Shchedrinskaya et al v. Nasonova et al

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UNITED STATES BANKRUPTCY COURT
FASTERN DISTRICT OF NEW YORK

wee ee ee eee xX
Chapter 7
Inre
LARISA NASANOVA, Case No. 04-26867-ess
Debtor.
wee ee ee eee xX
SVETLANA SHCHEDRINSKAY A and
ANATOLIY SHCHEDRINSKITY,
Plantiffs,
-against- Adv. Pro. No. 05-1068-ess
LARISA NASANOVA,
Defendant.
wee ee ee eee xX

MEMORANDUM DECISION DENYING ‘THE DEBTOR'S MOTION TO DISMISS
ADVERSARY PROCEEDING

By moton dated March 4, 2005 (the “Motion” or “Motion to Dismiss”), Larisa Nasonova, the
debtor in this Chapter 7 case (the “Debtor’) seeks an order pursuant to Rule 12 of the Federal Rules of
Civil Procedure, made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy
Procedure 7012, dismissing this adversary paroceeding (the “Adversary Proceeding”) rought by
Svellana Shchedninskaya and Anatoliy Shchedrinskiy (the “Plaintiffs’”’) and for attomeys’ fees and costs

pursuant to Section 523(d) of the Bankruptcy Code.' By Adversary Proceeding Response to Motion

' The Debtor cites Federal Rules of Civil Procedure 12(c) and 9(b) and argues for dismissal
on grounds that the Plaintiffs fail to state a claim upon which relief may be granted and fail to plead
fraud with particularity. See Notice of Motion to Dismiss; Silver Affirm; Record of Apml 15, 2005,
Hearing. As the Second Circuit has observed, “[t]he standard for granting a Rule 12(c) motion for
Judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a daim.”

Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001).
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to Dismiss dated March 9, 2005, the Plaintiffs, who are not represented by counsel, oppose the
Motion. After a hearing held on April 15, 2005, and consideration of the relevant factors, for the
reasons stated below, the Motion is denied.
Jurisdiction
This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334(b) and
157(b)(2)(I).
Procedural History
The Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on
December 2, 2004 (the “Petition Date”). On February 24, 2005, the Plaintiffs, appearing pro se, filed
an Adversary Proceeding Complaint dated February 10, 2005 (the “Complaint”), objecting to the
dischargeability of a debt owed to the Plaintiffs by the Debtor. On February 25, 2005, the Debtor filed
the Debtor’s Answer to Complaint Seeking Determination of Nondischargeability (the “Answer”) and
counterclaim for attorney fees and costs dated February 24, 2005. On March 7, 2005, the Debtor and
the Debtor’s attorney were served with a copy of a summons and Complaint.
On March 7, 2005, the Plaintiffs filed a Creditor(s) Answer and Counterclaim to Debtor’s
Answer to Complaint Seeking Determination of Nondischargeability and Counterclaim (the “Plaintiff’s
Counterclaim”) dated March 2, 2005. On March 12, 2005, the Debtor filed a Second Answer to
Plaintiff’s Counterclaims, dated March 12, 2005.
On March 14, 2005, the Plaintiffs filed an Amended Adversary Proceeding Complaint (the
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2 The Amended Complaint incorporates by reference a Notice of Judgment of the Civil Court
of the City of New York - County of Kings (Small Claims/Commercial Claims Part) (the “Civil Court
Judgment”), filed by the Plaintiffs in this Adversary Proceeding on February 24, 2005. See Amended
Complaint ¶ 4; Complaint ¶ 2, Exh. (Civil Court Judgment).
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“Amended Complaint”) dated March 9, 2005.2 On March 18, 2005, the Debtor filed an Answer to
the Amended Complaint. For purposes of this Motion, the Amended Complaint and Answer to the
Amended Complaint are the operative pleadings before the Court.
As noted above, on March 4, 2005, the Debtor filed this Motion to Dismiss and supporting
Affirmation of Jacob Silver, attorney for the Debtor dated March 4, 2005 (the “Silver Affirm.”). On
March 14, 2005, the Plaintiffs filed the Adversary Proceeding Response to the Motion to Dismiss (the
“Response”). On March 21, 2005, the Plaintiffs filed an Objection to the Motion (the “Objection”).
On April 15, 2005, the Court held a hearing on the Motion and a pre-trial conference in the Adversary
Proceeding, at which the Plaintiffs appeared and were heard and the Defendant and her counsel
appeared and were heard.
Background
By this Adversary Proceeding, the Plaintiffs object to the dischargeability of debts owed by the
Debtor to each of them in the amount of $5,000, totaling $10,000, under Section 523(a)(2) of the
Bankruptcy Code, and to the Debtor’s discharge under Section 727(a) of the Bankruptcy Code.
Amended Complaint ¶ 2. The Plaintiffs allege that these debts should not be discharged because they
arose from false pretenses, a false representation, or actual fraud. Id.
The Debtor seeks the dismissal of the Adversary Proceeding under Federal Rule of Civil
Procedure 12(c) and Bankruptcy Rule 7012 on grounds that the Amended Complaint fails to state a
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3 After the Motion was made, the Plaintiffs filed the Amended Complaint. The Debtor did not
amend the Motion, and the Court considers the Debtor’s arguments in light of the Plaintiffs’ amended
pleading.
4 The Debtor also argues that the Complaint should be dismissed because it states objections
to the dischargeability of the debt at issue on the basis of sections of the Bankruptcy Code that are not
related to this bankruptcy case, including 11 U.S.C. §§ 1141, 1228(a), and 1328(b). Silver Affirm. ¶
4. These sections are not cited in the Amended Complaint.
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claim upon which relief may be granted, and under Federal Rule of Civil Procedure 9(b) and
Bankruptcy Rule 7009(b) on grounds that the Amended Complaint fails to plead fraud with
particularity. See Silver Affirm. ¶¶ 5, 7, 11.3 See also n.1, supra. The Debtor also argues that the
Amended Complaint is improper because it is signed by only one of the Plaintiffs, and because the
signatory Plaintiff is improperly acting as the legal representative of the other. Silver Affirm. ¶ 4.4
In their Response, the Plaintiffs argue that they have requested, but not received, essential
information including the transcript of a meeting of creditors pursuant to Section 341 of the Bankruptcy
Code (the “341 Meeting”) held on January 6, 2005, at the Office of the United States Trustee.
Response at 1. The Plaintiffs state that at the 341 Meeting, the Debtor “intentionally and unlawfully
deceive[d], conceal[ed], and lie[d] to the U.S. Trustee about the specific evidentiary facts and
circumstances of this pending case.” Response at 2. The Plaintiffs also argue that the Debtor testified
falsely at the “Kings County Small Claims Court on July 3, 2004,” about receiving $10,000 from the
Plaintiffs in connection with being placed on the waiting list for apartments at the Neptune Avenue
building. Id. The Plaintiffs further state that the Civil Court Judgment found the Debtor liable to the
Plaintiffs in the amount of $10,000. Id. See Complaint, Exh. (Civil Court Judgment). Finally, the
Plaintiffs argue that the Debtor admitted to “deceiving, concealing, and lying to the Trustee about her
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actual taking” of the Plaintiffs’ funds in testimony before the Office of the United States Trustee.
Response at 2.
In their Objection, the Plaintiffs restate certain of the allegations made in the Amended
