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Derrick Hanna, of Counsel for

Brooklyn Bar Association


Volunteer Lawyers Project
Attorney for Defendant
Hanna & Vlahakis
7504 Fifth Avenue
Brooklyn, NY 11209
800-773-7867

UNITED STATES BANKRUPTCY COURT


EASTERN DISTRICT OF NEW YORK
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In Re: Case No.: 09-50086-ess

MICHAEL CHUN KIN LEE Adversary No.:


10-01051

Debtor.

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Renaissance Economic Development Corp.

Plaintiff,
-against-

Michael Chun Kin Lee


Defendant.
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ATTORNEY AFFIRMATION IN SUPPORT OF THE DEBTOR-DEFENDANT’S MOTION


TO DISMISS THE PLAINTIFF’S AMENDED AND ORIGINALCOMPLAINT

DERRICK HANNA, an attorney duly admitted to practice before the Courts of

the State of New York and the Eastern District of New York, affirms under penalty of

perjury as follows:

Preliminary Statement

1. I am a partner at Hanna & Vlahakis and of counsel to the Brooklyn Bar, VLP,

attorney of record for debtor, and I am familiar with the facts and circumstances of

this case. I was retained to represent the client on October 14, 2008 my retainer

agreement is annexed hereto as Exhibit A.


2. I have personal knowledge of the facts stated herein based on my review

of

the Complaints in this action and all prior proceedings.

3. I submit this affirmation in support of the Debtor-Defendant’s motion

seeking orders:

a.) pursuant to Fed.R.Civ.P.12(b)(6), made applicable herein by

Fed.R.Bankr.P. 7012, dismissing the original Complaint (“Complaint”) and the

First and Second Claim for Relief of the Amended Complaint in this action

(the “Amended Complaint”).

A copy of the Amended Complaint is annexed hereto as Exhibit “B.” ) for

a.) failing to state a claim for which relief can be granted; and b.) being
barred by

applicable statutes of limitation; and c.) granting such other and further
relief

as this Court deems proper.

4. The Motion should be granted and the Complaint and Amended Complaint

dismissed because:

a.) The Amended Complaint relies on entirely new allegations, so it does not
“relate back,” and is time barred. In Re Khafaga, 431 B.R. 329289 (Bankr.
E.D.N.Y.2010); In re Perez, 173 B.R. 284, 289 (Bankr. E.D.N.Y.1994);

b.) To the extent that the second claim of the Amended Complaint is the
same claim in the original complaint it fails to state a claim for relief. The
original complaint hinged on an erroneous statement in the Debtor’s
bankruptcy petition, Statement of Financial Affairs. Debtor corrected the
error by amendment and simultaneously cased Plaintiff’s complaint to lack a
claim upon which relief could be granted. These factors are elucidated
herein and in the accompanying memorandum of law.

BACKGROUND
5. The Debtor, filed his voluntary petition for relief under Chapter 7 of the

Bankruptcy Code on November 13, 2009. Pursuant to the Notice of Chapter 7


Bankruptcy the deadline set for filing of complaints objecting to discharge
was February 22, 2010

6. The Richard O’Connell was appointed Chapter 7 Trustee.

7. This Court has jurisdiction over this Motion, pursuant to 28 U.S.C. §§ 1334

and 157.

8. Upon information and belief, this matter is a “core” proceeding, under 28

U.S.C. §§ 1334 and 157.

9. This district is the appropriate district to consider this Motion, pursuant to


28

U.S.C. §§ 1408 and 1409.

THE AMENDED COMPLAINT’S FIRST CLAIM FOR RELIEF


MUST BE DISMISSED FOR FAILURE TO STATE A CLAIM OF
NONDISCHARGEABILITY FOR DEBT, PROPERTY OR SERVICES
OBTAINED BY FRAUD OR FALSE PRETENSES, 11 U.S.C. 523(a)(2)
The Amended Complaint’s First Claim Fails to Relate Back

10. The Amended Complaint’s First Claim for Relief, asserting denial of
dischargeability

for debt, property or services obtained by fraud or false pretenses, 11 U.S.C.

