Commercial Props., LLC v. Aslansan (In re Aslansan)

• Decision Date: 10 April 2013
• Docket Number: Bankruptcy No. 12–12910 ELF.,Adversary No. 13–0028.
• Citation: 490 B.R. 675
• Parties: In re Murat ASLANSAN, Debtor. Commercial Properties, LLC, Plaintiff, v. Murat K. Aslansan, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

490 B.R. 675

In re Murat ASLANSAN, Debtor.

Commercial Properties, LLC, Plaintiff,

v.Murat K. Aslansan, Defendant.

Bankruptcy No. 12–12910 ELF.

Adversary No. 13–0028.

United States Bankruptcy Court,

E.D. Pennsylvania.

April 10, 2013.

Aaron S. Applebaum, McElroy Deutsch Mulvaney & Carpenter LLP, Philadelphia, PA, for Plaintiff.

Zachary Perlick, Philadelphia, PA, for Defendant.

MEMORANDUM

ERIC L. FRANK, Chief Judge.

I. INTRODUCTION

Murat K. Aslansan, the defendant herein (hereafter “the Debtor”), filed this chapter 13 bankruptcy case on March 27, 2012. Plaintiff Commercial Properties, LLC (“the Plaintiff”) filed a complaint (“the Complaint”), commencing the above adversary proceeding on January 17, 2013. In the Complaint, the Plaintiff seeks the entry of a money judgment in its favor with respect to four (4) state law claims: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) conversion and (4) fraud (collectively, “the State Law Claims”). In the Fifth Count of the Complaint, the Plaintiff requests a determination that its claim against the Debtor is nondischargeable pursuant to 11 U.S.C. § 523(a)(3).

Before me is the Debtor's Motion to Dismiss the Complaint (“the Motion”), which was filed on February 17, 2013. The Debtor asserts that the bankruptcy court lacks subject matter jurisdiction and that the Complaint fails to state a claim upon which relief may be granted. The Plaintiff responded to the Motion on March 4, 2013.

For the reasons set forth below, the Motion will be granted with respect to the State Law Claims and denied with respect to the § 523(a)(3) claim.

II. THE FACTUAL ALLEGATIONS IN THE COMPLAINT

In the Complaint, the Plaintiff alleges the following:

The Debtor is an individual and resident of Philadelphia, Pennsylvania. The Plaintiff is a Massachusetts limited liability company. (Compl. ¶¶ 2–3).

On July 26, 2005, the Debtor entered into a loan transaction (“the Mortgage Loan”) with the Plaintiff as evidenced by a note and mortgage encumbering the property located at One Brock's Court, Nantucket, Massachusetts (“the Property”). ( Id. ¶¶ 7–8). Pursuant to the terms of the Mortgage Loan, the Plaintiff advanced $200,000.00 to the Debtor, repayable at an interest rate of 22%. ( Id. ¶ 9–10). In accordance with Massachusetts law, the Plaintiff notified the Usury Division of the Office of Attorney General of the Commonwealth of Massachusetts of its intent to enter into the loan transaction with a 22% interest rate, see 49 M.G.L.A. c. 271, § 49(d). (Comp. ¶ 11).

On March 3, 2006, following a restructuring of the Mortgage Loan, the Plaintiff filed a discharge and release of the original July 2005 mortgage and a new, “updated” mortgage on the Property (“the Updated Mortgage”) with the county registry of deeds. ( Id. ¶¶ 12–16). By September 2007, the Debtor defaulted on his obligations under the Mortgage Loan. ( Id. ¶ 17).

In January 2008, the Debtor caused a forged discharge and release of the Updated Mortgage (“the Forged Discharge of Mortgage”) to be recorded. ( Id. ¶¶ 21–27). The Forged Discharge of Mortgage falsely states that the Plaintiff was paid in full on the debt secured by the Updated Mortgage. ( Id. ¶ 23). The Debtor also entered into a loan transaction with Indymac Mortgage Services that resulted in the recordation of a mortgage on the Property in favor of Indymac securing a debt in the amount of $1,690,000.00. ( Id. ¶¶ 22, 27). Resultantly, the Plaintiff's mortgage was wrongfully dissolved and the Plaintiff was wrongfully deprived of its collateral. ( Id. ¶ 27).

On July 7, 2010, the Debtor filed a chapter 7 bankruptcy case in this court (“the Chapter 7 Case”). The Debtor failed to give notice to the Plaintiff of the Chapter 7 Case and the Plaintiff was unaware of the case. ( Id. ¶¶ 32–34).

The Debtor received a chapter 7 discharge on July 23, 2010. The Debtor has stipulated that he is not entitled to a discharge in the present, chapter 13 case. See11 U.S.C. § 1328(f)(1).

