Opinion
No. 94-6272
December 1, 1995
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S FURTHER MOTION TO DISMISS
Plaintiff, Lois V. Payne ("Payne"), commenced this suit against defendant, Eugene A. Weibel ("Weibel"), on November 21, 1994 for his alleged conversion of property that she entrusted to his care. The complaint alleges breach of contract (Counts I and II), breach of a duty of good faith and fair dealing imposed by G.L.c. 106, § 1-203 (Count III), negligence (Counts IV and XI), fraud (Count V), breach of a fiduciary duty (Count VI), conversion (Count VII and VIII), violation of securities laws (Count IX), and intentional infliction of emotional distress (Count X).
Weibel moves for summary judgment, contending that the claims are barred by the applicable statutes of limitations, that Counts I-IV and VI-XI are barred by Weibel's bankruptcy discharge, that defendant's assets consists of nonattachable property, and that the claims are barred by the doctrine of laches.
The parties have agreed that the defendant's Motion to Dismiss should proceed pursuant to Mass.R.Civ.P. 56.
For the following reasons, defendant's Motion for Summary Judgment is DENIED.
FACTUAL BACKGROUND
Plaintiff, Lois V. Payne, currently ninety-one years old, was widowed on April 9, 1977, at which time she inherited her husband's estate consisting of a house at 4 Perham Street, West Roxbury, Massachusetts ("the Perham Residence"), stocks, antiques, furniture, cash, jewelry, and diamonds. She continued to live at the Perham Residence by herself, intending to procure her income from interest income and stock dividends and the periodic sale of jewels, and in 1979, engaged an attorney, the defendant Eugene A. Weibel, to assist in the winding up of her husband's estate.
In the early 1980s, Payne became concerned about security at the Perham Residence and hired Harold Kravitz ("Kravitz") to install locks and an alarm system. Also in the early 1980s, Kravitz obtained a loan from Payne of $100,000 for a business venture, which was subsequently spent and never repaid. Ultimately, Weibel secured a judgment in favor of Payne against Kravitz, obtaining a Court Order for periodic payments. Kravitz made payments directly to Weibel, which Payne never received. In 1983, Payne loaned Weibel $25,000, which he never repaid. In 1985, at Weibel's suggestion and for security reasons, Payne entrusted her stock, jewelry, and jewels to Weibel so that he could place them in a safety deposit box. Also at Weibel's suggestion, Payne provided Weibel with a power of attorney to manage her stock portfolio and to do her banking. In 1985, Payne sold the Perham Residence to her neighbor, Daniel Furden, for $100,000, represented by Weibel in the transaction. Weibel suggested that the proceeds be held by Weibel, on Payne's behalf, for safe keeping. Payne also had the contents of the house sold at auction, with the proceeds, $13,500, again being paid to Weibel, on Payne's behalf, for safe keeping.
In October 1990, after moving to Albany, NY, Payne met with Weibel to request the return of her money and property and an accounting, and to revoke the power of attorney. Weibel responded that the property was being kept in a safe deposit box and that he would forward the property to her within two weeks, which, however, he did not do.
In November, 1991, Payne received a letter from Centerior Energy, explaining that, in 1989, 200 shares of her stock had been exchanged and containing a copy of the certificate which bore a forgery of Payne's signature. In August, 1992, Payne contacted Weibel once more to obtain the assets and question him about the stock transaction. He told her that she "was a nobody that didn't mean anything to anybody" and refused to return her property.
Weibel is now retired and suffers from Alzheimer's disease. He filed a petition for a Chapter 7 bankruptcy in the United States Bankruptcy Court in Boston, Massachusetts (Case Number 92-14858)on May, 13, 1992. Prior to filing the bankruptcy schedules, Weibel's attorney, John R. Cox, interviewed Weibel to ensure that all existing or potential creditors were listed on the bankruptcy schedules. Payne was not listed because Weibel did not provide her name. At the Meeting of Creditors on June 29, 1992, no one raised any question about Weibel's entitlement to discharge, and on September 24, 1992, the Bankruptcy Court (Hillman, J.) ordered that:
1. [Weibel] is released from all dischargeable debts.
2. Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following:
(a) debts dischargeable under 11 U.S.C. § 523;
(b) unless heretofore or hereafter determined by order of this court to be nondischargeable, debts alleged to be excepted from discharge under clauses (2), (4) and (6) of 11 U.S.C. § 523(a);
(c) debts determined by this court to be discharged.
3. All creditors whose debts are discharged and all creditors whose judgments are declared null and void by paragraph 2 above are enjoined from instituting or continuing any action or employing any process or engaging in any act to collect such debts as personal liabilities of [Weibel].
Currently, Weibel's sole sources of support are a pension and social security.
DISCUSSION
1. Standard for Motion for Summary Judgment
This Court will grant summary judgment where there are no genuine issues of material fact and where the summary judgment record entitles the moving party to judgment as a matter of law. Cassesso v. Commissioner of Correction, 390 Mass. 419, 422 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976); Mass.R.Civ.P. 56(c). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). A party moving for summary judgment who does not bear the burden of proof at trial demonstrates the absence of a triable issue either by submitting affirmative evidence negating an essential element of the nonmoving party's case or by showing that the nonmoving party is unlikely to submit proof of that element at trial. Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). The nonmoving party must respond by alleging facts demonstrating the existence of a genuine issue of material fact. Pederson, supra at 17.
2. Bankruptcy Discharge
Defendant contends that Counts I-IV and VI-XI are barred by the defendant's bankruptcy discharge, whereas plaintiff contends that the claims were not dischargeable because defendant's wrongful acts were not reasonably discoverable until after the bankruptcy discharge date.
This Court has concurrent jurisdiction with the bankruptcy court to determine the dischargeability of debts that fall within § 523(a)(3) of the Bankruptcy Code. In re Thibideau, 136 B.R. 7, 10 (D. Mass. 1992). Debts within § 523(a)(3) are those which are neither listed nor scheduled under § 521(l), where the creditor did not have notice or actual knowledge of the debtor's bankruptcy case (a) in time for a creditor to file a Proof of Claim as to debts not specified in §§ 523(a) 2, 4, or 6; or (b) in time for a creditor to file a Proof of Claim and timely request a determination of dischargeability as to debts specified in §§ 523(a) 2, 4, or 6. For the discharge of unlisted debts, the debtor bears the burden of proving that a creditor received notice or had actual knowledge of the bankruptcy. In re Stratton, 29 B.R. 93, 95 (W.D. Ky. 1983). In the instant case, it is undisputed that Payne was not listed on the bankruptcy schedule and lacked actual knowledge of the bankruptcy prior to filing this cause of action. Thus, this Court has concurrent jurisdiction to determine whether these claims are discharged.
In order to determine whether the claims in this case were discharged, the Court must first determine whether the claims in this case are pre-bankruptcy debts. The Bankruptcy Code contains a broad definition of claim, providing that a claim is "a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." 11 U.S.C. § 101 (1994). Congress intended the definition of a claim to be "the broadest possible definition . . . [contemplating that] all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case." H.R. Rep. No. 595, 95th Cong.2d Sess. 309. Moreover, since the purpose of Chapter 7 is to provide the debtor with a fresh start, the discharge provisions of the Bankruptcy Code must be construed in favor of the debtor. In re Endicott, 157 B.R. 255, 261-262 (W.D. Va. 1993).
Rather than equating the accrual of a creditor's bankruptcy claim with the maturing of a state law cause of action, the majority of courts have used either the conduct test or the prepetition relationship test. In re Piper Aircraft Corp., 168 B.R. 434, 437-439 (S.D.Fla. 1994). Under the conduct test a debt arises "at the moment when acts giving rise to the alleged liability are performed," In re Waterman, 141 B.R. 552, 556 (Bkrtcy.S.D.N.Y. 1992). The prepetition relationship test is narrower than the conduct test, requiring that there be some "contact, exposure, impact, or privity between the debtor's prepetition conduct and the claimant." In re Piper Aircraft Corp., 168 B.R. at 439. Accordingly, this Court finds, that Payne's claims, in the circumstances here, were prepetition claims under both the conduct test and the narrower prepetition relationship test.
