Posted By USFN,
Monday, February 15, 2021
Updated: Friday, February 12, 2021
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by Peter A. Ventre, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY, OR, TX, WA)
In In Re: Omer Ahmed Salem, United States Bankruptcy Court, District of Connecticut, Hartford Division, Case No. 20-212103 (JJT), debtor attempted to use bankruptcy to delay a state foreclosure sale. Plaintiff in an underlying state foreclosure filed a motion for in rem relief from automatic stay in debtor’s Chapter 13 Bankruptcy. Plaintiff, with her husband, purchased commercial property to retire on its rental income, but the husband became gravely ill which caused substantial medical bills, forcing them to sell the property to acquire funds to pay mounting expenses. At the closing of the loan and sale of the property, the named borrower under the loan documents and owner of the property were changed from the debtor to his LLC. Debtor’s LLC was formed, then dissolved before the closing, but reforming thereafter. The LLC defaulted on the loan leading to the state foreclosure action. Judgment of foreclosure by sale entered against the LLC. After failed attempts to extend the sale date, the debtor through his LLC, just days before the scheduled foreclosure sale, transferred the property to the debtor who then filed bankruptcy, stopping the sale. The plaintiff immediately filed the motion for in rem relief from stay. Plaintiff, a 78-year-old lady, suffering significant health issues, needed the property to be sold to acquire immediate needed funds to meet her ever growing financial needs and medical expenses. The Court conducted a two-day hearing then issued an order granting in rem relief from stay which enabled the plaintiff to reset the sale date in the state foreclosure action.
The Bankruptcy Court found the plaintiff had been “subjected to a scheme to hinder, delay or defraud them involving a transfer of ownership in the property without their consent”. The Court held the property was procured by the debtor in a transaction “tainted by misrepresentations on corporate formalities, fraud, deceit, abuse of corporate forms and an absence of sufficient resources to support Debtor’s financial obligation.” Though debtor’s counsel sought to keep out evidence of the Connecticut Secretary of State website as to the LLC reforming, the debtor himself testified the reforming date on the website was accurate. Debtor submitted an exhibit as to income/expenses on the property, showing the property could not support itself. After the Court noted that issue, the debtor attempted to refute his own exhibit. Debtor‘s testimony consisted of speculation of future funds from a lawsuit against Saudi Arabia in New York, possible commissions, and selling a property in Egypt, but the testimony failed to support a plan and offered inadequate protection for the plaintiff. The Court held those speculative claims also failed before the trial court on motions to extend the sale date, and therefore, disregarded those arguments under the doctrines of res judicata, collateral estoppel, and the Rooker-Feldmen doctrine. Debtor’s action in attempting to use the Bankruptcy Court to stop a state foreclosure sale only delayed the sale, but in so doing, resulted in an in rem order preventing future delays of the sale, casting the debtor in a poor light.
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February 2021 e-Update
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