Daniels v. Howe Law Firm, P.C. (In re Daniels)
Daniels v. Howe Law Firm, P.C. (In re Daniels)
Opinion of the Court
Before the Court is the Motion for Partial Summary Judgment (the "Motion") (Doc. No. 69), filed in the above-captioned adversary proceeding by Gregory Daniels ("Plaintiff"). Howe Law Firm, P.C. ("Defendant") opposes the Motion. This matter arises in connection with Plaintiff's suit against Defendant seeking damages for violations of the discharge injunction, violations of the Fair Debt Collection Practices Act (the "FDCPA"), and for negligence.
FACTS AND PROCEDURAL HISTORY
On March 2, 2009 (the "Petition Date"), Plaintiff filed a voluntary petition under Chapter 7 of the Bankruptcy Code. See Case Number 09-65367-LRC, Dkt. No. 1. On June 11, 2009, the Chapter 7 trustee assigned to Plaintiff's case filed a report indicating that there was no property available for distribution to creditors, and no claims bar date was ever established. Id. The deadline for filing a complaint objecting to Plaintiff's discharge or for a determination of the dischargeability of a particular debt was June 12, 2009. Id. Dkt. No. 2; Fed. R. Bankr. P. 4004, 4007. The Court entered a discharge order and closed the bankruptcy estate on June 17, 2009 (the "Discharge Order"). Id. Dkt. No. 16, Complaint, Ex. A.
On April 14, 2011, Plaintiff filed an emergency motion for sanctions and violation of the discharge injunction in Plaintiff's bankruptcy case (the "Emergency Sanctions Motion").See Case Number 09-65367-LRC, Dkt. No. 21. In the Emergency Sanctions Motion, Plaintiff asserted that, on June 29, 2010, Kim Anderson ("Anderson") had filed a civil action in the Superior Court of Fulton County ("Superior Court") against Plaintiff, seeking damages related to the prepetition sale of real property. Plaintiff sought a determination from this Court that the debt asserted by Anderson in the state court suit had been discharged. On August 17, 2011, this Court abstained from granting the relief requested in the Emergency Sanctions Motion on *819the basis that: (1) the Superior Court had concurrent jurisdiction to determine whether the debt at issue was discharged; and (2) a suit was already pending before the Superior Court in which such a determination could be made.
Thereafter, Plaintiff moved the Superior Court to enforce the discharge injunction by finding that the debt was discharged. The Superior Court denied Plaintiff's motion, stating:
[T]o the extent that it can be established that Plaintiff's breach of warranty claim rests upon false pretenses, false representations, or fraud, such a claim would be excepted from discharge. Indeed, at this time, and without addressing the merits of Plaintiff's breach of warranty claim, it appears that the breach of warranty claim is excepted from the discharge. Therefore, the instant motion is DENIED. However, based upon further development of the record, the Court may revisit this issue at a later date.
Complaint Exh. C. Anderson voluntarily dismissed the action without prejudice before the Superior Court could revisit the issue. Complaint, ¶ 16.
In November 2013, Network Commercial Services Incorporated ("Network"), as assignee of Stewart Title Guaranty Company ("Stewart Title"), as subrogee Anderson, filed a complaint against Plaintiff in the State Court of Fulton County (the "Network Action"). Plaintiff's Statement of Undisputed Material Facts
In his amended answer, filed on November 27, 2014, Plaintiff moved for dismissal and for summary judgment on the basis of "the existence of the chapter 7 discharge." SUMF ¶ 5; Response to SUMF ¶ 5. Plaintiff also filed a motion to dismiss the Network Action on December 11, 2013, on the basis that Network lacked standing to bring the claims. SUMF ¶ 6; Response to SUMF ¶ 6. In January 2015, the Network Action was dismissed without prejudice for failure to prosecute. SUMF ¶ 8; Response to SUMF ¶ 8.
After the dismissal of the Network Action, Plaintiff filed a complaint against Network and Defendant in the District Court for the Northern District of Georgia (Case No. 15-cv-00827-SCJ) (the "Federal Action"). SUMF, ¶ 9; Response to SUMF, ¶ 9. In the Federal Action, Plaintiff sued Defendant for violations of the FDCPA and alleged the existence of a Chapter 7 *820bankruptcy discharge. SUMF, ¶ 9; Response to SUMF, ¶ 9.
On April 3, 2015, Defendant refiled in the State Court of Fulton County a complaint against Plaintiff on Network's behalf that was "closely similar" to the complaint previously dismissed for failure to prosecute (the "Second Network Action"). SUMF, ¶ 10; Response to SUMF, ¶ 10. Defendant voluntarily dismissed the Second Network Action in November 2015, prior to a scheduled trial. SUMF, ¶ 11; Response to SUMF, ¶ 11.
