules of Civil Procedure applicable in bankruptcy proceedings, provides
that the court may dismiss the Complaint for failure to state a claim on which relief may be
granted. Here, where the plaintiff seeks an Order denying the debtor a discharge, the plaintiff has
the threshold burden, to establish facts necessary to show by a preponderance of the evidence
that the debt should be exempt from the discharge under Section 523(a) or Section 727(a) of the
Bankruptcy Code. In re Foto, 258 B.R. 567, 571 (Bankr.S.D.N.Y. 2000); In re Silverstein, 151
B.R. 657, 660 (Bankr. E.D.N.Y. 1993); See also Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654,
112 L.Ed.2d 755 (1991).
Rule 7008 of the Federal Rules of Bankruptcy Procedure makes Rule 8 of the
Federal Rules of Civil Procedure applicable in bankruptcy proceedings. Fed.R.Civ.P. 8(a)
establishes standards for pleading a claim for relief and states in pertinent part that a pleading
which sets forth a claim for relief shall contain “...(2) a short and plain statement of the claim
showing that the pleader is entitled to relief[.]...” Federal Rules of Civil Procedure Rule 8.
Pursuant to F.R.Bankr.P. 7009, which makes Fed.R.Civ.P 9 applicable in bankruptcy
proceedings, “...(b) In all averments of fraud or mistake, the circumstances constituting fraud or
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mistake shall be stated with particularity” and “(f) For the purpose of testing the sufficiency of a
pleading, averments of time and place are material and shall be considered like all other
averments of material matter.” Federal Rules of Civil Procedure Rule 9. The term
“circumstances” as used in Fed.R.Civ.P. 9(b), includes matters such as time, place, contents of
the false representations, identity of the person whose conduct is the subject of the cause of
action, and what the actor obtained thereby. Federal Rules of Civil Procedure Rule 9; Flexi-Van
Leasing, Inc. v. Perez, 155 B.R. 844, 849 (Bankr.E.D.N.Y. 1993); In re Rifkin, 142 B.R. 61, 64-
65 (Bankr. E.D.N.Y. 1992). The requirement that the allegations should be stated with
particularity has been interpreted to mean that the complaint should allege specific facts, sources
that support the alleged specific facts and a basis from which an inference of fraud may be fairly
drawn. Id. A review of each of the causes of action in the Complaint follows.
B. 	Review of the Complaint
Count One of the Complaint alleged that the debtor transferred certain properties
and other assets with an intent to hinder, delay or defraud the plaintiff and that his discharge
should be denied pursuant to Section 727(a)(2)(A) of the Bankruptcy Code. The essential
elements of this cause of action are 1) a transfer of property, 2) that belongs to the debtor, 3)
within one year before the filing of the petition, 4) with intent to hinder, delay or defraud a
creditor or officer of the estate. 11 U.S.C. §727(a)(2)(A). In re George K. Boyer (In re Boyer),
2009 WL 1635922, 3 (C. A. 2 (Conn.) 2009); Thibodeaux v. Olivier (In re Olivier), 819 F.2d
550, 552 (5th Cir. 1987); In re Silverstein, 151 B.R. 657, 660-661 (Bankr. E.D.N.Y. 1993).
The pleading of Count One lacked the required specificity and failed to allege the second, third
and fourth elements set forth immediately above, as it failed to allege that the debtor transferred
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properties belonging to the debtor, that the transactions were within a year of the filing of the
petition and that the debtor had acted with the intent to hinder, delay or defraud a creditor. Count
One should be dismissed.
