Dubbeld v. Diget (In re Diget)
| Decision Date | 03 March 2022 |
| Docket Number | Adversary Proceeding 20-1042,19-12387-PMB |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
| Parties | In re: DEE BENSON DIGET and DAVID KENNETH DIGET, II, Debtors. v. DEE BENSON DIGET, Defendant. DIANA MAY-DIGET DUBBELD, Plaintiff, |
Paul Baisier U.S. Bankruptcy Court Judge.
This matter comes again before the Court on Defendant's Amended Motion to Dismiss filed by Dee Benson Diget, the above-named Defendant and Co-Debtor herein (the "Debtor" or the "Defendant"), [1] on March 3, 2021 (Docket No. 18)(the "Motion") and related Brief in Support of Defendant's Amended Motion to Dismiss (Docket No. 19)(the "Debtor's Brief"; collectively, with the Motion, the "Motion to Dismiss"). The Plaintiff named above, Diana May-Diget Dubbeld (the "Plaintiff"), initiated this matter (the "Adversary Proceeding") by filing a two (2) count Complaint to Determine Dischargeability of Debts on December 15, 2020 (Adversary Docket No. 1)(the "Original Complaint"). Thereafter, through the consent of the parties, [2] on February 4, 2021, the Plaintiff filed a five (5) count Amended Complaint to Determine Dischargeability of Debts (Adversary Docket No. 11)(the "Amended Complaint"), adding Counts I, II, and III that are addressed herein to the Original Complaint.[3]
I. PROCEDURAL BACKGROUND AND POSTURE
The Motion to Dismiss was previously considered in the Order Granting in Part and Denying in Part Defendant's Motion to Dismiss, dated September 30, 2021 (Docket No. 25)(the "Prior Order"). The Prior Order addressed only Counts IV and V of the Amended Complaint. The Debtor filed the Motion to Dismiss following entry of a Scheduling Order (Docket No. 17) on March 2, 2021. In the Scheduling Order, the Court established a timeline for filing motions and responses with respect to the nondischargeability counts of the Amended Complaint, Counts IV and V.[4] On March 19, 2021, the Plaintiff filed a Response in Opposition to Defendant's Amended Motion to Dismiss (Docket No. 23)(the "Plaintiff's Response"), and on March 26, 2021 the Debtor filed a Reply to Plaintiff's Response to Motion to Dismiss (Docket No. 24)(the "Reply").[5]
In the Motion to Dismiss, the Debtor seeks dismissal under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, incorporated herein through Rule 7012(b) of the Federal Rules of Bankruptcy Procedure. In the Prior Order, Count IV of the Amended Complaint was dismissed in part and Count V was dismissed in its entirety. With respect to Count IV, the Plaintiff was found to have failed to state a claim in accordance with Rule 12(b)(6), F.R.C.P., as to the Note[6] under Section 523(a)(2)(B), since the Plaintiff could not have relied upon certain Financial Statements[7] in accepting the repayment terms in the Note (see also, pp. 4-5, infra). However, dismissal was found not to be appropriate as to the Plaintiff's Guaranty[8] given the existence of certain factual disagreements. See Prior Order, pp. 17-18. Although the Debtor sought dismissal of all Counts in the Amended Complaint in the Motion to Dismiss, no ruling was made in the Prior Order concerning the dismissal of Counts I, II, and III. Prior Order, p. 5, n. 8. Unlike Counts IV and V, those specific counts do not assert that the causes of action asserted therein should be excepted from discharge. Further, none of the allegations contained specifically in Counts I - III are incorporated in Counts IV and V. Amended Complaint, ¶¶ 130, 141.
In addition, prior to filing the Original Complaint, on December 1, 2020, the Plaintiff filed three (3) proofs of claim in the Main Case (Main Case, Claims Docket, Claim Nos. 22-24)(the "Proofs of Claim"). In Proof of Claim No. 22 ("POC No. 22"), the Plaintiff asserts a general unsecured claim in the total amount of $463, 449.80 for "[m]oney loaned" and due and owing under the Note in the original principal amount of $441, 736.43 plus interest and late fees signed by "Dee Benson Diget, President of Foundation Ambulance" on June 19, 2018 (a copy of the Note is also attached to POC No. 22).[9] In Proof of Claim No. 23 ("POC No. 23"), the Plaintiff asserts a general unsecured claim in an unliquidated amount for "[c]ontribution for potential liability of co-guarantor" regarding certain obligations allegedly due South State Bank, N.A.[10] by Foundation under two (2) loans made by the Bank in the approximate amount of $568, 000 (i.e. the Bank Loans). Finally, in Proof of Claim No. 24 ("POC No. 24"), the Plaintiff asserts a general unsecured claim in an amount of $500, 000 for "Breach of Fiduciary Duty, Breach of Duty of Loyalty, Negligent Misrepresentation." The Plaintiff alleges that she paid $500, 000 in connection with the purchase of a 33 1/3% interest in Foundation (i.e. the Equity Investment). Based on this payment, the Plaintiff asserts a claim against the Debtor in this amount arising from alleged breaches by the Debtor of her duty of loyalty and fiduciary duty owed to the Plaintiff "stripping [the Plaintiff] of her $500, 000 equitable interest in the business." See Addendum to Proof of Claim (as attached to POC No. 24).