Complaint and state that the Plaintiffs mutually elected to have Svetlana Shchedrinskaya, who signed
the Complaint, act as the pro se representative of both Plaintiffs because of her greater fluency in the
English language. Objection ¶ 8. The Plaintiffs also argue that they adequately allege that the Debtor
acted with malice, unlawful intent, false pretense, knowledge of wrongdoing, and false representation.
Objection ¶ 11. The Plaintiffs further argue that their claims are “legally feasible.” Objection ¶ 16.
Finally, the Plaintiffs note that they have amended the Complaint, and ask that the Debtor’s request for
attorneys’ fees and costs be denied. Objection ¶¶ 14, 15.
Discussion
The Standard on a Motion to Dismiss
In determining whether the Plaintiffs’ Amended Complaint states a claim upon which relief may
be granted, this Court must construe the allegations liberally, “accepting all factual allegations in the
complaint as true, and drawing all reasonable inferences in the plaintiff’s favor.” Chambers v. Time
Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). “[A] federal court may not dismiss a complaint for
failure to state a claim unless it appears beyond doubt, even when the complaint is liberally construed,
that the plaintiff can prove no set of facts which would entitle him to relief.” Hoover v. Ronwin, 466
U.S. 558, 587 (1989). The Second Circuit has described the standard applicable to pleadings drafted
by self-represented individuals as follows:
In order to survive dismissal, a plaintiff must assert a cognizable claim and allege facts
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that, if true, would support such a claim. In evaluating whether a plaintiff has met these
requirements, we hold complaints prepared pro se “to less stringent standards than
formal pleadings drafted by lawyers.”
Boddie v. Schnieder, 105 F.3d 857, 860 (2d Cir. 1997) (quoting Haines v. Kerner, 404 U.S. 519,
520 (1972)).
In deciding whether the Plaintiffs have satisfied the heightened standard applicable to fraud
claims, this Court must apply Rule 9(b) of the Federal Rules of Civil Procedure, which provides that
“[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated
with particularity.” FED. R. CIV. P. 9(b). “The primary purpose of Rule 9(b) is to afford defendant fair
notice of the plaintiff’s claim and the factual ground upon which it is based.” Ross v. Bolton, 904 F.2d
819, 823 (2d Cir. 1990). In considering a motion to dismiss for failure to satisfy the particularity
requirements of Rule 9(b):
[T]he court’s consideration is limited to the assertions made within the four corners of
the complaint, to documents attached to the complaint as an exhibit or incorporated in it
by reference, to matters of which judicial notice may be taken, or to documents either in
plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bringing suit.
Sharp Int’l Corp. v. State St. Bank, 281 B.R. 506, 512 (Bankr. E.D.N.Y. 2002), aff’d, 302 B.R.
760 (E.D.N.Y. 2003), aff’d, 403 F.3d 43 (2d Cir. 2005).
The Plaintiffs’ Allegations
The Amended Complaint attempts to assert claims that the debt owed by the Debtor to the
Plaintiffs is not dischargeable under Section 523(a)(2) of the Bankruptcy Code because it was incurred
through “false pretenses, a false representation, or actual fraud,” and that the Debtor is not entitled to
receive a discharge under Section 727(a) of the Bankruptcy Code for these same reasons and because
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of her conduct during her bankruptcy case. 11 U.S.C. §§ 523(a)(2)(A), 727. See Amended
Complaint ¶ 2.
More specifically, the Plaintiffs allege that in 2002, they each paid $5,000 to the Debtor in
order to secure desirable apartments in a sought-after building on Neptune Avenue in Brooklyn, New
York. Amended Complaint ¶ 3. The Plaintiffs further allege that they were induced to do so by the
Debtor’s false representations that she was the “vice president of the tenants association” of the
Neptune Avenue building, as well as an affiliate of the Grenadier Realty Corporation. Id. The Plaintiffs
allege that the Debtor represented that because of these connections, she was able to “‘put people on
the list’” of prospective tenants and secure apartments for them within a year. Id. The Plaintiffs allege
that more than a year passed without any progress in obtaining apartments in the Neptune Avenue
building, and they demanded the return of their money. Id. The Plaintiffs allege that the Debtor refused
to return their money and instead demanded additional funds. Id.
The Plaintiffs allege that they continued their efforts to collect these funds from the Debtor, and
to that end, brought an action in New York City Civil Court. Amended Complaint ¶ 4. They allege
that the action was tried on July 13, 2004, and the Debtor appeared, represented by an attorney. Id.
They further allege that the trial resulted in the Civil Court Judgment, finding the Debtor liable to the
Plaintiffs in the amount of $10,000. Id. See Complaint, Exh. (Civil Court Judgment).
Finally, the Plaintiffs allege:
[T]he Debtor, while being represented by legal counsel, was examined at a Court
ordered Meeting of Creditors at the Office of the U.S. Trustee . . . [and] intentionally:
lied; made false statements; concealed or otherwise withheld true facts; mislead the
Court’s Trustee by denying: ever stating she worked for or with, or as an agent of, a
realty company, and denied ever receiving money from the co-Creditors.
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Subsequently, the Trustee was apparently able to successfully compel the Debtor to
admit to receiving the co-Creditor’s $10,000.00 and to not being an any capacity to
have afforded them any benefit of real estate that they had depended upon her for.
Amended Complaint ¶ 5.
The Plaintiffs’ Section 523 Claims
The elements of a claim under Section 523(a)(2)(a) are well-established. They are first, that
