In re Martin Levy of Berlin D.M.D., P.C., Bankruptcy No. 06-40463-HJB.

• Decision Date: 11 June 2009
• Docket Number: Bankruptcy No. 06-40463-HJB.,Adversary No. 08-4111.
• Citation: 416 B.R. 1
• Parties: In re MARTIN LEVY OF BERLIN D.M.D., P.C., Debtor. Janice G. Marsh, Chapter 7 Trustee, Plaintiff v. Martin Levy, Jeffrey S. Forgosh and Creative Dental Associates of Berlin, P.C., Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

Page 1

416 B.R. 1

In re MARTIN LEVY OF BERLIN D.M.D., P.C., Debtor.

Janice G. Marsh, Chapter 7 Trustee, Plaintiff v. Martin Levy, Jeffrey S. Forgosh and Creative Dental Associates of Berlin, P.C., Defendants.

Bankruptcy No. 06-40463-HJB.

Adversary No. 08-4111.

United States Bankruptcy Court, D. Massachusetts, Central Division.

June 11, 2009.

Janice G. Marsh. The Marsh Law Firm, PC, Worcester, MA, pro se.

Martin Levy, Hudson, MA, pro se.

Richard N. Gottlieb, Law Offices of Richard N. Gottlieb, Boston, MA, for Defendants.

Creative Dental Associates of Berlin, PC, Berlin, MA, pro se.

MEMORANDUM OF DECISION

HENRY J. BOROFF, Bankruptcy Judge.

Before the Court is the "Motion of Defendant Jeffrey Forgosh, DMD to Dismiss Adversary Complaint" (the "Motion to Dismiss") as well as defendants Martin Levy and Creative Dental Associates of Berlin P.C.'s "Motion for Joinder." Through their motions, co-defendants Jeffrey S. Forgosh ("Forgosh"), Martin Levy ("Levy"), and Creative Dental Associates of Berlin, P.C. ("Creative Dental")¹ seek dismissal of the instant adversary proceeding pursuant to Fed.R.Civ.P. 12(b)(6), made applicable through Fed. R. Bankr.P. 7012(b). They contend that the Court acted without authority when it granted the Chapter 7 trustee's request for an extension of the deadline set forth by 11 U.S.C. § 546(a)² and, accordingly, this adversary proceeding, filed more than two (2) years after the commencement of this bankruptcy case, must be dismissed as untimely.

I. FACTS AND TRAVEL OF THE CASE

Martin Levy of Berlin, D.M.D., P.C. (the "Debtor"), owned and operated by its principal Levy, filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on March 31, 2006. Janice G. Marsh (the "Trustee") was appointed Chapter 7 trustee on or about April 3, 2006.

Although this adversary proceeding now comes before the Court on a procedural dispute, the Court pauses briefly to provide context. According to the Trustee's Complaint (the "Complaint"), on May 1, 1995, Levy, in his individual capacity, executed a promissory note, payable to Forgosh in his individual capacity, in the principal amount of $41,000, and on even date, on behalf of the Debtor, guaranteed that obligation and secured the Debtor's guaranty with the grant of a security interest covering all of the Debtor's personal property. Approximately eleven (11) years later, on March 28, 2006, Forgosh foreclosed on that security interest and purchased, at auction, all of the Debtor's assets with a credit bid of $15,000. One day later, on March 29, 2006, Forgosh "licensed" the Debtor's equipment and materials to Levy and his newly formed company, Creative Dental, for the sum of $1.00.

The Trustee contends that the value of the Debtor's personal property, when purchased at auction by Forgosh, was approximately $49,000. She also contends that the original promissory note given to Forgosh in 1995 was never funded, and that the Debtor received no consideration for its guaranty of the illusory obligation or for the auction of its assets.

Shortly after the Debtor's Section 341 meeting, originally conducted on May 1, 2006 but continued to and concluded on June 8, 2006, the Trustee commenced her investigation relative to the Debtor's prepetition financial affairs, which, as a matter of course, necessitated a review of the relevant documents and other financial information. She received little cooperation in that regard from Levy and Forgosh. By September 8, 2006, the Trustee was forced to file a motion seeking an order from the Court compelling the production of certain requested documents (her "First Motion to Compel").³ Originally scheduled for September 19, 2006, the hearing on the First Motion to Compel was continued at the request of Debtor's counsel — though assented-to by the Trustee. A hearing on the First Motion to Compel was held on January 18, 2007 and the motion granted with a strong verbal warning from the bench to Debtor's counsel — intended to be passed along to Levy — regarding the importance of complying with the Trustee's requests and the potential consequences of failing to do so. On March 5, 2007, the Trustee moved for leave to conduct a 2004 examination of the Debtor and Levy as the Debtor's sole officer and shareholder. She alleged that the information she had received up to that time was "vague, ambiguous, incomplete and otherwise unresponsive." On March 19, 2007, that motion was granted.

