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In re Seven Oaks Partners, L.P.

United States District Court, D. Connecticut

January 3, 2018




         Appellant Cynthia Licata has appealed [Doc. # 1] the order of the United States Bankruptcy Court for the District of Connecticut (the "Bankruptcy Court") which sustained [Doc. #1-1] Debtor-Appellee Seven Oaks Partners, L.P.'s objection to Ms. Licata's Proof of Claim. In its order, the Bankruptcy Court disallowed Ms. Licata's Proof of Claim in the amount of $900, 000, in its entirety, as untimely filed. ([Doc. #1-1.]) Ms. Licata contends that the Bankruptcy Court erred as a matter of law in sustaining the Debtor's objection to her claim. For the reasons that follow, the Court affirms the Bankruptcy Court's disallowance of Ms. Licata's Proof of Claim.

         I. Background

         Prior to Debtor's bankruptcy filing, Debtor and Appellant "had been engaged [for several years]... in state court litigation concerning property at 23 Meeting House Road, Greenwich, CT." (Appellant's Br. [Doc. # 9] at 5.) Debtor "sought to foreclose a mortgage it held on the Property" and "Appellant asserted counterclaims based on [alleged] misrepresentations made by Debtor's principal Murray Chodos." (Id.) On September 27, 2006, a state court jury awarded Appellant $500, 000 in damages, which was affirmed by the Connecticut Appellate Court on August 18, 2009. Sovereign Bank v. Licata, 116 Conn.App. 483, 491, 509 (2009). The Connecticut Supreme Court heard argument on Debtor's appeal on January 11, 2012, twenty days before Debtor filed its Chapter 7 bankruptcy petition, and on February 21, 2012, the Connecticut Supreme Court dismissed the appeal, finding that certification had been granted improvidently. Sovereign Bank v. Licata, 303 Conn. 721, 722 (2012).

         The Debtor's Chapter 7 Bankruptcy Petition omitted any mention of Appellant's judgment, but did list the state court litigation with the description "Debtor claim against defaulted borrower." (Appellant's Appx. [Doc. # 10] at 6, 11-19, 24, 32-33.)

         On April 4, 2012, Debtor moved to convert its case from a Chapter 7 Bankruptcy to a Chapter 11 Bankruptcy, and the case was converted on April 12, 2012. (Id. at 39, 43.) The Conversion Order instructed Debtor to file the statements and schedules required by Bankruptcy Rule 1007(b) within 15 days and to file a list of the names, addresses, and amount of claims of the creditors that held the 20 largest unsecured claims, as required by Bankruptcy Rule 1007(d), within 2 days. (Id. at 43.) Appellant was not provided notice of the conversion, and was not included in the list of Debtor's 20 largest unsecured creditors. (Id. at 40-41, 45-46.) Appellant was similarly not listed as a creditor in the amended schedules that Debtor filed on May 11, 2012 and June 27, 2012. (Id. at 48, 61; Appellant's Appx. Vol. 2 [Doc. # 10-1] at 2, 11.)

         On November 13, 2012, in a hearing on the state court matter of Sovereign Bank v. Licata, Appellant's attorney, Ridgely W. Brown, noted on the record that Debtor had not listed Ms. Licata "as a creditor in the bankruptcy proceeding[, ]" and that Ms. Licata had received "[n]o notice whatsoever" of the bankruptcy proceeding.[1] (Appellee's Br. and Appx. [Doc. # 13] at 108-09.) Debtor's state-court counsel acknowledged that he had "observe[d] that. . . [Ms. Licata was] not listed in the original schedules[]" that Debtor had filed, but stated that he had "notified [Debtor's] bankruptcy counsel" and that Debtor's bankruptcy counsel had "told me that he was going to add them to the schedule and put them on notice." (Id. at 109.)

         On November 14, 2012, Debtor filed another set of amended schedules, which listed Appellant as holding an unsecured claim in the amount of $500, 000. (Appellant's Appx. Vol. 2 at 27, 32.) On this amended Schedule F, which lists creditors holding unsecured non-priority claims, Debtor marked Appellant's $500, 000 claim as "unliquidated" and as "disputed." (Id. at 32.)

         The record contains a certificate of service dated November 13, 2012 that indicates that notice of the amended schedules was provided to "any and all entities affected by the amendment on the attached list." (Id. at 27.) The service list does not include Appellant or her attorney (id. at 28), but as part of the amendment, Debtor added Appellant and her husband to the creditor matrix (id. at 33-34). Debtor added Appellant's husband to the creditor matrix with a Bradenton, Florida address, and provided two addresses for Appellant on the creditor matrix: the disputed property (23 Meeting House Road), and care of her state court appellate attorney, Ridgely Brown, at his office address in Stamford, Connecticut. (Id. at 34.) Appellant concedes that notice of the amended schedule was sent to Attorney Brown, Appellant, and Appellant's husband at those addresses. (Appellant's Br. at 7.)

