Hassett v. Weissman (In Re O.P.M. Leasing Services, Inc.)

48 B.R. 824, 12 Collier Bankr. Cas. 2d 1322, 1985 U.S. Dist. LEXIS 20889, 13 Bankr. Ct. Dec. (CRR) 114
CourtDistrict Court, S.D. New York
DecidedApril 10, 1985
Docket84 Civ. 1334 (JFK)
StatusPublished
Cited by75 cases

This text of 48 B.R. 824 (Hassett v. Weissman (In Re O.P.M. Leasing Services, Inc.)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hassett v. Weissman (In Re O.P.M. Leasing Services, Inc.), 48 B.R. 824, 12 Collier Bankr. Cas. 2d 1322, 1985 U.S. Dist. LEXIS 20889, 13 Bankr. Ct. Dec. (CRR) 114 (S.D.N.Y. 1985).

Opinion

KEENAN, District Judge.

This is an appeal from a decision of the United States Bankruptcy Court for the Southern District of New York, Lifland, B.J., dated December 9, 1983, 35 B.R. 854. In his decision, the Bankruptcy Judge denied appellant’s motion which sought, inter alia, (1) a jury trial in an adversary proceeding commenced by the Trustee of O.P.M. Leasing Services, Inc. (“Trustee”) against the appellants in the Bankruptcy Court (“Adversary Proceeding”), and (2) permission to file a late proofs of claim in the O.P.M. Leasing Services, Inc. (“OPM”) reorganization proceeding under Chapter 11 of the Bankruptcy Code. 1 For the reasons stated below, we reverse the Bankruptcy Court’s decision on the issue of appellants’ right to a jury trial and affirm on the issue of the filing of late proofs of claim.

BACKGROUND

OPM is engaged in the business of buying, selling and leasing new and used computers and related equipment. On March 11,1981, OPM filed a voluntary petition for reorganization under Chapter 11 of the Code. On March 27, 1981, James P. Has-sett was appointed reorganization trustee of OPM. In a complaint filed March 3, 1983 in the Bankruptcy Court, the Trustee asserts claims, under Bankruptcy Code §§ 544, 548 and 550 and the New York Debtor-Creditor Law § 270 et seq., against Herbert Weissman (“Weissman”) and Fundways, Ltd. (“Fundways”). OPM allegedly made fraudulent conveyances to Weissman and Fundways. The Trustee seeks judgment against Weissman for $599,062.42 and against Fundways for $266,562.45.

Shortly thereafter, the Trustee, in view of the ' uncertainty' of the Bankruptcy *826 Court’s jurisdiction after Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), commenced a similar action against appellants in the United States District Court for the Southern District of New York. That action is currently on the suspense docket, 83 Civ. 1917 (GLG).

On June 3, 1983, appellants filed their answers to the complaints filed in the Bankruptcy Court and District Court actions. Appellants also filed a separate demand for a jury trial in the District Court action. Although no similar demand was made to the Bankruptcy Court, a copy of the District Court jury demand was sent to the Bankruptcy Court. On the same day, appellants moved for an order, pursuant to Rule 9015 of the Rules of Bankruptcy Procedure (“Bankruptcy Rules”), Rule 12(b)(1) of the Federal Rules of Civil Procedure (“FRCP”) and Rule 1(d)(1)(D) of Emergency Bankruptcy Rule I of the Southern District of New York (“Emergency Rule”), either dismissing the Bankruptcy Court action for lack of subject matter jurisdiction or transferring it to the District Court for a jury trial. On July 13, 1983, appellants moved for an order, pursuant to Bankruptcy Rule 9006(b), permitting the late filing of their proofs of claim in the OPM Chapter 11 case.

In denying appellants’ motion to dismiss or transfer the action to the District Court for a jury trial, Judge Lifland ruled (1) that the Trustee’s claims were equitable, rather than legal, in nature, thus not requiring a jury trial, 35 B.R. at 860-61; and (2) that even if a jury trial was required, appellants had waived their right thereto, id. at 860. Judge Lifland also ruled that appellants were not entitled to file late proofs of claim against the Trustee because they had failed to prove that their neglect in making a timely filing was excusable. Id. at 864-67.

DISCUSSION

A. Right to a Jury Trial

1. Nature of the Claim

A determination of the right to a jury trial requires the consideration of three factors: (1) the custom with reference to the issue in dispute prior to the merger of law and equity in the federal system, (2) the nature of the remedy sought, and (3) the practical abilities and limitations of juries. Ross v. Bernhard, 396 U.S. 531, 538 n. 10, 90 S.Ct. 733, 738 n. 10, 24 L.Ed.2d 729 (1970).

The second factor is clear. The Trustee alleges that Weissman and Fund-ways fraudulently received certain monies. (Complaint ¶¶ 6, 8). The only relief sought by the Trustee is money damages, $599,-062.42 from Mr. Weissman and $266,562.45 from Fundways (Id. ¶¶13, 16, 19, 22, 26, 31, 34, 37, 40, 44, 48). As such, it is a classic example of an action at law, entitling appellants to a jury trial. See In Re Huey, 23 B.R. 804, 804 (Bkrtcy.Cal.1982); cf. Damsky v. Zavatt, 289 F.2d 46, 48-52 (2d Cir.1961) (where complaint sought a money judgment and nothing more, even though it was for taxes, there is a right to a jury trial).

The third prong too needs little discussion. This case is not so detailed or confusing as to preclude the use of a jury. Cf. Towers v. Titus, 5 B.R. 786, 796-97 (N.D.Cal.1979) (where plaintiff sought injunction, reconveyance of real property, an equitable lien, and a constructive trust amidst confusing factual and legal issues, no jury trial provided).

The first prong, the pre-merger custom with respect to the issues in dispute, presents the most difficulty. As Bankruptcy Judge Abram has explained, the Court must look to whether the particular fraudulent conveyance action at issue would, prior to the merger of law and equity, have been tried in a court of law or a court of equity. In re Black & Geddes, Inc., 25 B.R. 278, 280 (Bkrtcy.S.D.N.Y.1982). Since the right to a trial by jury must emanate from the Seventh Amendment to the United States Constitution, this inquiry requires a determination of the common law customs in England at the time the Constitution was *827 adopted. Id. As Judge Friendly has said, “the Seventh Amendment ... ‘is derived from history’ ... and we must turn to history to give it content and meaning.” Damsky, 289 F.2d at 48 (quoting Green v. United States, 355 U.S. 184, 199, 78 S.Ct. 221, 229, 2 L.Ed.2d 199 (1957)).

Historically, fraudulent conveyance actions were equitable in nature. Damsky, 289 F.2d at 53. It is from this general proposition that Judge Lifland, in the decision below, determined that the instant action was equitable. The cases cited below, however, primarily involved the quest for equitable relief. See In re Checkmate Stereo & Electronics, 21 B.R. 402, 409 (E.D.N.Y.1982) (reconveyance of stocks and merchandise and money damages as an alternative remedy); In re Hause, 10 B.R. 628, 629 (Bkrtcy.D.Mass.1981) (reconveyance of real property and money damages as alternative remedy), aff'd,

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48 B.R. 824, 12 Collier Bankr. Cas. 2d 1322, 1985 U.S. Dist. LEXIS 20889, 13 Bankr. Ct. Dec. (CRR) 114, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hassett-v-weissman-in-re-opm-leasing-services-inc-nysd-1985.