D'Angelo v. Blue Chip Fed. Credit Union (In re D'Angelo), Bankruptcy No. 1:11–bk–07248–RNO.
| Decision Date | 07 January 2015 |
| Docket Number | Adversary No. 1:12–ap–00144–RNO.,Bankruptcy No. 1:11–bk–07248–RNO. |
| Citation | 524 B.R. 624 |
| Parties | In re Timothy Frank D'ANGELO, and Ronda Suzanne D'Angelo, Debtors. Timothy Frank D'Angelo, and Ronda Suzanne D'Angelo, Plaintiff, v. Blue Chip Federal Credit Union, Metro Bank, and Small Business Association, Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
Gary J. Imblum, Imblum Law Offices, P.C., Harrisburg, PA, for Plaintiff.
Anthony Todd McBeth, Peter E. Meltzer, Weber Gallagher Simpson Stapleton Fires, Harrisburg, PA, for Defendants.
The Chapter 13 Debtors in the Adversary Proceeding seek a determination of the priorities of two mortgages against their principal residence. For the reasons stated herein, I conclude that the mortgage held by Blue Chip Federal Credit Union is superior to any mortgage claim by Metro Bank.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(b)(2). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (K).
I write today principally for the sake of the parties to this Adversary Proceeding. A more complete procedural history can be obtained by reviewing two prior Opinions which concerned motions for summary judgment by the respective Defendants, each of which were denied. Those Opinions are In re D'Angelo, 494 B.R. 639 (Bankr.M.D.Pa.2013) and In re D'Angelo, 505 B.R. 181 (Bankr.M.D.Pa.2014).
For purposes of this Opinion, I offer the following. A voluntary Chapter 13 proceeding was filed by Timothy and Ronda D'Angelo (“Debtors”) on October 25, 2011. The Debtors' bankruptcy schedules include Schedule A—Real Property. Schedule A includes the Debtors' principal residence, located on Tarryton Road, Harrisburg, Pennsylvania (“Tarryton Property”).
On May 24, 2014, the Debtors commenced the within Adversary Proceeding. The proceeding seeks a determination of the respective priorities of mortgages against the Tarryton Property. The mortgages at issue are a mortgage in the face amount of $256,800.00 (“Metro Mortgage Three”) held by Metro Bank (“Metro”), and a mortgage in the face amount of $52,500.00 (“Blue Chip Mortgage”) held by Blue Chip Federal Credit Union (“Blue Chip”). Prior to trial, the parties filed a document titled Stipulated Facts, ECF No. 95. The Stipulation contains twenty-five paragraphs.
A one day trial on this dispute was held on September 19, 2014, and post trial briefs have been submitted.
Metro argues that an adverse inference should be drawn because of the Debtors' failure to call the Co–Plaintiff, Timothy D'Angelo, as a witness at the time of the trial. Further, Blue Chip argues that an adverse inference should be drawn because of Metro Bank's failure to call as witnesses Karen Ramm and Salvatore Fazzolari.
ID Security Systems Canada, Inc. v. Checkpoint Systems, Inc., 249 F.Supp.2d 622, 678 (E.D.Pa.2003), amended, 268 F.Supp.2d 448 (E.D.Pa.2003). However, when a potential witness is equally available or unavailable to the parties, this strongly militates against the drawing of an adverse inference. ID Security Systems Canada, 249 F.Supp.2d at 678, citing, United States v. Vastola, 899 F.2d 211, 235 (3d Cir.1990).
A witness is not unavailable to a party who fails to make any effort to seek his or her testimony. Chevron Corp. v. Donziger, 974 F.Supp.2d 362, 702 (S.D.N.Y.2014).
To invoke the missing witness rule, the burden of proof is on the party who requests the court to draw an adverse inference. Adelson v. Hananel, 641 F.Supp.2d 65, 77, n. 3 (D.Mass.2009) aff'd 652 F.3d 75 (1st Cir.2011). In this case, I conclude that neither Metro nor Blue Chip have met their burdens concerning application of the missing witness rule. I find that neither party has shown that any missing witness was not equally available or unavailable. I note that Timothy D'Angelo appeared for a pre-trial deposition and there is nothing in the record to suggest that Metro sought his appearance at trial by the issuance and service of a subpoena. Also, nothing in the record establishes whether or not Karen Ramm and Salvatore Fazzolari are currently employees of Metro. I do note that the subject loan closing was held on July 21, 2008—more than six years ago.
Giving due consideration to the circumstances presented, I conclude that no adverse inference should be drawn from the parties' failures to call Timothy D'Angelo, Karen Ramm, or Salvatore Fazzolari as witnesses.