the debtor made a false representation; second, that the debtor knew the representation was false at the
time it was made; third, that the debtor made the false representation with the intent to deceive the
creditor; fourth, that the creditor justifiably relied on the representation; and finally, that the creditor
sustained a loss that was proximately caused by the false representation. Chase Manhattan Bank,
USA, N.A. v. Giuffrida (In re Giuffrida), 302 B.R. 119, 123 (Bankr. E.D.N.Y. 2003). Exceptions
to discharge under Section 523 are construed narrowly and in favor of the debtor, in order to give
effect to the Bankruptcy Code’s objective of providing “the debtor ‘a new opportunity in life and a
clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.’”
Cazenovia College v. Renshaw (In re Renshaw), 222 F.3d 82, 86 (2d Cir. 2000) (quoting Local
Loan Co. v. Hunt, 292 U.S. 234 (1934)). See 4 COLLIER ON BANKRUPTCY ¶ 523.05 (15th ed. rev.
2004).
Here, the Plaintiffs have adequately alleged the elements of a claim to deny the dischargeability
of the debt owed to them by the Debtor under Section 523(a)(2)(A), and that where necessary, they
have alleged those elements with the particularity required by Rule 9(b). First, the Plaintiffs adequately
allege that the Debtor made the false representation that she represented a real estate company and
could furnish the Plaintiffs with an apartment within one year. Amended Complaint ¶ 3. Next, the
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Plaintiffs adequately allege that the Debtor knew the representations were false at the time they were
made because she did not represent a tenants’ association or real estate company, or have the ability to
procure apartments for the Plaintiffs. Amended Complaint ¶¶ 3, 5. The Plaintiffs also adequately allege
that the Debtor made the false representation with the intent of deceiving them because, among other
reasons, she did not return the Plaintiffs’ funds when asked to do so, or when ordered to do so by the
Civil Court Judgment. Amended Complaint ¶¶ 2, 4. Finally, the Plaintiffs adequately allege that they
justifiably relied on the representation and sustained a loss that was proximately caused by the false
representation by their allegations that they paid the Debtor a total of $10,000, and that they did not
receive the promised services, or a refund of their money, in return. Amended Complaint ¶¶ 3, 4, 5.
For these reasons, the Court concludes that the Plaintiffs have stated a claim with the necessary
particularity against the Debtor to deny the discharge of the debts owed by the Debtor to them in the
amount of $10,000.
The Plaintiffs’ Section 727 Claims
Section 727(a)(4)(A) of the Bankruptcy Code provides that the debtor shall receive a
discharge unless “the debtor knowingly and fraudulently, in or in connection with the case . . . made a
false oath or account.” 11 U.S.C. § 727(a)(4)(A). To state a claim for denial of discharge under
Section 727(a)(4)(A), a plaintiff must allege that the debtor made a statement under oath; the statement
was false; the debtor knew the statement was false; the debtor made the statement with fraudulent
intent; and the statement related materially to the bankruptcy case. Calucci & Legum v. Murray (In
re Murray), 249 B.R. 223, 228 (E.D.N.Y. 2000). In this inquiry:
Fraudulent intent must be shown by actual, not constructive fraud. The party objecting
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5 The Debtor argues that under Section 523(d) of the Bankruptcy Code, she is entitled to an
award of costs and a reasonable attorney’s fee if the debt that is the subject of this nondischargeability
action is eventually discharged. Silver Affirm. ¶¶ 12-17. In deciding this Motion, the Court has
determined only that the Plaintiffs have stated a claim for denial of the dischargeability of the debt owed
to the Plaintiffs under Section 523(a)(2)(A), and for denial of the Debtor’s discharge under Section
727(a)(4)(A). Accordingly, this portion of the Debtor’s Motion is denied without prejudice.
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to the discharge must show that the information was omitted for the specific purpose of
perpetrating a fraud and not simply because the debtor was careless or failed to fully
understand his attorney’s instructions.
Dubrowsky v. Estate of Perlbinder (In re Dubrowsky), 244 B.R. 560, 571 (E.D.N.Y. 2000).
Here, the Plaintiffs have adequately alleged the elements of a claim to deny the Debtor’s
discharge under Section 727(a)(4)(A), and that they have done so with the particularity required by
Rule 9(b). First, the Plaintiffs adequately allege that the Debtor’s statements denying receipt of
$10,000 from the Plaintiffs were made under oath. Amended Complaint ¶ 5 (alleging that statements
were made at the 341 Meeting). Next, the Plaintiffs adequately allege that the Debtor’s statements
were false, and knowingly false when made, by their allegations that the Debtor “lied; made false
statements; concealed or otherwise withheld true facts” and subsequently acknowledged receiving
$10,000 from the Plaintiffs. Id. Further, the Plaintiffs adequately allege that the statements were made
with fraudulent intent. Id. Finally, the Plaintiffs adequately allege that the statements were made in
connection with her bankruptcy case because they relate to the question of the Debtor’s assets and
claims against her bankruptcy estate. Id.
For these reasons, the Court concludes that the Plaintiffs have stated a claim with the necessary
particularity against the Debtor to deny her discharge in this bankruptcy case.5
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Conclusion
For the reasons stated herein, the Motion to Dismiss is denied. An order in accordance with
this Memorandum Decision shall be entered simultaneously herewith.
Dated: Brooklyn, New York
May 16, 2005
s/Elizabeth S. Stong
ELIZABETH S. STONG
UNITED STATES BANKRUPTCY JUDGE
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