On January 5, 2021, the Debtors filed Debtors' Objection to Proofs of Claim Nos. 22, 23 and 24 Filed by Diana Dubbeld (Main Case, Docket No. 89)(the "Objection"). On February 4, 2021, the Plaintiff responded to the Objection by filing Respondent's Response to Debtors' Objection to Proofs of Claim Nos. 22, 23 and 24 (Main Case, Docket No. 101)(the "Objection Response"). The Trustee also filed the Trustee's Response to Debtors' Objection to Proofs of Claim Nos. 22, 23, and 24 Filed by Diana Dubbeld on February 4, 2021 (Main Case, Docket No. 100)(the "Trustee's Response").[11]
In the Prior Order, the Court scheduled a Status Conference on this matter that was held on November 10, 2021 (the "Status Conference"). See Order and Notice Rescheduling Status Conference, entered October 1, 2021 (Adversary Docket No. 26). During the Status Conference, the Court and the parties discussed the process for addressing the remaining issues in this Adversary Proceeding along with the Proofs of Claim and the Objection. The Plaintiff asked that a ruling be entered on the Motion to Dismiss regarding Counts I, II, and III because they appear to overlap with matters alleged in the Proofs of Claim. It was also decided at the Status Conference that the scope of Counts I, II, and III needs to be determined in connection with the Motion to Dismiss before the parties engage in discovery so that discovery can be tailored more efficiently.
In accordance with the Court's instruction at the Status Conference, the Plaintiff filed her Supplemental Response in Opposition to Defendant's Amended Motion to Dismiss on November 30, 2021 (Docket No. 30)(the "Supplemental Response"), that incorporates the Plaintiff's Response in which, among other things, she objects to the Debtor's standing to bring the Objection. The Debtor filed her Supplemental Brief in Support of Defendant's Amended Motion to Dismiss on December 9, 2021 (Docket No. 31)(the "Debtor's Supplemental Brief"). The Debtor also filed her Answer to Amended Complaint on October 13, 2021 (Docket No. 29)(the "Answer"). As contemplated in the Prior Order and as discussed at the Status Conference, the Motion to Dismiss as to Counts I, II, and III of the Amended Complaint is addressed in this Order. All pleadings and orders on the docket have been considered in connection with this Order.[12]
II. STANDARD OF REVIEW
Under Rule 12(b)(1), F.R.C.P., the court may dismiss a complaint if it does not have subject matter jurisdiction over the claim. Subject matter jurisdiction of the bankruptcy court is limited to "all cases under title 11 [of the United States Code]" and any or "all civil proceedings arising under title 11, or arising in or related to cases under title 11." 28 U.S.C. § 1334(a) & (b); see also 28 U.S.C. § 157(a). Moreover, a plaintiff must establish its standing to bring suit on a claim and a motion to dismiss for lack of standing is "properly brought pursuant to Rule 12(b)(1) because standing is a jurisdictional matter." Ballentine v. United States, 486 F.3d 806, 810 (3rd Cir. 2007). See also Roberts v. Swearingen, 358 F.Supp.3d 1341, 1346 (M.D. Fla. 2019)(standing "is a fundamental component of the Court's subject matter jurisdiction")(citation omitted). As a prerequisite for subject matter jurisdiction, a party asserting standing must allege "an actual case or controversy." O'Shea v. Littleton, 414 U.S. 488, 493-94, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974). To establish standing, the plaintiff must show "(1) an injury in fact that (2) is fairly traceable to the challenged action of the defendant and (3) is likely to be redressed by a favorable decision." Jacobson v. Fla. Sec'y of State, 974 F.3d 1236, 1245 (11th Cir. 2020)(citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)).
Further dismissal of a complaint is appropriate under Rule 12(b)(6), F.R.C.P., if it fails "to state a claim upon which relief can be granted." Rule 12(b)(6) is viewed through Rule 8(a), which requires that a pleading set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." See Fed.R.Civ.P. 8(a)(2) and Fed.R.Bankr.P. 7008. Under this standard, "to survive a motion to dismiss, a complaint must now contain factual allegations that are 'enough to raise a right to relief above the speculative level.'"[13] In addition, pursuant to Rule 9(b), F.R.C.P., applicable herein through Rule 7009, F.R.B.P., fraud must be pled with particularity and, although...
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