Matter of Ksenzowski
| Decision Date | 27 November 1985 |
| Docket Number | Adv. No. 183-0402.,Bankruptcy No. 183-31493 |
| Citation | 56 BR 819 |
| Parties | In the Matter of Simion KSENZOWSKI, Debtor. Hukumad CHAUDHRY and Haridas Shah, Plaintiffs, v. Simion KSENZOWSKI, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of New York |
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Robert Tauber, Brooklyn, N.Y., for debtor.
Manojkumar D. Patel, New York City, for plaintiffs Chaudhry & Shah.
Pending before the Court are a variety of motions and cross-motions. Because so many duplicate each other, they have taken on a Byzantine complexity, compounded by the misstatements respecting the record in the papers signed by Manojkumar D. Patel, Esq., attorney for the plaintiffs. (See e.g. pp. 833-838, infra) This has created enormous difficulty for the Court in recreating the procedural history of this case pertinent to the pending motions which raise the following issues:
(1) Should the Court vacate its Order of July 3, 1984 closing the case?
(2) Is the defendant, regardless of how the prior issue is decided, entitled to dismissal of the complaint (a) for failure to state, in timely fashion, a valid claim under 11 U.S.C. § 727, and/or (b) for failure of the plaintiffs to prosecute their cause of action diligently?
(3) Have the plaintiffs furnished grounds for disqualifying Robert Tauber, Esq. from representing the defendant?
(4) Are plaintiffs entitled for any reason to a judgment by default against the defendant?
(5) Should sanctions be imposed on Patel and his clients for the manner in which this case has been litigated and for the numerous misstatements prejudicial to the defendant contained in the papers signed by Patel?
On August 1, 1983, the defendant herein, Simion Ksenzowski, filed a Petition for relief under Chapter 7 of Title 11. The time to file objections to his discharge expired October 31, 1983. Ksenzowski filed pro se.
On October 24, 1983, the plaintiffs, Hukumad Chaudhry and Haridas Shah, from whom Ksenzowski, in partnership with one Barbara Usoskin, had purchased a stationery store about one year earlier, filed a complaint "pursuant to 11 U.S.C. § 727." The complaint alleged the sale of the store to Ksenzowski and Usoskin, a default on the notes given as part of the purchase price and requested judgment against the defendants in the amount of $26,500.00.1
At the first pre-trial hearing on November 30, 1983, in both cases, at which Barbara Usoskin and Ksenzowski both appeared pro se, the Court observed during the Usoskin pre-trial that the complaint failed to state a cause of action under § 727, whereupon Patel announced his intention to amend it, to which the Court responded, "Alright".
Thereafter, on December 27, 1983, Patel served Ksenzowski (and Usoskin) with an amended complaint containing the same allegations as his first complaint, but adding, in haec verba, the text of 11 U.S.C. § 727(a)(1), (a)(2), (a)(3), (a)(4) and (a)(5). The complaint contains a number of other allegations of misconduct ending with the allegation that Ksenzowski has obtained money and credit from plaintiffs and other creditors "by materially false statement in writing respecting financial position of the debtors/defendants" and, therefore, "they obtained this business property and loan-money by fraud."2
In the letter to the Clerk of the Bankruptcy Court enclosing the amended complaint in this and in the Usoskin proceeding, Patel wrote:
.
Letter of December 27, 1983.
At the pre-trial hearing on February 7, 1984, the Court set both the Usoskin and Ksenzowski cases down for trial on April 30, 1984 (provided that Ksenzowski had filed an answer by that date), after satisfying itself that in the companion Usoskin case discovery would be completed by that date.
On February 22, 1984, Ksenzowski filed an answer to plaintiffs' amended complaint. He filed it pro se, duplicating an answer previously filed by Usoskin, prepared for her by an attorney, Richard Koral, Esq., a personal friend. As affirmative defenses, the answer pleaded failure to state a cause of action and failure to plead with particularity as required by FRCP 9(b) and Bankruptcy Rule 7009.
On April 30, 1984, Ksenzowski appeared for trial, as did Usoskin and her attorney, Koral. Neither Patel nor his clients were present. It was later learned that Patel was on vacation in India where he had gone on March 23rd or 24th, 1984 and from where he did not return until May 14th, 1984. (Application to Set Aside Default Order and to Reclose Adversary Proceeding to Calendar, dated July 26, 1984 ("July 26, 1984 Application"), at par. 6.) On April 30, 1984, the Court adjourned the trial peremptorily to May 17, 1984.