Count Two of the Complaint alleged that the debtor made false statements,
namely that while an owner of Kensington Terrace Apartments LLC, that the debtor did not list
Kensington on the schedules and that this false statement related materially to the bankruptcy
case, which should result in the denial of his discharge pursuant to Section 727(a)(4)(A) of the
Bankruptcy Code. The essential elements of this cause of action are that 1) the debtor made a
statement under an oath, 2) the statement was false, 3) the debtor knew that the statement was
false, 4) the debtor made the statement with fraudulent intent, and 5) the statement related
materially to the bankruptcy case. 11 U.S.C. §727(a)(4)(A). In re Boyer, 2009 WL 1635922 at 3;
In re Dubrowsky, 244 B.R. 560, 571-573 (E.D.N.Y. 2000); In re Silverstein, 151 B.R. at 662; In
re Miller, 97 B.R. 760, 764 (Bankr. W.D.N.Y. 1989); In re Beaubouef, 966 F.2d 174, 178 (5th
Cir. 1992); In re Yadidi, 274 B.R. 843, 852 (9th Cir. 2002). The pleading of Count Two lacked
the required specificity and failed to allege the second, third and fourth essential elements of this
cause of action, that the debtor made a false statement under an oath, that the debtor knew that
the statement was false and that the debtor had fraudulent intent when he made the statement.
Count Two should be dismissed.
Count Three of the Complaint alleged that the debtor made a false statement
materially related to the bankruptcy case by omitting a material fact and not listing the
Kensington Guaranty on schedules, which should result in the denial of his discharge pursuant
to Section 727(a)(4)(A) of the Bankruptcy Code. As set forth above, the essential elements of
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this cause of action are that 1) the debtor made a statement under an oath, 2) the statement was
false, 3) the debtor knew that the statement was false, 4) the debtor made the statement with
fraudulent intent and 5) the statement related materially to the bankruptcy case. 11 U.S.C.
§727(a)(4)(A). In re Boyer, 2009 WL 1635922 at 3; In re Dubrowsky , 244 B.R. at 571-573; In
re Silverstein, 151 B.R. at 662; In re Miller, 97 B.R. at 764; In re Beaubouef, 966 B.R. at 178; In
re Yadidi, 274 B.R. at 852. Count Three failed to allege, with specificity, the second, third and
fourth elements, that the debtor knew that the statement was false and that the debtor had
fraudulent intent when he made the statement. Count Three should be dismissed.
Count Four of the Complaint alleged that the debtor made a false statement
omitting a material fact related materially to the bankruptcy case when the debtor failed to list on
his schedules the Kensington Option which should result in the denial of his discharge pursuant
to Section 727(a)(4)(A) of the Bankruptcy Code. The essential elements of this cause of action
are 1) the debtor made a statement under an oath, 2) the statement was false, 3) the debtor knew
that the statement was false, 4) the debtor made the statement with fraudulent intent and 5) the
statement related materially to the bankruptcy case. 11 U.S.C. §727(a)(4)(A). In re Boyer, 2009
WL 1635922 at 3; In re Dubrowsky , 244 B.R. at 571-573; In re Silverstein, 151 B.R. at 662; In
re Miller, 97 B.R. at 764; In re Beaubouef, 966 B.R. at 178; In re Yadidi, 274 B.R. at 852. Count
Four failed to allege the third and fourth of these essential elements, that the debtor knew that the
statement was false and that the debtor had fraudulent intent when he made the statement. Count
Four should be dismissed.
Count Five of the Complaint alleged that the debtor concealed the Kensington
Option when the debtor failed to list the Kensington Option on schedules, which should result in
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the denial of his discharge pursuant to Section 727(a)(2)(A) of the Bankruptcy Code.. The
essential elements of this cause of action are 1) a concealment of property, 2) that belongs to the
debtor, 3) within one year before the filing of the petition, 4) with intent to hinder, delay or
defraud a creditor or officer of the estate. 11 U.S.C. §727(a)(2)(A). In re Boyer, 2009 WL
1635922 at 3; In re Olivier, 819 F.2d at 552; In re Silverstein, 151 B.R. at 660-661. Count Five
failed to allege the elements of second, third and fourth of these essential elements, that the
debtor had fraudulent intent to conceal property belonging to the debtor when the alleged
concealment occurred, and that the concealment of the property was within one year before the
filing of the petition. Count Five should be dismissed.
