MINAFRI v. UNITED ARTISTS THEATRES INC

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Supreme Court, Westchester County, New York.

Gloria MINAFRI, Plaintiff, v. UNITED ARTISTS THEATRES, INC., United Artists Theatre Circuit, Inc., and Movie Center, Inc., d/b/a Movieland, Defendants.

Decided: June 25, 2004

Babaja Guarneri, Esq., Yonkers, Attorney for Plaintiff. Thomas G. Chojancki, Esq., Ahmuty, Demers & McManus, Esqs., Albertson, Attorney for Defendants.

BACKGROUND AND FACTS

This is an action for personal injuries arising from an alleged slip and fall which took place on February 4, 2000 while plaintiff was attending a movie at the Movieland theatre, 2548 Central Park Avenue, Yonkers, New York.   The action was commenced against the three corporate defendants on February 3, 2003.   They are:  United Artists Theatres, Inc.;   United Artists Theatre Circuit, Inc., and Movie Center, Inc d/b/a Movieland.

On the date plaintiff's claim arose, defendants had an insurance policy in effect with Kemper Insurance Company (“Kemper”) which policy, it is not disputed, provides ample coverage for the underlying claim and under which, to date, Kemper has neither declined nor threatened to decline coverage for the accident.   Plaintiff set up a claim with defendant's insurer shortly after plaintiff's accident occurred.

At or near the time of plaintiff's accident, various corporate entities, including defendant United Artists Theatre Circuit, Inc., were in the midst of bankruptcy proceedings and, ultimately, underwent a re-organization from bankruptcy in connection with which an injunction was granted barring any claims for incidents that happened prior to September 5, 2000.   Consequently, an Order was issued by the United States District Court for the District of Delaware, confirming the Second Amended Joint Plan of Re-Organization (the “Joint Plan”) for the subject corporate entities including United Artists Theatre Circuit, Inc., effective January 26, 2001.

Among other things, the Joint Plan provides:

․ from and after the effective date, all persons and entities are permanently enjoined from commencing or continuing in any manner, any suit, action, or other proceeding, on account of or respecting any claim, demand, liability, obligation, debt, right, cause of action, interests, remedy released or to be released pursuant to Article 10 of this plan.

Defendants now move to dismiss the complaint pursuant to CPLR § 3211(a)(5) on the ground that plaintiff has failed to comply with an Order of the Bankruptcy Court with respect to the bankruptcy proceeding of “United Artists Theatres [as in original without any reference to “Inc.”, as appears in the caption, or “Company” as appears in the underlying bankruptcy papers].”

Plaintiff opposes the motion as untimely, as defendants failed to move within the time provided for the filing of an answer (CPLR § 3211[e] ).   In addition, plaintiff argues that defendants have failed to preserve the affirmative defense upon which they base the instant motion by failing to precisely assert it in their answer pursuant to CPLR § 3211(e).

CONCLUSIONS OF LAW

Waived or not (see, CPLR 3211[e] ), the Court finds that there is no merit to defendants' motions.

 Although this motion is made on behalf of all defendants, neither defendant United Artists Theatres, Inc. nor defendant Movie Center, Inc., d/b/a Movieland have established that either was a party to or was covered under the Joint Plan.   Therefore, the motion is denied as it pertains to defendants United Artists Theatres, Inc. and Movie Center, Inc., d/b/a Movieland.

As to defendant United Artists Theatre Circuit, Inc., the Court rules as follows:

Pursuant to 11 U.S.C. § 524(a), a discharge in a case under this title “voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged ․ whether or not discharge of such debt is waived” (11 U.S.C. § 524[a][1] ).   Further, subsection (e) of that statute provides “[e]xcept as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any entity on, or the property of any other entity for, such debt” (11 U.S.C. § 524[e] ).

 In general, after a discharge in bankruptcy, a creditor must file a notice of claim during the bankruptcy proceedings to maintain its claim against the debtor (see, In re Jet Florida Systems, Inc., 883 F.2d 970 [11th Circuit, 1989];  Litton Systems, Inc. v. Frigitemp Corp., 8 B.R. 284 [S.D.N.Y.1981] ).   If the creditor fails to file such notice, any rights against the bankrupt are said to be waived (In re Jet Florida Systems, Inc., 883 F.2d at 972).   The purpose of the bankruptcy discharge and related injunction affords the debtor a “financial fresh start” (id. at 972, citing Jackson, The Fresh-Start Policy in Bankruptcy Law, 98 Harv.L.Rev. 1393, 1396-97 [1985] ).   However, the “discharge will not act to enjoin a creditor from taking action against another who also might be liable to the creditor” (In re Jet Florida Systems, Inc., 883 F.2d at 973, citing 11 U.S.C. § 524 [e] ).

