Nextgear Capital, Inc. v. Ferati (In re Ferati)
| Citation | 622 B.R. 1 |
| Decision Date | 27 July 2020 |
| Docket Number | CASE NO. 17-50917 (JAM),ADV. PRO. NO. 17-05034 (JAM) |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — District of Connecticut |
| Parties | IN RE: Dritero FERATI, Debtor. Nextgear Capital, Inc., Plaintiff, v. Dritero Ferati, Defendant. |
Geraldine A. Cheverko, Eckert Seamans Cherin & Mellott, LLC, 10 Bank Street, Suite 700, White Plains, New York 10606, Attorney for the Plaintiff
Stephen M. Kindseth, Zeisler & Zeisler, P.C., 10 Middle Street, 15th Floor, Bridgeport, Connecticut 06604, Attorney for the Defendant
On July 31, 2017, Dritero Ferati (the "Defendant") filed a voluntary Chapter 7 petition. On November 6, 2017, NextGear Capital, Inc. ( the "Plaintiff") commenced the above-captioned adversary proceeding by filing a five-count complaint (the "Complaint") seeking a determination that a debt owed to it by the Defendant is non-dischargeable pursuant to 11 U.S.C. §§ 523 (a)(2)(A), (a)(4), and (a)(6). On December 29, 2017, the Defendant filed an answer and affirmative defenses (the "Answer"). On May 31, 2018, the Plaintiff moved for summary judgment on all counts of the Complaint (the "Motion for Summary Judgment," ECF No. 12). On June 21, 2018, the Defendant filed an Objection to the Motion for Summary Judgment (the "Objection to the Motion for Summary Judgment," ECF No. 13).
The Court held a Status Conference on the Motion for Summary Judgment on July 30, 2019 (the "Status Conference"). During the Status Conference, the Court noted the existence of inconsistencies between the Defendant's Answer and the Defendant's Local Rule 56(a)(2) Statement. The Defendant proposed to address the inconsistences by amending the Answer. On August 1, 2019, the Defendant filed a Motion for Leave to Amend Answer (the "Motion to Amend," ECF No. 42). The Plaintiff filed an Objection to the Motion to Amend on August 16, 2019 (the "Objection to the Motion to Amend," ECF No. 43).
After careful consideration of the arguments made by the parties in their submissions and during hearings before the Court, and under the specific facts and circumstances of this case, for the reasons that follow, the Motion to Amend is denied and the Motion for Summary Judgment is denied.
The United States District Court for the District of Connecticut has jurisdiction over the instant proceeding pursuant to 28 U.S.C. § 1334(b). The Bankruptcy Court derives its authority to hear and determine this matter pursuant to 28 U.S.C. §§ 157(a) and (b)(1) and the District Court's General Order of Reference dated September 21, 1984. This is a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2)(I).
The Defendant was a member and sole equity holder of Atlantic Motors, LLC ("Atlantic Motors"), a used car dealership in Waterbury, Connecticut. On March 16, 2013, Atlantic Motors entered into a Demand Promissory Note and Loan and Security Agreement with the Plaintiff (the "Note"), which the Defendant signed in his capacity as a member of Atlantic Motors. Under the terms of the Note, the Plaintiff granted Atlantic Motors a line of credit to finance its purchase of vehicle inventory, and Atlantic Motors granted the Plaintiff a security interest in all of Atlantic Motor's assets and properties (the "Collateral"). The Defendant executed an Individual Personal Guaranty (the "Guaranty") of the Note in favor of the Plaintiff, which required the Defendant to guarantee prompt and full payment of all of the obligations of Atlantic Motors under the Note.
The Plaintiff alleges that the Defendant engaged in a series of false representations, including submitting false vehicle identification number information to the Plaintiff and making false statements about the status of the Collateral, in order to obtain additional monetary advances from the Plaintiff. The Plaintiff additionally alleges that after the Defendant defaulted on the Note, the Plaintiff was not able to recover from Atlantic Motors all of the financed vehicles. The Plaintiff seeks a declaration that the debt owed by Atlantic Motors and guaranteed by the Defendant in the amount of $1,488,848.30 is non-dischargeable pursuant to. 11 U.S.C. §§ 523 (a)(2)(A), (a)(4), and/or (a)(6).
