Opinion
Civ. No. 98-3080 (DRD), Chapter 11 Proceeding, 97-40019 (RG), Adversary Proceeding, 98-2013 (RG)
March 25, 1999.
Mr. Daniel Provezano, II, Pro se Appellant
John A. Adler, Esq., Hellring, Lindeman, Goldstein Siegal LLP, for James A. Scarpone, Chapter 11 Trustee
Appellant, Daniel Provenzano, II ("Provenzano"), appeals from an order of the Honorable Rosemary Gambardella, U.S.B.J., dated May 26, 1998, that continued certain attachments and restraints on Provenzano's assets and property and denied Provenzano's cross-motion for dissolution of the attachments and restraints. James A. Scarpone ("Scarpone"), the Chapter 11 Trustee of Advice Worldwide, LLC ("Advice Worldwide"), opposes and seeks affirmance of the order. For the reasons set forth below, Provenzano's appeal will be dismissed.
I. BACKGROUND
In detailing the facts and throughout the opinion, reliance will be had upon the documents and transcripts contained within the appendices submitted by the parties.
Beginning in or about 1990, Provenzano was engaged in the business of commercial print brokerage. He operated through three companies, Advice Inc., Austin Publishing, Inc., and XTC Graphics, Inc. See Provenzano Appellate Appendix, at DA148. On or about February 27, 1997, a written agreement was entered into between Provenzano, Ralph Ianuzzi, Stephen Ianuzzi, and Provenzano's three companies whereby the Ianuzzis would contribute $1 million in cash and Provenzano would contribute certain designated assets of the above-mentioned three corporations to a limited liability company to be formed under the name Advice Worldwide Limited.Id. at DA357-65. As part of this agreement, Provenzano signed a written employment agreement with the new company for a period of two years. Id. DA 370-80. The employment agreement called for Provenzano to work full time and exclusively for Advice Worldwide. Id. at DA374-76. The agreement also stated that, at the closing of the transaction, Provenzano would receive $1 million, $500,000 which was designated as a "signing bonus" and another $500,000 which was designated as a loan. Id. Provenzano executed a promissory note in the amount of $500,000. The note provided that the loan would be repaid as follows, $250,000 with accrued interest, no later than February 26, 1998, and another $250,000 to be paid no later than February 27, 1999. Id. DA3l7-68.
One of Advice, Inc.'s accounts receivable that was transferred to Advice Worldwide was one owed by an entity known as Mothering Magazine in the amount of $143,000. On or about March 1, 1997, almost immediately after the receivable was assigned to Advice Worldwide, Provenzano, without the knowledge or consent of Advice Worldwide, allegedly sold the receivable to Joseph Valenzano ("Valenzano") for $120,000. Id. DA509-40. Provenzano did not advise Valenzano that before selling the receivable to Valenzano, he had previously assigned the receivable to Advice Worldwide. Id. at DA5l0. Provenzano did not turn over to Advice Worldwide the $120,000 he received from Valenzano. Id.
In or about June of 1997, Provenzano was arrested and charged with attempting to extort from one Jeffrey Pumilla, Pumilla's interest in an insurance business in Franklin Lakes, New Jersey. He was released after posting $500,000 in cash bail. Less than a week after this arrest, Provenzano was arrested and charged with violating a restraining order barring Provenzano from contacting Pumilla or members of his family. Provenzano was required to post another $200,000 in cash bail. On or about July 22, 1997, Provenzano was again arrested and charged with kidnaping, conspiracy, and aggravated assault in connection with forcing Anthony Confredo ("Confredo"), an employee of Advice, Inc., and later of Advice Worldwide, into a van and breaking his thumb with a hammer. The New Jersey Superior Court set bail at $350,000. Id. DA705-13.
