In re Union Hosp. Ass'n of Bronx
| Decision Date | 15 October 1998 |
| Docket Number | Bankruptcy No. 97 B 45032(TLB). |
| Citation | 226 BR 134 |
| Parties | In re UNION HOSPITAL ASSOCIATION OF THE BRONX d/b/a Union Hospital, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
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Kasowitz, Benson, Torres & Friedman, L.L.P., New York City, by Adam L. Shiff, for Debtor.
Bartlett, McDonough, Bastone & Monaghan, L.L.P., White Plains, NY, by Kenneth J. Burford, for Claimants.
Thelen Reid & Priest, L.L.P., New York City, by Teena H. Kim, for Creditors Committee.
OPINION ON OBJECTION TO CLAIMS FOR CONTRIBUTION OR INDEMNITY
Union Hospital ("Union"), a recidivist chapter 11 debtor, moves to expunge an asserted administrative claim filed by Montefiore Medical Center, The Jack D. Weiler Hospital of the Albert Einstein College of Medicine, and Dr. Bhagwhat Gill (collectively, the "Claimants") because their claim for contribution or indemnification arising out of two tort actions pre-dating the first bankruptcy petition, which claim had not been asserted against Union in the non-bankruptcy forum prior to the last date to file proofs of claim in either chapter 11 case, was discharged in Union's first bankruptcy case or is time barred in this one. In a nutshell, resolution of the parties' dispute turns on whether the claimants were known or unknown creditors. If known, they were entitled to notice by mail of the bar date, which they did not receive; if unknown, notice by publication sufficed to bar their claims.
Union and the Claimants rendered medical services to two individuals from which lawsuits arose naming the parties as defendants. In 1992, David Serrano, by his mother, filed suit for alleged malpractice said to have occurred earlier that year. In 1993, Ruby Zammett filed a wrongful death action against Union and Claimants for acts which occurred during 1990 and 1991. The Claimants hired the law firm of Bower & Gardner to represent them in both the Serrano and Zammett actions. When the attorneys working on the matters moved to Bastone and Monaghan, LLP (the "Bastone firm") some time in late August, 1993, the new firm was substituted for the old one. In neither action did the Claimants serve Union with a cross-claim, nor did they file a separate action against Union for indemnification or contribution.
On September 23, 1994, Union filed its first chapter 11 petition. Union promptly served on Bower & Gardner, identified as counsel in the Serrano action, notice of this bankruptcy filing and the Clerk's Certificate of Filing Chapter 11. This is not surprising; Union obviously intended to notify the parties to the action of its bankruptcy, the effect of which was to stay the lawsuit. For reasons unclear on this record, similar notice was not sent in the Zammett action.1
The bar date for filing timely proofs of claim was set for February 1, 1996. As approved in form and method by the Bankruptcy Court, Union published notice of the bar date 12 times and sent direct notice to all its patients and employees for the prior 10 years. This direct mailing did not include the Claimants, who were neither patients nor employees. The Claimants filed no proof of claim. On March 26, 1996, Union filed its plan and disclosure statement providing that the general unsecured creditors, the class in which Serrano, Zammett and the Claimants were included, would receive no distribution under the plan. (The claims of the plaintiffs in those actions were not covered by insurance.) After confirmation of the plan on May 31, 1996, Union published notice of that fact. It also sent notice by mail in July, 1996, to the Bastone firm in both the Serrano and Zammett actions. One effect of the plan was to discharge Union from its unsecured claims. As a result of that discharge, on February 14, 1997, the debtor was dismissed from both actions. Neither has yet been tried against the remaining defendants.
On July 29, 1997, Union filed its second chapter 11 petition. Remember that by this time Union was no longer a defendant in either state court action and had not been sued by the Claimants for indemnity or contribution. On October 25, 1997, Union filed its plan and disclosure statement, but a number of issues necessitated adjournment of the hearing on the disclosure statement. Pursuant to an October 27, 1997 order, December 1, 1997 was set as the bar date to file timely proofs of claim. Union published notice of the bar date seven times but did not send notice by mail to the Claimants. The Claimants filed no proof of claim.