In response to the inconsistencies in the Defendant's pleadings discussed during the Status Conference, the Defendant seeks leave to amend paragraph 6 of the Answer. In paragraph six, the Defendant admits that he was actively involved in the day-to-day business operations of Atlantic Motors and/or supervised the activities of others employed by Atlantic Motors. The Plaintiff's Local Rule 56(a)(1) Statement filed in support of summary judgment cites to paragraph six as the authority for the undisputed fact that the Defendant "was actively involved in the day-to-day business operations" of Atlantic Motors, "and/or supervised the activities of others in the employment of" Atlantic Motors.
Despite the admission in paragraph six of the Answer, the Defendant's Local Rule 56(a)(2) Statement admits that he was "actively involved in the day-today business operations of Atlantic Motors, but only to an extremely limited extent. " In support of this proposition, the Defendant refers to two affidavits attached to the Objection to the Motion for Summary Judgment: one by the Defendant (the "Defendant's Affidavit")2 and one by Edmund Ferati, the Defendant's brother (the "Edmund Ferati Affidavit")3 . The Defendant now seeks to amend paragraph six to assert that he had "only limited involvement in the day-to-day operations" of Atlantic Motors, and "did not supervise others in the employ of Atlantic Motors."
Federal Rule of Civil Procedure 15, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7015, provides that "a party may amend its pleading only with the opposing party's written consent or the court's leave," which should be "freely give[n] ...when justice so requires." Fed. R. Civ. P. 15(a)(2). "Although the Federal Rules provide that leave to amend be freely given, ‘it is within the sound discretion of the district court to grant or deny leave to amend.’ " Censor v. ASC Techs. of Connecticut, LLC , 900 F. Supp. 2d 181, 207 (D. Conn. 2012) (quoting McCarthy v. Dun & Bradstreet Corp. , 482 F.3d 184, 200 (2d Cir. 2007) ). When there is a showing of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment," leave to amend should be denied. Foman v. Davis , 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962).
In determining whether there is undue prejudice to the nonmoving party, courts consider factors such as "whether the assertion of the new claim would: (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; or (ii) significantly delay the resolution of the dispute." Enzo Biochem, Inc. v. Applera Corp. , 243 F.R.D. 45, 49 (D. Conn. 2007) (citations omitted). Mere delay, absent a showing of undue prejudice, does not provide a basis for denying leave to amend. See id. at 448.
The Motion to Amend is denied on the grounds of undue prejudice. By seeking leave to amend, the Defendant is attempting to withdraw a prior admission to defeat summary judgment. As noted above, the Defendant admits in paragraph six of the Answer that he was "actively involved in the day-to-day business operations" of Atlantic Motors, "and/or supervised the activities of others in the employment of" Atlantic Motors. The Plaintiff, as it was entitled to do, relied on that admission in preparing for and filing the Motion for Summary Judgment. The Objection to the Motion for Summary Judgment, however, argues that summary judgment should not enter in the Plaintiff's favor because the Defendant did not personally engage in the conduct alleged and had a very limited responsibility for Atlantic Motors. The Motion to Amend was filed well after the Motion for Summary Judgment was filed and only after the inconsistencies between the Answer and the Affidavits in Opposition to Summary Judgment were discussed during the Status Conference.
Under the circumstances present here, the Court concludes that the proposed amendment is prejudicial to the Plaintiff. The Plaintiff had a right to rely on the Answer and the admissions it contained in preparing for and filing the Motion for Summary Judgment. To allow the Defendant to amend the Answer for the purpose of avoiding summary judgment would cause undue prejudice to the Plaintiff. See Classicberry Ltd. v. Musicmaker.com, Inc. , 48 F. App'x 360, 362 (2d Cir. 2002) ().
Accordingly, the Motion to Amend is denied.
Federal Rule of Civil Procedure 56(a) is made applicable to these proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56 directs that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; Fed. R. Bankr. P. 7056. The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original). "Upon consideration of a motion for summary judgment, ‘the judge's...
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