At or about this time, and in violation of his employment agreement and the representations he made prior to the formation of the limited liability company, Provenzano succeeded in convincing some of the employees of Advice Worldwide to resign and work for a competing company, Graphic Color, in which Provenzano maintained a secret interest, convincing customers not to pay bills sent by Advice Worldwide, taking possession of monies paid by customers to Advice Worldwide, and removing office equipment from the office of Advice Worldwide. As part of this alleged scheme, the competing company, Graphic Color, would collect receivables on jobs that had been performed by Advice Worldwide. Details of Provenzano's fraudulent acts were provided in numerous certifications which were filed in support of debtor's application. See id. at DA69-71; DA72-76; DA79-85.
As a result of Provenzano's acts, in the first week of August 1997, one of the customers of Advice Worldwide received an invoice dated July 7, 1997, on the letterhead of Graphic Color for work Advice Worldwide had performed. Id. at DA574-77. Similarly, on or about June 30, 1997, a customer of Advice Worldwide, John Langton, stopped payment on a check that had been issued in payment of an outstanding bill of Advice Worldwide in the amount of $12,250. When asked why he had stopped payment on the check, Langton's response was "speak to Mr. Provenzano." Provenzano had previously indicated to Mr. Schwaninger that Provenzano had sent people to "visit" Langton in order to "scare" him. Id. at DA403-04; DA425-80; DA94.
On July 2, 1997, Stephen Ianuzzi, the "operating manager" of Advice Worldwide, barred Provenzano from the offices of the company. Id. at DA93. Shortly thereafter, Ianuzzi discharged Provenzano as an employee.Id. at DAll3. On or about July 7, 1997, Advice Worldwide and the Ianuzzi brothers filed a Verified Complaint in the Chancery Division of the New Jersey Superior Court seeking an order restraining Provenzano and his agents from interfering with the business and employees of Advice Worldwide. Id. at DA469-83. Provenzano did not contest the allegations made against him. The Court issued restraining orders against Provenzano and other named agents of Provenzano dated July 25 and July 28, 1997.Id. at DA485-87; 492-93.
On or about August 29, 1997, three creditors filed an involuntary bankruptcy petition against Advice Worldwide. One of these was a company named Universal Logistics. Provenzano, purportedly on behalf of Universal Logistics, paid one-third of the fee of the attorney who filed the involuntary Chapter 7 petition. Id. at DA631. On October 3, 1997, the debtor filed a superseding Chapter 11 petition and thereby became a debtor-in-possession. Its bankruptcy schedules show "gap claims" of approximately $640,000 and general unsecured claims exceeding $2,000,000.
On January 12, 1998, the debtor commenced this adversary proceeding in the bankruptcy court against Provenzano and Bernard Recanati, seeking an ex parte writ of attachment and restraints. Numerous papers were filed both in support of and in opposition to Advice Worldwide's application. In his papers, Provenzano denied any wrongdoing. When his denials were proven to be false, as in the case of his assignment of the Mothering Magazine receivable to Joseph Valenzano, he provided no explanations.Id. at DA627-28. Provenzano denied that he had convinced employees of the debtor to resign and work for Graphic Color, but did not respond to the specific charges made by Schwaninger, Confredo, and Scognamiglio. See id. at DA 164-66. Provenzano did not deny the billing of Advice Worldwide customers by Graphic Color which corroborated the charges made by Schwaninger, Confredo, and Scognamiglio. Id. at DA629-31. Provenzano's denial that he assaulted Neil Rose, the president of Mid-State Litho, one of the debtor's customers, was refuted by a detailed Certification of Mr. Rose which was submitted by Advice Worldwide to the bankruptcy court. Id. at DA53; DAl62; DA351; DA628-29; DA70l-49.
Advice Worldwide's application for a writ of attachment and restraints on Provenzano's assets included the bail monies he had paid to the New Jersey Superior Court and the interest in his home. Provenzano claimed that without access to the bail monies and his interest in his home, he could not support his family and had to borrow money from his mother-in-law. Id. at DA632. He did not disclose how much remained of the $1,000,000 he had received in February of 1997. Additionally, Provenzano had received approximately $100,000 from the sale of a house in Toms River, New Jersey at or about the time of the attachment, but provided no details concerning what became of that money. Id. at DAl2. Provenzano also did not disclose the amount of his equity in his house.
