In re Koch
| Decision Date | 26 January 1999 |
| Docket Number | Bankruptcy No. 191-10480. |
| Citation | 229 BR 78 |
| Parties | In re Ronald KOCH, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Neiman, Ginsburg & Mairanz, New York City, for Debtor.
Miller & Wrubel, P.C., New York City, for NBA.
The matter under consideration in this Chapter 11 case was brought before this Court on the motion of the National Basketball Association and NBA Properties, Inc. (collectively, "NBA" or "Defendants"), seeking to intervene in this case, and for this Court to vacate its Order dated November 26, 1996, which had granted the application of the Debtor, Ronald Koch ("Koch" or "Debtor") to reopen his bankruptcy case which had been previously closed on January 6, 1992. The motion also seeks to have me vacate my Order dated January 17, 1997, which allowed him to amend his schedule of assets to include certain slides or the value of the same, which he claimed were property of his bankruptcy estate.
Upon consideration of the evidence and the arguments presented by all parties and for the reasons stated below, NBA's motion is granted in all respects.
On January 28, 1991, the Debtor filed a voluntary petition under Title 11 commencing this Chapter 7 bankruptcy case. The Debtor was a professional sports photographer who, as it hereinafter appears, claims to be the owner of over 2000 photographic slides. They were not listed in the schedules of his assets. The Debtor was represented by Robert Tauber, Esq., now deceased. Allan Nisselson, Esq., was appointed as the Chapter 7 trustee of the Debtor's estate and he eventually filed a report of no assets. On January 6, 1992, a final decree closing the case and discharging the trustee was signed by this Court.
In or about June of 1993, almost a year and a half after this case was closed, the Debtor, as plaintiff, commenced an action against NBA, as the defendants, in the Supreme Court of the State of New York (hereinafter "the state court action"), captioned Ronald Koch v. National Basketball Association, Inc. and NBA Properties, Inc., in which he seeks the return of 2,893 photographic slides which he claimed he owns and which he had turned over to NBA. The complaint further alleges that 1,566 slides were lost or misplaced by NBA. It also seeks punitive damages resulting from NBA's acts and conduct.
As a result of discovery including the examination of Koch conducted by NBA, pursuant to the laws of the state of New York, NBA moved for summary judgment to dismiss the complaint on the ground that the Debtor had no standing in the action when it learned for the first time of Koch's bankruptcy. It was NBA's contention that Koch had lost all rights, if any, to the slides or their value, the same having passed to his bankruptcy estate. During the pendency of the motion Koch sought bankruptcy counsel advice in order to protect his interests.
Consequently, on November 25, 1996, more than four years after this case was closed and more than three years after he commenced the state court action, Koch had bankruptcy counsel, who had replaced his deceased previous bankruptcy counsel, move this Court on Koch's behalf to reopen this bankruptcy case as permitted by 11 U.S.C § 350(b)1 and Federal Rule of Bankruptcy Procedure 5010.2
The application in support of the motion recited that, "Since these slides were not listed in the Debtor's schedules of assets, or abandoned by the Chapter 7 Trustee, who was unaware of this property, they remain property of the estate pursuant to 11 U.S.C. 554(d)."3 (Debtor's App. Supp. Mot. Reopen, ¶ 7.) The application goes on to state, in pertinent part, that "there is a significant asset to be administered here (3)27 requiring the appointment of a Chapter 7 Trustee in order to protect the interests of the creditors and the Debtor in accordance with B.R. 5010." (Debtor's App. Supp. Mot. Reopen, ¶ 8.) The motion to reopen the case apparently was made by the Debtor to controvert NBA's contention that he had no interest in the slides to enforce in the state court action. In order to examine into all of the facts I signed my Order of November 26, 1996 reopening this case.
The application to reopen the case referred generally to the state court action, with only a passing reference to NBA's motion for summary judgment; a copy of the complaint naming NBA as defendants therein verified on June 15, 1993 was attached to the application, although it did not include a copy of NBA's answer to the complaint. I therefore made provision in my order reopening the case that a hearing be held before me at such time as would be fixed by this Court upon application by the attorney for the Debtor, on notice to the United States Trustee, Allan Nisselson who was the former Chapter 7 trustee, and NBA, to consider the relief requested by the Debtor in the reopened case, to wit, for "the appointment of a Chapter 7 Trustee in order to protect the interests of the creditors and the Debtor. . . ." (Debtor's App. Supp. Mot. Reopen, ¶ 8.)
