In re Horton
| Citation | 149 BR 49 |
| Decision Date | 18 December 1992 |
| Docket Number | Bankruptcy No. 91 B 21505,Adv. No. 92-5103A. |
| Parties | In re Michael A. HORTON, Debtor. DEPENDABLE INSURANCE COMPANY, Plaintiff, v. Michael A. HORTON and Sheldon Lowe, as Interim Trustee for the Debtor Michael A. Horton, Defendants. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
McElroy, Deutsch & Mulvaney, Morristown, NJ and New York City, for plaintiff.
Loeb and Loeb, New York City, for Michael A. Horton.
Bower & Gardner, New York City, for trustee.
DECISION ON MOTION FOR SUMMARY JUDGMENT
The plaintiff, Dependable Insurance Company ("Dependable"), has filed this adversary proceeding to object to the dischargeability of its claim against the debtor, Michael A. Horton, pursuant to 11 U.S.C. §§ 523(a)(2), (3) & (4) and to deny the debtor's discharge pursuant to 11 U.S.C. §§ 727(a)(3) and (4). Dependable has also named the Chapter 7 trustee as a defendant and seeks a declaratory judgment that certain assets of the debtor are not property of the estate. The debtor has moved for summary judgment pursuant to Federal Rule of Civil Procedure 56, as incorporated by Federal Rule of Bankruptcy Procedure 7056, on the ground that the instant adversary complaint was not timely filed because it was filed more than 60 days after the first scheduled section 341 meeting of creditors and that therefore the complaint should be dismissed.
The plaintiff, Dependable, has cross-moved for "modification" of this court's order of March 9, 1992 granting the debtor a discharge, partial summary judgment, and a recommendation of withdrawal of the reference. Dependable contends that the mailing matrix that the debtor submitted with his Chapter 7 petition and which the clerk of the bankruptcy court used for noticing purposes was not calculated to apprise it of the bankruptcy filing because it did not contain part of Dependable's address and because notice was not sent to Dependable's counsel, whose existence the debtor knew of and listed in Schedule F accompanying his bankruptcy petition.
The debtor filed with this court a petition under Chapter 7 of the Bankruptcy Code on September 30, 1991 and thereafter a Chapter 7 trustee was assigned to the case. The first meeting of creditors was scheduled for October 30, 1991.
Litigation between Dependable and the debtor dates back to July 6, 1989 at which time Dependable through its present counsel McElroy, Deutsch & Mulvaney (the "McElroy firm"), filed a third-party complaint and jury demand against the debtor, his wife, and others in Trans-World Construction Co., Inc. v. Dependable Insurance Company, Inc. v. Raymond Pearson, Margaret Pearson, Robert Pearson, Benedicta Pearson, Michael Horton and Carolyn Horton, United States District Court for the Eastern District of New York, CV-89-2013. The instant debtor was a director, vice-president and twenty percent owner of the voting securities of Trans-World Construction Co., Inc. ("Trans-World"), a general contractor on whose behalf Dependable issued various performance bonds, labor and material payment bonds, bid bonds and release or lien bonds in conjunction with Trans-World construction projects. Dependable alleges that the aggregate amount of the bonds it issued on behalf of Trans-World totalled $9,280,352.00 as of May, 1989.
On October 20, 1987, the debtor, together with Raymond Pearson ("Pearson"), Trans-World's principal shareholder, and their respective wives, executed an indemnification agreement in favor of Dependable.
On July 11, 1989, Trans-World filed a Chapter 11 petition in the United States Bankruptcy Court for the Eastern District of New York. On August 21, 1989, the McElroy firm, as counsel to Dependable, filed a proof of claim in Trans-World's bankruptcy in the amount of $4.3 million. This proof of claim requested that all notices be sent to Dependable at the McElroy firm's address.
In March of 1990, Trans-World was converted to Chapter 7. Thereafter, Dependable, the Chapter 7 trustee and others stipulated to withdraw the reference as to an adversary proceeding in which Dependable asserted trust fund diversion causes of action with respect to contracts on which Dependable issued bonds on behalf of Trans-World. This stipulation also modified the automatic stay to allow Dependable to prosecute such claims in the pending federal court action in the Eastern District of New York.