Count Six of the Complaint alleged that the debtor concealed his ownership
interest in Kensington, the Kensington Units and the Kensington Option within a year prior to
filing, which should result in the denial of his discharge pursuant to Section 727(a)(2)(A) of the
Bankruptcy Code. The essential elements of this cause of action are 1) concealment of property,
2) belonging to the debtor, 3) within one year before the filing of the petition, 4) with intent to
hinder, delay or defraud a creditor or officer of the estate. 11 U.S.C. §727(a)(2)(A). 	In re Boyer,
2009 WL 1635922 at 3; In re Olivier, 819 F.2d at 552; In re Silverstein, 151 B.R. at 660-661.
The pleading of Count Six lacked the required specificity and failed to allege the second, third
and fourth essential elements, that the debtor had intent to conceal property that belonged to the
debtor within a year before the filing of the petition, and to specify the subjects of the
concealment. Count Six should be dismissed.
Count Seven of the Complaint alleged that the debtor signed Monthly Operating
Reports, that the signing of the reports constituted an oath, and that the reports were materially
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false because they failed to disclose the true extent of the debtor’s income and liabilities, for
which the debtor should suffer the denial of his discharge pursuant to Section 727(a)(4)(A) of
the Bankruptcy Code. The essential elements of this cause of action are 1) the debtor made a
statement under an oath, 2) the statement was false, 3) the debtor knew that the statement was
false, 4) the debtor made the statement with fraudulent intent and 5) the statement related
materially to the bankruptcy case. 11 U.S.C. §727(a)(4)(A). 	In re Boyer, 2009 WL 1635922 at
3; In re Dubrowsky , 244 B.R. at 571-573; In re Silverstein, 151 B.R. at 662; In re Miller, 97
B.R. at 764; In re Beaubouef, 966 B.R. at 178; In re Yadidi, 274 B.R. at 852. 	Count Seven
failed to allege with the required specificity the first, third and fourth of these essential elements,
that the debtor made a statement under an oath, that the debtor knew that the statement was false
and that the debtor had fraudulent intent when he made the statement. Count Seven should be
dismissed.
Count Eight of the Complaint alleged that the debtor’s account at Signature Bank,
contrary to the debtor’s schedules, remained opened as of the petition date and the debtor utilized
the account as his primary depository account. 	The essential elements of this cause of action are
1) the debtor made a statement under an oath, 2) the statement was false, 3) the debtor knew that
the statement was false, 4) the debtor made the statement with fraudulent intent and 5) the
statement related materially to the bankruptcy case.11 U.S.C. §727(a)(4)(A). 	In re Boyer, 2009
WL 1635922 at 3; In re Dubrowsky , 244 B.R. at 571-573; In re Silverstein, 151 B.R. at 662; In
re Miller, 97 B.R. at 764; In re Beaubouef, 966 B.R. at 178; In re Yadidi, 274 B.R. at 852. Count
Eight fails to allege with the required specificity the third and fourth essential elements, that the
debtor knew that the statement was false and had fraudulent intent when he made the statement.
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Count Eight should be dismissed.
Count Nine of the Complaint alleged that the Court issued an order authorizing a
receiver to collect the rental payments, and the debtor intentionally remitted the rental payments
to his counsel and not to the receiver. Consequently, the debtor should be denied his discharge
for failure to follow an Order of the Court pursuant to Section 727(a)(6)(A) of the Bankruptcy
Code. 	The essential elements of this cause of action are 1) the court in the case issued an order,
and 2) the debtor refused to obey the order. 11 U.S.C. §727(a)(6)(A). In re Demar, 373 B.R. 232,
240 (Bankr. E.D.N.Y. 2007); In re Miller, 97B.R. at 765. The pleading of Count Nine lacked the
required specificity and failed to allege the second element, that the debtor wrongfully refused to
obey the court’s order. Count Nine should be dismissed.