§ 523(a)(2), should be dismissed pursuant to Fed.R.Bankr.P. 7012, for failing

to state a claim for which relief can be granted.

11. It is barred by applicable statutes of limitation and otherwise fails to


state a

claim.

12. Fed. R. Bankr. P. 7012 makes Fed. R. Civ. P. 12(b)(6) applicable to this

adversary proceeding. Fed. R. Civ. P. 12(b)(6) authorizes this Court to

dismiss the Amended Complaint for “failure to state a claim for which relief
can be granted.”

13. A defense based on applicable statutes of limitation may be asserted via


a

motion to dismiss for failure to state a claim when the facts that give rise to

the defense are clear from the face of the complaint. Nader v. The

Democratic Nat. Committee, 555 F.Supp.2d 137, 156 (D.D.C. 2008).

A copy of the Court’s decision is annexed to the accompanying

memorandum of law as Appendix “A” (the “Decision”). See, pp. 6-12.

The First Claim for Relief

14. The Amended Complaint’s First Claim for Relief is based on denial of

dischargeability for debt, property or services obtained by fraud or false

pretenses, 11 U.S.C. 523(a)(2). See Exhibit “B.”

15. The time to assert a claim under 11 U.S.C. 523(a)(2) is sixty days after
the

first date set for the meeting of creditors under 11 U.S.C. § 341(a).

Fed.R.Bankr.P. 4007( c.).

16. Pursuant to the Notice of Chapter 7 Bankruptcy the deadline set for filing
of complaints objecting to discharge was February 22, 2010. See Exhibit

17. Plaintiff filed its Amended Complaint on January 12, 2011 (See, Court’s

ECF docket sheet”).

18. However, the Amended Complaint’s First Claim seeking relief under 11

U.S.C. § 523(a)(2) is time barred.


19. It asserts new, previously omitted allegations absent from the initial
Complaint.

20. Plaintiff has made a vain attempt to create the allusion of relating back
by alleging that it relied on or about September 20, 2006 on alleged false
representations of Debtor’s ownership of Eight Star Inc., borrower and L& W
Express Van Services Corp., co-borrower in extending a loan in the amount of
$100,000. It cannot be said that the transaction in the initial Complaint’s
First Claim is the same transaction in the Amended Complaint’s First Claim.
Plaintiff through discovery is aware that Debtor has always owned the
corporations.

21. Plaintiff provides no evidence in the Amended Complaint for its sudden
belief that Debtor did not own the said corporations or was not the president
of them in 2006 or at any other time.

22. Plaintiff in the First claim of the Amended Complaint states that it was
induced into making a loan based upon alleged false representations by
Debtor of his ownership interest in the two corporations. However, this
contradicts Plaintiff’s Second claim where it states that “On March 28, 2007,
to induce Renaissance to make the loan, the defendant, in this action, Mr.
Lee executed a Personal Guaranty guaranteeing the full repayment of the
Promissory Note. “ See Exhibit page 5, para. 33. On the face of the
Amended Complaint there are contradictory claims of reliance and
inducement. Surprisingly Plaintiff’s counsel made the following argument in
his Affirmation in Opposition dated June 3, 2010:

“15. It is not necessary that Lee be issued a L&W stock certificate to prove
that Lee is a stockholder in L&W. See Generally, Dissoultion of C&M Plastics
Inc., 194 A.D.2d 1020, 599 N.Y.S2d 880 (3d Dept. 1993) (in order to
constitute a stockholder in a corporation, it is not necessary that the stock
certificate to which he or she is entitled actually be issued.)

16. Furthermore, the individual (in this case Lee’s) name need not be
recorded on the books of the corporation as a stockholder, to attain
shareholder status. See White v. Melillo, 165 misc. 318,300 N.Y.S. 1275 (City
Ct. 1937).