A separate, later bar date of July 1, 1998, was set for administrative claims, including those relating to Union's postpetition healthcare service resulting in personal injury. Before the administrative claims bar date passed, the Claimants filed an alleged administrative claim for indemnity or contribution arising out of the Serrano action. Union asserts that this claim is barred and, for that reason, has not challenged its assertion as an administrative, rather than general unsecured, claim. Union has indicated its intention to do so, however, should I find that the claim is not barred.
Union's committee of unsecured creditors (the "Committee") joins Union in its attack on the claim, adding that, in any event, it must be disallowed pursuant to section 502(e)(1)(B) of the Bankruptcy Code as a contingent claim for reimbursement or contribution. The Claimants agree, but, together with the debtor, nonetheless desire a ruling with respect to the timeliness of the claim because they would assert a liquidated claim against Union were their claim to become fixed in time to move for reconsideration under section 502(j) of the Bankruptcy Code.
Union argues that this claim should be expunged from its current bankruptcy case because the claim, even if the Claimants were found to have been known creditors, could only be asserted in the first bankruptcy case, receiving a distribution identical to what creditors in the same class received, that is, zero. That contention flows, says Union, from the decision of my colleague Judge Beatty in Emons Indus., Inc. v. Allen (In re Emons Indus., Inc.), 220 B.R. 182 (Bkrtcy. S.D.N.Y.1998). There, mass tort claimants unknown by the debtor at the time its plan was confirmed, and for whom no bar date was ever set and no class representative appointed, were held entitled to treatment identical with that afforded known tort claimants under the plan and to no further recovery from the rehabilitated debtor. Judge Beatty's rationale was that those creditors' claims were prepetition claims which could still be timely filed and share in the same recovery afforded to the known tort creditors under the terms of the confirmed plan.
Notwithstanding that she held the claims of these unknown creditors could not have been barred absent the setting of a bar date, Judge Beatty remarked that she had found Id. at 192 (emphasis supplied). This language plainly is dictum inasmuch as Judge Beatty held that the claims of the unknown creditors for whom no bar date had been set could not be late. Extrapolating from Emons, Union urges that, whether known or unknown, the Claimants are entitled to no more than other tort claimants received under the first plan. However tempting it might be to consider whether the Emons dictum ought have broader applicability, it is unnecessary to do so, because I conclude that the Claimants were unknown creditors for whom publication notice sufficed to bar the claim and work its discharge in the first bankruptcy case.
Congress intended the definition of a "claim" for bankruptcy administration to be extremely broad, including contingent and unmatured claims. See 11 U.S.C. § 101(5); Emons, 220 B.R. at 193. The proper focus in deciding whether a claim arose prepetition or postpetition is on the time when the acts giving rise to the alleged liability were performed. In re Chateaugay Corp., 87 B.R. 779, 796 (S.D.N.Y.1988), aff'd sub nom. Pension Ben. Guar. Corp. v. LTV Corp., 875 F.2d 1008 (2d Cir.1989), rvs'd on other grounds, 496 U.S. 633, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990); In re Johns-Manville Corp., 57 B.R. 680, 690 (Bankr.S.D.N.Y.1986). Thus, a third party's claim for indemnity and contribution against a debtor arising from a pre-bankruptcy tort is a prepetition claim against the bankruptcy estate, subject to the bankruptcy court's jurisdiction. See Acevedo v. Van Dorn Plastic Machinery, Co., 68 B.R. 495, 498 (Bankr.E.D.N.Y.1986). Here, the two alleged tortious acts leading to the state court lawsuits occurred prior to Union's first bankruptcy petition, as a result of which they were subject to the jurisdiction of the bankruptcy court. So we turn to whether the claim which the Claimants now assert was discharged in that first case.
Confirmation of a plan of reorganization, so long as it does not provide for the liquidation of the debtor, discharges the reorganized debtor from any preconfirmation debt whether or not a proof of claim is filed, the claim is allowed or the holder of the claim has accepted the plan. See 11 U.S.C. § 1141(d)(1). Even the claims of tort creditors unaware of the bankruptcy are ordinarily discharged. Brown v. Seaman Furniture Co., Inc., 171 B.R. 26, 27 (E.D.Pa.1994); Grant v....
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