Atkins v. Gelt Props., LLC (In re Atkins)
| Decision Date | 27 February 2015 |
| Docket Number | Adv. No. 14–0330 ELF,Bky. No. 14–14696 ELF |
| Citation | 525 B.R. 594 |
| Parties | In re: Craig Atkins, Debtor. Craig Atkins, Plaintiff, v. Gelt Properties, LLC, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
OPINION TEXT STARTS HERE
Joseph A. Diorio, Brian J. Smith and Associates, Willow Grove, PA, for Plaintiff.
Thomas Daniel Bielli, O'Kelly Ernst & Bielli, LLC, Philadelphia, PA, for Defendant.
Federal Deposit Insurance Corporation, Washington, DC, pro se.
National Penn Bank, Doylestown, PA, pro se.
Capital Bank, National Association, Rockville, MD, pro se.
In this adversary proceeding, the chapter 13 debtor seeks to avoid a mortgage on real property by invoking the chapter 13 trustee's status as a hypothetical bona fide purchaser and avoidance power under 11 U.S.C. § 544(a)(3). The debtor asserts that a bona fide purchaser may avoid the subject mortgage because the original mortgagee assigned the mortgage and the assignee did not record the assignment in the public record. The debtor also asserts a claim for equitable subordination of the mortgage.
Presently before the court is a motion to dismiss the amended complaint under Fed. R. Civ. P. 12(b)(6). For the reasons explained below, I will grant the motion and dismiss the complaint with prejudice.
Craig O. Atkins (“the Debtor”) filed a chapter 13 bankruptcy case in this court on June 10, 2014. (Bky. No. 14–14696). He commenced this adversary proceeding by filing a complaint against Defendant Gelt Properties, LLC (“Gelt”) on July 23, 2014.1
The Complaint included three (3) counts:
(1) Count I: a request for a declaratory judgment that the Debtor's interest as a hypothetical bona fide purchaser for value is superior to that of Gelt;
(2) Count II: a claim for avoidance of Gelt's mortgage under 11 U.S.C. § 544(a)(3); and
(3) Count III: a demand for turnover of the subject real estate from Gelt (in Gelt's capacity as pre-petition state court receiver).
On September 15, 2014, Gelt filed a Motion to Dismiss Debtor's Complaint, or in the Alternative for Summary Judgment, (Doc. # 4), to which the Debtor responded on October 22, 2014.
By order dated October 23, 2014, the court granted Gelt's Motion and dismissed the Complaint. The court dismissed Count III with prejudice, but granted the Debtor leave to file an amended complaint with respect to Counts I and II.
The Debtor filed an Amended Complaint on November 7, 2014. (Doc. # 15). In the Amended Complaint, the Debtor added three (3) additional parties: Federal Deposit Insurance Corporation (“FDIC”), National Penn Bank (“NPB”) and Capital Bank, N.A. (“Capital”).2 The Amended Complaint again requested declaratory relief and asserted an avoidance claim under 11 U.S.C. § 544(a)(3). It also asserted a new claim, for either the equitable subordination or the “striking” of the subject mortgage.
On December 8, 2014, Gelt again filed a Motion to Dismiss Debtor's Amended Complaint, or in the Alternative for Summary Judgment (“the Motion”) (Doc. # 17). The Debtor filed his response to the Motion on January 8, 2015. (Doc. # 30). None of the new Defendants have responded to the Amended Complaint. 3
The purpose of a motion to dismiss a case under Fed. R. Civ. P. 12(b)(6) (incorporated by Fed. R. Bankr. P. 7012) is to test the legal sufficiency of the factual allegations of a complaint, seeKost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993), and to determine whether a plaintiff is “entitled to offer evidence to support the claims,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 n. 8, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).
A defendant is entitled to dismissal of a complaint only if the plaintiff has not pled “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 547, 127 S.Ct. 1955. A claim is facially plausible where the facts set forth in the complaint allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In evaluating the plausibility of the plaintiff's claim, the court conducts a context-specific evaluation of the complaint, drawing from its judicial experience and common sense. See, e.g.,Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir.2009); In re Universal Marketing, Inc., 460 B.R. 828, 834 (Bankr.E.D.Pa.2011) (citing authorities); In re Olick, 2011 WL 2565665, at *1–2 (Bankr.E.D.Pa. June 28, 2011).4
In deciding a motion to dismiss a complaint under Rule 12(b)(6), the court is required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, viewing them in the light most favorable to the plaintiff. See, e.g.,Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Taliaferro v. Darby Township Zoning Board, 458 F.3d 181, 188 (3d Cir.2006). However, a court is not “bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).