17. The fact that Lee and Zhen’s names do not appear in the corporate
records, or stock certificates, is not dispositive of the issue of whether, Lee
sold L&W to Zhen.” (See, Court’s ECF docket sheet document #23”). Clearly
Plaintiff’s counsel previously made a strong argument that Debtor, Lee, is
the owner of L&W, further contradicting the Amended Complaint.

18. Plaintiff states in its Amended Complaint that it has a state court
judgment against Eight Star Inc., borrower and L& W Express Van Services
Corp., co-borrower. Therefore, Plaintiff cannot establish any damages,
another essential element of its claim. There is a lack of a causal
relationship between the alleged fraud and alleged injury. Plaintiff’s
Amended Complaint fails to state a claim upon which this court could grant
relief and must be dismissed. This case been ongoing for almost a year.
Plaintiff’s attorney had on numerous occasions discussed his intention to
drop his case for its lack of merit. Defendant’s attorney relied on these
representations which were also recited in open court on the record. Yet on
the eve of trial at a time when extensive discovery was complete Plaintiff
desires to start all over again with wholly new issues. This is not only highly
prejudicial to the Debtor it also prejudices the limited resources of the
Brooklyn Bar, VLP. Plaintiff’s attorney is well aware that Debtor’s attorney is
pro bono and is clearly attempting to frustrate Debtor’s counsel in order to
force a settlement.

24. Furthermore, the Amended Complaint as it concerns Section 523(a)(2)(A)


or (B) recites all new facts not present in the original complaint and therefore
does not “relate back,” pursuant to Fed.R.Civ.P. 15(c) made applicable
herein by Fed.R.Bankr.P. 7015, and must be dismissed. There is nothing in
Plaintiff’s Amended Complaint that was not known to Plaintiff at the time of
the original complaint and but for the lack of diligence on the part of Plaintiff
the claim was not timely made. The initial Complaint did not give Debtor fair
notice that he was being sued for the new alleged conduct relating back to
2006.

The Initial Complaint’s Claim

25. The initial Complaint’s Claim for Relief (A copy of the Initial Complaint

is annexed hereto as Exhibit “C.”), sought to deny the Debtor his discharge
for willful and malicious injury to property. This claim is founded in tort law
and clearly has no connection to the First Claim contained in the Amended
Complaint.

34. The initial Complaint’s Claim describes a claim solely based upon
debtor’s bankruptcy petition Statement of Financial Affairs which
erroneously stated in paragraph #10 “Other Transfers” that debtor
transferred on 5/2008 “L & W Express Van Service Corp” to Zhen Yong Li.
Debtor’s counsel, after a thorough review of the documents, filed an
Amended Statement of Financial Affairs on November 13, 2009 correcting
the Statement of Financial Affairs by removing the erroneously stated
transfer. Plaintiff, to date, has not objected to the amendment which
effectively made his initial Complaint and second claim of the Amended
Complaint moot. Plaintiff’s initial Complaint and second claim of the
Amended Complaint are identical. Plaintiff has had extensive discovery and
is aware that Debtor owns both corporations, is the president of both
corporations and has never transferred either of the corporations.

37. To the extent, the Amended First Claim relies on the new allegations, it
does

not relate back and is time barred. Standing alone this claim fails to state a
claim based on its contradictions in inducement and reliance and the failure
to plead the details concerning the claim that Debtor did not own the
corporations in 2006.

38. The transaction described in the original pleading is not the same as the
claim asserted in the amended pleading.

55. I declare the foregoing statements of fact to be true and correct under
penalties

of perjury, pursuant to 28 U.S.C. § 1746.

WHEREFORE, the Defendant requests that this Court grant this Motion and
issue

orders: a.) pursuant to Fed.R.Civ.P.12(b)(6), made applicable herein by

Fed.R.Bankr.P. 7012, dismissing the Plaintiff’s original and amended


complaint and for attorney’s fees pursuant to 11 U.S.C. 523(d). Debtor’s
retainer agreement with the Brooklyn Bar, VLP allows for payment of
attorney fees by third parties pursuant to court order. Any fees awarded are
the property of the Brooklyn Bar, VLP. See attached Attorney affirmation in
support of attorney fees being awarded.

