In re Rapino, Bankruptcy No. 180-07230-21

• Decision Date: 09 June 1981
• Docket Number: Adv. No. 181-0092-21.,Bankruptcy No. 180-07230-21
• Parties: In re Dana L. RAPINO, Debtor. INTERNATIONAL PLAYTEX, INC., Plaintiff, v. Dana L. RAPINO, Defendant.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York

11 B.R. 651 (1981)

In re Dana L. RAPINO, Debtor.

INTERNATIONAL PLAYTEX, INC., Plaintiff, v. Dana L. RAPINO, Defendant.

Bankruptcy No. 180-07230-21, Adv. No. 181-0092-21.

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

June 9, 1981.

Charles R. Tropp, Staten Island, N.Y., for debtor-defendant.

Harvey H. Fein, Staten Island, N.Y., for plaintiff.

Rubin Ferziger, Brooklyn, N.Y., Chapter 7 Trustee.

OPINION and ORDER

CECELIA H. GOETZ, Bankruptcy Judge:

Dana L. Rapino, the debtor herein, has moved to dismiss the complaint filed by International Playtex, Inc. ("Playtex") objecting to her discharge in bankruptcy. The grounds for her motion are that the complaint was filed late. Playtex filed its complaint on February 13, 1981 and filed an amended complaint on February 20, 1981. Accompanying the amended complaint was an application to extend the time for filing objections to her discharge. That application also is opposed by the debtor. Playtex is also moving to add Rubin Ferziger, Esq., the trustee in this Chapter 7 proceeding, as a defendant.

The procedural background to the present motion can be briefly stated. Dana L. Rapino filed a petition under Chapter 7 of the United States Bankruptcy Code¹ on November 21, 1980. Miss Rapino is currently employed as a salesperson at Star Pontiac. In response to the question as to whether or not she had been engaged in business during the six years preceding the filing of the petition herein, she answered as follows:

"My father, Daniel Rapino, commenced a business known as `Dana Wholesale Products\' in Aug. 1975 and had my name placed as the owner by filing a d/b/a certificate in my name in the County Clerk\'s Office. I had no interest in said business, but my father opened checking accounts in my name and I was directed to sign necessary checks. At the time the business was commenced, I was under the age of 18. I answered the telephone at the premises 1871 Victory Boulevard until Feb. 1977. I believe the business terminated in 1977."

The only unsecured creditor listed by Miss Rapino in her petition is Playtex. Her petition states that she owes Playtex $43,025 on a judgment secured in the Supreme Court of the State of New York, Richmond County, in September, 1979 (Index No. 1346/76), for merchandise purchased by Dana Wholesale Products in 1976.

At the time the petition was filed, Charles R. Tropp, Esq., counsel for the debtor, sent Harvey H. Fein, Esq., who had represented Playtex in the proceeding resulting in the judgment against Miss Rapino, a brief form letter advising him that "the debtor has been granted an order for relief on a petition filed in the United States Bankruptcy Court, Eastern District of New York," and that all proceedings to enforce the collection of claims against the debtor's property had been stayed.

On December 11, 1980, the Court sent out notice of the filing of the petition; that a meeting of creditors pursuant to 11 U.S.C. § 341(a) would be held on December 30, 1980; and that February 6, 1981 had been fixed as the last day for filing objections to the discharge of the debtor or the dischargeability of a debt. This notice was sent to the address of Playtex shown on the petition, P.O. Box 631, Dover, Delaware 19901, and not to Mr. Fein. The notice was received by Playtex and forwarded to other counsel, Goldman, Horowitz & Cherno. This letter was lost somewhere in transit. The notice, therefore, was never received by either Goldman, Horowitz & Cherno or Harvey H. Fein, Esq.

No representative of Playtex was present at the first meeting of creditors held pursuant to 11 U.S.C. § 341. Rubin Ferziger, Esq., the interim trustee appointed by the Court, interrogated Miss Rapino briefly concerning the business described in her petition, and concluded the meeting. When Mr. Fein, Playtex's attorney, subsequently endeavored to ascertain the status of the proceeding, he was erroneously advised by Mr. Ferziger that the § 341 meeting had not been held because the debtor and her attorney had not appeared.

Mr. Fein did learn from Mr. Tropp sometime before February 8, 1981 that this date was the last date fixed by the Court for filing a complaint opposing the debtor's discharge or the dischargeability of a debt.