The bankruptcy court heard oral argument on Advice Worldwide's motion and Provenzano's cross-motion on May 5, 1998. On May 14, 1998, the court announced its decision in a telephone conference call to counsel. In its opinion, the court summarized nineteen certifications it had received.See Transcript of May 14, 1998 Opinion, at 4:23-17:10. The court made the following factual findings as disclosed by the record:
(1) A contract existed between Provenzano and the debtor-in-possession. Id. at 20:3-9;
(2) Provenzano owned property in the State of New Jersey which was subject to attachment. Id. at 21:4-6;
(3) Provenzano had received from the debtor-in-possession at least one million dollars and had signed a promissory note pursuant to which he was obligated to pay the debtor at least $250,000 on February 26, 1998, and another $250,000 thereafter. Id. at 22:25-23:6;
(4) Provenzano had collected and possibly diverted certain accounts receivable belonging to Advice Worldwide. Id. at 23:6-12;
(5) Advice Worldwide had sustained damages in excess of $260,000. Id. at 24:10-19;
(6) Provenzano had failed to prove that he possessed any equity in his house. Id. at 22:1-4;
(7) Provenzano had failed to demonstrate that he had not been able to use his non-attached assets, including the $1,000,000 he received in February of 1997, to retain and pay counsel. Id. at 23:19-22.
With regard to the attachment, the bankruptcy court found that Advice Worldwide had demonstrated a probability that final judgment would be rendered in its favor. With regard to the statutory requirements for attachment and, in particular, the issue of Provenzano's fraud, the court found that it was "satisfied that [Advice Worldwide had] submitted credible and detailed evidence in support of their claims to the Court to allow the Court to find that there is a probability that final judgment will be rendered in favor of the plaintiffs." The court rejected Provenzano's contention that because he had denied all of Advice Worldwide's charges, the proofs were in "equipoise," and the court could not find that there was a probability that final judgment would be rendered in favor of Advice Worldwide. Id. 21:11-23.
The bankruptcy court also found that Advice Worldwide had demonstrated that it was entitled to the ancillary restraints it sought. In particular, the court found that absent the attachments and the ancillary restraints, Advice Worldwide might suffer irreparable injury in that there would be no funds with which to satisfy a judgment. Id. at 24:8-23. The court found that Provenzano had failed to demonstrate any injury resulting from the restraints. Id. at 23:13-22; 22:1-4. The court also found that Advice Worldwide had established a likelihood of success on the merits of its claim. Id. at 22:11-24.
The bankruptcy court entered an order reflecting its decision on May 26, 1998. See DA772-74. Provenzano filed his notice of appeal on June 5, 1998. Id. at DA775-78. Pursuant to an order of the bankruptcy court dated August 11, 1998, which was based on a motion brought by the Chapter 7 Trustee of Advice Inc., the court ordered the appointment of a Chapter 11 trustee. James A. Scarpone was subsequently appointed trustee by the United States Trustee.
II. STANDARD OF REVIEW
On appeal, a district court may set aside a bankruptcy court's factual findings only if they are clearly erroneous. Fed.R.Bankr.P. 8013(a). Issues committed to the discretion of the bankruptcy court may be disturbed only if the bankruptcy court abused its discretion. In re Vertientes, Ltd., 845 F.2d 57, 59 (3d Cir. 1988). The bankruptcy court's legal conclusions, however, are subject to the district court's plenary review. In re Modular Structures, Inc., 27 F.3d 72, 76 (3d Cir. 1994);Matter of J.P. Fyfe, Inc. of Florida v. Bradco Supply Corp., 891 F.2d 66, 69 (3d Cir. 1989); Hagaman v. State of New Jersey, Dep't of Environ. Protection and Energy, 151 B.R. 696, 698 (D.N.J. 1993).
III. DISCUSSION
Before considering the merits of this appeal, it must first be determined whether this Court has jurisdiction. Although Provenzano characterizes this matter as an appeal from a final order, that characterization has been challenged by the Chapter 11 Trustee. Accordingly, the first inquiry must be to determine whether or not appellate jurisdiction exists. See In re West Electronics, Inc., 852 F.2d 79, 81 (3d Cir. 1988).
