Cablevision Systems Corp. v. Malandra (In Re Malandra)Cablevision Systems Corp. v. Malandra (In Re Malandra)
OPINION
(Motion for Extension of Time to File Complaint)
Louis Malandra (“Malandra” or the “Debt- or”) filed a voluntary petition for relief under
The Chapter 7 Trustee conducted the § 341 meeting on November 2, 1995 and, on November 15, 1995, filed a “no-asset” report with the Court.
As of January 2,1996, no creditor had filed a complaint objecting to the Debtor’s discharge. Accordingly, pursuant to Federal Rule of Bankruptcy Procedure (“FRBP”) 4007(c) and 11 U.S.C. § 727, the Court entered an Order on January 17, 1996 discharging the Debtor from all dischargeable debts (the “Discharge Order”). On January 19, 1996, the Clerk mailed a copy of the Discharge Order to all creditors, including Cablevision, at “Cablevision, c/o Daniel J. Lefkowitz, Esq., 350 Jericho Tpk, Suite 100, Jericho, NY 11753” (ie., the same address to which the Notice was mailed). Cablevision’s counsel concedes receipt of the Discharge Order.
On January 31, 1996, Cablevision filed the above-captioned adversary proceeding complaint, seeking a determination of discharge-ability of the debt owed to it pursuant to 11 U.S.C. § 523(a)(6). 3 The complaint was filed on Cablevision’s behalf by Daniel J. Lefkowitz, Esq. The complaint alleges, inter alia, that Cablevision holds a claim against the Debtor in excess of $800,000 as a result of a judgment entered against him in the United States District Court for the Eastern District of New York following a decision by Hon. David F. Jordan, U.S. Magistrate Judge, on April 10, 1992 (the “District Court Decision”). The complaint further alleges that Cablevision was listed on Schedule D of the Debtor’s petition as a secured creditor holding a judgment lien against the Debtor’s residence. The complaint avers that the District Court Decision found that the Debtor was liable for modifying and selling at least 350 television decoding devices designed and intended to enable their purchasers to receive unauthorized cable television. It further alleges that (i) the Debtor had modified and sold the “pirate” cable descramblers intentionally and deliberately, (ii) the Debtor knew or should have known that his actions would harm Cablevision, (iii) the Debtor intended to harm Cablevision, and (iv) Cablevision was in fact harmed. It therefore seeks a determination that the debt owed to it is nondischargeable. A review of the docket in the adversary proceeding shows that Cablevision has not yet filed a certificate of service of the summons and complaint; nor has the Debtor answered or moved with respect to the complaint.
On February 5,1996 — well after the January 2nd date by which creditors were required to object to discharge or discharge-ability and after the January 31st date on which it commenced the within action, Cablevision filed a motion for an Order “pursuant to 11 U.S.C. 105 and 523(a)(6) and (c) and
The motion alleges that on January 22, 1996, the Discharge Order was received at the offices of plaintiffs counsel, Daniel J. Lefkowitz, Esq., P.C. (the “Lefkowitz Firm”). Cablevision contends that the
Discharge [njotice was the first notice of any kind regarding the debtor’s Chapter 7 ease received by the Lefkowitz Firm. Pri- or to that time, neither Cablevision nor the Lefkowitz Firm had any notice or knowledge, either actual, constructive or otherwise, of the debtor’s Chapter 7 case.
See Notice of Motion, dated Feb. 1,1996, ¶ 9. The motion is supported by the affidavits of two attorneys at the Lefkowitz Firm, who recount the manner in which their office processes mail, aver that had a bankruptcy notice been received, they would have seen it, and deny receipt of any notice of the Malandra bankruptcy case.
Arguments of the Parties
The Debtor urges that a motion to extend the time to file a complaint to determine dischargeability must, pursuant to FRBP 4007(c),
4
be made before the time has expired, and that the Court has no discretion to grant a motion which is untimely made. The Debtor asserts that notice to Cablevision’s counsel constitutes “notice sufficient to apply the actual 4007 Statute of Limitations,” Def.’s Aff. in Opp. ¶ 8, and that there is a presumption of the validity and regularity of service of the Clerk’s notice. Lastly, the Debtor contends that the Court should not grant an extension, even if it finds that Cablevision did not receive any notice prior to the Discharge Order, because “Congress’ intent to promote the expeditious and efficient administration of the Bankruptcy process is revealed in its acceptance of the rules limitiiig the Bankruptcy Court’s discretion to extend § 523(c) bar dates, notwithstanding that notices for unknown reasons may not have been received, so long as the process of noticing is constitutionally sound.”