Having concluded that the claims arose pre-petition, the Court must next determine whether the claims were barred by the bankruptcy discharge or whether the claims fall within any exceptions to the discharge. In re Mendiola, 99 B.R. 864, 870 (N.D. Ill. 1989). Defendant contends, citing In re Mendiola, 99 B.R. at 865, 870, In re Thibideau, 136 B.R. at 8, and In re Sarapas, 83 B.R. 195, 196-197 (D. Mass. 1988), that the discharge was a no-asset discharge, and thus, as there was no prejudice to the plaintiff in not being listed on the schedule, the claims were thereby barred by the discharge. Id. However, as the record is devoid of any evidence in this regard which this Court may consider on a motion for summary judgment, either by affidavit or other sworn testimony, and as the discharge order does not itself indicate that discharge was a no-asset discharge, the omission of Payne's claims from the schedule cannot be said, as a matter of law, to have been nonprejudicial so as to have barred these claims by the discharge.
In a no-asset proceeding, debtors are notified that they need file no proof of claim unless or until assets are subsequently discovered.
Count V would appear to be nondischargeable in any event under 11 U.S.C. § 523(a)(2) as a debt for money obtained by false representation, and Count VI would appear to be nondischargeable under 11 U.S.C. § 523(a)(4) as a debt for fraud or defalcation while acting in a fiduciary capacity.
2. Statute of Limitations
Defendant also contends that, in any event, the tort claims (Counts III-VIII, X, and XI) and statutory claims (Counts III and IX) are barred by the applicable statutes of limitations. The three year period of limitations for bringing a tort action, however, only commences when a reasonably prudent person in the plaintiff's position, based upon any suspicious circumstances of which she might have been aware, should have discovered the harm and the cause of the harm. Bowen v. Eli Lilly Co., 408 Mass. 204, 208 (1990).
Defendant agrees that the contract claims (Counts I and II) are not barred by the applicable statute of limitations.
In asserting that Weibel was acting in a fiduciary capacity and that he continued to assure her that the property was safe and would be returned to her, however, Payne has set forth facts sufficient to create a factual dispute as to whether the causes of action were reasonably discoverable before November 21, 1991.
Payne filed the complaint on November 21, 1994.
Moreover, "[i]f a person liable to a personal action fraudulently conceals the cause of action from the knowledge of the person entitled to bring it, the period prior to the discovery of [the] cause of action . . . shall be excluded in determining the time for the commencement of the action." G.L.c. 260, § 12 (1994). Here, plaintiff has asserted facts sufficient to raise an issue of material fact in this regard.
3. Nonattachable Assets
Defendant also contends that the complaint must be dismissed because his sole assets are a non-attachable pension and social security benefits. However, while this argument may be germane to any recovery, it is not relevant to the issue of liability, and, therefore, does not constitute grounds to dismiss the complaint.
4. Laches
Defendant contends that the complaint is barred by laches because of plaintiff's alleged delay in filing suit. Laches, however, is an equitable defense and is not available against legal claims. Srebnick v. Lo-Law Transit Management, Inc., 29 Mass. App. Ct. 45, 49-50 (1990); Cohen v. Bailley, 266 Mass. 39 (1929).
5. Conclusion
This Court has concluded that Counts I-IV and VII-XI were not discharged for purposes of this motion because of the absence of proof, on this record, that the bankruptcy was a "no-asset" discharge. It would seem advisable, however, to obtain the bankruptcy court's clarification of its order in this regard, since, if it was a no-asset discharge, Counts I-IV and VII-XI would be dischargeable debts for which recovery would be barred in this proceeding by the bankruptcy court's order. Even if it was not a no-asset case, moreover, any judgment of this Court may be null and void unless the bankruptcy court has first determined that such claims were not discharged or dischargeable. See Bankruptcy Court Order, p. 4, supra. For all of these reasons, this Court concludes that clarification by the Bankruptcy Court is required before this case can proceed any further.
The bankruptcy proceeding, of course, could in that event be reopened and a proof of claim filed upon the subsequent discovery of assets (for instance, an insurance policy owned by the defendant). See In re Sarapas, supra at 197-198.
ORDER
For the foregoing reasons, defendant's Motion for Summary Judgment is DENIED as to all counts, but further proceedings in this action are stayed pending a determination by the Bankruptcy Court as to which, if any, of the claims made in this action were discharged and which, if any, of the undischarged claims are "undischargeable" so that they may proceed in this Court, pursuant to the Bankruptcy Court's order of September 24, 1992.
Thayer Fremont-Smith Justice of the Superior Court
DATED: December 1, 1995.