In re Segal
| Decision Date | 06 March 2015 |
| Docket Number | Case No. 1–13–45519–NHL |
| Citation | 527 B.R. 85 |
| Parties | In re: Herman Segal, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
Herman Segal, Pro Se Debtor
Richard E. O'Connell, Yost & O'Connell, 24–44 Francis Lewis Boulevard, Whitestone, N.Y. 11357–1633, Chapter 7 Trustee
Fred Stevens, Klestadt & Winters, LLP, 570 Seventh Ave., 17th Floor, New York, N.Y. 10018, Attorney for Trustee
DECISION DENYING MOTION TO DISMISS
A voluntary petition for relief, in the name of Herman Segal as debtor (the “Debtor”), filed on September 10, 2013, commenced this chapter 7 bankruptcy case. On January 30, 2014, the Debtor moved to dismiss the case. In his motion to dismiss (the “Motion to Dismiss”), the Debtor claimed that he neither signed the petition nor approved the filing. After considering the entire record, including testimony, arguments, and submissions, the Court finds that the Debtor authorized his former counsel to place him into bankruptcy; the Debtor's conduct subsequent to the filing ratified the chapter 7 petition; and the Debtor is equitably estopped from disavowing the bankruptcy case. Moreover, the Debtor has acted in bad faith, and dismissal would severely prejudice his creditors. Because the Debtor failed to establish cause for dismissal, the Motion to Dismiss is denied.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This matter is a core proceeding under 28 U.S.C. § 157(b)(2). This decision constitutes the Court's findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure (“Bankruptcy Rule”) 7052.
On September 13, 2013, while out of the country, the Debtor called Maxim Maximov, Esq., the initial attorney in this case.1 Mr. Segal was facing the imminent foreclosure sale of a co-operative apartment, titled in his name, located at 4720 Pinetree Drive, Unit # 15, Miami Beach, FL (the “Co-op”). Mr. Maximov advised the Debtor that he could halt the auction by filing for bankruptcy. That same day, the Debtor completed the credit counseling course required under 11 U.S.C. § 109. Then, Mr. Maximov electronically field an “emergency” chapter 7 petition (the “Original Petition”). Ev. Hr'g Tr. 32:20–21, Sept. 4, 2014, ECF No. 116. The Debtor did not physically sign the Original Petition. Trustee P.T. Statement 4 ¶ 1, ECF No. 90; Debtor P.T. Statement 3 ¶ 1, ECF No. 91. No schedules or statements required under 11 U.S.C. § 521(a)(1)(B) accompanied the Original Petition, and the only creditor listed was The Esquire House, the cooperative association, who had obtained the judgment of foreclosure due to unpaid maintenance fees.
After the Original Petition was filed, Richard E. O'Connell, the chapter 7 trustee for the Debtor's estate (the “Trustee”), began investigating the Debtor's finances. On October 10, 2013, the Trustee filed (i) Motion for Authorization to Conduct a 2004 Examination of the Debtor and the Debtor's wife, Yocheved Segal, and (ii) Motion to Compel the Debtor to Perform His Duties Under § 521(a) and Bankruptcy Rule 4002. Neither the Debtor nor Mr. Maximov appeared at the hearing held on November 14, 2013, and the Court granted the Trustee's motions.
The Debtor did not cure the § 521 deficiencies, and the Court issued an Order to Show Cause why the case should not be dismissed for failure to file schedules. There was no appearance by or on behalf of the Debtor at the hearing on the Order to Show Cause, held on November 21, 2013. The Debtor incorrectly assumed that if he ignored the Court's notices and the Trustee's requests for information, the case would be dismissed. However, the Court adjourned the show cause hearing to December 4, 2013, based upon the Trustee's “request[ ] that the Debtor's case not be dismissed and that the Trustee be permitted to continue the discharge of his duties under section 704 of the Bankruptcy Code.” Statement of Trustee 2 ¶ 1, ECF No. 27.
The Trustee's motion for authorization to sell the Co-op, pursuant to 11 U.S.C. § 363 (the “Sale Motion”), finally elicited a response from the Debtor. Mr. Maximov filed written opposition; and the Debtor, Mr. Maximov, and Warren Graham, Esq., also representing the Debtor, appeared before this Court on December 4, 2013, for the hearing on the Sale Motion. On the record, Mr. Segal, personally and through his attorneys, addressed the Sale Motion, but did not advise the Court that he believed the entire case should be dismissed. The Court overruled the Debtor's objection and authorized the Trustee to sell the Co-op. Hr'g Tr. 41:8–9, Dec. 4, 2013, ECF No. 72. Additionally, the Court determined it would not proceed on its Order to Show Cause regarding dismissal. Hr'g Tr. 13:16–19. The Court admonished that a debtor who files a “barebones” petition to obtain the automatic stay should not assume the case will be automatically dismissed if he ignores his duties as a debtor.2 Hr'g Tr. 9:20–13:4.
