In re Natale, Bankruptcy No. 190-15846-353
| Decision Date | 07 February 1992 |
| Docket Number | Bankruptcy No. 190-15846-353,Adv. No. 191-1209-353. |
| Parties | In re Michael and Lori T. NATALE, Debtors. Salvatore PERNICIARO, Plaintiff, v. Michael NATALE, Defendant. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
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Wilkie Farr & Gallagher, New York City, by Gregory L. Harris, John Scott, for debtor.
George Poulos, Astoria, N.Y., by George Poulos, for plaintiff.
DECISION ON MOTION TO DISMISS COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION
Before this Court is a motion by the Debtor, Michael Natale ("Debtor"), to dismiss the complaint ("Complaint") filed in this adversary proceeding for failure to state a cause of action upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), made applicable herein by Fed. R.Bankr.P. 7012(b). The Complaint was filed by Salvatore Perniciaro ("Plaintiff"), a creditor of the Debtor, and seeks an order denying the Debtor's discharge or, in the alternative, an order dismissing the Debtor's Chapter 7 case. Based upon this Court's review of the Complaint, the papers submitted in support of, and in opposition to, the motion to dismiss and our own independent legal research, we find that the Complaint is utterly defective and is therefore dismissed, with prejudice.
The adversaries in this lawsuit are former friends whose relationship soured after a failed business venture of the Debtor and resultant debts to Plaintiff left unpaid. Plaintiff sold a landscaping business to the Debtor in February 1985 for $27,000. Payment for the purchase price was to be made in four note installments of $6,750. The Debtor paid $5,000 on the first note in August 1986 and ceased to make further payments on these notes. Efforts to restructure the debt to Plaintiff in 1988 and 1989, including the issuance of new notes, resulted in no further payments to Plaintiff. Several other attempts by the Debtor to own a business were also unsuccessful, leaving the Debtor with additional debts. Apparently, the Debtor ultimately realized that business was not his forte; he then sought and obtained work in construction. The Debtor is now a laborer in the recession plagued construction industry.
On December 24, 1990, the Debtor and his wife filed a joint pro se petition for relief under Chapter 7 of the Bankruptcy Code. At the time, the Debtor was employed as a construction worker, taking home approximately $2,300 per month. The Debtor's wife remained at home to take care of their two young daughters who were then 2½ years old and 5 months old. Assets of $3,500 were reported, as compared to liabilities of $61,762.95. Plaintiff was scheduled as being owed $19,500.
The Debtor and his wife appeared at the meeting of creditors held pursuant to 11 U.S.C. § 341 on February 7, 1991. Plaintiff attended the meeting, but opted not to avail himself of the opportunity to question the Debtor and his wife. Instead, Plaintiff subsequently sought and obtained an order authorizing an examination of the Debtor under Fed.R.Bankr.P. 2004. Meanwhile, the exact time being unclear, the Debtor obtained the assistance of counsel. The law firm of Wilkie Farr and Gallagher undertook the pro bono representation of the Debtor and his wife in their Chapter 7 case.1 Thereafter, by application dated April 24, 1991, the Debtor and his wife sought permission to file amendments to their bankruptcy schedules and statement of financial affairs pursuant to Fed. R.Bankr.P. 1009. This application was granted by order dated April 26, 1991, and the Debtor's bankruptcy papers were accordingly amended to include, among other things, two omitted annuities and a correction of the Debtor's monthly rental payments. On that same date, April 26, 1991, Plaintiff filed the Complaint initiating this adversary proceeding.
The Complaint alleges what appears to be two causes of action, one cause of action objecting to the Debtor's discharge and the other cause of action seeking an outright dismissal of the Chapter 7 case. As best as we can, we will attempt to summarize the contents of the Complaint.
