In re Hyland, Bankruptcy No. 95-10547 B

• Decision Date: 08 October 1997
• Docket Number: Bankruptcy No. 95-10547 B,Adversary No. 96-1124 B.
• Citation: 213 BR 631
• Parties: In re William Michael HYLAND, Debtor. CITIBANK (New York State), Plaintiff, v. William Michael HYLAND, Defendant.
• Court: U.S. Bankruptcy Court — Western District of New York

213 B.R. 631 (1997)

In re William Michael HYLAND, Debtor CITIBANK (New York State), Plaintiff, v. William Michael HYLAND, Defendant.

Bankruptcy No. 95-10547 B, Adversary No. 96-1124 B.

United States Bankruptcy Court, W.D. New York.

October 8, 1997.

Pack, Hartman, Ball, Brody & Kinney, P.C., Buffalo, NY (Daniel J. Hartman, of counsel), for Plaintiff.

Aaron, Dautch, Sternberg & Lawson, Buffalo, NY (William E. Lawson, of counsel), for Defendant.

CARL L. BUCKI, Bankruptcy Judge.

Significance and meaning attach to every word and sentence of a well-drafted complaint. Often, the recitation of a cause of action begins with a paragraph which incorporates by reference all of the preceding paragraphs. Such language is not idle chatter, but contributes to a definition of the issues presented to the Court for its consideration. Any such definition will inevitably establish the range of issues to which the preclusive effect of collateral estoppel may extend. Thus, in the present instance where the plaintiff urges the collateral estoppel effect of a state judgment, this Court must examine that prior judgment in light of those issues which the pleadings serve to identify.

In 1985, William Michael Hyland and Stephen Bartee formed a partnership to engage in the business of "contracting and development." Known as Phoenix Associates, this partnership maintained a checking account at Citibank (New York State). Although not licenced as a check cashing service under New York Banking Law, the partnership cashed approximately $20,000 of customer checks per month, for a fee that ranged between three and five percent of the face value of the checks. In 1990, Phoenix Associates brokered a mortgage for Maria Weiss. As a result of this transaction, Weiss learned of Phoenix's check cashing activity. Between September 1991 and January 1992, Weiss purloined 24 checks from her employer for a total sum of $36,643.10. Forging the endorsement of the named payee, Weiss delivered the checks to Bartee in exchange for a discounted amount of cash. Bartee then deposited the checks into Phoenix's checking account. Ultimately, Citibank discovered this fraud. After reimbursing the rightful owner of the instruments, Citibank was able to recover only $8,139.18 through a set off against the moneys on deposit in the account.

In 1992, to recover its remaining loss of $28,503.92, Citibank commenced an action in New York State Supreme Court against William M. Hyland, Stephen W. Bartee, Phoenix Associates, and Maria C. Weiss. Upon completing discovery, Citibank served its motion for summary judgment in February of 1995. Meanwhile, on the 22nd day of that month, William Michael Hyland filed his petition for relief under Chapter 7 of the Bankruptcy Code. Although noting the pendency of Citibank's civil action in his Statement of Financial Affairs, Hyland neglected to include Citibank on his list of creditors. As a consequence, Citibank received no notice of Hyland's bankruptcy filing.

Without knowledge of Hyland's bankruptcy, Citibank scheduled argument on its motion for summary judgment in the state court action. No one appears to have asserted the application of any bankruptcy stay. Rather, on the return date of Citibank's motion, Hyland's separate trial counsel proceeded to argue the merits of his client's position. At the conclusion of oral argument on March 31, 1995, the state court rendered summary judgment in favor of Citibank. Entered on August 3, 1995, the court's written order recites that Citibank was granted summary judgment "on each of its causes of action" other than on its claim for punitive damages.

Hyland's bankruptcy case was closed on June 20, 1995, that is, at a point between the announcement of the state court's decision and its execution of an order granting summary judgment. Upon motion of Hyland's bankruptcy counsel, this Court reopened the bankruptcy proceeding on October 17, 1995, so that the debtor might amend his schedule of unsecured creditors to include Citibank. Following that amendment, Citibank commenced the present adversary proceeding to determine the dischargeability of its claim. Hyland has answered...