On February 13, 1981, Playtex filed its complaint against Rapino opposing her discharge. The complaint recites that in April, 1976, Playtex sold and delivered to her merchandise in the value of $35,579.20; that at the time she represented herself to be the sole owner of Dana Wholesale Products; that no part of the $35,579.20 has been paid; that in the proceeding brought to recover this money, she testified that she was the sole owner of Dana Wholesale Products, and that her father was employed solely as a salesman; and claimed that the goods and merchandise delivered by Playtex in April, 1976 had been stolen. The complaint alleges that, in fact, the father had secured insurance on December 17, 1975 from Allstate Insurance Co., on which he collected $38,781.61 pursuant to a judgment entered in his favor on April 4, 1978, and that the property on which he recovered from Allstate was the property delivered to his daughter, the debtor. The complaint concludes that the recovery by the father, Daniel Rapino, from the insurance company for the loss of the goods and merchandise sold the daughter by Playtex defrauded Playtex, as well as other creditors of the debtor, if any.

Following the filing of an amended complaint on February 20, 1981, Mr. Fein applied for an extension of the time to file objections to discharge and requested that the trustee, Rubin Ferziger, be added as a party to the adversary proceeding. The Court did not sign the application to extend the time to object to discharge on the ground that such relief was not available by ex parte application.

Subsequently, the debtor moved to dismiss the summons and complaint on the ground that it was "untimely filed pursuant to Bankruptcy Rules 712, 404 and 409." In essence, the debtor urges that Playtex has failed to demonstrate that its failure to file its complaint within the time fixed by the order of the Court was the result of "excusable neglect," and that, accordingly, no extension of that time should be allowed and its complaint should be dismissed.

DISCUSSION

The sole purpose of the debtor in filing her petition for relief was to avoid the judgment secured by Playtex against her while she was doing business under the name of Dana Wholesale Products.² If the allegations of the complaint are accepted as true, as they must be at this stage, while Miss Rapino was representing herself to Playtex to be the sole owner of that business and refusing to pay for merchandise delivered to Dana Wholesale Products because it was stolen, her father, in a separate proceeding unbeknownst to Playtex, was collecting the insurance on this stolen merchandise for his own benefit.

This alleged fraud, however, is claimed to now be no longer open to examination because the Court fixed February 6, 1981 as the last day for filing of a complaint, and Playtex, due to a series of errors, did not file its complaint until February 13, 1981. Miss Rapino can show no prejudice from the late filing of the complaint, i.e., nothing occurred between February 6 and February 13 that in any way changed or affected her legal position. Nevertheless, it is her position that the Court cannot, and should not, accept Playtex's complaint.

The issue thus raised is whether the Court should permit a complaint objecting to a debtor's discharge to be lodged after expiration of the time fixed by order of the Court for the initiation of such a proceeding where excusable neglect has not been demonstrated. Although the issue is a recurrent one in the bankruptcy courts, the principles to be applied are far from settled.

The new Bankruptcy Code, like its predecessor, the 1898 Bankruptcy Act, excepts certain debts from discharge (11 U.S.C. § 523) and also authorizes the denial of a discharge where certain circumstances are present (11 U.S.C. § 727).³ Unlike the Act, however, the Code is silent respecting the time limits for objecting to the discharge of the debtor, or to particular debts of the debtor. Section 14(b)(1) of the Act (former 11 U.S.C. § 32(b)(1)) required the Court to fix a time for the filing of objections to discharge or to the dischargeability of debts not less than thirty days and not more than ninety days after the First Meeting of Creditors.

The vacuum in the Code respecting time limits is filled by Bankruptcy Rules 404 and 409.⁴

Paragraph (a) of Rule 404 directs the court to fix a time for the filing of a complaint objecting to the debtor's discharge, which time "shall be not less than 30 days nor more than 90 days after the first date set for the first meeting of creditors." Paragraph (b) requires that at least 30 days' notice be given creditors of this cut-off date. However, in a no-asset case, i.e., where "notice of no dividend is given" creditors, the last day to object to the debtor's discharge can be fixed as early as the same date as is fixed for the first meeting of creditors, and only ten days' notice of this date need be given. Rule 409(a)(2), respecting complaints to the dischargeability of debts, parallels these provisions of Rule 404.

Since it is customary to combine the notice of the first meeting of creditors, the meeting held pursuant to 11 U.S.C. § 341, with the notice of the time limits for the filing of complaints objecting to discharge or to dischargeability, a creditor may have as little as ten days from the time he first receives notice that a petition in bankruptcy has been filed to prepare and file his complaint opposing discharge or dischargeability.

These short time periods are mitigated by the power given the Court in both Rules 404 and 409 to extend the time earlier fixed. Paragraph (c) of Rule 404 authorizes the court "for cause, on its own initiative or on application of any party in...