After numerous postponements, Levy was finally examined by the Trustee on November 8, 2007. At his examination, Levy testified that the requested list of patients with their respective insurance companies (the "Patient List") which the Court had ordered produced in its January 18, 2007 order, was not in his possession and would take years to produce.

The Trustee responded on December 3, 2007 with a motion seeking an order of contempt and sanctions against Levy (the "Motion for Contempt"). Responding to the Motion for Contempt, Levy claimed that compliance with the Trustee's request for additional information was impossible on account of financial hardship. At the January 4, 2008 hearing on the motion, the Court stated that it would grant the Trustee's request finding Levy in contempt and order Levy to provide the Patient List,⁴ but failed thereafter to enter the requested order. The Trustee took no steps to alert the Court that the order had not yet been entered.

On March 6, 2008, the Trustee filed a second motion to compel turnover and for sanctions against Forgosh and Levy (the "Second Motion to Compel"), citing the failure to provide certain requested information and the specific failure of Levy to respond or provide the Patient List as had been requested in the First Motion to Compel and ordered by the Court, albeit orally, at the January 4, 2008 hearing on the Motion for Contempt. The Second Motion to Compel was not accompanied by a request for expedited determination and was set to be heard on April 18, 2008.

In the interim, however, on March 27, 2008, four (4) days prior to the two (2) year statutory deadline set forth in § 546(a), the Trustee filed a "Motion to Extend Deadlines Pursuant to 11 U.S.C. Section 546(a)" (the "Motion to Extend"), requesting an extension until June 30, 2008 to preserve her right to bring "one or more actions or proceedings." In support of her extension request, the Trustee referenced the upcoming April 18, 2008 hearing and the effort to receive further information from Forgosh and Levy. The Motion to Extend was served upon Levy, Forgosh, and counsel of record to the Debtor and Forgosh. No objections to the Motion to Extend were filed, and, accordingly, on April 11, 2008, the Court entered the following order on the Motion to Extend:

GRANTED. THE DEADLINE IS HEREBY EXTENDED TO JUNE 30, 2008. NO OBJECTIONS HAVE BEEN FILED.

In the months following the Court's April 11, 2008 order, the Trustee continued her quest for document and record turnover from Levy. On April 15, 2008, she filed an expedited motion to compel Levy to turn over the patient records of one Clarinha Pimentel to the patient's designated successor dentist (the "Third Motion to Compel"). Hearings on both the Second and Third Motions to Compel were held on April 18, 2008 along with a continued hearing on the Motion for Contempt. On May 22, 2008, the Court issued its order holding Levy in civil contempt of the Court's January 18, 2007 order requiring Levy to provide the Patient List to the Trustee, with daily monetary sanctions to commence on June 3, 2008. A continued hearing on the Motion for Contempt was set for June 24, 2008. And on May 23, 2008, the Court entered orders relating to the Second and Third Motions to Compel, requiring Levy to provide the information requested in those two (2) motions no later than June 3, 2008. On June 16, 2008, now apparently satisfied with the compliance originally sought, the Trustee filed a motion requesting that the June 24, 2008 continued hearing be canceled.

Approximately two (2) weeks later, and a day prior to the June 30, 2008 extended deadline, the Trustee filed the instant Complaint alleging four (4) counts against Forgosh, Levy and Creative Dental, respectively: fraudulent transfer pursuant to 11 U.S.C. § 548 against Forgosh and Levy and Creative Dental (Count I), conversion against Forgosh, Levy and Creative Dental (Count II), breach of fiduciary duty against Levy (Count III), and aiding and abetting Levy's breach of fiduciary duty against Forgosh (Count IV). Levy filed his answer and counterclaims, pro se, on July 28, 2008. On July 29, 2008, Forgosh filed the instant Motion to Dismiss contending that the adversary proceeding was untimely filed as outside the statute of limitations prescribed by 11 U.S.C. § 546(a)(1)(A) — that the Court never had the authority to extend that date and therefore it was not extended and the Complaint was correspondingly untimely.

The Trustee subsequently objected to the Motion to Dismiss and also filed a motion to strike portions of Levy's pro se answer and counterclaims (the "First Motion to Strike"), seeking an order that Levy make more definite statements and comply with Fed.R.Civ.P. 10(b), made applicable to the proceeding by Fed. R. Bankr.P. 7010. On October 10, 2008, Levy filed a motion to amend his answer, a response to the Trustee's First Motion to Strike, and the instant Motion for Joinder seeking his and Creative Dental's inclusion in the Forgosh Motion to Dismiss. The Trustee similarly objected to the Motion for Joinder and sought to have it stricken as untimely under Fed.R.Civ.P. 7(a), applicable through Fed. R. Bankr.P. 7007 (the "Second Motion to Strike"), asserting that any motion to dismiss by Levy would be untimely since he had already filed an answer to the Complaint.

Subsequently, a hearing was held on all of the pending motions in the adversary proceeding — the Motion to Dismiss, the First and Second Motions to Strike, and the ...