When Patel left for India, he closed his office. Just prior to doing so, on March 19, 1984 he sent Koral, by mail, "Notice for Discovery and Inspection" in both the Usoskin and Ksenzowski cases (although Koral was the attorney of record only in the Usoskin case). (Affidavit of Service signed by Patel attached to "Notice for Discovery and Inspection"). The demand called for the production within the next 30 days at Patel's office of all the defendant's business and personal financial records for the previous five years. It also demanded an explanation of the reasons for the business losses, the unpaid debts and the bankruptcy filing.
After plaintiffs failed to appear for trial on April 30, 1984, Koral moved in both the Usoskin and Ksenzowski cases to dismiss the complaint (a) for plaintiffs' failure to prosecute, (b) for plaintiffs' failure to state a cause of action, and (c) for plaintiffs' failure to plead with particularity as required by FRCP 9(b). (Notice of Motion for Dismissal of Adversary Proceeding). Koral originally prepared the motion on behalf of Usoskin and, at her suggestion, filed it also on behalf of Ksenzowski who gave his consent thereto. This was Koral's first and only appearance in this proceeding on behalf of Ksenzowski. (Application of Richard Koral, dated November 29, 1984)
Both motions were made returnable on May 17, 1984, the date to which the Court had adjourned the trial. An affidavit of service dated May 2, 1984 attests to the fact that the motions were mailed to Patel's office. He claims, however, not to have found them when he returned from India on May 14th and reopened his office.
When Patel returned on May 14th, he made no inquiry at the court or of Koral or of anyone else respecting the adjourned trial date, nor did he inspect the Court's docket, but he did communicate with Koral to push his stale discovery demand, which resulted in Usoskin making available to him in the courthouse on May 25th, the papers she had collected in response to the earlier demand. Evidently, Ksenzowski was not present and produced no papers.3
On June 3rd, Patel claims to have written Koral (which Koral denies), with respect to both the Usoskin and Ksenzowski cases complaining of the inadequacy of the production to date stating that The same letter which Koral acknowledges receiving, was sent on July 26, 1984.
On May 17, 1984, for the convenience of the Court, both the trial date and the motion to dismiss were adjourned to June 7th, 1984. Koral has filed an affidavit reciting that on May 17th, 1984, he, Usoskin and Ksenzowski were all in the court prepared to proceed. (Application of Richard Koral, dated November 29, 1984 at par. 7). Patel acknowledges that neither he nor his clients were present. (Patel's Application dated December 27, 1984, at par. 7).
On June 7th, when the Court called the Usoskin and Ksenzowski cases for trial, no one was present in court on either matter. Patel was not present, nor were his clients. This information was recorded in the Court's docket. The Court then marked both adversary proceedings "Closed."
With the proceedings in this posture, there was no need to rule on the pending motions to dismiss and no action was taken on them. A formal Order closing each case was signed on July 3, 1984, and recorded on the respective docket, but no copy was sent any of the parties.
On July 26, 1984, Patel communicated with this Court for the first time since February 7, 1984 to find out the next date of hearing and trial. (July 26, 1984 Application, at par. 8). When he learned that the cases had been closed three weeks earlier, he moved to set aside the orders of default in the Usoskin and Ksenzowski case, filing identical documents in each. Only Koral was served; no service was made on Ksenzowski. (Affirmation of Service, dated July 27, 1984, attached to "Notice of Motion to Set Aside a Default Order and to Restore Calendar" (sic). (Tr. 3/7/85, p. 24-25).
The only statement on the merits of the plaintiffs' cause of action contained in Patel's moving papers to reopen this proceeding was the following:
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In re Usoskin, Bankruptcy No. 183-31433-21
... ... The complaint pleaded that Usoskin, with one Simion Ksenzowski, had purchased a store from the plaintiffs, had defaulted on the notes given as part of the purchase price, and requested judgment against the ... On the scheduled trial date of April 30, 1984, neither Patel nor plaintiffs were in court, whereupon the Court adjourned the matter peremptorily to May 17, 1984. Thereafter, Koral filed a motion to dismiss based on the failure of the complaint to state a cause of action and ... ...