Authority to hear appeals from bankruptcy courts can be found in 28 U.S.C. § 158(a). This section reads:
[t]he district courts of the United States shall have jurisdiction to hear appeals (1) from final judgments, orders, and decrees; (2) from interlocutory orders and decrees issued under section 1121(d) of title 11 increasing or reducing the time periods referred to in section 1121 of such title; and (3) with leave of the court, from other interlocutory orders and decrees; and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.28 U.S.C. § 158(a). Federal law thus provides two avenues of appeal to district court from bankruptcy court orders. A party has an appeal as of right from final judgments, orders or decrees or an appeal by leave of court from an interlocutory order. In re National Office Products, Inc., 116 B.R. 19, 20 (D.R.I. 1990). The concept of finality is somewhat broader in the bankruptcy context than in ordinary civil litigation. In re Taylor, 913 F.2d 102, 104 (3d Cir. 1990); see also In re Hooker Investments, Inc., 937 F.2d 833, 836 (2nd. Cir. 1991); Bowers v. Connecticut Nat'l Bank, 847 F.2d 1019, 1022 (2d Cir. 1988); In re Oglesby, 158 B.R. 602, 604 (E.D.Pa. 1993); see also Locks v. United States Trustee, 157 B.R. 89 (W.D.Pa. 1993). Rather, in bankruptcy proceedings, it is generally the particular adversary proceeding or controversy that the court must have finally resolved, rather than the entire bankruptcy, for a decision to be final. In re Chateaugay Corp., 922 F.2d 86, 89-90 (2nd Cir. 1990); In re National Office Products, 116 B.R. at 20. When an order, entered or not, resolves only a preliminary matter, it will not constitute a final order for purposes of an appeal.Id.; In re Colon, 941 F.2d 242, 245 (3rd Cir. 1991). Accordingly, final orders are those that finally resolve a discrete set of issues, leaving no unrelated issues for later determination. See In re Taylor, 913 F.2d at 104; West Electronics, 852 F.2d at 82.
The order of attachment in this matter was not a final order and is therefore not appealable at this time. See Merrimac Corp. v. Sved, 128 B.R. 874, 875 (S.D.N.Y. 1991). Orders of attachment "are frequently and necessarily made in the progress of a cause." Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed.2d 404 (1848). Because attachment orders are intended to preserve the subject matter in dispute from waste and to keep it within the control of the court until the rights of the parties concerned can be adjudicated by a final order, they are interlocutory in nature. Id.; Merrimac Corp., 128 B.R. at 875. The bankruptcy court's attachment order resolved only a preliminary matter in this adversary proceeding. It did not resolve any discreet set of issues and this particular adversary proceeding has yet to come to a final resolution. The order was entered to ensure that the property at issue was not transferred or disposed of and made unavailable to the court and the parties to this action. Hence, it is not a final order and is not appealable as of right.
The district court may grant a party leave to appeal an interlocutory order upon motion pursuant to 28 U.S.C. § 158(a)(3) and Fed.R.Bankr.P. 8003. I examined with great care the extensive body of certifications and other evidence submitted in connection with the attachment motion in order to determine whether I should treat Provenzano's notice of appeal as a motion for leave to appeal. I concluded that I should not treat the notice of appeal as such a motion.
Provenzano challenges reliance upon the verified complaint which the debtor filed on January 12, 1998, because the verification was only upon information and belief. The complaint would have been an inadequate evidentiary basis for the bankruptcy court's findings. The bankruptcy court, however, did not rely upon the complaint; the court relied upon the numerous certifications and documents filed in the case. These certifications in pertinent respects did not constitute "double and triple" hearsay, as Provenzano charges; rather they set forth matters in which the declarants participated or otherwise had personal knowledge and frequently set forth statements of Provenzano himself, which would not be hearsay. Fed.R.Evid. 801(d)(2).