Count Ten of the Complaint alleged that the debtor utilized money from the
debtor-in-possession’s account and concealed the money from the Internal Revenue Service with
intent to hinder, delay and defraud creditors and the debtor should be denied his discharge
pursuant to Section 727(a)2)(B) of the Bankruptcy Code. 	The essential elements of this cause
of action are 1) a transfer or concealment of property, 2) that belongs to the estate, 3) that
occurred after the filing of the petition, and 4) the debtor had intent to hinder, delay or defraud a
creditor or officer of the estate. 11 U.S.C. §727(a)(2)(B). In re Boyer, 2009 WL 1635922 at 3; In
re Miller, 97 B.R. at 763. Count Ten failed to allege with the required specificity the first and
fourth of these elements, that the debtor transferred or concealed property from the estate, and
that the debtor had intent to hinder, delay or defraud a creditor. Count Ten should be dismissed.
Count Eleven of the Complaint alleged that the debtor failed to comply with a
Confirmation Order that approved the Entity Debtors’ plan of reorganization which restricted the
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debtor’s use of the Entity Debtors’ payment, and should be denied his discharge pursuant to
Section 727(a)(6)(A) of the Bankruptcy Code. The essential elements of this cause of action are
1) the court issued an order in the case, and 2) the debtor refused to obey the order. 11 U.S.C.
§727(a)(6)(A). In re Demar, 373 B.R. at 240; In re Miller, 97 B.R. at 765. Count Eleven failed
to allege with the required specificity the second element and to allege instances of the debtor’s
wrongful conduct or refusal to obey this Court’s order. Count Eleven should be dismissed.
Count Twelve of the Complaint alleged that the debtor failed to abide by the
terms of the Confirmation Order and the Entity Debtor’s Plan within this case and in connection
with another case in the Bankruptcy Court, and should be denied a discharge pursuant to Section
727(a)(7) of the Bankruptcy Code. The essential elements of this cause of action are 1) an
instance of a debtor’s refusal to obey an order, 2) a year prior or during the case, 3) in connection
with another case, and 4) concerning an insider. 11 U.S.C. §727(a)(7). In re Demar, 373 B.R. at
240; In re Miller, 97 B.R. at 765. Count Twelve failed to allege with the required specificity the
first and fourth elements, and also failed to allege an instance of the wrongful conduct, the date
of the occurrence and the act concerning an insider. Count Twelve should be dismissed.
Count Thirteen of the Complaint alleged that the debtor failed (i) to record on the
operating reports all of his transactions, and (ii) to comply with the Guidelines, and therefore (iii)
the debtor concealed and falsified records from which the debtor’s financial condition or
transactions might be ascertained and (iv) without justification under all of the circumstances.
The Count sought denial of his discharge pursuant to Section 727(a)(3) of the Bankruptcy Code.
The essential elements of this cause of action are 1) the debtor has concealed, falsified or failed
to keep records, 2) from which the debtor’s financial condition or transactions might be
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ascertained, and 3) the conduct was not justified under all of the circumstances of the case. 11
U.S.C. §727(a)(3). In re Yadidi, 274 B.R. at 852; In re Miller, 97 B.R. at 763-764. Count
Thirteen failed to allege with the required specificity the first and third elements, and to allege
facts and an instance of the concealment, falsification or lack of records that is not justified
under all of the circumstances of the case. Count Thirteen should be dismissed.
Count Fourteen of the Complaint alleged that the debtor obtained loans from
Kensington Terrace Apartments LLC that were not reflected on the operating reports, without
notice to the creditors and by signing the operating reports the debtor made a false statement, and
that his discharge should be denied pursuant to Section 727(a)(4)(A) of the Bankruptcy Code. .
The essential elements of this cause of action are 1) the debtor made a statement under an oath,
2) the statement was false, 3) the debtor knew that the statement was false, 4) the debtor made
the statement with fraudulent intent and 5) the statement related materially to the bankruptcy
case. 11 U.S.C. §727(a)(4)(A). In re Boyer, 2009 WL 1635922 at 3; In re Dubrowsky , 244 B.R.
at 571-573; In re Silverstein, 151 B.R. at 662; In re Miller, 97 B.R. at 764; In re Beaubouef, 966
B.R. at 178; In re Yadidi, 274 B.R. at 852. Count Fourteen lacked the required specificity and
failed to allege the first, third and fourth elements, that the statement was made under oath, that
the debtor knew that the statement was false and that the debtor made the statement with
fraudulent intent. Count Fourteen should be dismissed.
