In re Gumieny, Bankruptcy No. 79-02410

• Decision Date: 30 January 1981
• Docket Number: Adv. No. 80-0200.,Bankruptcy No. 79-02410
• Citation: 8 BR 602
• Parties: In re Wayne Roger GUMIENY, Debtor. AMERICAN FAMILY INSURANCE GROUP, a domestic insurance corporation, Plaintiff, v. Wayne Roger GUMIENY, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Wisconsin

8 B.R. 602 (1981)

In re Wayne Roger GUMIENY, Debtor AMERICAN FAMILY INSURANCE GROUP, a domestic insurance corporation, Plaintiff, v. Wayne Roger GUMIENY, Defendant.

Bankruptcy No. 79-02410, Adv. No. 80-0200.

United States Bankruptcy Court, E.D. Wisconsin.

January 30, 1981.

James W. Hill, Racine, Wis., for plaintiff.

Harrison W. Nichols, Union Grove, Wis., for defendant/debtor.

DECISION

D.E. IHLENFELDT, Bankruptcy Judge.

American Family Insurance Group (American), a creditor, has filed what is in effect a motion to extend time for filing a complaint seeking to except its claim from discharge under § 523(a)(4).¹

The debtor filed this Chapter 7 case on December 19, 1979. On December 28, 1979, an order was entered scheduling the § 341(a) hearing for January 10, 1980, and in accordance with Bankruptcy Rule 409(a)(2), March 10, 1980 was fixed as the last day for filing a complaint to determine the dischargeability of a debt under § 523(a)(2), (4), or (6), pursuant to 11 U.S.C. § 523(c). Copies of the order were mailed to all creditors the same day. On April 4, 1980, pursuant to § 524(d), an order was entered fixing April 24, 1980 as the date for hearing and approving reaffirmation agreements—the so-called "discharge hearing." Copies of this notice and order were mailed to all creditors that same day, April 4, 1980.

On June 12, 1980, American filed its motion with a supporting affidavit. The affiant, an attorney, stated that it was American's policy to refer to him all pleadings and correspondence pertaining to bankruptcy proceedings; that he did not receive the December 28, 1979 notice and had been unable to locate it in American's files; that the first notice he had received was the April 4, 1980 notice of the discharge hearing; and that had he received the initial notice, he would have filed a timely nondischargeability complaint on behalf of American. Also accompanying American's motion was its proposed nondischargeability complaint.

Bankruptcy Rule 906(b)(2), which was adopted from Rule 6(b) of the Federal Rules of Civil Procedure, is applicable to American's motion to extend time, and it provides that the court may, after the expiration of the period specified and for cause shown, extend the time and permit the subsequent doing of an act required to be done pursuant to a notice given in accordance with the rules or by a court order where the failure to act within the time fixed was "the result of excusable neglect."

When mailing notices to creditors in this district, the clerk's office uses a matrix or master list supplied by the debtor's attorney from which the addresses are photocopied onto gummed labels, which in turn are affixed to the face of the mailing envelopes. The master list in this case contains American's correct mailing address, and a certificate of mailing is signed by a deputy clerk reciting that the initial December 28, 1979 notice was mailed to all creditors. The court's files often contain letters returned by the post office as undeliverable, but no such letter addressed to American was returned.

Anything is possible, of course, and it cannot be stated with certainty exactly what happened in this case, i.e., whether the deputy clerk failed to get the letter into the mailbox, whether it was lost or misdirected by the postal service, or whether it was lost or misdirected by American upon receipt. American's affidavit fairly states that a diligent search has been made of American's records, but the notice could not be found. In the absence of some sort of log for incoming mail, it does not seem that American could say more.

Assuming that American received the initial bankruptcy notice in the mail, and absent any allegation of fraud on the part of the debtor, or an "act of God" event interfering, it is unlikely that any court would condone the long filing delay in this case on the ground of excusable neglect. In re Manning (D.Conn., 1978), 4 BCD 304; In re Lee (E.D., Va., 1978) 4 BCD 585; In re Wooding (D.Kans., 1974) 1 BCD 451. The issue in this case is therefore not so much that of excusable neglect, but rather a factual issue regarding delivery of the initial notice.²

Interestingly, this case presents almost a mirror image of the situation in In re Nimz Transportation, Inc. (7th Cir., 1974) 505 F.2d 177. In the Nimz case, evidence was presented that proofs of claim had been mailed to the clerk of the district court, but the clerk's file did not contain the proofs of claim. In the absence of evidence that the claims were not received, or of the procedures used by the clerk in processing claims received through the mail, the court held that the "presumption of receipt" must prevail. The court said:

"It is also well recognized, however, that a timely and accurate mailing raises a rebuttable presumption that the mailed material was received, and thereby filed. Hagner v. U.S., 285 U.S. 427, 430 52 S.Ct. 417, 418, 76 L.Ed. 861 (1932); Haag v. Commissioner, 59 F.2d 516, 517 (7th Cir. 1932).

"Although the record supports the finding of a timely and accurate mailing, we cannot conclude that the presumption of receipt which correspondingly arises has been rebutted."

The court went on to say the circumstances that the clerk's files did not contain the proof of claims was by itself insufficient to rebut the presumption of receipt.

In the case at bar, the record shows that the first notice was mailed to American at its correct address, and that the letter was not returned to the court by the post office. In the absence of any evidence to the contrary, it must be presumed that American received the notice. The court will add further its belief that the circumstances in this case tend to support that conclusion — that the most likely happenstance is that the notice was received by American and then mislaid or misdirected in the internal procedures of the company. American's resultant delay in filing has not been shown to be due to excusable neglect, and its application to extend time must be denied.

While the foregoing is dispositive of this action, a few additional comments are offered regarding American's proposed complaint. It recites that the debtor had acted as American's agent, and as such had received certain insurance premiums which constituted trust funds in his hands by reason of Section 3c of a written agreement which debtor had entered into with American. The complaint recites further that debtor had failed to pay trust funds to American in the sum of $4285 and had converted them to his own use. Section 3c of the agreement states:

3. The agent agrees:

c. to deliver policies and to collect premiums and other moneys due the company in accordance with company rules and while in possession of any such money to hold it in trust as the absolute property of the company.

Affidavits filed by the parties indicate that when initially employed, the debtor received a monthly draw of $700 and commissions. He maintained a personal checking account at one bank and a business account at another. Insurance premiums collected were always deposited in the business account, but since commissions earned on the premiums collected were insufficient to balance the draws, the balance in the account dropped below what was owing to American, and from time to time checks which the debtor sent in payment to American were returned for insufficient funds. On many occasions over the years, the debtor owed American in excess of $5000. American of course was aware of all this, if for no other reason because of the "NSF" checks.

American offers two alternative theories of liability: (1) Debtor acted in a fiduciary capacity as to premiums collected by reason of the agency agreement, and (2) debtor's use of the premiums constituted a conversion or embezzlement by one acting as trustee or bailee.

The requirement that the debtor be acting in a fiduciary capacity has consistently been limited to technical or express trusts, and not to trusts that may be imposed by the very act of wrongdoing out of...