Welt v. Publix Super Markets, Inc. (In re Phoenix Diversified Inv. Corp.)

Erik P. Kimball.

Erik P. Kimball, Judge

United States Bankruptcy Court

THIS MATTER came before the Court for hearing on May 31, 2011 upon the Plaintiff's Motion for Partial Summary Judgment as to Count V of the Complaint [ECF No. 25] filed by Kenneth A. Welt, Chapter 7 Trustee of Phoenix Diversified Investment Corp., and the Defendant's Motion for Summary Judgment on Affirmative Defense One, Statement of Material Facts, and Memorandum of Law in Support [ECF No. 27] filed by Publix Super Markets, Inc. At the conclusion of the hearing, the Court stated as follows:

This is the Court's ruling on two pending motions for summary judgment filed in the case of Welt against Publix Supermarkets, Inc., adversary proceeding number 10-3005-EPK.
The motions are: Plaintiff's Motion for Partial Summary Judgment as to Count V of the Complaint, filed at ECF 25; and Defendant's Motion for Summary Judgment on Affirmative Defense One, Statement of Material Facts, and Memorandum of Law in Support, filed at ECF 27.
This adversary proceeding is one of many filed by Kenneth A. Welt, the trustee for Phoenix Diversified Investment Corp. It is alleged that Michael A. Meisner operated a Ponzi scheme through Phoenix Diversified, the debtor in this case. Mr. Meisner is currently incarcerated in federal prison as a result of a criminal conviction relating to his operation of the debtor. Mr. Meisner is also a debtor before this Court. In this ruling, when I refer to the debtor I mean Phoenix Diversified.
On May 8, 2008, the bankruptcy case of Phoenix Diversified Investment Corp. was commenced by the filing of an involuntary petition. This Court entered an order for relief on June 10, 2008.
On September 4, 2009, the United States of America and Mr. Meisner entered into a plea agreement. Attached to the plea agreement is Mr. Meisner's proffer. In the proffer, among other things, Mr. Meisner states that he knowingly, willfully, and with an intent to defraud failed to tell prospective investors in Phoenix Diversified that only a small portion of investor monies was actually used for trading; that the investor monies used for trading maintained a significant loss; that he knowingly, willfully and with an intent to defraud failed to tell potential investors that a large portion of investor monies was not invested but was instead used to make fraudulent, Ponzi-type interest payments to prior investors; and that he knowingly, willfully and with an intent to defraud failed to tell potential investors that a large portion of investor monies was not invested but, instead, was used to support his family's luxury lifestyle. Mr. Meisner proffered that approximately $6.8 million in investor funds was directly paid to or for the benefit of Mr. Meisner and his family.
The defendant, Publix, is in the business of selling groceries and otherabsent the trustee's admission, based on the evidence presented the Court must conclude that the debtor bought goods from the defendant. In response to the defendant's request for admissions, the trustee denied that the items purchased constituted value sold or given to the debtor. This is because the trustee believes the goods were ultimately used by Mr. Meisner and his family. The trustee's denial is consistent with the trustee's position that value, in the context of the defense as well as the affirmative claim, means benefit to the debtor.
In light of the law outlined a few moments ago, this is not the correct focus for the defenses presented. The question for this Court is - did the defendant provide goods equivalent in value to the price paid by the debtor? The trustee has not alleged that the debtor overpaid for the goods. The debtor paid for groceries and other items, and the defendant provided them. For purposes of the defenses, the defendant gave full value. The trustee concedes that the defendant acted in good faith. Thus, the defendant has a complete defense under section 548(c) of the Bankruptcy Code and section 729.109(1) of the Florida Statutes.
The Court will grant the defendant's motion for summary judgment on the defendant's first affirmative defense. Counts 1, 4 and 5 of the complaint present claims subject to these defenses.

With the Court having considered the record and being otherwise fully advised in the premises, and for the foregoing reasons as stated on the record at the May 31, 2011 hearing, it is

ORDERED AND ADJUDGED that:

1. Plaintiff's Motion for Partial Summary Judgment as to Count V of the Complaint [ECF No. 25] is DENIED.

2. Defendant's Motion for Summary Judgment on Affirmative Defense One, Statement of Material Facts, and Memorandum of Law in Support [ECF No. 27] is GRANTED. The defendant has a complete defense to Counts 1, 4, and 5 of the complaint.

Copies Furnished To:

Daniel N Gonzalez, Esq

Roberta A Colton, Esq

U.S. Trustee Plaintiff's counsel is directed to serve a conformed copy of this Order on all appropriate parties not listed above and to file a certificate of service with the court.