Although not clearly demarcated, the first cause of action deals with Plaintiff's objection to the Debtor's discharge. No provision of Title 11 of the United States Code, i.e., the Bankruptcy Code, is mentioned as the basis for the objection. Instead, 11 U.S.C. § 727 is referred to in the jurisdictional statement of the Complaint preceding the alleged substantive causes of action. Nowhere in the Complaint is the specific subdivision of the multi-layered Section 727, upon which Plaintiff relies, specifically identified. It would seem, however, from the parroting of statutory language in the Complaint, that Plaintiff is objecting to the Debtor's discharge pursuant to 11 U.S.C. § 727(a)(4)(A)-(B), the provisions barring a discharge to persons who knowingly and fraudulently made false oaths or accounts or presented or used false claims in connection with a bankruptcy case. Specifically, the Complaint alleges the following, i) the Debtor failed to list two annuity funds in his bankruptcy schedules; ii) the Debtor stated "at a 2004 examination" that he could not recall who typed and prepared his bankruptcy petition and schedules; iii) the Debtor's schedule of unsecured creditors includes friends and family members and "at a 2004 examination" the Debtor stated that there was no written instrument evidencing these debts, that he could not recall whether he received the money in cash or by check, that he never made any payments on these debts, and that his friends and family never took any action to enforce the debts; iv) the Debtor's schedules list two debts incurred in 1984 that "are barred by the New York Statute of Limitations, pursuant to CPLR, Section 213;" v) the Debtor's bankruptcy petition lists his rent at $610.00 per month, while his actual rent is $450.00 per month; and vi) the Debtor's monthly medical expenses of $515.00 listed in his schedules are "very high."
Plaintiff's second cause of action requests dismissal of the Debtor's Chapter 7 bankruptcy case. In scatter gun fashion, the Complaint seeks dismissal of the bankruptcy case pursuant to 11 U.S.C. § 707,2 the court's inherent power to dismiss a bankruptcy case not filed in good faith, and because it would be a substantial abuse to grant this Debtor a discharge. Parsing through the rambling, confusing and often irrelevant allegations, it seems that the essential thrust of the second cause of action is Plaintiff's contention that the Debtor's bankruptcy filing constitutes a substantial abuse of the provisions of Chapter 7 in that this Debtor is not needy and should pay his debts, particularly the monies owing Plaintiff. In support of these assertions, Plaintiff makes rather unusual "allegations." Initially, he recites at length the history of his loan relationship with the Debtor and related debt collection difficulties. Plaintiff then proceeds to detail an elaborate program altering the personal and financial lifestyle of the Debtor and proposes monthly payments of $387.00 to himself and $122.16 to certain other creditors over a five year period. The Complaint contains a laundry list of speculative intrusions into the Debtor's privacy and other conjectures which if realized might implement the Plaintiff's proposed payout program. These intrusions and conjectures include, i) the Debtor's wife entering the work force and obtaining income; ii) the Debtor obtaining overtime income; iii) the application of tax refunds toward payment of certain creditors; iv) the use of certain deductions on the Debtor's tax returns; v) the discounting of debts to certain creditors; and vi) the reduction of medical expenses.
The Complaint predicates the jurisdiction of this Court upon 28 U.S.C. § 1334 and 11 U.S.C. §§ 707, 727. Sections 707 and 727, however, are not jurisdictional provisions; they are substantive provisions of the Bankruptcy Code. The Complaint goes on to state that this lawsuit is a core proceeding under 28 U.S.C. "§ 157(b)(2)(5) sic"; there is no such provision. Presumably, Plaintiff means 28 U.S.C. § 157(b)(2)(A), (J) and (O). Venue is placed in the United States Bankruptcy Court for the Eastern District of New York pursuant to 28 U.S.C. § 1408. Plaintiff probably means 28 U.S.C. § 1409, which provision relates to the venue of proceedings under title 11 or arising in or related to cases under title 11, and not 28 U.S.C. § 1408. Section 1408 of title 28 deals only with the venue of the bankruptcy case and not proceedings arising thereunder.
Fed.R.Civ.P. 12(b)(6) provides for dismissal of a complaint for "failure to state a claim upon which relief can be granted." A motion of this genre, which would summarily extinguish litigation at an early stage and foreclose factual discovery and presentation, should be treated with the greatest of care. Nonetheless, such a motion is a valuable procedural tool that can weed out litigation that cannot succeed, at great savings in time, effort and expense to litigants and the judicial system. In determining the motion, the court must presume that the factual allegations of the complaint are true and all reasonable inferences are to be made in favor of the nonmoving party. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 1848-49, 23 L.Ed.2d 404 (1969). The purpose of a motion to dismiss is to assess the legal sufficiency of a complaint, not to judge the weight of evidence which might be offered in its support. Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980).
However, on a motion to dismiss, it is clear that the court does not have to accept every allegation in the complaint as true in assessing its sufficiency. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and...
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