MEMORANDUM OF DECISION
MELVIN S. HOFFMAN, Bankruptcy Judge.
This adversary proceeding involves a dispute between plaintiff, who is the Chapter 7 trustee of the estate of the debtor in the main case, Prime Mortgage Financial, Inc. (the "Debtor"), and defendant, Prime Financial, Inc. ("PFI"), an affiliate of the Debtor. The dispute is over the rights to a refund of $62,500 from co-defendant, International Golf Club LLC ("The International") arising from the cancellation of a country club membership.
This matter was tried before me on June 23, 2010. Prior to trial The International was dismissed as a party upon its agreeing to pay over the disputed refund to whichever of the remaining parties emerged victorious at trial. As to the third defendant, Prime Title Services, Inc., an agreement for judgment in favor of plaintiff and against it had entered on August 25, 2009. At trial the evidence consisted of live testimony, agreed upon documents and an agreed statement of facts.
Findings of Fact
On July 1, 2003, the Debtor paid to The International $125,000 as a membership deposit and contemporaneously William J. Poutre, at the time a director and substantial shareholder of both the Debtor and PFI, submitted to The International a Membership Agreement and Application (the "Membership Agreement"). While the Membership Agreement sought a corporate membership at The International, the section entitled "Applicant Information" listed Mr. Poutre as the applicant. In a section of the Membership Agreement entitled "Mailing Information" Mr. Poutre listed PFI as the business to which communications from The International should be directed. The International approved the Membership Application and established a corporate country club membership in the name of PFI.
The Membership Agreement provides that at the option of the applicant 50% of the membership deposit ($62,500) was refundable upon resignation of the member. However, the Agreement does not specifically address to whom the refund is paid.
On August 19, 2004, Aris Pappas in his capacity as president and CEO of the Debtor sent a letter to counsel for The International notifying The International that its membership records listing PFI as member were incorrect and that the correct member name should be that of the Debtor. The International notified Mr. Poutre of the Debtor's request. Poutre, who, having had a falling-out with Mr. Pappas, no longer participated in the active management of the Debtor but retained control of PFI, objected to any change in the membership records and no change in the records was ever effected. Therefore, at all times relevant to this action, according to the records of The International PFI was its corporate member. However, as testified to by Brian Lynch, who served as executive vice president and general manager of The International for 25 years, there was no requirement that the member and the payor/owner of the membership deposit be one and the same individual or entity.
In addition to the membership deposit, members of The International were required to pay annual dues. At all times relevant to this action, the Debtor paid the annual dues to The International. For example, according to a financial worksheet of the Debtor introduced into evidence, in 2004 the Debtor prepaid the annual dues to The International in the amount of $21,225.
Under a corporate membership, certain individuals designated by the corporate member could be approved for membership privileges at The International. Mark Belinsky, an employee of both the Debtor and PFI or a subsidiary, testified that he received such an individual membership when he was hired in 2003. The terms of his employment required him to reimburse the Debtor for $21,125 (roughly one-third) of the non-refundable portion of the membership deposit (namely 50% of the $125,000 membership deposit paid by the Debtor to The International). Mr. Belinsky testified these payments were made through deductions by the Debtor from commissions due him. Mr. Belinsky testified that the other two-thirds of the non-refundable portion of the membership deposit were required to be repaid to the Debtor by other employees who received individual memberships.
When the Debtor filed its Chapter 7 petition in this court on January 29, 2008, it listed in schedule B (personal property assets) under item 3 (security deposits) $62,500 in "dues" held by The International, which obviously refers to the refundable portion of the membership deposit.
Discussion and Conclusion
The Debtor and PFI have devoted much of their energies both at the pre-trial stage and at trial tangling over which of them was the member of The International based on the misplaced belief that ownership of the right to the membership deposit refund necessarily followed the holder of the membership. The testimony of Mr. Lynch of The International, however, was that there was no requirement that the owner of the refund right and the member of the country club be one and same. Resort to a written document for clarification of this key issue has proven futile. The only contract in evidence in this action is the Membership Agreement which is, to say the least, not a model of clarity. It begins with the ambiguity discussed earlier as to the identity of the corporate member and deteriorates from there. Much of the Agreement is written, from the perspective of the applicant, in the first person. For example, the last paragraph states:
I hereby acknowledge that I have received, have read and understand the Bylaws and The International Rules and Regulations ("Rules and Regulations") applicable to this membership, which are incorporated herein by reference. If elected to membership, I hereby agree that my use of the Club and privileges under the membership are subject to the terms, conditions and restrictions set forth therein.
