Gonzalez v. MCS Life Ins. Co. (In re Gonzalez)
| Decision Date | 02 November 2012 |
| Docket Number | CASE NO. 10-05375 (ESL),ADVERSARY NO. 11-00255 |
| Parties | In re: MARIA ANA PEREZ GONZALEZ Debtor MARIA ANA PEREZ GONZALEZ Plaintiff v. MCS LIFE INSURANCE CO., MEDICAL CARD SYSTEM, INC. Defendants |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
This adversary proceeding is before the court upon defendants MCS Life Insurance Co and Medical Card Systems Inc.'s (collectively referred to as "MCS") Motion to Dismiss ... For Failure to State [a] Claim Upon Which Relief can be Granted ("Motion to Dismiss", Docket No. 16), and the Plaintiff's two Motion[s for] Leave to Amend Complaint (Docket Nos. 23 and 31) alleging that the Second and Third Amended Complaint[s] moot MCS' Motion to Dismiss. For the reasons stated below, MCS' Motion to Dismiss is hereby denied in part and granted in part, Plaintiff's Motion for Leave to Amend Complaint (Docket No. 23) is hereby granted and her subsequent Motion [for] Leave to File Amended Complaint (Docket No. 31) is hereby denied.
The Plaintiff filed her Chapter 13 bankruptcy petition on June 17, 2010 (Lead Case Docket No. 1). On June 18, 2010, Alejandro Oliveras Rivera, Esq. ("Oliveras") was appointed as the Chapter 13 Trustee (Lead Case Docket No. 14). On August 28, 2010, the Plaintiff filed an Amended Chapter 13 Plan (the "Plan", Lead Case Docket No. 15) which proposed monthly payments of $450.00. On November 17, 2010, the Plan was confirmed (Lead Case Docket No. 23).
On or about September 30, 2010, the Plaintiff purchased money order no. 17796898271 at the United States Post Office in the amount of $450.00 and made it payable to the order of Oliveras (the "Money Order"). See Lead Case Docket No. 27. She mistakenly addressed the Money Order to amailbox that MCS uses to receive payments for MCS Personal, one of its insurance products. See Docket No. 16, p. 4.
Upon receipt, the Money Order was altered by someone writing "MCS Personal" on it and it was deposited into MCS' account. See Docket No. 16-1. MCS became aware that the Money Order had been erroneously deposited into its account and thus, on February 2, 2011, it issued a check to the Plaintiff in the amount of $450, which the Plaintiff endorsed and deposited (Docket Nos. 16, p. 5, and 16-2).
The Plaintiff filed the instant Complaint on November 11, 2011 seeking compensatory and punitive compensation against defendant MCS Life Insurance Co. for the alteration of the Money Order, which was meant to be paid on or around September 30, 2010 to Oliveras to fund the Plan. See Docket No. 1. The Plaintiff avers that altering a money order issued by the United States Post Office is a criminal offense pursuant to 18 U.S.C. § 500 and that pursuant to Article 1802 of Puerto Rico's Civil Code,31 L.P.R.A. § 5141, she is entitled to recover compensatory and punitive damages. Thesummons were issued on even date (Docket No. 2).
Before the defendant MCS Life Insurance Co. appeared to answer the Complaint or otherwise plead, on December 27, 2011 the Plaintiff amended her complaint to include Medical Card System, Inc. as a defendant (Docket No. 5) and requested an order for the issuance of new summons, which were issued on January 12, 2012 (Docket Nos. 6, 7 and 8).
After the Court granted two motions for extensions of time to answer the Amended Complaint or otherwise plead (Docket Nos. 10, 11, 13 and 14), on March 21, 2012, MCS filed its Motion to Dismiss (Docket No. 16) under Fed. R. Civ. P. 12(b)(6) alleging that 18 U.S.C. § 500 does not provide for a private cause of action for recovery of damages and that because she admitted her own errors, she is the direct cause of her alleged damages and as such, she is not entitled to recovery under 31 L.P.R.A. § 5141. In addition, MCS sustains that punitive damages are not available to the Plaintiff under 31 L.P.R.A. § 5141 as a matter of law.
On March 27, 2012, this Court ordered the Plaintiff to "file a reply to the Motion to Dismiss within thirty (30) days" (Docket No. 18). Because the Plaintiff did not comply, MCS filed a Requestthat [the] Motion to Dismiss be Granted as Unopposed (Docket No. 20). On May 3, 2012, the Plaintiff filed a Motion [for] Final Extension of Time to expire on May 7, 2012 to reply to MCS' Motion to Dismiss (Docket No. 21), which the Court granted (Docket No. 22). Instead of replying, however, the Plaintiff filed a Motion [for] Leave to Amend Complaint and tendered a Second Amended Complaint (Docket No. 23). The amendments in the Second Amended Complaint consist of additional factual allegations regarding the investigation the Plaintiff pursued at the United States Post Office regarding the Money Order.