Finally, in assessing a Rule 12(b)(6) motion, the court may “consider the allegations in the complaint, exhibits attached to the complaint and matters of public record ... [as well as,] ‘undisputedly authentic documents' where the plaintiff's claims are based on the documents and the defendant has attached a copy of the document to the motion to dismiss.” Unite Nat'l Ret. Fund v. Rosal Sportswear, Inc., 2007 WL 2713051, at *4 (M.D.Pa. Sept. 14, 2007) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993)); see alsoIn re Angulo, 2010 WL 1727999, at *12 n.1 (Bankr.E.D.Pa. Apr. 23, 2010).5
For purposes of deciding the Motion, I accept the following facts as true based on the allegations in the Amended Complaint and the admitted or indisputably authentic documents attached to the Motion.
1. On September 23, 2003, the Debtor, along with Andrew Duren and Joel Davenport (collectively, “the Purchasers”),6 purchased the real property located at 223–25 High Street, Phoenixville, PA (“the Property”) for the sum of $400,000.00. .
2. The Purchasers financed the transaction through two (2) mortgage loans:
(a) a loan from Gelt Business Credit, LLC (“GBC”) in the amount of $225,000.00 (“the GBC Mortgage Loan”), secured by a mortgage on the Property;
(b) a loan from Lee Erb in the amount of $135,00.00 (“the Erb Mortgage Loan”), secured by a mortgage on the Property.
3. On September 18, 2003, Erb recorded a mortgage against the Property on account of the Erb Mortgage Loan in the office of the Chester County Recorder of Deeds. (Am.Compl., Ex. C).
4. On September 18, 2003, GBC recorded a mortgage (“the Mortgage”) against the Property on account of the GBC Mortgage Loan in the office of the Chester County Recorder of Deeds. (Am.Compl., Ex. B).7
5. In connection with the GBC Mortgage Loan Transaction, the Purchasers also granted GBC an Assignment of Rents, Leases and Agreements of Sale (“the Assignment of Rents”), which was recorded September 18, 2003.
6. The GBC loan was “table funded.” 8
7. On September 18, 2003, Defendant NPB recorded a Collateral Assignment of Mortgage which stated:
a. GBC had “sold two thirds of [the GBC Mortgage Loan of $225,000.00] to Public Savings Bank (“Public”); and
b. GBC had assigned to NPB its remaining interest in the GBC Mortgage Loan “[a]s security for repayment” of an NPB loan to GBC of no more than $67,500.00.
(Am.Compl., Ex. E).
8. Public did not record any document reflecting the assignment of GBC's interest in the GBC Mortgage Loan to Public.
9. On or about September 28, 2007, Public executed an Assignment of Mortgage, reassigning “all of its right, title and interest” in the Mortgage back to GBC. ( See Am. Compl., Ex. F).9
10. On September 11, 2006, GBC merged into Gelt Financial Corporation (“GFC”).10
11. On January 29, 2014, Gelt Financial Corporation merged into Gelt.
12. On August 11, 2011, Public Savings Bank was “taken over” by Defendant FDIC and all of its assets subsequently sold to Defendant Capital. (Am.Compl.¶¶ 34–35).
13. On January 17, 2011, GFC (by then, GBC's successor-in-interest) 11 filed a foreclosure action (“the C.P. Action”) against the Debtor and the co-owners of the Property in the Court of Common Pleas, Chester County (“the C.P. Court”).
14. On October 21, 2013, following the non-jury trial, the C.P. Court entered a decision in favor of GFC in the amount of $381,491.77 (“the C.P. Court Decision”). (Am.Compl., Ex. G).
15. On or before December 5, 2013, the C.P. Court docketed the C.P. Court Decision on the count judgment index. (Am.Compl.¶ 28).
16. On November 18, 2013, the Debtor appealed the C.P. Court Decision to the Pennsylvania Superior Court.
17. On January 27, 2014, the appeal was quashed by the Superior Court because it was taken before the entry of judgment in the C.P. Action.12 (Am.Compl., Ex. H).
18. The Superior Court order quashing the appeal was entered on the docket in the C.P. Action on March 20, 2014.
19. The C.P. Court Decision of October 21, 2013 has not been entered as a judgment in the C.P. Action.
20. On July 24, 2013, prior to trial of its foreclosure claim, GFC filed a Petition for Appointment of a Receiver with respect to the Property in the pending foreclosure action in the C.P. Court. (Am.Compl., Ex. G). 13
21. The C.P. Court did not act on the Petition for Appointment of Receiver until after the foreclosure trial. By order dated May 10, 2014, the C.P. Court granted GFC's receivership petition and...
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