Id.
at ¶ 9,
quoting In re Pratt,
Cablevision urges that the Court may extend the time where the creditor had no actual notice of the deadline. It argues that its factual affidavits rebut the presumption of receipt which is raised by the Court’s certificate of service, and that a judicially-created exception to the rule that a motion must be filed before the bar date expires is therefore warranted. It further contends that to strictly apply Rules 4007 and 9006 when it had no notice of the bar date would deny it due process. Lastly, Cablevision contends that this Court has the power under 11 U.S.C. § 105 to grant an extension of time, particularly since it received no notice, its complaint was filed promptly upon learning of the bankruptcy, it holds a claim which, under controlling precedent, would be nondischargeable and its claim is large, representing approximately 97% of all claims scheduled by the Debtor. In its arguments, Cablevision does not, however, address or respond to the Debtor’s assertion that notice to the attorney (i.e., the Lefkowitz Firm) constitutes sufficient notice to the creditor.
DISCUSSION
This case arises in a somewhat peculiar context, as Cablevision has filed an adversary proceeding (as to which no certificate of service of the summons and complaint or answer has been filed) and, subsequently thereto, moved for an extension of time to do so. Despite the odd procedural posture, however, it is clear that what the parties are asking the Court to decide is whether Cablevision’s complaint is timely.
5
In address
Section 523 and FRBP 4007, 9006
Rule 4007(c) requires that a complaint, such as Cablevision’s, that seeks to except a debt from discharge on the ground that it is of the kind specified in paragraphs (2), (4) or (6) of Section 523(a) 6 must be filed within 60 days following the first date set for the § 341 meeting. Alternatively, Rule 4007(c) permits that time to be extended on motion, after a hearing on notice, so long as “[t]he motion [is] made before the time has expired.” Rule 4007(c) does not stand alone, however. Rather, Rule 9006(b)(3) bears on the subject and states, in pertinent part, that:
The court may enlarge the time for taking action under Rule ... 4007(c) ... only to the extent and under the conditions stated in those rules.
Courts have been divided on the issue of whether a bankruptcy court has the power to extend the time period afforded under Rule 4007(c) after it has expired. Some have held that the time limitation imposed by Rule 4007(c) is jurisdictional and that there is no discretion under Rule 9006(b)(3) to grant an extension after expiration of the time allowed.
See, e.g., In re Klein,
A second line of eases has permitted late filings of complaints to determine discharge-ability in certain limited circumstances, such as where a bankruptcy court may have inadvertently, but nonetheless affirmatively, misled a creditor by setting an incorrect deadline.
See, e.g., In re Kennerley,
A third line of cases, and that which has been adopted by the Court of Appeals for the Second Circuit, rejects the notion that the time period imposed by Rule 4007(c) is jurisdictional and permits an extension of time for a creditor to file a complaint to determine dischargeability after the Rule 4007(e) time period has expired, “if equity so requires.”
In re Benedict,
Having decided that the time period imposed by Rule 4007(c) is not jurisdictional and thus is subject to waiver, estoppel, and equitable tolling, we now turn to the issue of whether the circumstances in the present case required the bankruptcy court to extend [the creditor’s] time to file a complaint to determine dischargeability. [The creditor] argues that, because of [the debt- or’s] recalcitrant behavior in complying with [the creditor’s] discovery requests, it should have been allowed to file an untimely complaint. While in certain circumstances this may be an appropriate basis to extend a creditor’s time to file a complaintto determine dischargeability, in this case it does not provide a sufficient ground in light of the bankruptcy court’s finding that [the debtor] did not act in bad faith.
In re Benedict,
Turning to the issues at bar, neither Cablevision’s motion nor its complaint allege any facts which would bring it within the reasoning of Benedict. Neither is the Court aware of any equitable considerations that might apply to warrant the grant of the creditor’s untimely request for an extension of time. Clearly, the mere fact that the Debtor may have committed an intentional wrong that could, if properly presented, be declared non-disehargeable within the meaning of § 523(a)(6), or the mere fact that the creditor’s claim is large, totaling 97% of the scheduled debts, is not the sort of equitable consideration contemplated by the Court in Benedict.
Returning then to the statutory framework of Section 523, subsection (c)(1) provides that, in the absence of a timely complaint as to which there is a determination of non-dischargeability, a debtor is discharged of debts of a kind specified in § 523(a)(2), (4) or (6), unless the exception set forth in Section 523(a)(3)(B) applies. 7 Section 523(a)(3)(B) excludes from discharge any debt:
neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit— ...
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request.
Section 523(a)(3)(B) therefore ensures that debts of the kind specified in paragraphs (2), (4) or (6) are excepted from discharge where the creditor did not have notice of the case in time to file a complaint.