Count Fifteen of the Complaint alleged that the debtor acted with intent to hinder, delay
or defraud his creditors when the debtor failed to collect account receivables owed by entities
which the debtor controlled while he was a debtor-in-possession, and his discharge should be
denied pursuant to Section 727(a)(2)(B) of the Bankruptcy Code. The essential elements of this
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cause of action are 1) a transfer or concealment of property, 2) that belongs to the estate, 3) after
the filing of the petition, and 4) with intent to hinder, delay or defraud a creditor or officer of the
estate. 11 U.S.C. §727(a)(2)(B). In re Boyer, 2009 WL 1635922 at 3; In re Miller, 97 B.R. at
762-763. Count Fifteen lacked the required specificity, and failed to allege the first and fourth
elements and to identify the account receivables which constituted property of the estate, what
acts represented concealment of the property and the debtor’s intent to hinder, delay or defraud a
creditor and officer of the estate. Count Fifteen should be dismissed.
Count Sixteen of the Complaint alleged that the debtor testified under an oath that
he did not incur any direct or contingent liabilities in connection with the post-confirmation
refinancing of properties held by the Entity Debtors and the debtor’s testimony was false, and his
discharge should be denied pursuant to Section 727(a)(4)(A) of the Bankruptcy Code. The
essential elements of this cause of action are 1) the debtor made a statement under an oath, 2) the
statement was false, 3) the debtor knew that the statement was false, 4) the debtor made the
statement with fraudulent intent and 5) the statement related materially to the bankruptcy case.
11 U.S.C. §727(a)(4)(A). 	In re Boyer, 2009 WL 1635922 at 3; In re Dubrowsky , 244 B.R. at
571-573; In re Silverstein, 151 B.R. at 662; In re Miller, 97 B.R. at 764; In re Beaubouef, 966
B.R. at 178; In re Yadidi, 274 B.R. at 852. The allegations of Count Sixteen failed to allege with
the required specificity the third and fourth elements, that the debtor knew that the statement
was false, and that the debtor had fraudulent intent when he made the statement. Count Sixteen
should be dismissed.
Count Seventeen of the Complaint alleged that the debtor had committed an act
specified under section 727(a)(7) and the debtor’s testimony under an oath with regards to the
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confirmation hearing in another case was false, and his discharge should be denied pursuant to
Section 727(a)(7)of the Bankruptcy Code. The essential elements of this cause of action are 1)
an instance pursuant to 727(a)(4)(A), 2) the act occurred a year prior or during the case, 3) in
connection with another case and 4) concerning an insider. 11 U.S.C. §727(a)(7). 	In re Boyer,
2009 WL 1635922 at 3; In re Dubrowsky , 244 B.R. at 571-573; In re Silverstein, 151 B.R. at
662; In re Miller, 97 B.R. at 764; In re Beaubouef, 966 B.R. at 178; In re Yadidi, 274 B.R. at
852. Count Seventeen failed to allege with the required specificity the second and fourth
elements, when the wrongful conduct occurred, and that the conduct concerned an insider. Count
Seventeen also failed to allege that the debtor knew that the claimed false statement was false,
and that the debtor had fraudulent intent when he made the statement. Count Seventeen should
be dismissed.
Count Eighteen of the Complaint alleged that the Yeshiva Lease was a transfer of
property of the debtor’s estate and it was made within the year before the filing date and with the
intent to hinder, delay or defraud the debtor’s creditors, and his discharge should be denied
pursuant to Section 727(a)(2)(A) of the Bankruptcy Code. The essential elements of this cause
of action are 1) a transfer of property, 2) belonging to the debtor, 3) within one year before the
filing of the petition, and 4) with intent to hinder, delay or defraud a creditor or officer of the
estate. 11 U.S.C. §727(a)(2)(A). In re Boyer, 2009 WL 1635920 at 3; In re Olivier, 819 F.2d at
552; In re Silverstein, 151 B.R. at 660-661. Count Eighteen failed to allege with the required
specificity the second, third and fourth elements, that the debtor made a transfer of property
belonging to the debtor, when the transfer occurred and that the debtor had fraudulent intent
when the transfer occurred. Count Eighteen should be dismissed.
