On February 1, 1999, this court made the determination under 11 U.S.C. § 1104 that the appointment of a chapter 11 trustee in this case is warranted. In re Altman, 230 B.R. 6 (Bankr.D.Conn. 1999) (the "Order"). On February 9, 1999, the debtor filed a motion seeking a stay pending appeal of that decision.
On February 1, 1999, an order entered appointing a chapter 11 trustee (the "1999 Decision"). The 1999 Decision also held that the Painting was property of the debtor's bankruptcy estate. See In re Altman, 230 B.R. 6 (Bankr. D. Conn. 1999). On appeal, the District Court vacated the order in part and remanded the matter to "afford [ Roberta] Carroll adequate notice and opportunity to be heard as to her claimed interest in the Painting."
ARTERTON, District Judge. Appellant, Dr. Roberta Carroll ("Carroll") appeals the Bankruptcy Court's February 1, 1999 Memorandum and Order appointing a trustee ("Trustee Order"), In re Altman, 230 B.R. 6 (Bankr.D.Conn. 1999), which also held that the painting by American impressionist Richard E. Miller (1875-1943) alternately referred to as "Woman at Tea," a/k/a "Women at Tea," a/k/a "Woman on a Terrace, Giverny" a/k/a "Two Women Taking Tea" a/k/a "Women on a Terrace: Giverny" (the "Painting") was the property of the chapter 11 estate of Debtor Michael Altman ("Altman"), as well as the March 3, 1999 Order denying Carroll's Motion For a New Trial (R. 17). Items designated by Altman for inclusion in the record on appeal will be cited to as "R. ___" and those additional items designated by Galleries will be cited to as "Add'l Item ___."
Familiarity with this court's prior decisions, which, inter alia, appointed a chapter 11 trustee under § 1104(a)(1), determined whether certain property was part of the bankruptcy estate, and held that Prin Corporation is the successor in interest to claims filed here by the trustee in another bankruptcy case, is assumed. See Prin Corp. v. Altman (In re Altman), 248 B.R. 475 (Bankr. D. Conn. 2000) and In re Altman, 230 B.R. 6, 13 (Bankr. D. Conn. 1999), stay pending appeal denied, 230 B.R. 17 (Bankr. D. Conn. 1999), vacated and remanded in part, 254 B.R. 509 (D. Conn. 2000), aff'd in part, id. (trustee appointment), appeal pending. The district court vacated the finding that the Miller painting was property of the estate and remanded that determination so that this court could provide Dr. Roberta Carroll an adequate opportunity to assert her interest in the painting.
See, e.g., In re Altman, 230 B.R. 6 (Bankr. S.D. Conn. 1999); In re Canion, 129 B.R. 465, 470 (Bankr. Tex. 1989); In re Natrl Plants and Lands Management Co., Ltd., 68 B.R. 394, 396 (Bankr. S.D.N.Y. 1986). The Court does not at this time make any determination as to the bona fides of Sara Gardner's lien or judgment.
BACKGROUND While familiarity with this court's decision in In re Altman, 230 B.R. 6 (Bankr. D.Conn. 1999), appeals pending, is presumed, the following facts, which are not disputed, provide some additional context. The obligation underlying the challenged proofs of claim arises from Altman's personal guaranty of a July 27, 1988 note in the amount of $800,000.00 that Cambridge Factors, Inc., a financing company, gave to Altman's alter-ego company, Altman Fine Arts, Inc. ("AFA").
In June 1988, Rafael Gallery, Inc., an art gallery owned and operated by plaintiff Benjamin Aryeh; and Altman Fine Arts, Inc., an art gallery owned and operated by Michael N. Altman ("Altman"), son of defendant Carol Altman, jointly purchased the Miller painting underlying this action, from Hollis Taggart Galleries, for $200,000.00 (Aryeh Aff. ¶ 4; Tr. at 74-75). In a related Bankruptcy Court decision, discussed infra, defendant Carol Altman is referred to as "Carole" Altman, and is identified as the mother of Michael N. Altman, a debtor in bankruptcy ( In re Altman, 230 BR 6 [US Bankr Ct, D Conn 1999] [Hon. Alan H.W. Shiff, Ch. J.], vacated in part on other grounds affd in part 254 BR 509 [US Dist Ct, D Conn 2000]). References to "Aff.
See also Tradex Corp. v. Morse, 339 B.R. 823, 829 (D. Mass. 2006) ("[F]actual findings for appointment of a trustee must be made to a preponderance of the evidence by the appointing judge, and should be reviewed under a clearly erroneous standard, while the determination that such evidence is sufficient to show cause for appointment will be evaluated for an abuse of discretion."); In re Altman, 230 B.R. 6, 16-17 (Bankr. D. Conn. 1999) (holding that, following Grogan v. Garner, the appropriate standard of proof for appointment of a Chapter 11 trustee is preponderance of the evidence), vacated on other grounds, 254 B.R. 509 (D. Conn. 2000). That being said, we conclude that the Bankruptcy Court did not clearly err in ordering the appointment of a trustee, even if the higher clear and convincing standard of proof applied.
Courts have held that "the particular items listed in Section 1104(a)(1) are not exclusive and that factors that may constitute cause for the appointment of a trustee include . . . misuse of assets and funds, inadequate record-keeping and reporting, and various instances of conduct found to establish fraud or dishonesty, lack of credibility, and lack of creditor confidence." Id. (citing In re Altman, 230 B.R. 6, 16 (Bankr. D. Conn. 1999), vacated in part on other grounds, 254 B.R. 509 (D. Conn. 2000)). Here, Appellant was acting on behalf of the debtor-in-possession, admitted to misusing funds by making a payment to herself without authorization, misrepresented the timing of when such misuse would cease, failed to cure the deficiency of assets and incurred unauthorized transfers of assets for personal use despite repeated warnings.
The burden then shifted to the trustee as the party seeking to sweep assets into the estate to show that the deposited funds actually came from the debtor. In re Neidorf, 534 B.R. 369, 372 (B.A.P. 9th Cir. 2015); In re Dunn, 436 B.R. 744, 747 (Bankr. M.D. Ga. 2010); In re Altman, 230 B.R. 6, 11 (Bankr. D. Conn. 1999). As the bankruptcy court recognized, there was a lot of evidence from which one could conclude that Erdmann and Hansen removed property from the debtor's facility on the eve of the bankruptcy filing and that Erdmann had ample opportunity to take the debtor's property without raising suspicion. Nevertheless, Judge Alston found that the trustee had not proven that the assets at issue, namely the money that was wired to TTLG and the gold bullion that was sold on March 31, 2016, came from the debtor. While the bare record may favor a finding in the trustee's favor on this issue, Judge Alston had the opportunity to hear from the witnesses, evaluate their credibility, question the attorneys, and consider the evidence in context.