For the most part, this Court follows the line of cases represented in this district by
In re Candelaria,
The present case is all the more unusual in that Cablevision acknowledges that the Debt- or identified it as a creditor on his schedules and listed the debt. The thrust of Cablevision’s contention is that, notwithstanding its debt having been scheduled, it did not receive notice of the case until after the discharge had issued and, therefore, it should be permitted to file an untimely complaint seeking a determination of non-dischargeability. Thus, the issue is not whether Section 523(a)(3) applies (since it clearly does not) but whether Cablevision had notice of the ease in time to file either a motion for an extension of time or a timely complaint.
Notice to the Creditor
It is settled law that “proof that a letter properly directed was placed in a post office creates a presumption that it reached its destination in usual time and was actually received by the person to whom it was addressed.”
Hagner v. United States,
Although the United States Supreme Court adopted in Hagner, the common law presumption of receipt which arises from a proper mailing, it did not enunciate the quantum of proof required to rebut the presumption, or the continued vitality of the presumption, once rebutted. On those points, the cases are divided.
The case most frequently cited for the rule that a presumption of receipt may be rebutted by testimony of non-receipt is
In re The Yoder Company,
The courts which have followed
Yoder
and its reasoning have relied upon the general proposition that a presumption is rebutted “upon the introduction of evidence which would support a finding of the nonexistence of the presumed fact”—a fairly minimal standard.
See Yoder,
at 1118
(quoting
10 Moore’s Federal Practice § 301.04[2] (2d ed));
see also In re Cover,
Despite this line of cases, federal courts in New York have not been as forgiving. Rather, they hold quite uniformly that an affidavit of non-receipt is insufficient to rebut the presumption of receipt.
See In re Heyward,
The Court agrees with former Chief Bankruptcy Judge Burton Lifland of the Southern District of New York that if “a party were permitted to defeat the presumption of receipt of notice resulting from the certificate of mailing by a simple affidavit to the contrary, the scheme of deadlines and bar dates under the Bankruptcy Code would become unraveled.”
In re R.H. Macy & Co.,
One other point merits brief discussion. The Court agrees that
Yoder
is a thorough and carefully-reasoned decision and that it is particularly persuasive in the context of a Chapter 11 case (such as Yoder) in the aftermath of the decision of the United States Supreme Court in
Pioneer Inv. Services Co. v. Brunswick Assocs. Ltd. Partnership,
Unlike
Yoder,
the present case is one filed under Chapter 7. As the Court stated in
Pioneer:
“the ‘excusable neglect’ standard of rule 9006(b)(1) governs late filings of proof of claim in Chapter 11 cases
but not in Chapter 7 cases.” Pioneer,
One of the time requirements listed as excepted in Rule 9006(b)(3) is that governing the filing of proofs of claim in Chapter 7 cases. Such filings are governed exclusively by Rule 3002(c). See Rule 9006(b)(3); In re Coastal Alaska Lines, Inc.,920 F.2d 1428 , 1432 (CA9 1990). By contrast, Rule 9006(b) does not make a similar exception for Rule 3003(c), which, as noted earlier, established the time requirements for proofs of claim in Chapter 11 cases.
Even if the Court were to hold that the presumption had been rebutted in this case by the affidavits of Cablevision’s counsel, it would still conclude as a matter of law, based upon the undisputed evidence, that the creditor’s attorney received notice of the proceeding. On the one side are the affidavits of Cablevision’s counsel. On the other is the following evidence: the Court’s certificate of mailing, the fact that the case file contains no returned mail, and counsel’s concession that his office timely received the Discharge Order, which was mailed to the same address as the Notice.
In re Hobbs,
Denial of Due Process
Cablevision contends that to apply the Rule 4007 time limitations in this case would deny it due process of law under the Fifth Amendment to the Constitution of the United States. The due process clause requires that no person be deprived of property without due process of law. Under
Mullane v. Central Hanover Bank & Trust Co.,
must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it. The reasonableness and hence the constitutional validity of any chosen method may be defended on the ground that it is in itself reasonably certain to inform those affected ... or,where conditions do not reasonably permit such notice, that the form chosen is not substantially less likely to bring home notice than other of the feasible and customary substitutes.
Mullane,
at 315,
Congress’ intent to promote the expeditious and efficient administration of the bankruptcy process is revealed in its acceptance of the rules limiting the bankruptcy court’s discretion to extend § 523(e) bar dates, notwithstanding that notices for unknown reasons may not have been received, so long as the process of noticing is constitutionally sound____ The noticing procedure employed by bankruptcy courts is deemed complete when the clerk’s office certifies that notice was mailed to the appropriate parties---- Proof of receipt is not required.