On May 11, 2012, MCS filed an Opposition to Plaintiff's Request for Leave to File Second Amended Complaint (Docket No. 26) alleging that the causes of action in this the Second Amended Complaint are the same as those alleged in the Amended Complaint, which MCS had already moved to dismiss for failure to state a claim upon which relief can be granted. Consequently, MCS avers that the Second Amended Complaint is an exercise in futility that would needlessly prolong the instant case.
On May 14, 2012, this Court entered an Order denying the Plaintiff's Motion [for] Leave to Amend Complaint (Docket No. 23) without prejudice to moving the Court within 14 days setting forth the factual and legal basis for the Court to find that the Second Amended Complaint moots MCS' pending Motion to Dismiss, which until then had remained unopposed. The Court also noted that MCS' Motion to Dismiss was addressed to Plaintiff's Amended Complaint.
On June 24, 2012, the Plaintiff filed a Motion in Compliance with Order (Docket No. 29) arguing that her claim is based on illegal acts by MCS -which could result in federal criminal prosecution- that caused her damages. She also avers that the jurisdiction of this Court is proper because MCS took control of assets administered by the Chapter 13 trustee and under the jurisdiction of this Court inasmuch the Money Order was issued to fund the Chapter 13 Plan. As to the "mooting argument", the Plaintiff contends that she addressed MCS' bald and unsupported statements in its Motion to Dismiss by heightening the pleading standard in the Second Amended Complaint and explaining in more detail the allegations. She also avers that in Puerto Rico, negligence or fault can arise from illegal acts for tort purposes under31 L.P.R.A. § 5141 (Docket No. 23-1, p. 8, ¶ 28).
On June 25, 2012, the Plaintiff filed another Motion [for] Leave to Amend Complaint with which she tendered a Third Amended Complaint (Docket No. 31). She claims that the Third AmendedComplaint would also moot MCS' Motion to Dismiss and alleges for the first time that the jurisdiction of this Court in the instant civil action arises from 11 U.S.C. § 105. On even date, MCS filed an Opposition to Plaintiff's Request for Leave to File Third Amended Complaint (Docket No. 32) alleging that it suffers from the same infirmities as its previous two versions and that it constitutes a continued attempt to cure not having to file an opposition to MCS' Motion to Dismiss. MCS also requests that the Plaintiff be sanctioned by paying all of MCS' attorneys' fees and costs incurred in the instant adversary proceeding.
On June 29, 2012, MCS filed an Opposition to Plaintiff's Motion in Compliance with Order and Third Motion Requesting Leave to Amend Complaint (Docket No. 33) rehashing its prior positions.
Bankruptcy Courts, like other lower federal courts, cannot create their own jurisdiction. They have only the jurisdiction permitted under the Constitution and given to them by Congress. See Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995). Consequently, Bankruptcy Courts have "an obligation to inquire sua sponte into [their] subject matter jurisdiction..." Godin v. Schencks, 629 F.3d 79, 83 (1st Cir. 2010).
Fed. R. Civ. P. 8, applicable in adversary proceedings through Fed. R. Bankr. P. 7008, requires an express allegation on the grounds of the Court's jurisdiction.
The Bankruptcy Court's subject matter jurisdiction emanates from a District Court's jurisdiction under 28 U.S.C. § 1334, which endows it with original and exclusive jurisdiction for cases that are under Title 11 of the United States Code, that is, the actual bankruptcy case commenced by the filing of a petition under one of the applicable chapters of the Bankruptcy Code, and original but not exclusive jurisdiction for civil proceedings arising under Title 11, or arising in or related to cases under Title 11. See 28 U.S.C. § 1334(a) & (b); Nickless v. Aaronson (In re Katz), 341 B.R. 123, 127 (Bankr. D. Mass. 2006).
Because an adversary proceeding in bankruptcy is not the same as the lead case, the Bankruptcy Court must determine whether the adversary proceeding, which is a civil proceeding, "arises under" the Bankruptcy Code, "arises in" a case under the Bankruptcy Code, or is "related to" the bankruptcy case.If the adversary proceeding falls within none of the aforementioned categories, then the Bankruptcy Court has no jurisdiction. In re Katz, 341 B.R. at 127. Adversary proceedings "arise under" Title 11 if they involve a "cause of action created or determined by a statutory provision of title 11." Wood v. Wood (In re Wood), 825 F.2d 90, 96 (5th Cir. 1987). Also see Work/Family Directions v. Children's Discovery Ctrs. (In re Santa Clara County Care Consortium), 223 B.R. 40, 43 fn. 2 (B.A.P. 1st Cir. 1998). In contrast, proceedings "arising in" a bankruptcy case "are those that are not based on any right expressly created by Title 11, but nevertheless, would have no existence outside of the bankruptcy." In re G.S.F.Corp., 938 F.2d 1467, 1475 (1st Cir. 1991) quoting In re Wood, 825 F.2d at 97. "[R]elated to" proceedings are proceedings which "potentially have some effect on the bankruptcy estate, such as altering...
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