In April 2015, Plaintiff filed a motion to reopen his bankruptcy case for the purpose of filing suit against Network. See Case Number 09-65367-LRC, Dkt. No. 32. Plaintiff initiated this adversary proceeding on July 23, 2015, by filing a complaint against Network, to which Defendant was later added by amendment.
The Court takes judicial notice of the fact that Plaintiff's Schedule F did not list a debt owed to Anderson, Stewart Title, or Network and that Plaintiff's attached creditors' list did not include the names and addresses of Anderson, Stewart Title, Network, or HLF. See Case Number 09-65367-LRC, Dkt. No. 1. The Court takes further judicial notice of the fact that the Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines mailed to scheduled creditors in Plaintiff's bankruptcy case was not mailed to Anderson, Stewart Title, Network, or HLF. See id. , Dkt. No. 7.
While Defendant does not dispute the facts above, Defendant's Response to Plaintiff's Statement of Undisputed Facts in Support of Plaintiff's Motion for Partial Summary Judgment and Statement of Additional Facts ("Defendant's SUMF") includes additional facts, which Defendant asserts are "material to the Court's consideration" of the Motion. Defendant's SUMF, ¶ II. Plaintiff objects to the Court's consideration of these additional facts as being supported only by "inadmissible hearsay."
The Court finds the following additional facts to be relevant to this matter and that Defendant has properly relied upon the affidavits of Kim Anderson and Felicia E. Saintil-Deltis for the purpose of demonstrating the existence of a genuine issue of material fact in defense of the Motion.
*821Plaintiff applied for and obtained a HELOC from Washington Mutual, which was secured by the Property. Affidavit of Felicia E. Saintil-Deltis, ¶ 2. The security deed for the HELOC was never cancelled or marked paid in the land records of Cobb County, Georgia. Id. ¶ 9. After August 30, 2005, Plaintiff continued to borrow on the HELOC and ultimately defaulted under the terms of the HELCO and failed to make payments, leaving, as of March 16, 2010, an unpaid principal balance of $296,226.37. Id. ¶¶ 10, 13. Prior to June 2010, Anderson had no notice of knowledge of Plaintiff's bankruptcy filing. Affidavit of Kim Anderson, ¶ 2.
CONCLUSIONS OF LAW
Plaintiff seeks partial summary judgment as to Defendant's liability for violations of the discharge injunction, violations of the FDCPA, and negligence.
A. Summary Judgment Standard
In accordance with Federal Rule of Civil Procedure 56 (applicable to bankruptcy proceedings under Rule 7056 of the Federal Rules of Bankruptcy Procedure ), the Court will grant summary judgment only if "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c) ; see also Hairston v. Gainesville Sun Publ'shg Co. ,
To determine whether a genuine issue of material fact exists, the Court must view the evidence in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co. ,
B. Violations of the Discharge Injunction
" Section 524 of the bankruptcy code provides the debtor with a post-discharge injunction against collection of debts discharged in bankruptcy," -a "barrier that prevents creditors from reaching the debtors' wages, property or assets." In re Hardy ,
"A willful violation occurs when the defendant: (1) knew that the discharge injunction was in place, and (2) intended the action that violated the discharge injunction." Henriquez ,
That being said, "[t]o reach the issues of whether ... contempt is appropriate, the Court must first determine whether any debts that the Debtor purportedly owes to [Network] were discharged in his bankruptcy case." In re Hardej ,
A party seeking summary judgment cannot show "that he is entitled to judgment as a matter of law" without establishing "by record evidence that there are no genuine disputes of material fact and that he is entitled to judgment as a matter of law." In re Russo ,
Here, Plaintiff alleges that Defendant violated the discharge injunction by collecting a debt owed to Network. According to Network's complaint filed in the *824Network Action, the debt arose due to Plaintiff's false swearing and misrepresentations in his "Sellers Affidavit" and "Warranty Deed" in connection with his sale of real property to Anderson and a payment to Anderson by Network's assignor, Stewart Title. In its defense, Defendant asserts that the debt was not discharged, either because it arose post-petition or, alternatively, if it did arise pre-petition, because it is excepted from discharge under § 523(a)(3)(B).
