Jones v. Brand (In re Belmonte), 551 B.R. 723

Involuntary Chapter 7 relief was entered against debtor Alice Belmonte; Harold D. Jones was appointed chapter 7 trustee.
Trustee alleges that post-petition (Jan/Feb 2014) debtor obtained a $250,000 loan secured by a second mortgage, and loan proceeds were disbursed directly to defendants Craig Brand and The Brand Law Firm.
Trustee sued under 11 U.S.C. §§ 549 and 550 to avoid the unauthorized post-petition transfer and to recover the $250,000.
Defendants answered, raised affirmative defenses including setoff, demanded a jury trial (refusing bankruptcy-court adjudication), and moved for judgment on the pleadings under Rule 12(c).
Trustee moved to strike the jury demand; the court consolidated trial of this adversary with a related § 329 disgorgement matter.
Decision: the bankruptcy court granted the Trustee’s motion to strike the jury demand and denied defendants’ motion for judgment on the pleadings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether defendants are entitled to a 7th Amendment jury trial on trustee's § 549 claim	Jones: § 549 is equitable/post-petition and no jury right attaches	Defendants: Granfinanciera entitles them to a jury on money-recovery claims	Court: No jury right for § 549 post-petition claim; jury demand struck
Whether defendants are entitled to a jury on the derivative § 550 claim	Jones: § 550 recovery is remedial/equitable and derivative of § 549	Defendants: money judgment under § 550 implicates right to jury	Court: § 550 relief is equitable/derivative; no jury right
Whether pleading setoff preserves a jury right	Jones: asserting setoff invokes equitable bankruptcy jurisdiction and waives jury right	Defendants: setoff is a defense that does not remove jury right	Court: asserting setoff is tantamount to asserting a claim against the estate and submits defendant to equitable jurisdiction, weighing against jury
Whether the Trustee pleaded plausible § 549/§ 550 claims and whether judgment on the pleadings is appropriate	Jones: Complaint alleges post-petition transfer, lack of authorization, and direct payment to defendants — sufficient under Iqbal/Twombly	Defendants: argue estate was made whole by avoiding the Thompson mortgage so trustee cannot recover from them (argues double recovery)	Court: Complaint meets plausibility standard; avoiding the mortgage did not show the estate recovered the $250,000; Rule 12(c) motion denied

Executive Benefits Ins. Agency v. Arkinson, 134 S. Ct. 2165 (U.S. 2014) (distinguishes limits on bankruptcy courts’ constitutional authority for certain Stern claims)
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (U.S. 1989) (Seventh Amendment jury-trial test and distinction between legal and equitable bankruptcy claims)
Stern v. Marshall, 564 U.S. 462 (U.S. 2011) (limitations on bankruptcy courts’ authority to enter final judgments on certain state-law claims)
In re M & L Bus. Mach. Co. v. Youth Benefits Unlimited, Inc., 59 F.3d 1078 (10th Cir. 1995) (holding § 549 turnover/avoidance is equitable and does not carry a jury right)
Braunstein v. McCabe, 571 F.3d 108 (1st Cir. 2009) (post-petition turnover/avoidance actions do not entitle defendants to a jury trial)
Langenkamp v. Culp, 498 U.S. 42 (U.S. 1990) (filing a proof of claim subjects creditor to bankruptcy court jurisdiction; relevant to setoff/waiver analysis)