The Plaintiff calculates that the Debtor owes the Plaintiff $357,633.19.

III. LEGAL STANDARD—MOTION TO DISMISS

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, see Kost 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)).

In deciding a Rule 12(b)(6) motion, 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, but is not bound by mere speculation or legal conclusions couched as factual allegations. The court may consider the allegations in the complaint, exhibits attached to the complaint and matters of public record, 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). The court must determine whether the alleged facts demonstrate that the plaintiff has a “plausible” claim for relief in which the facts set forth in the complaint allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. In evaluating the facts alleged and the plausibility of the claim for relief, the court accepts only the well-pleaded facts as true and may disregard any legal conclusions. 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, 209–10 (3d Cir.2009); ¹In 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).

IV. DISCUSSION

In the Motion, the Debtor contends that: (1) the court lacks subject matter jurisdiction over this adversary proceeding, seeFed.R.Civ.P. 12(b)(1); and (2) the Complaint fails to state a claim upon which relief can granted, seeFed.R.Civ.P. 12(b)(6).

As explained below, I conclude that: (1) the court lacks jurisdiction over the State Law Claims; (2) the court has jurisdiction over the § 523(a)(3) claim; and (3) the Complaint states a cause of action under § 523(a)(3).

A. Subject Matter Jurisdiction

1.

In filing a complaint setting forth traditional state law causes of action and a request for a money judgment in a chapter 13 bankruptcy case, the Plaintiff misunderstands the bankruptcy process and the limited jurisdiction of this court. In chapter 13 cases, creditors do not file complaints against debtors seeking money judgments based on pre-petition claims; rather, they file “claims” against the bankruptcy estate and those claims, are subject to treatment, in some manner, in the debtor's chapter 13 plan.

The bankruptcy court is not a court of general jurisdiction in which individual creditors may obtain money judgments against bankruptcy debtors. See generally28 U.S.C. § 1334(b) (limiting bankruptcy jurisdiction in civil proceedings to those “arising under, arising in or related to” bankruptcy cases).... When the trustee makes a distribution to a creditor, he does so to satisfy the creditor's “claim” against the bankruptcy estate that was “allowed” by the court.... No entry of a traditional “money judgment” is entered against the debtor as part of the claims allowance and claim distribution process.

In re Reinford, 2011 WL 139207, at *3 (Bankr.E.D.Pa. Jan. 11, 2011).

In this chapter 13 case, the only proper functions of the bankruptcy court (other than determining dischargeability issues) are to determine whether the Plaintiff's claim against the bankruptcy estate should be allowed ² and, if allowed, whether the proposed treatment of that claim passes muster under the Code's standards for confirmation of a chapter 13 plan, see11 U.S.C. §§ 1322 and 1325.

The State Law Claims are cognizable in this bankruptcy case only insofar as they form the underlying basis for the Plaintiff's proof of claim (and the § 523(a)(3) nondischargeability claim to be discussed further below). Standing alone, as legal actions requesting the entry of money judgments on state law claims, the State Law Claims are unrelated to the bankruptcy case and this court lacks authority to consider them.³ Consequently, they will be dismissed without prejudice.

2.

It is not clear exactly why the Debtor contends that this court lacks subject matter jurisdiction over the Fifth Count, the Plaintiff's nondischargeability claim under 11 U.S.C. § 523(a)(3). However, it does not matter. It is clear that this court has jurisdiction.

A nondischargeability proceeding “arises in” a bankruptcy case and is a core matter. See28 U.S.C. § 1334(b); 28 U.S.C. § 157(b)(2)(I); Stoe v. Flaherty, 436 F.3d 209, 218 (3d Cir.2006). Further, in the present circumstances, the nondischargeability determination sought by the Plaintiff not only is a core aspect of the prior Chapter 7 Case, but, if not a core proceeding in the chapter 13 case,⁴ is at least related to the administration of the present chapter case.⁵ Whether the matter is core or merely related, the court has subject matter jurisdiction under 28 U.S.C. § 1334(b). See, e.g., Universal Marketing, Inc., 459 B.R. 573, 579 (Bankr.E.D.Pa.2011) (citing In re Mullarkey, 536 F.3d 215, 221–22 (3d Cir.2008) and In re Seven Fields Dev. Corp., 505 F.3d 237, 257 (3d Cir.2007)).

For these reasons, no serious issue exists regarding this court's subject matter jurisdiction over the Plaintiff's § 523(a)(3) claim.

B. Failure to State a Claim

The Debtor offers four (4) arguments in support of its Rule 12(b)(6) argument:

• the underlying debt was discharged in the Chapter 7 Case;

• the Complaint...