Notwithstanding my foregoing direction in the Order, Koch's attorney failed to make an application for this hearing. Instead Koch moved to convert the case to a case under Chapter 11. The application in support of the motion to convert stated that at the time of the filing of the bankruptcy the Debtor's creditors were owed approximately $70,000 and in light of the alleged value of the slides, if the Debtor were successful in the state court action he would be able to fully reorganize in Chapter 11 and pay creditors 100% of their claims. The creditors listed in the Debtor's schedules and the United States Trustee were given notice of the motion to convert. Neither Allen Nisselson, the former trustee, nor NBA received notice of such motion. By reason of the provision of 11 U.S.C. § 706(a)4, and recognizing the right of a debtor to convert his case from Chapter 7 to Chapter 11 without notice and a hearing, I granted that motion on December 19, 1996 which converted the case from a Chapter 7 case to a Chapter 11 case. It is abundantly clear that by doing so the Debtor was able to avoid the appointment of a trustee.
While NBA's motion for summary judgment was still pending in the state court action, on January 17, 1997 I entered an Order upon the application of the Debtor: (1) to amend his Schedule of Assets to include the slides, (2) to amend Schedule G which contained a Statement of Executory Contracts to include an agreement with NBA for use of the slides and, (3) to amend his Statement of Financial Affairs to reflect that the slides were in the possession of NBA. In an affidavit of the Debtor in support of the motion to amend he stated that the slides were not included in his original schedules because his previous bankruptcy counsel, now deceased, who prepared his original schedules told him that the slides did not have to be listed.
According to the Debtor, no notice of the application in support of the order was given other than to the creditors in light of the provision of Federal Rule of Bankruptcy Procedure 1009, which only requires that notice to amend the debtor's schedules be given to the "trustee and any entity affected thereby." Inasmuch as this case had been converted to a Chapter 11 case, there was no trustee to receive notice albeit there is no question that NBA certainly was affected by the proposed amendments.
On January 14, 1998 NBA moved before this Court for an order permitting it to appear as a party in interest in this case, or in the alternative, to intervene as an interested entity because of its claimed pecuniary and legal interests as the holder of the slides. In addition, as has been noted earlier, NBA argues that this Court should vacate its Order of November 26, 1996 which had permitted the Debtor to reopen this case, and the Order of January 17, 1997 which amended his schedules. It is this motion that is presently before this Court in which NBA argues that the Orders should be vacated because the Debtor failed to meet his burden of showing good cause and lack of fraud when he sought the reopening of his bankruptcy case, that he acted in bad faith in filing false and incomplete amended schedules, and that judicial estoppel barred reopening.
In answer to NBA's arguments, the Debtor contends that the motion should be denied because of NBA's failure to act timely in making its motion, almost 14 months after the original order to reopen the case was signed. In addition, the Debtor argues that NBA is not an interested party, nor does it have standing to intervene, but is merely interested in the outcome of the case. Lastly, the Debtor contends that the court should not vacate its previous orders because the Debtor relied on its previous bankruptcy counsel in initially not scheduling the slides and that he eventually returned to this court to reopen the case in order to administer the assets which should be included in his estate.
At the very outset, this Court is called upon to determine whether NBA has standing to appear in this bankruptcy case. NBA contends first that it qualifies as a party in interest under 11 U.S.C. § 1109(b), and as such, has standing to contest the reopening and seek the remaining relief in its motion. Applicable only in Chapter 11 cases, 11 U.S.C. § 1109(b) provides:
(b) A party in interest, including the debtor, the trustee, a creditors\' committee, an equity security holders\' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter.
11 U.S.C. § 1109(b). NBA argues that it holds a pecuniary interest as the holder of slides that the Debtor claims as part of this bankruptcy estate. In addition, NBA contends that it has a legal stake in this bankruptcy case by reason of a decision of the Appellate Division of the State of New York, First Department,...
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