As a threshold matter, Plaintiff asserts that Network "was never an actual creditor [of Plaintiff] and was owed nothing in light of Anderson's continued possession of title and right to press her claims." Plaintiff, therefore, argues that Network has no standing to assert that the debt was not discharged. While that might be the case if Defendant were the creditor seeking a determination of nondischargeability in order to collect the debt, Defendant has never asserted an ownership interest in the debt and relies on the determination of nondischargeability solely to defend itself against liability for violating the discharge injunction. Standing " 'is a jurisdictional prerequisite to suit in federal court.' " Chen v. Siemens Energy Inc.,
In any event, even if prudential considerations would prevent Defendant from raising the rights of another, the Court rejects Plaintiff's argument that Network did not become a creditor holding a debt against Plaintiff when it took an assignment from Stewart Title. Plaintiff argues that Network did not receive the right to sue Plaintiff when it took the assignment of Stewart Title's subrogation claim because Stewart Title, and therefore Network, would have been required to sue Plaintiff in Anderson's name, rather than in its own name. Even assuming that is the law, the fact that Network did not do so when it filed the State Court Action does not establish that Network had no right to do so. Plaintiff appears to have conceded that Stewart Title assigned whatever debt it had against Plaintiff to Network. For purposes of the discharge injunction violation before this Court, the only relevant question is whether that debt, whatever it was and to whomever it was owed, was subject to the discharge injunction. To make that determination, the Court need not determine that Network successfully collected the debt or speculate whether it would have renewed its efforts. Rather, the Court need only determine that any debt that Defendant attempted to collect was a prepetition debt that was not of the kind listed in § 523(a)(2), (4), or (6).
In that regard, Plaintiff asserts that the debt Defendant attempted to collect is a prepetition debt because Anderson's claim for breach of warranty of title arose when Plaintiff executed the warranty deed. Defendant asserts that no claim arose until such time as Plaintiff borrowed additional *825money on the HELOC and Plaintiff's lender notified Anderson that it was going to foreclose on the Property.
In a Chapter 7 case, only debts that arose prior to the date of the order for relief-the date of the commencement of the bankruptcy case-are discharged. See
In the Eleventh Circuit, courts apply the " Piper test" to determine whether a creditor holds a "claim" against the bankruptcy estate. Epstein,
The undisputed facts demonstrate that a relationship existed between Plaintiff and Anderson prepetition, in that Plaintiff executed the warranty deed in 2005, well before the Petition Date, and that Plaintiff engaged in the conduct necessary to create a claim. Plaintiff executed the warranty deed in 2005. To the extent that the warranty of title was false, it was false at the time it was given because the encumbrance that Anderson complained of as breaching the warranty of title was not marked satisfied and remained on the Property, subject to future advances being taken by Plaintiff. Teems v. City of Forest Park ,
As to this, Plaintiff argues, and the Court agrees, that the debt cannot be of the kind specified under § 523(a)(2) because the undisputed facts demonstrate that any claim held by Network against Plaintiff for fraud was not originally owed to Network, and Georgia law does not permit the assignment of fraud claims. See O.C.G.A. § 44-12-24 ; see also In re Pittard ,
This conclusion leaves the possibility that Defendant may be able to defend itself against Plaintiff's claim by showing that the debt at issue is of the kind specified in § 523(a)(6) and, therefore, was nondischargeable under § 523(a)(3)(B). The undisputed facts show that Plaintiff filed a Chapter 7 bankruptcy case and did not schedule or otherwise list a debt to Anderson; that the deadline for filing a complaint to determine the dischargeability of a particular debt in Plaintiff's case was June 12, 2009; and that prior to June 2010, Anderson had no notice of knowledge of Plaintiff's bankruptcy filing. In opposition to Plaintiff's motion for summary judgment, Defendant has pointed to evidence to raise questions of fact as to whether Plaintiff borrowed money on a HELOC, knowing the resulting debt would be secured by property he had sold to Anderson and failed to make payments on the debt, causing it to go into default. None of the facts stated in Plaintiff's statement of undisputed facts rebut the possibility that Plaintiff incurred a debt "for willful and malicious injury" to Anderson or her property. This determination requires a highly factual analysis, and factual disputes exist on matters including, but not limited to, Plaintiff's intent when continuing to borrow funds on the HELOC and his understanding of the impact of his continued use of the HELOC on the Property. Based on these factual issues, the Court cannot conclude that Plaintiff is entitled to summary judgment that Defendant violated the discharge injunction.
C. FDCPA and Negligence Claims
The Court has not determined whether it has subject matter jurisdiction over Plaintiff's claims for violations of the FDCPA and negligence. This Court's subject matter jurisdiction is limited to "any or all cases under title 11 and any or all proceedings arising under title 11 or arising in or related to a case under title 11."