Provenzano in his certifications and briefs raises a number of factual issues which are not relevant to the attachment motion or which are only marginally relevant. Included among these issues are Ralph and Stephen Ianuzzi's prior relationship with Provenzano and his companies, the allegedly failed prior businesses of Ralph and Stephen Ianuzzi, and the Ianuzzi's allegedly improper use of the debtor's assets. If there were such improprieties the Trustee will track them down and take appropriate action. They do not affect the attachment.
Provenzano mischaracterizes the evidence when he asserts that the debtor's losses are only $260,000. He bases this conclusion upon William Schwaninger's statement that the Provenzano corporations were supposed to convey assets which exceeded certain assumed liabilities by $140,000 but instead the debtor wound up taking on liabilities that exceeded assets by at least $120,000. This ignores the other elements of the damages claim such as Provenzano's secretly operating a competing company which appropriated accounts receivable of the debtor and Provenzano's diversion by other means of accounts receivable owing to the debtor. The evidence is overwhelming that while bound by an employment agreement with the debtor Provenzano competed with the debtor through Graphic Color, which he secretly controlled, assaulted and threatened the debtor's employees, customers, and suppliers, and stole the debtor's employees, documents, and other assets.
Provenzano relies upon McQueeny v. J.W. Ferguson Sons, Inc., 527 F. Supp. 728 (D.N.J. 1981), to support his contentions that the bankruptcy court had an insufficient evidentiary foundation for its findings. In McQueeny, the court held the "probability that final judgment will be rendered in favor of plaintiff" element was not satisfied, stating:
The complaint and supporting affidavits are oddly silent on the question whether the agreement was oral or written and no documentary items chargeable to [defendant] are tendered to confirm [plaintiff's] bare assertions.
* * *
The responding affidavit effectively contradicts every significant assertion of fact, and it does so with supporting detail, not by negative pregnant.Taking the complaint and moving affidavits in their best light, the responding proof at least puts the key elements in equipoise. . . . In this posture, the court certainly cannot say that it is "probable that [plaintiff] can succeed, and for that independent reason, the writ cannot issue.
Id. at 731-32 (emphasis supplied).
In the present case it is Provenzano, not the debtor, who supports his position on key issues with "bare assertions" and by "negative pregnant." The debtor, on the other hand, provided numerous declarations supporting in meticulous detail every significant assertion of fact. There was ample support in the evidence for the bankruptcy court's findings.
The attachment is limited in its scope. The restraints are narrowly drawn and designed to do no more than ensure the effectiveness of the attachment. The bankruptcy court correctly found that the debtor had satisfied the requirements of the New Jersey Attachment Act, N.J.S.A. 2A:26-1 et seq., and New Jersey Court Rule 4:60. There was real and personal property of Provenzano located in New Jersey subject to attachment. There were statutory grounds for the issuance of the writ,i.e., facts entitling a plaintiff to an order of arrest before judgment in a civil action, N.J.S.A. 2A:26-2(a); N.J.S.A. 2A:15-42(d) (in contract action a plaintiff is entitled to an order of arrest where defendant "fraudulently contracted the debt or incurred the demand"). The debtor had shown that there was a probability that final judgment would be entered in its favor.
Given Provenzano's proclivities, the bankruptcy court reasonably found that the attachment was essential to preserve the assets of the estate and make available the funds and assets which Provenzano held to satisfy a judgment against him.
Taking all of these considerations into account, it is evident that even if Provenzano had moved for leave to appeal the motion would been denied. The ruling of the bankruptcy court does not involve a controlling issue of law as to which there is substantial ground for differences of opinion. An immediate appeal will not materially advance the ultimate termination of the litigation.
IV. CONCLUSION
For the reasons set forth above, Provenzano's appeal from the bankruptcy court's May 26, 1998, order will be dismissed. An appropriate order will issue.
Appellant, Daniel Provenzano, II ("Appellant"), having appealed the May 26, 1998, order of the United States Bankruptcy Court for the District of New Jersey; and the Court having heard oral argument on January 29, 1999; and in accordance with the Court's opinion of even date;
IT IS this day of March, 1999, hereby
ORDERED that Appellant's appeal be and hereby is DISMISSED.