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Count Nineteen of the Complaint alleged that upon a state court decision the
debtor owes to the plaintiff a distribution award in the amount of $2,111,048.20 plus the
remainder of the plaintiff’s unsecured claim, the debtor maintained the ability to pay the amount,
and his discharge should be denied pursuant to Section 523 (a)(15)(A) of the Bankruptcy Code.
The essential elements of this cause of action are 1) a debt to a former spouse, 2) incurred by the
debtor, 3) in a course of a divorce, or determination by a governmental unit pursuant to a state
law. 11 U.S.C. §523(a)(15)(A) 2. Carlin-Blume v. Carlin, 314 B.R. 286, 293 (Bankr.S.D.N.Y.
2004); In re Foto, 258 B.R. 567, 571-573 (Bankr.S.D.N.Y. 2000). Count Nineteen alleged the
elements of a debt incurred by the debtor in the course of a divorce. Count Nineteen should be
allowed.
Count Twenty of the Complaint alleged that due to the debtor's alleged fraudulent
conduct, the debtor’s estate was left with few assets and the debtor’s future business prospects
and earning potential ensure that the debtor can not pay Mrs. Hirsch claim in full, and his
discharge should be denied pursuant to Section 523 (a)(15)(B) of the Bankruptcy Code. The
essential elements of this cause of action are 1) debt to a former spouse, 2) incurred by the
debtor, 3) in a course of a divorce, or determination by a governmental unit pursuant to a state
law. §523(a)(15)(B).3 In re Foto, 258 B.R. at 571-573. Count Twenty alleged the elements of a
2 Former 11U.S.C. §523(a)(15) applies in this case and in pertinent part provides that Section 523(a)(15)
would apply unless:
“(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably
necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor
is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation
of such business; or
(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a
spouse, former spouse, or child of the debtor;”
3 Id.
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debt incurred by the debtor in compliance with Section 523(a)(15)(B) of the Bankruptcy Code.
Count Twenty should be allowed.
Count Twenty-One of the Complaint alleged that the plaintiff’s claim is the result
of the debtor’s fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny
because the debtor and the plaintiff were husband and wife and the debtor was bestowed with a
fiduciary responsibility to the plaintiff, and his discharge should be denied pursuant to Section
523 (a)(4) of the Bankruptcy Code. The essential elements of this cause of action are 1)
fiduciary relationship, and 2) an act of fraud or defalcation or 3) embezzlement or larceny. 11
U.S.C. §523(a)(4). Farina v. Balzano (In re Balzano), 127 B.R. 524, 531-533 (Bankr. E.D.N.Y.
1991). Count Twenty-One failed to allege the first, second and third elements, and to allege with
the required specificity that there was a fiduciary relationship and the debtor committed fraud,
defalcation, embezzlement or larceny. Count Twenty-one should be dismissed.
Count Twenty-Two of the Complaint alleged that the debtor committed the
fraudulent transfer of the marital assets described in the State Court Decision and filed for
bankruptcy protection. Count Twenty-Two alleged that the debtor's course of conduct was
willful and malicious and injured the plaintiff by depriving her of property rights in the marital
assets, and his discharge should be denied pursuant to Section 523 (a)(6) of the Bankruptcy
Code. The essential elements of this cause of action are 1) willful and malicious act, 2) resulting
in injury, 3) by the debtor, 4) to another entity or its property. 11 U.S.C. §523(a)(6). Ball v. A.O.
