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Lumbermens Mutual Cas. Co. v. Morse Shoe Co.

Appellate Division of the Supreme Court of New York, First Department
Aug 31, 1995
218 A.D.2d 624 (N.Y. App. Div. 1995)

Summary

noting that state courts retain the power to determine the effect of a discharge in bankruptcy where a tort claimant seeks to proceed against a discharged debtor only for the purpose of recovering against an insurer

Summary of this case from Reyes v. McCarley

Opinion

August 31, 1995

Appeal from the Supreme Court, New York County (Harold Tompkins, J.).


Plaintiff's insured sustained a loss as the result of a fire that started in premises occupied by defendant. Plaintiff paid the claim of its insured for loss of inventory in the amount of $82,611. In this action, it asserts a claim, as subrogee, to recover against defendant on the theory that the fire was the result of defendant's negligence. However, between the date of the loss and the date plaintiff commenced this action, defendant underwent reorganization pursuant to chapter 11 of the Bankruptcy Code (11 USC).

Defendant moved to dismiss the complaint based upon its discharge in bankruptcy. It is undisputed that plaintiff failed to file a proof of claim against defendant in that proceeding. Plaintiff, in reliance on the Bankruptcy Code ( 11 U.S.C. § 524[e]), asserts that discharge in bankruptcy avoids only the personal liability of the debtor and does not operate to relieve any other party that might be liable for payment of the claim, specifically, defendant's insurer. In support of its position, plaintiff cites Insurance Law § 3420(a)(1), which requires liability insurance policies to provide that insolvency or bankruptcy of the insured shall not release the insurer from the obligation to pay for covered injury or loss sustained while the policy is in effect. Finally, plaintiff argues that defendant should have informed it of the bankruptcy proceeding and should be estopped from relying on plaintiff's failure to file a proof of claim.

In its reply, defendant asserts, for the first time, that the subject policy has a deductible of $100,000 and, therefore, defendant's assets are exposed to judgment, requiring that the protection of the discharge in bankruptcy be extended to plaintiff's claim. Defendant includes two documents with its reply papers that assertedly make the deductible apparent — a "cash flow plan" and an undated "Agreement for Premium Payments", which provides that defendant will be billed for any amount paid to a third party on account of liability incurred under the policy, up to the limit provided in the policy.

It is settled that State courts, with certain exceptions not pertinent here, retain the power to determine the effect of a discharge in bankruptcy ( Chevron Oil Co. v. Dobie, 40 N.Y.2d 712, 715; State of New York v. Wilkes, 41 N.Y.2d 655, 657; Vleming v Chrysler Corp., 90 A.D.2d 773, 774). 11 U.S.C. § 524(e) provides that "discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt". Where, as here, a tort claimant seeks to proceed against a discharged debtor only for the purpose of recovering against an insurer, it has been held that suit is not barred by the discharge injunction ( Green v. Welsh, 956 F.2d 30 [2d Cir]; Matter of Edgeworth, 993 F.2d 51, 54, n 6 [5th Cir]).

The matter of the alleged deductible need not detain us. As this Court stated in Ritt v. Lenox Hill Hosp. ( 182 A.D.2d 560, 562): "the function of a reply affidavit is to address arguments made in opposition to the position taken by the movant and not to permit the movant to introduce new arguments in support of the motion ( see, Lazar v. Nico Indus., 128 A.D.2d 408, 409-410). Nor does it avail defendant to shift to plaintiff, by way of a reply affidavit, the burden to demonstrate a material issue of fact at a time when plaintiff has neither the obligation nor opportunity to respond absent express leave of court (CPLR 2214[c]; Lazar v Nico Indus., supra). We perceive no reason to protract a procedure designed `to expedite the disposition of civil cases where no issue of material fact is presented to justify a trial' ( Di Sabato v. Soffes, 9 A.D.2d 297, 299) by encouraging submission of yet another set of papers, an unnecessary and unauthorized elaboration of motion practice. If a movant, in preparation of a motion for summary judgment, cannot assemble sufficient proof to dispel all questions of material fact, the motion should simply not be submitted." Arguments advanced for the first time in reply papers are entitled to no consideration by a court entertaining a summary judgment motion. This Court has and will require consistent application of the rule ( Azzopardi v American Blower Corp., 192 A.D.2d 453, 454; Dannasch v. Bifulco, 184 A.D.2d 415, 415-417).

We note also that the so-called deductible provision relied upon by defendant provides that the insured will reimburse the insurer for its payment on a loss. Thus, it would appear that it is the insurer that bears the primary obligation to pay the claim of a third party notwithstanding that the insured's reimbursement responsibility would be covered by the discharge in bankruptcy.

Concur — Sullivan, J.P., Rosenberger, Ellerin, Rubin and Mazzarelli, JJ.


Summaries of

Lumbermens Mutual Cas. Co. v. Morse Shoe Co.

Appellate Division of the Supreme Court of New York, First Department
Aug 31, 1995
218 A.D.2d 624 (N.Y. App. Div. 1995)

noting that state courts retain the power to determine the effect of a discharge in bankruptcy where a tort claimant seeks to proceed against a discharged debtor only for the purpose of recovering against an insurer

Summary of this case from Reyes v. McCarley

In Lumbermans, the plaintiff sought to recover from the debtor's insurer after the debtor was discharged in bankruptcy [id. at 626].

Summary of this case from Louldacheva v. Filene's Basement Corp.

In Lumbermans. the plaintiff sought to recover from the debtor's insurer after the debtor was discharged in bankruptcy [id. at 626], However, in Lumbermans. the statute of limitations on the plaintiff's claim was not at issue.

Summary of this case from Iouldacheva v. Filene's Basement Corp.
Case details for

Lumbermens Mutual Cas. Co. v. Morse Shoe Co.

Case Details

Full title:LUMBERMENS MUTUAL CASUALTY COMPANY, Appellant, v. MORSE SHOE COMPANY…

Court:Appellate Division of the Supreme Court of New York, First Department

Date published: Aug 31, 1995

Citations

218 A.D.2d 624 (N.Y. App. Div. 1995)
630 N.Y.S.2d 1003

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