Chi. Title Ins. Co. v. Mazik (In re Mazik)

• Decision Date: 30 October 2018
• Docket Number: Bky. No. 18-10643 ELF,Adv. No. 18-151 ELF
• Parties: IN RE Tatyana MAZIK, Debtor. Chicago Title Insurance Co., Plaintiff, v. Tatyana Mazik, Defendant.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

592 B.R. 604

IN RE Tatyana MAZIK, Debtor.

Chicago Title Insurance Co., Plaintiff,
v.
Tatyana Mazik, Defendant.

Bky. No. 18-10643 ELF
Adv. No. 18-151 ELF

United States Bankruptcy Court, E.D. Pennsylvania.

Signed October 30, 2018

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Dana B. Ostrovsky, Fidelity National Law Group, Philadelphia, PA, for Plaintiff.

David A. Scholl, Law Office of David A. Scholl, Philadelphia, PA, for Defendant.

MEMORANDUM

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

In this adversary proceeding, Chicago Title Insurance Co. ("Chicago Title") seeks a determination that the debt owed by Debtor Tatyana Mazik ("the Debtor") is nondischargeable under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6). Pursuant to Fed. R. Civ. P. 12(b)(6), the Debtor filed a motion to dismiss the adversary complaint ("the Motion"). The Motion is based primarily on three (3) grounds:

(1) the untimely filing of Chicago Title's Complaint under nonbankruptcy law;

(2) the untimely filing of the Complaint under federal bankruptcy law; and

(3) failure to state facts alleging a valid claim against the Debtor.

For the reasons explained below, the Motion will be granted, and the Complaint dismissed. However, Chicago Title will be granted leave to amend to assert a claim under 11 U.S.C. § 523(a)(3).

II. PROCEDURAL HISTORY

Prior to commencing this bankruptcy case, the Debtor filed an earlier case, under chapter 7, on March 28, 2017, docketed at Bky. No. 17-12125 ("the Prior Case").

On June 30, 2017, Chicago Title filed an adversary proceeding in the Prior Case, alleging that the debt arising from two (2) promissory notes it holds ("the Notes") was nondischargeable under § 523(a)(2) and (a)(6). (Adv. No. 17-188). The Prior Case was dismissed on August 9, 2017 after the Debtor failed to attend several § 341 meetings of creditors. As a result, thereafter, the adversary proceeding was also dismissed.

The Debtor filed the present chapter 13 bankruptcy case on January 31, 2018.

On February 23, 2018, the court issued the Notice of Chapter 13 Bankruptcy Case (Official Form 309I) ("the § 341 Notice"). The § 341 Notice set April 4, 2018 as the date for the meeting of creditors and fixed June 3, 2018 as the deadline to file a complaint challenging the dischargeability of a debt under 11 U.S.C. § 523(a)(2), § 523(a)(4) and § 1328(f). See Fed. R. Bankr. P. 4007(c) (nondischargeability

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complaints under § 523(a)(2) or (a)(4) must be filed "no later than 60 days after the first date set for the meeting of creditors").¹

On July 2, 2018, Chicago Title filed the instant adversary complaint ("the Complaint") and a motion to enlarge time to file a proof of claim (Bky. No. 18-10643, Doc. # 47).²

On July 16, 2018, the Debtor filed the Motion. (Adv. No. 18-151, Doc. # 9). Chicago Title responded to the Motion on August 7, 2018. (Adv. No. 18-151, Doc. # 13).

III. MOTION TO DISMISS STANDARD

The Debtor moves to dismiss the Complaint for failure to state a claim. Fed. R. Civ. P. 12(b)(6) is applicable in adversary proceedings under Fed. R. Bankr. P. 7012. I have previously discussed the legal standard for a motion to dismiss:

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the factual allegations of a complaint, see Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993), and determines whether the 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). 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 doing so, 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). But, the court is not bound to accept as true a legal conclusion couched as a factual allegation. Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ; Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.

The Third Circuit Court of Appeals has condensed these principles into a three (3) part test:

First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions,

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are not entitled to the assumption of truth. Finally, where there are well-pled factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.

Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quotations and citations omitted).

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 also In re Angulo, 2010 WL 1727999, at *12 n. 1 (Bankr. E.D. Pa. Apr. 23, 2010).

In re Boltz-Rubinstein, 574 B.R. 542, 547–48 (Bankr. E.D. Pa. 2017).

IV. FACTS

In the Complaint, Chicago Title alleges that the Debtor's husband, Yuriy Mazik ("Mr. Mazik"), brokered the purchase of a property at 102 Horseshoe Lane, North Wales, Pennsylvania (the "First Property"). Mr. Mazik initially told the purchasers - the Shapiros - that he was a licensed real estate agent. However, on the closing date, Mr. Mazik revealed that in fact he was not licensed either to broker the sale or to obtain a mortgage on behalf of the Shapiros. Therefore, the sale of the First Property to the Shapiros was not completed as planned. Rather, the First Property was purchased by the Debtor, who took out a mortgage on the property, financed in part by the Shapiro's $40,000 deposit. In an odd arrangement, the Shapiros lived in the First Property and paid the Debtor's mortgage until, in 2008, the Shapiros were able to obtain their own mortgage; at that time, the Shapiros purchased the First Property from the Debtor.

The Debtor's mortgage financing was provided by America's Wholesale Lender ("America's Wholesale"). The Debtor signed a note ("the Horseshoe Lane Note") and mortgage for $391,400.00. Chicago Title insured America's Wholesale in this lending transaction.

Chicago Title alleges that due to the fraud and collusion of Mr. Mazik, the Debtor, and the settlement agent, America's Wholesale's mortgage on the First Property was not recorded. Because the America's Wholesale mortgage was unrecorded, its loan was not paid off at closing when the Shapiros purchased the First Property from the Debtor. Instead, the proceeds were received by the Debtor.

In 2005, the Debtor and Mr. Mazik purchased another property located at 1477 Rockwell Road, Abington, Pennsylvania ("the Second Property"). The Debtor and Mr. Mazik financed this purchase with another mortgage from America's Wholesale, and the Debtor signed the associated $216,000.00 note ("the Rockwell Road Note") (collectively with the Horseshoe Lane Note, "the Notes"). Chicago Title also insured America's Wholesale in the transaction.

Again, Chicago Title alleges that the Debtor, her husband, and their settlement agent colluded to insure that the Rockwell Road mortgage was not recorded.

In 2006, the Debtor and Mr. Mazik sold the Second Property. The unrecorded mortgage was not paid off at closing and the Debtor and Mr. Mazik received the

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loan proceeds. They continued to make monthly payments on the Rockwell Road Note until 2009.

The mortgages and their associated Notes were sold to Bank of America, which later discovered that the mortgages were unrecorded and had been primed by the properly-recorded mortgages of the subsequent purchasers. Bank of America tendered a title insurance claim to Chicago Title, which accepted coverage in 2015. Chicago Title paid the amount of the Notes to Bank of America, and...