Dated: Brooklyn, New York

By:/s/ Derrick Hanna


Derrick Hanna, of counsel
Brooklyn Bar, VLP
Hanna & Vlahakis
7504 Fifth Avenue
Brooklyn, NY 11209
(718) 680-8400

________________________

MICHAEL CHUN KIN LEE


UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------------X
In Re: Case No.: 09-50086

MICHAEL CHUN KIN LEE Adversary No.:


10-01051

Debtor.

-------------------------------------------------------------------X
Renaissance Economic Development Corp.

Plaintiff,
-against-

Michael Chun Kin Lee


Defendant.
------------------------------------------------------------------X
MEMORANDUM OF LAW IN SUPPORT OF

THE DEBTOR-DEFENDANT’S MOTION TO DISMISS THE AMENDED

COMPLAINT AND ORIGINAL COMPLAINT

The Debtor-Defendant, Michael Chun Kin Lee, submits this memorandum of


law in support of his motion seeking orders: a.) pursuant to
Fed.R.Civ.P.12(b)(6),

made applicable herein by Fed.R.Bankr.P. 7012, dismissing the original and


Amended Complaints for in this action for failing to state a claim for which
relief can be granted and being barred by applicable statutes of limitation;
and b.) granting such other and further relief as this Court deems proper.

The Motion should be granted and the original and Amended Complaint
dismissed because:

a.) The Amended Complaint relies on entirely new allegations, so it does not
“relate back,” and is time barred. Re Khafaga, 431 B.R. 329289 (Bankr.
E.D.N.Y.2010); In re Perez, 173 B.R. 284, 289 (Bankr. E.D.N.Y.1994);

b.) Plaintiff’s original complaint and second claim of the Amended Complaint
rely on erroneous statements in Debtor’s original Statement of Financial
Affairs which no longer exist due to Debtor’s amendment of such. Therefore,
Plaintiff’s original complaint and second claim of the Amended Complaint fail
to state a claim for which relief can be granted.

Point I

THE AMENDED COMPLAINT’S FIRST CLAIM FOR RELIEF

MUST BE DISMISSED FOR FAILURE TO STATE A CLAIM OF

NONDISCHARGEABILITY FOR DEBT, PROPERTY OR SERVICES

OBTAINED BY FRAUD OR FALSE PRETENSES, 11 U.S.C. 523(a)(2)

The Amended Complaint’s First Claim for Relief, asserting denial of


dischargeability

for debt, property or services obtained by fraud or false pretenses, 11 U.S.C.


§

523(a)(2), should be dismissed pursuant to Fed.R.Bankr.P. 7012, for failing to


state

a claim for which relief can be granted. It is barred by applicable statutes of

limitation and otherwise fails to state a claim.

Fed. R. Civ. P. 12(b)(6):

Fed. R. Bankr. P. 7012 makes Fed. R. Civ. P. 12(b)(6) applicable to this

adversary proceeding. Fed. R. Civ. P. 12(b)(6) authorizes this Court to


dismiss the

Amended Complaint for “failure to state a claim for which relief can be
granted.”

A defense based on applicable statutes of limitation may be asserted via a

motion to dismiss for failure to state a claim when the facts that give rise to
the

defense are clear from the face of the complaint. Nader v. The Democratic
Nat.

Committee, 555 F.Supp.2d 137, 156 (D.D.C. 2008), aff’d. on other grounds
567
F.3d 692 (D.C. Cir. 2009). If “no reasonable person could disagree on the
date” on

which the cause of action accrued, the court may dismiss a claim on statute
of

limitations grounds. Id., citing, Smith v. Brown & Williamson Tobacco Corp.,
3

F.Supp.2d 1473, 1475 (D.D.C.1998), and Kuwait Airways Corp. v. Am. Sec.
Bank,

N.A., 890 F.2d 456, 463 n. 11 (D.C.Cir.1989).

