In re Young, Bankruptcy No. 08-24099 JPK

• Citation: 428 B.R. 804
• Decision Date: 21 January 2010
• Docket Number: Adversary No. 09-2077,Bankruptcy No. 08-24099 JPK
• Parties: In re Stephen Mark YOUNG, Debtor. Centier Bank, Plaintiff, v. Stephen Mark Young, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Indiana

428 B.R. 804

In re Stephen Mark YOUNG, Debtor.Centier Bank, Plaintiff,

v.Stephen Mark Young, Defendant.

Bankruptcy No. 08-24099 JPK.

Adversary No. 09-2077.

United States Bankruptcy Court,

N.D. Indiana,

Hammond Division.

Jan. 21, 2010.

Greg A. Bouwer, Esq. and James M. Yannakopoulos, Esq., Koransky & Bouwer, P.C., Dyer, IN, for the Plaintiff Centier Bank.

Daniel L. Freeland, Esq., Highland, IN, for the Defendant, Stephen Mark Young.

MEMORANDUM AND DECISION

J. PHILIP KLINGEBERGER, Bankruptcy Judge.

This adversary proceeding was initiated by a complaint filed by Centier Bank("Centier") on March 9, 2009, which designated "Stephen Mark Young a/k/a Harvest Homes ("Young")" as the defendant. On April 13, 2009, Young filed an answer to the complaint which included certain designated affirmative defenses. The parties then filed what the court will describe as skirmishing motions.¹ In order to sort out the case, the court conducted a pre-trial conference on July 10, 2009, which resulted in the following order:

Docket Entry: Pre-Trial held on 7/10/09 RE: related document(s)[1]Complaint filed by Plaintiff Centier Bank. APPEARANCES: Atty. Paul Poracky on behalf of Plaintiff. It is ORDERED that the plaintiff shall file an amended complaint—designating each separate statutory basis for requested relief as a separate count—by August 7, 2009. The defendant shall file an answer or other response to the amended complaint by 8/28/09. The court will schedule a preliminary pre-trial conference upon the closing of these pleadings. The motions filed as record entries 6, 8 and 10 are mooted by this order's direction to file an amended complaint. In stating affirmative defenses the defendant is advised to review Heller Financial, Inc. vs. Midwhey Powder Co., Inc., 883 F.2nd 1286 [headnote 16](7th Cir.1989).(pg)

Pursuant to the court's order, Centier filed an amended complaint on August 7, 2009, which was met by Young's motion to dismiss the complaint pursuant to Fed.R.Bankr.P. 7012(b)/Fed.R.Bankr.P. 12(b)(6) filed on August 28, 2009. This motion was accompanied by a supporting memorandum, as required by applicable rules. On September 28, 2009, Centier filed a response to the motion to dismiss, and a memorandum in support of that response. At a preliminary pre-trial conference held on October 19, 2009, the court entered an order which stated that further proceedings in the case would be determined after the court's determination of Young's motion to dismiss.

This adversary proceeding is now before the court on Young's motion to dismiss filed on August 28, 2009, and Centier's response to that motion.

The court has jurisdiction of this adversary proceeding pursuant to 28 U.S.C. § 1334(b), 28 U.S.C. § 157(a) and (b), and N.D.Ind.L.R. 200.1(a). The contested matter is a "core" proceeding under 28 U.S.C. § 157(b)(2)(I).

In its response to Young's motion to dismiss, Centier has conceded dismissal of Count IV of the amended complaint. The court therefore determines that Count IV of the amended complaint is dismissed, with prejudice.

Young contends in part that Counts II and III of the amended complaint assert claims which were not presented in the original complaint, and thus are barred by the deadline for filing of a complaint asserting grounds for exception to discharge under 11 U.S.C. § 523(c)(1)/Fed.R.Bankr.P. 4007(c). Centier counters that all claims stated in the amended complaint relate back to the date of the filing of the original complaint, and are thus not time-barred.

Fed.R.Civ.P. 15(c)(1)(B)—the provision which is applicable to the parties' arguments—states the following:

(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:

...

