Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Bennett Funding Group

July 11, 2007

IN RE: THE BENNETT FUNDING GROUP, INC. DEBTOR.
ADES AND BERG GROUP INVESTORS, APPELLANTS,
v.
RICHARD C. BREEDEN, TRUSTEE OF THE BENNETT FUNDING GROUP, INC., ET AL., APPELLEES.



Bankr. Case No. 97-70049

Chapter 11

AMENDED MEMORANDUM-DECISION AND ORDER

This matter comes before the Court on appeal, pursuant to 28 U.S.C. § 158(a), from a Memorandum-Decision, Findings of Fact, Conclusion of Law and Order ("Bankruptcy Order"), dated October 23, 2006, of the United States Bankruptcy Court for the Northern District of New York (Gerling, Chief B.J.). The Ades Group and Berg Group (the "Ades Investors") appeal the Bankruptcy Order awarding Richard C. Breeden, Chapter 11 trustee (the "Trustee") of The Bennett Funding Group, Inc. ("BFG") and its related companies, including The Processing Center, Inc. ("TPC"), (collectively, the "Debtors"), judgment on the pleadings and dismissing the Ades Investors' counterclaims for imposition of a constructive trust upon the proceeds of a reinsurance policy allegedly covering the Ades Investors' losses. For the following reasons, the appeal is denied and the decision of the United States Bankruptcy Court for the Northern District of New York ("Bankruptcy Court") is affirmed.

I. Background

This action arises out of the bankruptcy filing of BFG and its related companies; a detailed account of the procedural and factual background of this adversary proceeding and the related bankruptcy case can be found in the following decisions: Ades-Berg Investors v. Breeden (In re Bennett Funding Group, Inc.), 439 F.3d 155 (2d Cir. 2006); Breeden v. Sphere Drake Ins., PLC (In re Bennett Funding Group, Inc.), 270 B.R. 126 (S.D.N.Y. 2001) ("2001 Standing Decision"), aff'd sub nom.Breeden v. Ades Investor Group (In re Bennett Funding Group, Inc.), 60 Fed. App'x. 863 (2d Cir. 2003); Breeden v. Sphere Drake Ins., PLC (In re Bennett Funding Group, Inc., 258 B.R. 67 (Bankr. N.D.N.Y. 2000); Breeden v. Sphere Drake Ins., PLC (In re Bennett Funding Group, Inc.), No. 97-70049, 2000 Bankr. LEXIS 1693 (Bankr. N.D.N.Y. Mar. 3, 2000); Breeden v. Sphere Drake Ins., PLC (In re Bennett Funding Group, Inc.), No. 97-70049, 1999 Bankr. LEXIS 1857 (Bankr. N.D.N.Y. Aug. 6, 1999). The facts and background, relevant to the present motion, are as follows. On February 24, 1997, the Trustee commenced an adversary proceeding against, inter alia, Sphere Drake Insurance, plc, and Sphere Drake Underwriting Management (Bermuda) Limited (collectively "Sphere Drake") in the Bankruptcy Court. This Court adopted the Bankruptcy Court's recommendation that the adversary proceeding be adjudicated with a class action instituted by various BFG investors against Sphere Drake in the United States District Court for the Southern District of New York (the "Southern District"). The Trustee asserted claims against Sphere Drake to recover the proceeds of a reinsurance policy Sphere Drake issued to one of BFG's companies and claims for aiding and abetting fraud and aiding and abetting breach of fiduciary duty. In addition, the Trustee asserted claims for a declaratory judgment against various investors in the Debtors; the Trustee sought a finding that these investors were not entitled to direct payment of insurance or reinsurance proceeds by Sphere Drake. The Ades Investors claimed rights to the proceeds of the reinsurance policy and asserted a counterclaim against the Trustee seeking a declaration that the reinsurance proceeds were not property of the Debtors' estate, and a cross-claim against Sphere Drake demanding payment of such proceeds to the Ades Investors rather than to the Trustee.