The First Claim for Relief

The Amended Complaint’s First Claim for Relief is based on denial of


dischargeability for debt, property or services obtained by fraud or false
pretenses, 11 U.S.C. 523(a)(2).

The time to assert a claim under 11 U.S.C. 523(a)(2) is sixty days after the

first date set for the meeting of creditors under 11 U.S.C. § 341(a).
Fed.R.Bankr.P.

4007( c.). A complaint filed after that period must be dismissed. In re


Harten, 78

B.R. 252, 254 (9th Cir. BAP 1987), citing, McIlroy Bank & Trust v. Couch (In
re

Couch), 43 B.R. 56, 58 (Bankr.E.D.Ark.1984); see also FDIC v. Kirsch (In re

Kirsch), 65 B.R. 297 (Bankr.N.D.Ill.1986).

Plaintiff’s time to commence this action was February 22, 2010.

This action was commenced on February 22, 2010. Discovery was to be


completed by August 16, 2010 pursuant to Scheduling Order dated June 17,
2010. Discovery was delayed due to Plaintiff’s counsel’s failure to go
forward with deposition of Debtor on scheduled date. Discovery was
completed on August 30, 2010.

The Court granted Plaintiff leave to file an amended complaint. Plaintiff filed
its Amended Complaint on January 12, 2011. However, the Amended
Complaint’s First Claim seeking relief under 11 U.S.C. § 523(a)(2) is time
barred. It asserts new, previously omitted allegations absent from the initial
Complaint. Therefore, the Amended Complaint does not “relate back,”
Fed.R.Civ.P. 15( c.) made applicable herein by Fed.R.Bankr.P. 7015, and
must be dismissed. Relating Back under Fed.R.Civ.P. 15(c) The time
limitation imposed under Fed.R.Bankr.P 4007( c.) is strictly enforced.
However, Fed.R.Bankr.P. 4007 operates in conjunction with

Fed.R.Bankr.P. 7015. Re Khafaga, 431 B.R. 329289 (Bankr. E.D.N.Y.2010); In


re Perez, 173 B.R. 284, 289 (Bankr. E.D.N.Y.1994). Fed.R.Civ.P. 15( c.) made
applicable herein by Fed.R.Bankr.P. 7015 governs “relation back of
amendments.” It provides, in pertinent part:

“( c.) Relation Back of Amendments.

(1) When an Amendment Relates Back. An amendment to a pleading relates


back to the date of the original pleading when:

(A) the law that provides the applicable statute of limitations allows relation
back;

(B) the amendment asserts a claim or defense that arose out of the conduct,
transaction, or occurrence set out—or attempted to be set out--in the original
pleading . . .”

If the original pleading adequately identifies the factual circumstances out of

which the amended claim arises, the amendment will relate back. However,
if an

amendment states an entirely new claim for relief based upon a different set
of

facts, it will not relate back. 7015. In Re Khafaga, 431 B.R. 329289 (Bankr.
E.D.N.Y.2010); In re Perez, 173 B.R. at 290.

If a claim does not relate back, additional or new grounds of objection may

not be added through an amendment filed after the deadline for filing
complaints

objecting to dischargeability expired. Id., at 292, citing, Chaudhry v.


Ksenzowski

(In re Ksenzowski ), 56 B.R. 819, 829 (Bankr.E.D.N.Y.1985); Maes v. Herrera


(In
re Herrera ), 36 B.R. 693, 694 (Bankr. D.Colo. 1984).

The Amended Complaint’s First Claim makes allegations and describes a

transaction omitted from the initial Complaint’s Claim. The allegations of

misrepresentations made prior to the parties executing the Loan Agreement


are

entirely new. The initial Complaint’s Claim was devoid of any allegation of

fraud or misrepresentation prior to the parties executing the Loan


Agreement.