It is then signed by William Poutre individually. The section of the Membership Agreement governing refunds of the membership deposit states: "I elect to receive fifty percent (50%) of the Membership Deposit I paid for my membership upon sixty (60) days' notice to the Club." Despite these provisions, no one has asserted that Mr. Poutre individually is the member under the Membership Agreement or is entitled to the membership deposit refund. While a credible argument has been made that PFI is the member for purposes of the Membership Agreement, the Agreement's terms simply do not support the conclusion that PFI is also the "I" referred to in the refund provision.
The Membership Agreement thus being as pellucid as a sandtrap and there being no other writing between the Debtor and PFI addressing the ownership of the membership deposit refund, I must resort to extrinsic evidence to ascertain the intent of the parties.
"Extrinsic evidence bearing upon the background and purpose of the parties, as well as their understanding of particular language used in a contract, may be considered in resolving uncertainties in applying a contract's terms." AsymmetRx, Inc. v. Biocare Medical LLC, 578 F.Supp.2d 333, 340 (D. Mass. 2008), vacated and remanded on other grounds, 582 F.3d 1314 (Fed. Cir. 2009).
The evidence presented establishes that while, according to the records of The International, PFI was its corporate member, the Debtor assumed all financial obligations associated with that membership, including paying the membership deposit and annual dues. No evidence was presented to suggest that the parties treated the Debtor's paying these financial obligations as a loan or gift to PFI, which would have conferred on PFI indicia of ownership with respect to these payments. On the contrary, the evidence established that from 2003 through the date the Debtor initiated its Chapter 7 case, the Debtor considered itself exclusively obligated to pay the monetary obligations associated with membership in The International and considered itself the owner of the refund rights with respect to the membership deposit which it had paid.
The Debtor listed the right to the refund as an asset in the schedules accompanying its bankruptcy petition. In a financial worksheet of the Debtor entitled "Prepaid Expenses" dated April 20, 2004, the Debtor carried the annual dues to The International of $21,225 as a prepaid expense. Finally, the Debtor required repayment of the non-refundable portion of the membership deposit from Mr. Belinsky and other individual members who were employees of the Debtor.
PFI attempted to prove an inconsistency in the Debtor's position with respect to the deposit refund by introducing into evidence a June 2, 2008 letter from Mr. Pappas to Mr. Poutre in which Mr. Pappas acknowledged that "at all times" the membership rights to The International were in the name of PFI. This letter carries very little weight, however. It is written by Mr. Pappas in his individual capacity and not as a representative of the Debtor (who was by then already a Chapter 7 debtor). It was written in the context of a confidential settlement of litigation involving Messrs. Poutre and Pappas. And finally, the letter addresses only the membership issue, not the ownership of the deposit refund right.
All the evidence taken together proves conclusively that the right to the refundable portion of the membership deposit was on the date of commencement of the Debtor's Chapter 7 case and all times prior thereto, property of the Debtor. I will, accordingly, enter judgment in this action in favor of the plaintiff on Count II of the Amended Complaint. No relief is necessary on Count I which seeks a turnover order against The International since The International has agreed to pay the refund to the prevailing party (the plaintiff) in this action. A separate order will issue.
edly obligated to pay any debt."
15 U.S.C. § 1692a(3).
To establish a violation under the FDCPA
(1) the plaintiff must be a "consumer" who allegedly owes the debt or a person who has been the object of efforts to collect a consumer debt, and (2) the defendant collecting the debt is considered a "debt collector," and (3) the defendant has engaged in any act or omission in violation of FDCPA requirements.
Healy v. Jzanus Ltd.,
2002 WL 31654571, at *2 (E.D.N.Y. Nov. 20, 2002) (citing
15 U.S.C. § 1692(a)).
Importantly, the Second Circuit in Kropelnicki held that a plaintiff cannot prevail in a claim under the FDCPA merely by showing that the communication from the debt collector conveying information about a debt was transmitted to just anybody. Rather, the plaintiff "must first show that the [communication conveying information about the debt] was a communication to her" — that is, a communication to the debtor herself. 290 F.3d at 130 (emphasis in original).
III. DISCUSSION
D S argues that (1) the doctrines of res judicata and collateral estoppel bar this suit, D S Mem. at 6-13; (2) D S is not a debt collector because it was enforcing a security interest, id. at 13-15; (3) D S is not a debt collector because it was attempting to collect its own fees, id. at 15-16; (4) the Nov. 29 Letter is not a "communication under the FDCPA," id. at 16-17; (5) the Nov. 29 Letter was sent to Linear, not to the debtor,id. at 17-19; (6) the FDCPA never meant to protect individuals like the Schuhs, and its purpose would be thwarted if a violation was found, id. 19-25; (7) the Nov. 29 Letter is accurate, id. at 25-27; and (8) "any failure to comply with the FDCPA was unintentional," id. at 27-28. Because the Schuhs have not shown that the Nov. 29 Letter was sent "to" either of them, Kropelnicki, 290 F.3d at 130, it is not necessary to reach D S's other arguments.