On December 5, 2013, the Court issued an Order (the “Order to Compel”) directing Mr. Segal to perform his duties as a debtor, including filing a list of creditors, schedules of assets and liabilities, schedule of current income and current expenditures, and a statement of financial affairs. Order, ECF No. 37. The Order to Compel also directed the Debtor to provide information and documents to, cooperate with, and submit to an examination by the Trustee.
The Debtor filed the required items on December 23, 2013. However, the Debtor repeatedly invoked the Fifth Amendment on the documents and refused to fully disclose his real and personal property, the nature and amount of claims against him, and the names of his creditors. Schedules, ECF No. 41; Means Test, ECF No. 42. Concurrently, the Debtor filed an amended petition on Official Form 1, which bears his original signature (the “Amended Petition”). Am. Pet., ECF No. 43.
On January 30, 2014, the Debtor, acting pro se, filed the instant Motion to Dismiss. The Motion to Dismiss raised, for the first time, that the Debtor never signed the Original Petition. Subsequently, Rachel Blumenfeld, Esq., replacement counsel for the Debtor, filed a memorandum of law in support of dismissal.3 The Debtor argues that the absence of his signature on the Original Petition is a “fatal defect to the filing.” Debtor Mem. 2 ¶ 2, ECF No. 80. Furthermore, Mr. Segal states that the only reason for the filing was to stop the foreclosure, which was, in retrospect, a “huge mistake.” Mot. ¶ 10, ECF No. 54. The Debtor claims that he never authorized Mr. Maximov to commence a case under chapter 7 and submits that he and his creditors do not need or want bankruptcy protection. Mot. ¶ 15, ECF No. 54.
The Trustee opposes the Motion to Dismiss. He contends that the Debtor's signature on the Amended Petition remedied any defects that inured from the unsigned Original Petition. Also, the Trustee argues that dismissal would reward the Debtor for his delay and refusal to cooperate and prejudice the Debtor's undisclosed creditors.
11 U.S.C. § 707(a). The statutory examples of cause “are illustrative, not exclusive.” Smith, 507 F.3d at 72. The right to voluntarily dismiss a chapter 7 case is not absolute; the debtor must establish cause for dismissal under § 707(a). Id. On a debtor's motion to dismiss, courts “determine[ ] whether cause exists by looking at ‘whether dismissal would be in the best interest of all parties in interest.’ ” Id. (quoting Dinova v. Harris (In re Dinova), 212 B.R. 437, 442 (2d Cir. BAP 1997) ). Equitable considerations guide the court in weighing factors in favor of and against dismissal. Smith, 507 F.3d at 73. The determination on dismissal falls within “the sound discretion of the bankruptcy court.” In re Hull, 339 B.R. 304, 308 (Bankr.E.D.N.Y.2006).
Bankruptcy Rules 1008 and 9011(a) require that a petition for relief be signed. Generally, if “the debtor did not sign the petition” and does not “promptly correct the deficiency” by executing it, then the case should be dismissed. Willis v. Rice (In re Willis), 345 B.R. 647, 651 (8th Cir. BAP 2006). However, certain facts mandate a different result.
In Willis, the debtor alleged that she did not sign or review the petition filed by her attorney. Although the debtor learned shortly thereafter that a case had been commenced without her authorization, six weeks passed before she first stated on the record that she did not sign the petition. Despite numerous opportunities to disclose the defect, the debtor remained silent and benefited from the automatic stay. The debtor participated in the bankruptcy, but “only in ways she deemed beneficial to her,” such as moving to reconvert her case and opposing motions for stay relief. Willis, 345 at 653–54. She did not fulfill any responsibilities of a debtor, such as “filing accurate schedules and cooperating with the trustee,” and “repeatedly failed to turn over documents.” Id. at 654, 651.
Similarly, in In re Scotto, No. 8–09–75956–REG, 2010 WL 1688743, at *4 (Bankr.E.D.N.Y. Apr. 26, 2010), the debtor argued that the case should be declared a “legal nullity” because his signature on the petition was forged, and he did not consent to the filing. The debtor...
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