In the fall of 2000, Sphere Drake reached an agreement with the Trustee to settle the adversary proceeding. As part of the settlement, the Southern District granted a summary judgment motion filed by both Sphere Drake and the Trustee, dismissed with prejudice the Ades Investors' cross-claim against Sphere Drake, and dismissed without prejudice to renew in the Bankruptcy Court proceeding the Ades Investors' counterclaim against the Trustee. See Breeden v. Sphere Drake Insurance, PLC (In re Bennett Funding Group, Ins. Secs. Litig.), 270 B.R. 126 (S.D.N.Y. 2001). The Southern District found that payment under the Sphere Drake reinsurance policy could only be made to a party named as a loss payee in the contract and that the Ades Investors were not named as a loss payees in any of the documents relevant to the contract dispute. Id. at 130-31. The United States Court of Appeals for the Second Circuit (the "Second Circuit" or the "Circuit") affirmed the Southern District's decision. See Breeden v. Ades Investor Group (In re Bennett Funding Group), No. 02-5021, 2003 WL 1191171 (2d Cir. Mar 13, 2003).

The Southern District transferred the Trustee's declaratory judgment action back to this Court on February 26, 2002; this Court then transferred the action back to the Bankruptcy Court.

Subsequently, the Trustee, Sphere Drake, and other investors with claims against Sphere Drake reached a settlement agreement; the agreement required Sphere Drake to pay approximately $27.5 million for a release of the claims asserted against it. On March 13, 2003, the Trustee filed a motion pursuant to Federal Rule of Bankruptcy Procedure 9019 seeking the Bankruptcy Court's authorization to enter into the settlement and approval of the pro rata allocation of $27.5 million. After the Ades Investors objected to the Trustee's motion, the Bankruptcy Court authorized the settlement. The Ades Investors then filed a motion seeking to alter or amend the Bankruptcy Court's order approving the settlement, which the Bankruptcy Court found untimely; this Court and the Second Circuit affirmed the Bankruptcy Court's decision. See Ades-Berg Investors v. Breeden (In re Bennett Funding Group, Inc.), 439 F.3d 155 (2d Cir. 2006).

On April 12, 2004, the Bankruptcy Court entered a separate order directing the allocation of the proceeds derived from the settlement with Sphere Drake; a portion of the proceeds was allocated to creditors with Sphere Drake-related investments, while the balance of the proceeds was to be distributed to the general unsecured creditors. The Ades Investors filed a notice of appeal from the Bankruptcy Court's order allocating the settlement proceeds, but the appeal was never perfected and this Court dismissed it on July 15, 2005. The Circuit affirmed the Bankruptcy Court's order allocating the settlement proceeds on June 5, 2006.

The Ades Investors also filed a Renewal of Counterclaim with the Bankruptcy Court on June 25, 2003. The Ades Investors again sought a judgment declaring that the proceeds of the Sphere Drake reinsurance policy were not property of the Debtors' estate and directing the Trustee, as trustee of a constructive trust, to pay the Ades Investors the amount of any proceeds received from Sphere Drake. After the Circuit affirmed the allocation of the settlement proceeds, the Trustee filed a motion for judgment on the pleadings to dismiss the Ades Investors' constructive trust counterclaims. The Bankruptcy Court granted the Trustee's motion for judgment on the pleadings on October 23, 2006 and ordered the Trustee to disburse the proceeds from the settlement with Sphere Drake. See Bankruptcy Order (Dkt. No. 1, Attach. 7). The Ades Investors then filed the appeal now before the Court.

II. Discussion

A. Standard of Review

This Court reviews de novo the Bankruptcy Court's grant of judgment on the pleadings. See Karedes v. The Ackerley Group, Inc., 423 F.3d 107, 113 (2d Cir. 2005). The Court accepts the Bankruptcy Court's factual findings unless they are clearly erroneous. Midland Cogeneration Venture Limited ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.