Metro argues that the original Complaint, which sought avoidance of the Blue Chip Mortgage, constitutes a judicial admission concerning the priority of Metro Mortgage Three. Reply Br. of Metro Bank to Post Trial Brs. of Debtors and Blue Chip Federal Credit Union, 3–5, ECF No. 100.
Generally, a judicial admission must be an unequivocal statement of fact. Statements of legal theory are not judicial admissions. In re Teleglobe Communications Corp., 493 F.3d 345, 377 (3d Cir.2007). Thus, the characterization by a Chapter 11 debtor of a document as a “lease” did not bind the debtor in a later proceeding which sought a determination as to whether the document was a “true lease” or a disguised financing agreement. In re Pittsburgh Sports Associates Holding Co., 239 B.R. 75, 81 (Bankr.W.D.Pa.1999).
In support of its argument that certain of the bankruptcy schedules and the original Complaint constitute judicial admissions, Metro cites Community Ass'n Underwriters of America, Inc. v. Rhodes Development Group, Inc., 805 F.Supp.2d 95 (M.D.Pa.2011). I note that this decision was vacated in Community Ass'n Underwriters of America, Inc. v. Rhodes Development Group, Inc., 488 Fed.Appx. 547 (3d Cir.2012). Further, District Judge Rambo's opinion includes:
Although caselaw appears to render the statements in the original complaint something less than conclusive judicial admissions, the court is nevertheless free to take such statements into account.
Community Ass'n Underwriters of America, Inc. v. Rhodes Development Group, Inc., supra, at 108.
On May 27, 2014, with the consent of both Defendants, I directed that the Debtors file an Amended Complaint. An Amended Complaint, which was unverified—just like the original Complaint—was filed on June 2, 2014.
Federal Rule of Bankruptcy Procedure 7015 makes Federal Rule of Civil Procedure 15 applicable to adversary proceedings, such as the case at bar. Generally, an amended complaint supercedes the original pleading. Facts not incorporated into the amended pleading are without further effect, at least when considering a motion to dismiss the amended complaint. West Run Student Housing Associates, LLC v. Huntington Nat. Bank, 712 F.3d 165, 171–72 (3d Cir.2013).
I note that the Amended Complaint utilizes pleading in the alternative. Paragraph six of the Amended Complaint provides:
6. Debtors do not know the correct order of priority of the aforementioned mortgages or whether the Metro Bank $256,000.00 mortgage is secured by the Tarryton property. Accordingly, in Count I Debtors take the position that the Metro Bank $256,000.00 mortgage is a valid mortgage against Tarryton property and is of higher priority to the Blue Chip mortgage. Alternatively, in Count II, Debtors take the position that the Blue Chip mortgage is of higher priority than the Metro $256,000.00 mortgage and that the Metro $256,000.00 is not secured by Debtors' Tarryton property.
Am. Compl. to Determine Extent of Secured Status 3, ECF No. 90. Federal Rule of Bankruptcy Procedure 7008 generally makes F.R.C.P. 8 applicable to an adversary proceeding. Federal Rule of Civil Procedure 8(d)(3) provides “a party may state as many separate claims or defenses as it has, regardless of consistency. ” (Emphasis added). Alternative pleading can be utilized, for example, to plead quantum meruit as an alternative theory to a breach of contract claim. In re Mortgage Lenders Network, USA, Inc., 395 B.R. 871, 880 (Bankr.D.Del.2008). It is recognized that Rule 8 permits flexible pleading of alternative theories of recovery. In re American Business Financial Services, Inc., 384 B.R. 66, 73 (Bankr.D.Del.2008). It is also recognized that a flexible pleading standard is necessary for a full presentation of all relevant facts and legal theories at trial. Further, Rule 8(d)(2) allows a party to plead alternatively within a single count or defense or assert separate claims in an alternative manner. In re Innovative Communication Corp., 2013 WL 1795977, at *4 (Bankr.D.Virgin Islands Apr. 29, 2013).
In this case, the respective mortgage positions have been hotly contested throughout this Adversary Proceeding, which was filed more than two and one-half years ago. Ultimately, a judicial determination is required to determine the encumbrances claimed by Metro and Blue Chip. It is acknowledged that the original Complaint sought avoidance of the Blue Chip Mortgage, based on the alleged higher priority of Metro Mortgage Three. However, this is not a simple factual allegation—such as the date of an accident or a party's age. I have given due consideration to the contents of the Debtors' bankruptcy schedules and the original Complaint. Due to the nature of the statements and allegations, which included legal conclusions and theories, I conclude it is improper to find any judicial admission concerning the priority of Metro Mortgage Three. I also find that this result serves the flexible pleading standards embodied in the...
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