In re O'Connor

630 B.R. 384

IN RE Misty G. O'CONNOR, d/b/a Misty Shores Events, LLC Debtor.

BK 18-11779 CLB

United States Bankruptcy Court, W.D. New York.

Signed July 27, 2021

Mark J. Schlant, Esq. 1600 Main Place Tower 350 Main Street Buffalo, New York 14202 Chapter 7 Trustee.

Craig A. Markham 5622 East Lake Road Erie, Pennsylvania 16511 Pro Se Creditor.

DECISION & ORDER

Carl L. Bucki, Chief U.S.B.J., W.D.N.Y.

On this claim objection, the central issue of law is whether email communications can satisfy the requirement of the New York Statute of Frauds that a promise to answer for the debt of another be in writing and subscribed by the party assuming the obligation.

Prior to the filing of her bankruptcy petition, Misty G. O'Connor established a limited liability company named Misty Shores Events, LLC. The purpose of this entity was to operate a wedding venue that was under construction in Ripley, New York. Anticipating a timely completion of its reception facility, Misty Shores Events, LLC, began to schedule wedding dates. Thus, on September 10, 2017, Shannon Markham and Cameron Folga entered into a contract with Misty Shores Events, LLC, for the purchase of a "full wedding and reception package" that included a rental of the reception facility on June 16, 2018, at a total cost of $17,500. Craig A. Markham, the father of the prospective bride, then paid to the company a required deposit of $1,000.

Misty Shores Events, LLC, was ultimately unable to open for business and failed to return any of ten customer deposits, including that which Mr. Markham had advanced. On March 4, 2018, in an effort to resolve the resulting claim, Misty O'Connor sent an email to Shannon Markham. In it, Ms. O'Connor wrote that she was "personally trying to pick up the pieces of my business not opening," and that she "agreed to pay each couple monthly payments until their full deposited amount is paid in full." Despite this promise, Craig Markham received no reimbursement.

Misty G. O'Connor filed a petition for relief under Chapter 7 of the Bankruptcy Code on September 12, 2018. In her schedule of unsecured creditors, the debtor included the customers who had paid deposits to Misty Shores Events, LLC. In each instance, the schedule contained no indication that the liability was contingent, unliquidated or disputed.

In June of 2019, the Chapter 7 trustee caused the issuance of a notice to all creditors that he had recovered assets and that a deadline had been set for the filing of proofs of claim. In response, Craig Markham filed a timely proof of claim for an unsecured, non-priority debt of $1,000. Objecting to this claim, the trustee contends that the deposit created an obligation of the limited liability company only and that the company's separate existence served to insulate Misty O'Connor. Craig Markham responds that he holds a valid claim against the bankruptcy estate by reason of the fact that the debtor had assumed personal responsibility for her company's indebted-ness.

The email from Misty O'Connor to Shannon Markham contains a promise to pay an obligation of Misty Shores Events, LLC. Consideration for this commitment derives from the decision of Craig Markham to defer legal proceedings for collection. At issue, however, is whether Misty O'Connor's personal pledge satisfies the requirements of the Statute of Frauds as codified in the New York General Obligations Law.

Section 5-701(a)(2) of the New York General Obligations Law states in relevant part as follows:

"Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking ... [i]s a special promise to answer for the debt, default or miscarriage of another person."

To be valid, therefore, the promise of Misty O'Connor to answer for the debt of Misty Shores Events, LLC, would need to be evidenced by a writing subscribed by the debtor. Here, the only such evidence is an email presented in the format of a letter. After what in a traditional letter would have been called the complimentary closing, Ms. O'Connor typed "Misty" in a space immediately above a line reciting her full name.

Since March 26, 2000, the Electronic Signatures and Records Act has governed the use and authentication of electronic documents in the State of New York. See N.Y. STATE TECH. Art. 3 (McKinney 2016). This statute confirms two conclusions: first, that the email from Misty O'Connor has the force of a writing; and second, that Misty O'Connor effectively subscribed that writing.

Section 302 of the Electronic Signatures and Records Act broadly defines "electronic record" as "information, evidencing any act, transaction, occurrence, event, or other activity, produced or stored by electronic means and capable of being accurately reproduced in forms perceptible by human sensory capabilities." N.Y. STATE TECH . § 302(2) (McKinney 2016). As a document stored by electronic means, Misty O'Connor's email satisfies the definition of an electronic record. Pursuant to section 305(3) of the statute, "[a]n electronic record shall have the same force and effect as those records not produced by electronic means." N.Y. STATE TECH . § 305(3) (McKinney 2016). Consequently, the email enjoys the same status of a writing in the form of a letter etched with ink on paper.

When applicable, New York's Statute of Frauds requires not only a writing, but also that the writing be subscribed. In this regard, the Electronic Signatures and Records Act provides that "unless specifically provided otherwise by law, an electronic signature may be used by a person in lieu of a signature affixed by hand. The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand."...