As background, it is undisputed that after the Schuhs' successful bid at the March 23, 2006 foreclosure sale, they attempted to secure financing from Countrywide Mortgage in order to close on the property in accordance with the terms of the sale. See D S Rule 56.1 Statement ¶ 39 (undisputed by plaintiffs); Compl. ¶ 140. Countrywide in turn engaged Linear Title, a title company, in connection with its loan to the Schuhs. See D S Rule 56.1 Statement ¶ 39 (undisputed by plaintiffs); Closing Instructions, dated Oct. 5, 2006 (annexed as Ex. A to Heineman Reply Aff.); see also Schuh Dep. at 102 (in September 2006, the outstanding mortgage on the property "was trying to be resolved between the bank — their title representatives, Countrywide's title representatives and the Druckman law firm"). On September 28, 2006, Linear Title wrote an email to D S directly — without copying the Schuhs — to inform D S that Linear Title was responsible for "coordinat[ing] the purchase of the . . . property from MERS" and that the Schuhs had made an application with Countrywide for a loan. See September Linear Title Email. This email referred to a closing scheduled for the next day. Id. As Linear Title sought extensions of the closing from D S, Countrywide made clear in its communications with D S that Linear Title was acting on Countrywide's behalf. See Fax from Matthew Waters, Countrywide, to Druckman Sinel, dated Oct. 6, 2006 (annexed as Ex. K to Klotz Decl.), at 3 (Countrywide employee directs D S to "forward correspondence [regarding closing extension] to my attorney at Linear Title"); Title Commitment: Linear Title and Closing, dated Nov. 21, 2006 (annexed as Ex. A to Heineman Reply Aff.), at 3 (prepared by Theresa Giannavola of Linear Title and addressed to Countrywide). As already described, Linear Title, not the Schuhs, requested the payoff amounts that were ultimately sent in the Nov. 29 Letter from D S. See Linear Title Fax. In accordance with these instructions, D S sent the Nov. 29 Letter to a Rhode Island fax number, addressed to the person at Linear Title, Giannavola, who had requested the payoff figures. The Schuhs bear the burden of proof as to their claim that D S violated the FDCPA, see generally Krawczyk v. Centurion Capital Corp., 2009 WL 395458, at *7 (N.D. Ill. Feb. 18, 2009);Hollis v. Stephen Bruce Assocs., 2008 WL 4570490, at *3 (W.D. Okla. Oct. 8, 2008), and thus bear the burden of showing that D S sent the Nov. 29 Letter to them. But the Schuhs have marshaled no evidence to support this contention. To the contrary, the record is clear that the Nov. 29 Letter was sent to Giannavola at Linear Title. Schuh's own deposition testimony confirms the circumstances of the sending of the Nov. 29 Letter inasmuch as he testified that he did not recall any discussions with Countrywide about trying to get a closing scheduled, that he did not believe he knew who Linear Title was, and that he had never heard of Giannavola. Schuh Dep. at 129. He also testified that he had no recollection of ever having seen the Nov. 29 Letter. Id. at 131. Following his deposition, Schuh submitted an unsworn "Errata Sheet" in which he purported to correct the portion of his testimony in which he stated that he had no recollection of seeing the Nov. 29 Letter. See Errata Sheet at 2. His correction reads: "I did see letter. It was reason why any attempt to pay off mortgage was abandoned by direct payment to HSBC." Id. (grammatical errors in original). The reason given for the correction was "further review and recollection and for clarity of testimony." Id.
Schuh also testified at his deposition that the Nov. 29 Letter was sent in connection with his continuing efforts to close on the property as the purchaser — that is, as the successful bidder. Id. at 135. Schuh's "errata sheet" also corrects this testimony and asserts that he knew about Linear Title. His correction states: "[i]n November when Linear title faxed[] [a] request for information, [the] sale had been cancelled. I was seeking information for financing, to pay off [the] mortgage, not [to] close [the] referee sale." Id. Schuh's reason for this change is stated as "clarity of testimony." Id. Similarly, in a declaration submitted in conjunction with the summary judgment motion, Schuh asserts that "Linear Title acting on my behalf, for the first time sought pay-off figures." Schuh Decl. ¶ 44. This statement is discussed further below.