Smith Corp. (In re Ball), 451 F.3d 66, 69 (2nd Cir. 2006); In re Rifkin, 142 B.R. at 67. Count
Twenty-Two failed to allege the first and second elements, and to allege with the required
specificity the instances of willful and malicious injury which are alleged. Count Twenty-Two
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should be dismissed.
Count Twenty-Three of the Complaint alleged the debtor committed actual fraud
as described in the State Court Decision and his discharge should be denied pursuant to Section
523 (a)(2)(A) of the Bankruptcy Code. The essential elements of this cause of action are 1) that
the debtor made a representation to the creditor, 2) at the time the representation was made, the
debtor knew that the representation was false, 3) the debtor made the representation with the
intention and purpose of deceiving the creditor, 4) the creditor relied on the representation, and
5) the creditor sustained a loss or damage as the proximate consequence of the representation. 11
U.S.C. §523(a)(2)(A). In re Rifkin, 142 B.R. at 64; In re Balzano, 127 B.R. at 530. The
circumstances constituting fraud should be stated with particularity. In re Rifkin, 142 B.R. at 65.
Count Twenty-Three failed to allege the five elements with the required particularity. Count
Twenty-Three should be dismissed.
Count Twenty-Four of the Complaint alleged existence of a domestic support
obligation which is non-dischargeable pursuant to Section 523 (a)(5)(A) of the Bankruptcy
Code. The elements of this cause of action are 1) the debt must have been incurred in connection
with a separation agreement, divorce decree or other order of a court of record, 2) the debt must
be to a spouse, former spouse, or child of the debtor, 3) the debt must be actually in the nature of
alimony, maintenance, or support. 11 U.S.C. §523(a)(5) 4
. Carlin-Blume v. Carlin, 314 B.R. at
4 Former Section 523 of the Bankruptcy Code applies here and provides in pertinent part that Section
523(a)(5) excepts from discharge debts:
“(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or
child, in connection with a separation agreement, divorce decree or other order of a court of record, determination
made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to
the extent that -
(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts
assigned pursuant to section 408(a)(3) of the Social Security Act, or any such debt which has been assigned to the
Federal Government or to a State or any political subdivision of such State; or
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291. Count Twenty-Four alleged the three elements in compliance with Section 523(a)(5)(A),
that the debt was owed to a former spouse and a child, in the nature of maintenance and child
support. Count Twenty-Four should be allowed.
THE PROPOSED AMENDED COMPLAINT
On December 22, 2007, counsel for plaintiff filed a Proposed Amended
Complaint. Many of the causes of action set forth in the Proposed Amended Complaint were the
same as those in the Complaint (Counts One through Six, Nine, Ten, Twelve, Thirteen and
Seventeen through Twenty-Four), or whose only change consisted of inclusion of or reference to
statutory language (Counts Seven, Eight and Fourteen through Sixteen). None of the changes in
the Proposed Amended Complaint change the decisions concerning the facial sufficiency of the
pleading contained in the original Complaint.
CONCLUSION
For the reasons set forth above, upon review of the Complaint the Court
finds
(1) that plaintiff has failed to set forth factual allegations necessary to state a cause of
action under Sections 523(a)(2), (4) and (6) or 727(a); AND
(2) that the plaintiff set forth factual allegations necessary to state a cause of action under
Section 523(a)(5) and (15).
The Court allows counts Nineteen, Twenty, and Twenty-Four of the Complaint to go forward.
None of the changes in the Proposed Amended Complaint either cured the deficiencies or
changed the decisions concerning the facial sufficiency of the pleading contained in the original
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is
actually in the nature of alimony, maintenance, or support[.]”
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Complaint.
IT IS SO ORDERED.
Dated: Brooklyn, New York
October 13, 2009
s/ Dennis E. Milton
DENNIS E. MILTON
United States Bankruptcy Judge
To: 	Gary M. Kushner, Esq.
Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn, LLP
330 Old Country Road
P.O. Box 31
Mineola, New York 11501
Joseph J. Haspel, Esq.
40 Matthews Street, Suite 201
Goshen, New York 10924
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