The Initial Complaint’s Claim for Relief and the second Amended Claim, seek
to deny the Debtor his discharge for “Willful and Malicious Injury by Mr. Lee
to Renaissance and to the Property of Renaissance” which allegedly occurred
on May, 2008 after Plaintiff entered into the Loan Agreement with the Debtor
in 2006. (Exhibit ). Based on the fact that the Debtor currently and always
owned the corporations in this case and Debtor’s amendment of his
Statement of Financial Affairs. It is clear that without the transfer of any
assets there could be no willful and malicious injury to property. Plaintiff was
given an opportunity to fix this claim and failed to.

Plaintiff’s claim under § 523(a)(2)(A) or (B), fails because the requisite causal
connection is lacking between the allegedly false written and oral statements
and the damages claimed by Plaintiff. Plaintiff cannot allege that the
allegedly false reports provided by the Defendant induced it to enter into the
Loan Agreement, because the Plaintiff claims to the contrary in the original
and second claim of the Amended Complaint that “On March 28, 2007, to
induce Renaissance to make the loan, the defendant, in this action, Mr. Lee
executed a Personal Guaranty guaranteeing the full repayment of the
Promissory Note. “ At that time Debtor owned real property known as 70-
87A Park Drive East, #887A, Flushing, NY.

Plaintiff’s claimed damages in the original complaint arose when the Debtor
erroneously stated in his bankruptcy petition that he had transferred L & W
Express Van Service Corp. to Zhen Yong Li, in May of 2008. See Exhibits .
This error was corrected by amendment and Plaintiff’s attorney was made
well aware that there was never any transfer and the Debtor owns the
corporations to date. Plaintiff’s counsel was shown the corporate kits, which
contained all original shares of stock, for both corporations. Both
corporations were offered to Plaintiff’s attorney pursuant to Plaintiff’s alleged
security interest and he refused. Therefore, Plaintiff cannot plausibly allege
that it suffered damages because it relied, let alone “reasonably relied” on
the Defendant’s erroneous statements in his original bankruptcy petition,
filed years after the Loan Agreement was made, as required under §523(a)
(2)(B). Daly v. Braizblot (In re Blaizblot), 194 B.R. 14, 19 (E.D.N.Y.1996).

There were no allegations in Plaintiff’s original complaint about the Debtor’s


conduct prior to entering into the Loan Agreement with Plaintiff. (Exhibit ).

The Amended Complaint’s New Allegations

The Amended Complaint adds twenty three new paragraphs to the


pleading’s.

The Amended Complaint’s First Claim Fails to Relate Back

It cannot be said that the transaction in the initial Complaint’s Claim is

the same transaction in the Amended Complaint’s First Claim. The initial

Complaint’s Claim describes a transaction that allegedly occurred after the

parties executed the Loan Agreement . The Amended Complaint’s First


Claim describes a transaction that allegedly occurred before the parties
executed the Loan Agreement.

To the extent, the Amended First Claim is based on allegations differing and
contradicting the initial Complaint’s Claim it fails to state a claim for which
relief could be granted. To the extent, the Amended First Claim relies on the
new allegations, it does not relate back and is time barred.

The transaction described in the original pleading is not the same as the
claim

asserted in the amended pleading. The initial Complaint did not give Mr. Lee

fair notice that he was being sued for his alleged conduct before the parties
signed

the Loan Agreement. Therefore, the Amended Complaint’s First Claim does

not relate back and must be dismissed. In Re Khafaga, 431 B.R. 329289
(Bankr. E.D.N.Y.2010); In re Perez, 173 B.R. at 290.

CONCLUSION
THE ORIGINAL COMPLAINT COMPLAINTMUST BE DISMISSED FOR FAILING TO
STATE A CLAIM AND THE AMENDED COMPLAINT MUST BE DISMISSED FOR
FAILING TO STATE A CLAIM AND BEING TIME BARRED

Dated: Brooklyn, New York

By:/s/ Derrick Hanna


Derrick Hanna, of counsel
Brooklyn Bar, VLP
Hanna & Vlahakis
7504 Fifth Avenue
Brooklyn, NY 11209
(718) 680-8400

________________________

MICHAEL CHUN KIN LEE