         Appellant contends that she was not living with her husband at the time, that her husband did not live at the Bradenton, Florida address, and that Debtor knew that she was no longer living at the disputed property. (Appellant's Appx. Vol. 3 [Doc. # 10-2] at 5.)

         At the time that Debtor amended its schedules to list Appellant as an unsecured creditor, the bar date for filing proofs of claims had passed three months earlier-on August 13, 2012. (Appellant's Appx. Vol. 2 at 36.) On April 19, 2013, Debtor filed a motion to set a new bar date for creditors added on November 14, 2012-namely, Appellant and her husband. (Id.) On May 7, 2013, the Bankruptcy Court granted Debtor's motion and set a bar date of July 8, 2013 for the filing of proofs of claims by Appellant and her husband. (Id. at 45-46.) On May 9, 2013, Debtor certified service by mail of the order setting the bar date on Appellant at three addresses in Connecticut and Florida and on her husband at three addresses in Florida. (Id. at 48-49.) Appellant contends that she did not reside at or have a place of business at any of those addresses. (Appellant's Appx. Vol. 3 at 5.)

         Appellant avers that she did not become aware that Debtor had filed a bankruptcy petition until shortly before her proof of claim was filed on September 5, 2014, and that at the time Debtor "filed amended schedules adding [her] as a creditor on November 14, 2012, " Attorney Brown "was not actively representing" her. (Id. at 11.) Further, Appellant states that when Debtor filed an amended schedule listing her as a creditor on November 14, 2012, she was living in Sarasota, Florida, and that when notice of the bar date was served in May 9, 2013, she was living in Juniper, Florida, and not at any of the addresses to which notice was mailed. (Id. at 11-12.) Appellant's husband states that he did not become aware of the bankruptcy until August 2014, and that in November 2012 and May 2013, he lived with his sister in Monroe, Connecticut, and not at any of the Florida addresses to which notice was sent. (Id. at 65.)

         Appellant's attorney in the state court appeal, Ridgely Brown, states that he "represented [Appellant] in certain aspects of litigation with Seven Oaks Partners, L.P., concerning property located at 23 Meeting House Road, Greenwich, Connecticut, in particular in appeals from a trial court judgment in favor of [Appellant]." (Id. at 17.) Attorney Brown further states that after "the Connecticut Supreme Court dismissed Seven Oaks, ' [sic] petition for certification as improvidently granted" he "did not actively represent [Appellant] until [he] was contacted to assist [Appellant] in filing a proof of claim, which was done on September 5, 2014." (Id.) Finally, Attorney Brown states that he never represented Appellant's husband, and that he did not receive notice of a bar date for Appellant nor in any other manner become aware of the bar date for Appellant until he assisted her in filing her proof of claim on September 5, 2014. (Id. at 18.) Attorney Brown's affidavit does not dispute the fact that he was aware of Debtor's bankruptcy petition as of November 2012, nor that he was served with notice of the amended schedules on November 13, 2012. (See Id. at 17-18.; see also Appellant's Br. at 7 (conceding that notice of the amended schedule was sent to Attorney Brown).)

         However, Debtor's state-court attorney Howard Wolfe states that notwithstanding Attorney Brown's representations, Attorney Brown was in fact actively representing Appellant in November 2012 in the state court litigation, as evidenced by his appearance on the record of the November 13, 2012 state court hearing. (Appellee's Br. and Appx. [Doc. # 13] at 71-72.) Moreover, the transcript of those proceedings before Judge Douglas Mintz in the Connecticut Superior Court, reveals that Attorney Brown entered an appearance that day on behalf of Appellant, during a time period in which he claimed not to be "actively" representing her. (Id. at 99-100.) During that hearing on the parties' state-law claims, Attorney Wolfe stated his position that if Appellant wanted to collect her $500, 000 judgment, she would need to do so by filing a proof of claim in the bankruptcy proceeding, even though counsel for both parties acknowledged the fact that Debtor had not yet listed Appellant as a creditor on Debtor's schedules:

MR. WOLFE: Well, first of all, Your Honor, there were counter claims. The judgment was appealed. It came back down in February of this year. In January of this year Seven Oaks filed a bankruptcy. To the extent that they want to claim that five hundred thousand, they have the right to do so under proof of claim in that bankruptcy action. They don't get to do it by way of setoff in this action. They are a general, unsecured creditor. They have no attachment in this --
THE COURT: Is Seven Oaks in bankruptcy?
MR. BROWN: They don't list us as a creditor in the bankruptcy proceeding. Today-
THE COURT: Do you list them as a creditor in the --
MR. WOLFE: We are not handling --
MR. BROWN: No notice whatsoever, Your Honor.
THE COURT: You represented to me that they were in the bankruptcy court. If they were never listed as a creditor, they are not bound by the bankruptcy court, are they?
MR. WOLFE: I've been -- excuse me, Your Honor. First of all, we are not representing them is the answer to your first question. The follow-up question was are they in it. I don't know what they filed in the case. I did find out, I did observe that they are not they were not listed in the original schedules. I notified bankruptcy counsel. ...

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