In this case, Plaintiff is a debtor in a Chapter 7 case, and the acts complained of occurred post-petition. Accordingly, the FDCPA and negligence claims are not property of the estate, see
There is a split of authority as to whether the bankruptcy court may exercise ancillary (or supplemental) jurisdiction over claims that would not otherwise meet the "related to" jurisdiction test. Compare In re Hosp. Ventures/LaVista ,
The Court has not yet considered or decided whether it has the authority to exercise supplemental jurisdiction, and the parties have not had an opportunity to brief the issue or argue that the claims in this case are not "core-related supplemental claims." Further, "[e]ven where a court has the power to employ supplemental jurisdiction, it is within the court's discretion to decline to do so in appropriate circumstances," In re Marshall ,
CONCLUSION
For the reasons stated above, the Court concludes that Plaintiff is not entitled to summary judgment as to Defendant's liability for violations of the discharge injunction and that the Court should defer any consideration of the Motion as it pertains to the FDCPA and negligence claims. Accordingly,
IT IS ORDERED that the Motion is DENIED in part, with a ruling on the remaining portion of the Motion being deferred pending further briefing on the issue of subject matter jurisdiction.
IT IS ORDERED as set forth below .
Plaintiff's claim for sanctions for violations of the discharge injunction arises under the Bankruptcy Code and, therefore, is a core proceeding, over which this Court has subject matter jurisdiction. See
Plaintiff filed a "separate and concise statement of the material facts, numbered separately, as to which the movant contends no genuine issue exists to be tried," as required by BLR 7056-1. Defendant has responded and, where appropriate, has "specifically controverted" certain of those facts. Accordingly, the Court has determined which facts have not been deemed admitted. See BLR 7056-1(a). In all instances, the Court has viewed "the evidence and factual inferences in the light most favorable to [Defendant], as required on a motion for summary judgment." Parton v. United Parcel Serv. ,
"The court recognizes that pursuant to Federal Rule of Bankruptcy Procedure 9020 and 9014, the traditional way to bring an action for contempt is by motion. However, because an adversary proceeding provides a defendant with more, not less procedural protection than in a Rule 9014 contested matter brought by motion, "courts routinely hear contempt actions brought as adversary proceedings." In re Bennett ,
Plaintiff has objected to Defendant's reliance on legal briefs filed by Anderson in the Bankruptcy Case as not constituting evidence or a judicial admission. The Court agrees that facts asserted in a brief are not evidence and has not considered such facts. The Court will consider only the two affidavits incorporated by reference in Defendant's SUMF. Although the best practice would have been for Defendant to attach copies of the affidavits as exhibits to Defendant's SUMF, the affidavits are filed in Plaintiff's related bankruptcy case and are easily accessible to the Court and Plaintiff, such that neither the Court nor Plaintiff has been prejudiced. Given their incorporation by reference, the Court finds that the affidavits are "filed in the record" within the meaning of Rule 56(c). Further, the Anderson and Saintil-Deltis affidavits appear to be based upon the personal knowledge of the affiants, and the information contained therein is either not hearsay or admissible under an exception to the hearsay rule.
Plaintiff seeks damages only with regard to Defendant's participation in the filing of the Second Network Action. See Third Amended Complaint, n.2 (Dkt. No. 57).
Here, Defendant ceased pursuit of the lawsuit against Plaintiff long ago and, thus, sanctions to coerce Defendant into complying with the discharge injunction are not warranted or available.
There is a split of authority as to which party bears the burden of proof on a motion for contempt of the discharge injunction when the issue turns on whether or not the debt has been discharged. Compare In re Azevedo ,
The Court recognizes a split of authority on the burden of proof regarding § 523(a)(3). However, the Court agrees with the reasoning of In re Jones that "[r]eading § 523(a)(3)(B) to include a requirement that the creditor prove the merits of the incorporated § 523(a)(2), (4) or (6) action simply states the obvious policy choice already made by Congress with respect to debtors who fail to list creditors: the short time periods and exclusive jurisdiction that a scheduled defrauded creditor faces under § 523(c) and Bankruptcy Rule 4007(c) are forfeited when the debtor fails to schedule a claim that would be nondischargeable under § 523(a)(2), (4) or (6)." Allowing an omitted creditor to establish nondischargeability under § 523(a)(3)(B) by showing a colorable claim "reads into § 523(a)(3)(B) congressional intent to bar the discharge of an inadvertently omitted debt-an outcome difficult to square with the robust policy of fresh start for the honest but unfortunate debtor."
Reference
- Full Case Name
- In the MATTER OF: Gregory DANIELS, Debtor. Gregory Daniels v. Howe Law Firm, P.C.
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