Id. at 762 (citations omitted). 8
For these reasons, the Court believes that the notice given in the present case complies with the strictures of the due process clause.
The Reach of Section 105
Cablevision relies upon statements in
In re Tuzzolino,
Cablevision further contends that this Court has the power under 11 U.S.C. § 105 to grant an extension of time because (i) its complaint was filed promptly upon learning of the bankruptcy, (ii) it holds a claim which, under controlling precedent, would be declared non-dischargeable, and (iii) its claim is large, representing approximately 97% of all claims scheduled by the Debtor. The Court is aware of no decision— and Cablevision has cited to none — which extends a deadline, in the nature of a statute of limitations, based upon the magnitude of the claim which would be lost if the limitations period were enforced.
Courts have granted an extension of the deadline to file complaints by relying upon 11 U.S.C. § 105.
See, e.g., In re Greene,
Similar facts are not, however, present in this case. The discharge here was not issued in error. Rather, it was issued after the Section 523(c) deadline had passed and after
Notice to the Creditor’s Counsel
Lastly, Cablevision has not responded to the Debtor’s assertion that notice to its counsel is sufficient, nor has it raised the argument on its own. However, the Court is mindful of the affidavit of Cablevision’s counsel where he states:
In the course of my firm’s practice, it frequently receives notices relating to the commencement of cases under Title 11 of the United States Code by persons or businesses we have obtained judgments against on behalf of our clients. My firm often represents the interests of our clients as creditors in the bankruptcy proceedings of such debtors and the attorneys at my firm know how such matters are to be handled, and the importance of deadlines in a Chapter 7 case.
Affidavit of Daniel J. Lefkowitz, Esq., sworn to Jan. 29, 1996, at ¶ 6. Further, the Lefkowitz Firm filed the present complaint on behalf of Cablevision and is representing Cablevision in this proceeding. Under these circumstances, the Court believes that notice to counsel is sufficient to bind the client and is constitutionally sound.
Yoder, supra,
at 1117, n. 1;
In re Savage,
CONCLUSIONS
1. The Court has jurisdiction over the subject matter and the parties to this core proceeding pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157(b)(2)(I). Venue is properly laid in this district pursuant to 28 U.S.C. § 1409.
2. The affidavits of Cablevision’s counsel are insufficient, as a matter of law, to rebut the presumption of receipt which is properly invoked in this case.
3. Cablevision has failed to raise a genuine issue of material fact as to whether it had actual notice of this proceeding.
4. Application of the deadline contained in FRBP-4007 to Cablevision does not deprive it of property without due process of law.
5. Notice to Cablevision’s counsel was sufficient to apprise Cablevision of the proceeding within constitutional mandates.
6. Section 105 of the Bankruptcy Court does not permit the Court, in circumstances such as those found in this case, to extend the deadline set forth in FRBP 4007.
7. Cablevision’s motion for leave to file an untimely complaint is denied. The Debtor’s cross-motion to dismiss is granted and the complaint is therefore dismissed in its entirety, without costs to either party.
Debtor’s counsel is directed to settle on notice an order and separate judgment within ten days hereof.
Notes
. This "first meeting notice" is computer-generated by a Court employee. The notice is actually served by a central noticing center in Reston, Virginia, and a certificate of mailing, under penalty of perjury, is forwarded to the Court.
. There is a standing order directing the Clerk's office to place any returned mail in the case file to which the mail relates, and the Clerk’s office customarily does so whenever returned mail is received.
.Section 523(a)(6) provides, in relevant part, as follows:
(а) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
H* 3{» ífc í|í
(б) for willful and malicious injury by the debt- or to another entity or to the property of another entity ...
. FRBP 4007(c) states, in relevant part, that:
A complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a).... On motion of any party in interest, after hearing on notice the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.
. Because Cablevision has already filed its complaint, its motion for an extension of time is, in one sense, moot. Yet the parties have submitted papers and briefs, and have pressed resolution of the motion. The more appropriate procedure would have been for the plaintiff to have filed its
. These paragraphs refer to debts obtained, respectively, by false pretenses, fraud, or willful and malicious injury.
. 11 U.S.C. § 523(c)(1) states:
Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4), (6), or (15) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), (6), or (15), as the case may be, of subsection (a) of this section.
. The court also noted, in a footnote, that it was aware of decisional authority relating to theories of presumption of receipt of notice, but preferred to decide the case on the grounds given.
. The creditor failed to timely appear at pre-trial conference, and the Court closed the adversary proceeding. When the creditor appeared late, the Court told him the case could be restored to the calendar by stipulation or upon motion. The creditor filed such a motion, but in the interim, the discharge had issued.