On July 12, 1990, Pearson filed a Chapter 7 petition in the United States Bankruptcy Court for the Eastern District of New York. On October 15, 1990, Dependable filed an adversary complaint against Pearson objecting to discharge and dischargeability. Thereafter, a Stipulation and Order was filed in the Pearson bankruptcy case which modified the automatic stay to allow Dependable to prosecute its claims against Pearson in the pending federal district court action in the Eastern District of New York, withdrew the reference of Dependable's adversary proceeding in the Pearson Chapter 7 case and recommended that the district court assign it to the pending Eastern District action. On June 23, 1992, the United States District Court for the Eastern District of New York withdrew the reference of Dependable's adversary proceeding against Pearson and ordered that proceeding be consolidated with Dependable's pending Eastern District court action ("Consolidated Eastern District Court Action"). The automatic stay has also been lifted in Pearson's Chapter 7 case to allow Dependable to proceed in the Consolidated Eastern District Court Action.
At present, both the Trans-World and Pearson bankruptcies and the Consolidated Eastern District Court Action are pending.
The instant debtor filed with his Chapter 7 petition in this court a mailing matrix listing creditors to whom notices should be sent pursuant to Federal Rule of Bankruptcy Procedure 1007(a) and Local Bankruptcy Rule 50(b). Dependable's name and address are listed on the mailing matrix and the Numbered Listing of Creditors as follows:
Dependable Insurance Co POB 44044 Jacksonville, Fla. XXXXX-XXXX
Dependable's name and address also appear this way on Schedule F of the debtor's petition. The debtor has listed Dependable's unsecured claim as fixed and liquidated. The debtor has submitted a copy of one of Dependable's corporate envelopes which includes above the "POB 44944" line, the street address for Dependable, "10 West Adams Street." The debtor omitted, this street address in its mailing matrix, Numbered Listing of Creditors and schedules.
Schedule F of the debtor's Chapter 7 petition, however, contains a "Duplicate Listing of Debt Collection Agency or Attorney For: Dependable Insurance Co." as follows:
McElroy, Deutsch & Mulvaney 218 Ridgedale Avenue POB 2075 Morristown, N.J XXXXX-XXXX
Schedule F of Debtor's Chapter 7 Petition, at 3. The McElroy firm is not on the mailing matrix or the Numbered Listing of Creditors. The debtor signed a Declaration for both the mailing matrix and the Numbered Listing of Creditors stating that each was true and correct to the best of his information and belief. The debtor also knew at the time he filed the present Chapter 7 petition that Dependable was represented by the McElroy firm in the Consolidated Eastern District Court Action. Debtor's Answer to First Amended Complaint, at ¶ 31.
Upon the filing of the debtor's Chapter 7 petition, the Clerk of the United States Bankruptcy Court for the Southern District of New York mailed via first class mail a copy of the Notice of Commencement of Case Under Chapter 7 of the Bankruptcy Code, Meeting of Creditors, and Fixing of Dates (the "Notice"), dated October 4, 1991, to each of the debtor's creditors listed on the mailing matrix. The Notice sent to Dependable was not sent to its full address to the extent that Dependable's street address was not included, but the correct P.O. Box number was included. The Notice provided that the deadline for filing a complaint objecting to the debtor's discharge or to determine the dischargeability of certain types of debts was December 30, 1991. The court file contains the certification of Paul A. Washington, a federal employee, dated October 4, 1991, which also shows that the Notice was mailed on October 4, 1991 to Dependable at the address listed on the mailing matrix. The envelope containing the Notice was not returned to the clerk of the court as undeliverable.
Dependable contends that it did not receive notice of the present bankruptcy until February 27, 1992, the date Dependable received from the office of Sheldon Lowe, the Chapter 7 trustee, a notice of a hearing for the appointment of counsel to the trustee. In support of its denial of receipt of the Notice, Dependable has submitted along with its cross-motion for summary judgment an affidavit of Thomas Galt, the Corporate Account Claims Specialist for Dependable, and an affidavit of Robert Thomsen, a former commercial and surety claims specialist for Dependable. Both affiants generally deny ever having received or seen the Notice.
The court discharged the debtor on March 9, 1992. See Discharge of Debtor. The order discharging the debtor reflects that no complaint objecting to the debtor's discharge was filed within the time fixed by the court.
On April 3, 1992, the McElroy firm, on behalf of Dependable, filed an adversary complaint in this court against the debtor and the Chapter 7 trustee in which Dependable objects to this debtor's discharge, to the dischargeability of the debt due and owing to Dependable, and to the inclusion in the debtor's estate of certain alleged assets.
On May 4, 1992, the Chapter 7 trustee filed an Answer to the complaint. On May 6, 1992, the debtor filed an Answer to the complaint. However, on April 27, 1992, prior to the debtor's filing of its Answer, Dependable filed an Amended Complaint Objecting to Discharge and Dischargeability and for Declaratory Relief with Jury Demand...
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