 Examination of New York Insurance Law is also instructive, as it “explicitly condones direct recovery from a liability insurer in the event of the insured's bankruptcy” (Andriani v. Czmus, 153 Misc.2d 38, 41, 580 N.Y.S.2d 123 [Sup.Ct. N.Y. Co., 1992] ).  Insurance Law § 3420 provides that a policy or contract insuring against liability must contain “a provision that the insolvency or bankruptcy of the person insured ․ shall not release the insurer from the payment of damages for injury sustained ․ within the coverage of such policy or contract” (N.Y. Ins. Law § 3420[a][1] ).   As such, defendant's insurer would be liable for plaintiff's injuries, regardless of whether plaintiff filed a notice of claim during the bankruptcy proceedings (see, Green v. Welsh, 956 F.2d 30 [U.S.Ct. of App., 2nd Circuit 1992] citing Andriani, supra [a liability insurer is a liable entity with respect to the covered debts of the insured];  In re Jet Florida Systems, Inc., supra, [plaintiff may proceed against the debtor to establish liability as a prerequisite to recover from an insurer];  In re Traylor, 94 B.R. 292, 293 [Bankr.E.D.N.Y., 1989] [discharge does not release debtor's insurer from liability] ).

Defendant's reliance on Freed v. Braniff Airways, Inc., 119 F.R.D. 10 [S.D.N.Y., 1987] is misplaced.   Unlike the facts in the instant case, Freed, supra, dealt with a plaintiff's tort claim brought in district court after a bankruptcy court in Texas specifically barred all of plaintiff's claims against the debtor.   Under the theory of collateral estoppel, the district court held that the bankruptcy court's holding prevented plaintiff from asserting the tort claim once again in district court (Green, supra, citing Freed, supra, 119 F.R.D. at 10-11).   Defendant is correct that Freed, supra, does not stand for the proposition that a properly commenced action could continue after a defendant filed for bankruptcy, but that is only because the Freed, supra, court did not address “the merits of whether 11 U.S.C. § 524 barred the plaintiff's claims against the debtor's insurer” (Green, supra, at 35).

In Jet Florida Systems, Inc., supra, the Court squarely dealt with § 524 and its preclusive effect.   In that case, the debtors argued that because the creditor failed to file any notice of claim in the bankruptcy proceedings, he was precluded from proceeding with his defamation action.   In support of their argument, the debtors relied on N.A. v. White Motor Corp., 761 F.2d 270 [6th Circuit, 1985], which held that all pre-petition and post-petition claims that had not been filed with the bankruptcy court were barred.   The court in Jet Florida Systems, Inc., supra, rejected the White Motor Corp., supra, holding because “it provided no commentary regarding the statutory language of section 524, nor did it offer any rationale of any kind for its holding” (In re Jet Florida Systems, Inc., 883 F.2d at 974;  see also Andriani, supra at 41-42, 580 N.Y.S.2d 123 [rejecting White Motor Corp.'s holding based on the reasoning of Jet Florida Systems, Inc.] ).   Instead, the Court in Jet Florida Systems, Inc., supra, turned to the plain language of § 524 and the line of relevant case law which interpreted the intent of that section as “prohibit[ing] the collecting of a debt as a personal liability of the debtor” (id. quoting In re Mann, 58 B.R. 953, 956 [Bankr.W.D.Va., 1986] ).   By permitting a creditor to proceed against a bankrupt for the purpose of seeking a judgment against a debtor's insurer, who may be liable, the intent of § 524 is not frustrated.   Rather, “ neither the debtor nor his property [is] in any jeopardy of personal liability” (id. at 975), and the insurer cannot “escape its obligations based simply on the financial misfortunes of the insured” (id.)

 Thus, while § 524(a) serves to protect bankrupt debtors and provide them with a financial fresh start, it is clear that pursuant to § 524(e), a creditor “may proceed against the debtor simply in order to establish liability as a prerequisite to recover from another, an insurer, who may be liable” (id. at 976;  see also In re Edgeworth, 993 F.2d 51 [5th Circuit, 1993] ).   Here, plaintiff seeks to proceed against defendants in order to recover from their insurer, a party which may be liable to plaintiff in the underlying personal injury action.  Section 524(e), and case law interpreting it, permit such course of action.

 Based upon the foregoing, the Court finds that plaintiff's failure to have filed a notice of claim during defendant United Artists Theatre Circuit, Inc.'s bankruptcy proceedings is not a bar to plaintiff's recovery for any liability attributed to United Artists Theatre Circuit, Inc. to the extent that plaintiff seeks recovery from its insured, Kemper, and, as to defendants United Artists Theatres, Inc. and Movie Center, Inc d/b/a Movieland, no bar exists at all since they have not come forward with any proof that they are covered under the Joint Plan.

Based upon the foregoing, it is hereby

ORDERED, that defendants' motion to dismiss be and is hereby denied.

The parties are to appear for a Preliminary Conference before the DCM Part, Room 806, on July 15, 2004 at 9:30 a.m.

The foregoing constitutes the Opinion, Decision, and Order of the Court.

JOHN R. LA CAVA, J.

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