We will pretermit the question of whether Schuh can properly contradict his own deposition testimony through an errata sheet signed more than two weeks after D S had filed its motion for summary judgment, see, e.g., Desulma v. City of N.Y., 2001 WL 798002, at *4 (S.D.N.Y. July 6, 2001) ("to allow [plaintiff's] changes [on defendant's motion for summary judgment] would permit him to tailor his testimony to meet specific deficiencies in his evidence" and plaintiff's "contradictory deposition changes, submitted to the Court six months after [defendant] filed her motion for summary judgment, should not provide a basis for avoiding summary judgment."). Even if we consider Schuh's corrections in conjunction with his original answers, nothing in his testimony or his corrections would provide sufficient evidence for a reasonable jury to conclude that the Nov. 29 Letter was sent to the Schuhs. Certainly, Schuh's own statements provide no evidence at all that D S sent the letter to him. At best, Schuh claims (in the errata sheet) that he saw the letter at some unspecified time. But letters are frequently shared by a recipient with other interested parties, and the mere fact that Schuh saw it is not enough to show it was sent "to" him. The letter was addressed to another individual and sent to a fax number in a state where the Schuhs were not even located. Virtually the only piece of evidence that would support the conclusion that the letter was sent to either plaintiff is the fact that the words "c/o Christopher Schuh" appear underneath Theresa Giannavola's name. But this would not allow a reasonable juror to infer that the letter was sent to Schuh. After all, it is unremarkable that Schuh's name appears on the letter inasmuch as Giannavola's request for the payoff statement referred to "the above borrower," and the only borrower's name in Giannavola's own fax requesting the letter was "Chris Schuh." See Linear Title Fax.
At a minimum, the Court would have to consider both the original answers and the corrections. See Podell v. Citicorp Diners Club, Inc., 112 F.3d 98, 103 (2d Cir. 1997). Notably, at least one case in this Circuit has suggested that the reason, to "clarify," might be "insufficient to explain plaintiff's alteration of her answer[s]" to deposition questions. Winston v. Marriott Int'l, Inc., 2006 WL 1229111, at *6 n. 2 (E.D.N.Y. May 8, 2006).
While Schuh asserts in a declaration that Linear Title was "acting on my behalf" when it sought the payoff figures, Schuh Decl. ¶ 44, this is merely a conclusory statement without any evidentiary support. In the context of the undisputed relationship between Countrywide and Linear Title, the statement does nothing to show that the response to Giannavola's request was sent "to" Schuh, as required by Kropelnicki. Nor does anything in Schuh's other testimony demonstrate that the plaintiffs even had contact with Linear Title with respect to the Nov. 29 Letter, let alone that the letter was sent "to" the plaintiffs.
The parties dispute whether the purpose of obtaining the Nov. 29 Letter was to pay off the Schuhs' mortgage, see Schuh Decl. ¶ 44, or for the purpose of the Schuhs' "closing of the Property as the successful bidder at the March 2006 foreclosure sale," D S Mem. at 2. But this dispute is irrelevant to the question of whether the Nov. 29 Letter was sent to the Schuhs, and thus it is unnecessary to resolve it.
The Schuhs argue that Linear Title was their "agent" and that this distinguishes their own case from the Second Circuit's decision in Kropelnicki, which rejected an FDCPA claim by a debtor's mother based on a letter sent from a debt collector to the debtor's daughter. See Schuh Opp. Mem. at 10. To begin with, the assertion that Linear Title was Schuh's "agent" not only is conclusory and unsupported by evidence but also is belied by the record inasmuch as Linear Title is identified as Countrywide's "settlement agent." See, e.g., Closing Instructions, dated Oct. 5, 2006 (annexed as Ex. A to Heineman Reply Aff.). But this characterization of Linear Title is of no relevance anyway. Whether or not Linear Title could be characterized as the Schuhs' "agent" for some purpose does not answer the fundamental question of whether the Nov. 29 Letter was sent "to" the Schuhs. As already described, the letter was not sent to them and thus does not fall within the statute. This result is in accord withTromba v. M.R.S. Assocs., Inc., 323 F. Supp. 2d 424, 425-26 (E.D.N.Y. 2004), in which the debt collector faxed a set of loan documents with a cover letter addressed solely to the plaintiff's attorney. The Court ruled that the plaintiff had no cause of action under the FDCPA because the letter at issue there "was solely directed to her attorney and no threat was made regarding contact with the debtor herself." Id. at 428.
Conclusion
For the foregoing reasons, D S's motion for summary judgment (Docket # 115) should be granted.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days from service of this Report and Recommendation to serve and file any objections. See also Fed.R.Civ.P. 6(a), (e). Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with copies sent to the Hon. Lewis A. Kaplan, and to the undersigned, at 500 Pearl Street, New York, New York 10007. Any request for an extension of time to file objections must be directed to Judge Kaplan. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).
Dated: June 29, 2010
New York, New York