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Montoya v. Daniel O'Connell's Sons, Inc.

United States District Court, S.D. New York

March 28, 2017

JAIME MONTOYA and HECTOR RESTREPO, Plaintiffs,
v.
DANIEL O'CONNELL'S SONS, INC. and MARIST COLLEGE, Defendants. DANIEL O'CONNELL'S SONS, INC., Third-Party Plaintiff,
v.
JUPITER ENVIRONMENTAL SERVICES, INC., Third-Party Defendant.

          OPINION AND ORDER

          ANDREW L. CARTER, JR., UNITED STATES DISTRICT JUDGE

         Plaintiff Jamie Montoya brings this personal injury action against Defendants Daniel O'ConnelFs Sons, Inc. ("DOC") and Marist College for injuries allegedly suffered while working for DOC's subcontractor, Third-Party Defendant Jupiter Environmental Services, Inc. ("Jupiter"), on a construction project at Marist College. DOC and Marist College have moved for summary judgment dismissing Montoya's claims on the basis that he lacks standing and is estopped from pursuing this action due to his failure to disclose the suit during his bankruptcy proceeding. Jupiter also moved for summary judgment on the basis of estoppel. Separately, Montoya filed a motion to substitute the bankruptcy trustee, John W. Sywilok, as the plaintiff in this action. For the reasons that follow, the Court grants Montoya's motion to substitute Sywilok as plaintiff, thereby rendering Defendants' motions for summary judgment on the basis of Montoya's lack of standing and estoppel moot.

         BACKGROUND

         On March 27, 2013, Montoya injured himself while working on a construction project at Marist College as an employee of Jupiter, a subcontractor of DOC. ECF No. 19 ("Am. Compl."), at ¶¶ 36-40. He did not commence this personal injury action related to the accident until March 2015, however. In the interim, Montoya filed a petition for voluntary bankruptcy pursuant to Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. ECF No. 106 (Affirmation of Carolyn Comparato ("Comparato Aff.")), Ex. A (Voluntary Petition, filed Apr. 7, 2014). Montoya is represented by different counsel in this action than in his bankruptcy proceeding. See id., Ex. A at 2.[1]

         While Montoya already had injured himself and retained counsel to explore the possibility of recovering in a personal injury action, Montoya did not disclose the potential personal injury action as personal property in his bankruptcy petition. Id. at 9-11; ECF No. 102 (Affirmation of Hillary P. Kahan ("Kahan Aff.")), Ex. F at 10-11. He did disclose his related Worker's Compensation Board claim against Jupiter, however. Comparato Aff., Ex. A at 11. At a meeting of his creditors in May 2014, Montoya again failed to disclose his potential personal injury action. Comparato Aff., Ex. B (Transcript of May 12, 2014 Hearing), at 9-10. In July 2014, the bankruptcy court granted Montoya a discharge under 11 U.S.C. § 727. Kahan Aff. Ex. B (Discharge Order, dated July 18, 2014).

         Less than a year after his bankruptcy discharge, Montoya filed the instant action against DOC and Marist College on March 4, 2015. See ECF No. 1. DOC and Marist College answered the Complaint and DOC filed a third-party complaint against Jupiter. ECF Nos. 20, 22, 24. Defendants then filed motions for summary judgment. After learning of Defendants' proposed motions, Montoya's counsel in this action contacted John W. Sywilok, Montoya's bankruptcy trustee (the "Trustee"), who then initiated proceedings to reopen Montoya's bankruptcy. Kahan Aff. ¶ 6, Ex. D (Motion to Reopen, dated Dec. 8, 2015). The bankruptcy court reopened Montoya's case in January 2016 and appointed Montoya's counsel in this action to serve as special counsel to the Trustee in this action as well. Id. ¶¶ 7-9, Exs. E-G. In his opposition to Defendants' motions for summary judgment, Montoya argued that the Trustee should be substituted as plaintiff in his place. ECF No. 64 at 18-19. The Court dismissed Defendants' motions without prejudice in light of Montoya's desire to substitute the Trustee as plaintiff so that the two issues could be briefed together. ECF No. 82.

         DOC and Marist College have again moved for summary judgment dismissing Montoya's claims on the basis that he lacks standing because this action is property of the bankruptcy estate. ECF Nos. 86-89, 90-92. They further argue that Montoya is estopped from pursuing this action as a result of his failure to disclose the suit in his bankruptcy proceeding. Jupiter also moved for summary judgment on the basis of estoppel. ECF Nos. 94-95, 97.

         Simultaneously, the parties briefed Montoya's motion to substitute the Trustee as plaintiff in this action. ECF Nos. 101 (Motion to Substitute), 102 (Kahan Aff), 103 (Affirmation of John W. Sywilok), 104 (Pi's Memo.). DOC and Marist College opposed the motion, arguing that the substitution is untimely and that this action was improperly instituted in violation of the automatic stay in the bankruptcy court. ECF Nos. 106 (Comparato Aff), 107 (DOC Memo.), 116 (Affirmation of Keith S. Grover). Jupiter also opposed the motion on the basis that the Trustee cannot serve as plaintiff because he is a witness to Montoya's alleged fraud on the bankruptcy court. ECF No. 115 (Jupiter Memo.). Montoya has submitted his reply in support of his motion to substitute, and the Court considers the motions fully briefed. ECF Nos. 126 (Pi's Reply), 128 (Declaration of Hillary P. Kahan ("Kahan Reply Decl.")).

         LEGAL STANDARD

         Rule 17 of the Federal Rules of Civil Procedure requires that actions "be prosecuted in the name of the real party in interest." Fed.R.Civ.P. 17(a)(1). If an action is brought by a party other than the real party in interest, the Rule prohibits a court from dismissing the action on that basis "until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action." Fed.R.Civ.P. 17(a)(3). The decision to substitute a party is committed to the discretion of the district court and "should be liberally allowed when the change is merely formal and in no way alters the original complaint's factual allegations as to the events or the participants." Advanced Magnetics, Inc. v. Bayfront Partners Inc., 106 F.3d 11, 20 (2d Cir. 1997). Once the real party in interest is substituted, the "action proceeds as if it had been originally commenced by the real party in interest." Fed.R.Civ.P. 17(a)(3).

         Upon commencement of bankruptcy proceedings, "all legal or equitable interests of the debtor" comprise the bankruptcy estate. 11 U.S.C. § 541(a)(1). Pursuant to § 323 of the Bankruptcy Code, the bankruptcy trustee is assigned as the "representative of the estate" and has the "capacity to sue and be sued." Thus, after a plaintiff initiates a bankruptcy proceeding, the bankruptcy trustee becomes the real party in interest of the debtor-plaintiffs legal interests. In re Jackson, 593 F.3d 171, 176 (2d Cir. 2010) (interests of bankruptcy estate "include causes of action possessed by the debtor at the time of filing").

         DISCUSSION

         Montoya moves to substitute the Trustee, John Sywilok, as plaintiff in this action. The parties do not dispute that the Trustee is the real party in interest; however, DOC and Marist College argue that Montoya's motion should be denied because any substitution would be untimely and a nullity. Jupiter further argues that, to the extent the Court grants the motion to substitute, Montoya should be prevented from recovering personally. The Court finds that substituting the Trustee as plaintiff is appropriate and the question of damages is premature.

         I. The ...


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