(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;

As stated in Bularz v. Prudential Insurance Company of America, 93 F.3d 372, 379 (7th Cir.1996):

Under Federal Rule of Civil Procedure 15(c)(2), an amended complaint relates back to the date of the original pleading when "the claim ... asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Id. In general, relation back is permitted under Rule 15(c)(2) where an amended complaint asserts a new claim on the basis of the same core of facts, but involving a different substantive legal theory than that advanced in the original pleading. Donnelly v. Yellow Freight System, Inc., 874 F.2d 402, 410 (7th Cir.1989), aff'd. on other grounds, 494 U.S. 820, 110 S.Ct. 1566, 108 L.Ed.2d 834 (1990); see also Worthington v. Wilson, 8 F.3d 1253, 1256 (7th Cir.1993) (quoting Wood v. Worachek, 618 F.2d 1225, 1229 (7th Cir.1980)); Alpern v. UtiliCorp United, Inc., 84 F.3d 1525, 1543 (8th Cir.1996) (collecting cases). Thus, a new substantive claim that would otherwise be time-barred relates back to the date of the original pleading, provided the new claim stems from the same "conduct, transaction, or occurrence" as was alleged in the original complaint; for relation back to apply, there is no additional requirement that the claim be based on an identical theory of recovery. E.g., Donnelly, 874 F.2d at 410; Federal Deposit Ins. Corp. v. Bennett, 898 F.2d 477, 479-80 (5th Cir.1990).

The original complaint asserted—albeit inartfully—that certain actions of Young undertaken with respect to specified transactions gave rise to actions under 11 U.S.C. § 523(a)(2), § 523(a)(4) and § 523(a)(6). The specific transactions alleged to have given rise to these actions were identified in Count I of the original complaint as being the provision of multiple sworn statements to obtain release of funds. The amended complaint is based only in part upon the same transactions as was the original complaint. As Young noted in his memorandum, and as the court endorses, the standard by which "relation back" is to be judged was well-stated in In re Austin Driveway Services, Inc., 179 B.R. 390, 395 (Bankr.D.Conn.1995), as follows:

Rule 15(c) is "to be liberally construed, particularly where an amendment does not 'allege a new cause of action but merely ... make[s] defective allegations more definite and precise.' " Siegel v. Converters Transp., Inc., 714 F.2d 213, 216 (2d Cir.1983) (per curiam) (quoting Glint Factors, Inc. v. Schnapp, 126 F.2d 207, 209 (2d Cir.1942)). "The rationale of Rule 15(c) is that a party who has been notified of litigation concerning a particular occurrence has been given all the notice that statutes of limitations were intended to provide." Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 150 n. 3, 104 S.Ct. 1723, 1725, n. 3, 80 L.Ed.2d 196 (1984) (per curiam). Thus, the relation back analysis focuses on the notice given by the general fact situation stated in the original pleading. Rosenberg v. Martin, 478 F.2d 520, 526 (2d Cir.), cert. denied, 414 U.S. 872, 94 S.Ct. 102, 38 L.Ed.2d 90 (1973); see Brandt v. Gerardo (In re Gerardo Leasing, Inc.), 173 B.R. 379, 388 (Bankr.N.D.Ill.1994) ("The most important factor in determining whether to allow an amended complaint to relate back to the date of the original filing is whether the original complaint provided the defendant with sufficient notice of what must be defended against in the amended pleading."). Put another way, a new cause of action otherwise barred by the statute of limitations may be asserted by an amendment that relies upon the same facts because the defendant is on notice that specific conduct, transactions, or occurrences allegedly support a claim against it so that relevant evidence should be preserved.

Both Count I of the original complaint and Count I of the amended complaint relate to construction draw transactions, identified in the original complaint and carried over into the amended complaint. However, Counts II and III of the amended complaint are premised upon documentation submitted, and representations made, prior to Centier's granting of loans in the first place and/or in a context other than construction draw submissions. The transactions and facts referenced in Count I of the original complaint and Counts II and III of the amended complaint are entirely different, in terms of both temporal and substantive elements. There is nothing in the original complaint which can be deemed to have placed Young on notice of the transactions which are the subjects of Counts II and III of the amended complaint. Therefore, Counts II and III of the amended complaint do not relate back to the time of filing of the original complaint, and the claims asserted in those two counts are time-barred by Fed.R.Bankr.P. 4007(c).

As is customary with motions to dismiss pursuant to Rule 12(b)(6) filed by defendants, much of Young's argument is devoted essentially to contentions that Centier has not proven its case on the face of the pleadings. As is customary with responses to Rule 12(b)(6) motions filed by plaintiffs, Centier has sought to elaborate upon the theories of its complaint in its responsive memorandum. Both parties have missed the point of Rule 12(b)(6), as construed by the United States Supreme Court. Amazingly, neither party has cited the presently applicable standard for review of complaints under Rule 12(b)(6) in relation to Rule 8(a) of the Federal Rules of Civil Procedure. The parties did a little better with respect to addressing the pleading requirements of Fed.R.Civ.P. 9(b), incorporated into adversary proceedings by Fed.R.Bankr.P. 7009.

Rule 12(b)(6), made applicable to adversary proceedings by Fed.R.Bankr.P. 7012(b), provides for the defense of "failure to state a claim upon which relief can be granted".

The decision of the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), now provides the definitive standard for allegations which must be provided in a...