Hutchinson v. First Cmty. Bank (In re Hutchinson), CASE NO. 18-71619

• Decision Date: 30 January 2020
• Docket Number: Adv. Pro. No. 19-07036,CASE NO. 18-71619
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia
• Parties: In re: DOUGLAS RAY HUTCHINSON Debtor. DOUGLAS RAY HUTCHINSON Plaintiff v. FIRST COMMUNITY BANK, W. BLAKE BELCHER, ROBERT L. BRUZZO, and GARY R. MILLS Defendants.

In re: DOUGLAS RAY HUTCHINSON Debtor.

DOUGLAS RAY HUTCHINSON Plaintiff v. FIRST COMMUNITY BANK, W. BLAKE BELCHER,ROBERT L. BRUZZO, and GARY R. MILLS Defendants.

CASE NO. 18-71619

Adv. Pro. No. 19-07036

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION

January 30, 2020

CHAPTER 11

MEMORANDUM OPINION

This matter comes before the Court on the Motion of First Community Bank (the "Bank") for Partial Judgment on the Pleadings to the Complaint Seeking Declaratory and Other Relief ("Complaint") filed against it by the Debtor, Douglas Ray Hutchinson ("Debtor"). The Debtor filed a petition for relief under Chapter 11 of Title 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq., on December 4, 2018. Over a year into this case, no disclosure statement has been approved nor is a Chapter 11 plan actively pending before the Court. The Debtor has asserted since early in the case that causes of action or disputes exist against the Bank, and those causes of action must be resolved before the main case can proceed.¹ However, the Complaint was not filed until October 1, 2019, almost ten months after the petition was filed. The Motion for Partial Judgment on the Pleadings was timely filed by the Bank on October 30, 2019, and the Debtor filed a two page response on November 16, 2019. For the reasons set forth below, the Motion for Partial Judgment on the Pleadings will be granted.²

FACTUAL BACKGROUND

Although far from a paragon of clarity, the Debtor's allegations against the Bank in the Complaint will be summarized herein. The Debtor and his family have a long history of dealing with the Bank. The Debtor's long time loan officer was an individual named Monte Rife, and most of the actions complained of herein the Debtor alleges took place with the complicity of Mr. Rife. The Debtor had a series of loans in his own name over many years, but the loans in controversy the Debtor contends are based on forged documents or the unauthorized execution of notes the Debtor had no authority to sign, all known by Mr. Rife. In addition, for the purposes of this Motion, the Debtor seeks that the Court find that enforcement of the obligations under various notes made to the Bank are time barred under the applicable statute of limitations.

Initially, the Debtor states in his Complaint that the Bank's "[c]laim numbers 1, 2, 3, 4, & 5, along with all of their attachments are all incorporated by reference into this complaint." Compl. ¶ 23. The Debtor requests that the Court examine each proof of claim and determine if any of them are barred by the applicable statute of limitations, determine the balance due, if any under each proof of claim, and also determine the validity of the various claims and deeds of trusts under theories not at issue for present purposes. In the Complaint, the Debtor never says which statute of limitations he is relying upon. In the Motion, the Bank states that each obligation which the Bank asserts against the Debtor is evidenced by a "note" within the scope of Va. Code Ann. § 8.3A-118(a). That Code section provides that "(a) Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date." Furthermore, subsection (h) of Section 8.3A-118 provides that "Notwithstanding the provisions of § 8.01-246, this section shall apply to negotiable and non-negotiable notes and certificates of deposit." Va. Code Ann. § 8.3A-118(h). Section 8.01-246, in turn, deals with the statute of limitations for personal actions based on contracts.

The Bank filed Claim 1 in the amount of $16,418.09 as secured based upon a promissory note dated April 24, 2000 in the original principal amount of $25,613.08, payable with interest of 9.500% per annum in monthly payments of $238.85, with a final payment of unpaid principal and accrued interest due April 24, 2020. The note references a credit line deed of trust dated September 8, 1997. The note is purportedly executed by the Debtor and his then wife, Linda Hutchinson. Claim 1 was initially filed as secured, but the Bank later filed an amended claim as unsecured. The Debtor does not allege he failed to sign the note forming the basis of Claim 1. Hedoes allege he forged his wife's name at the behest of the Bank on the note and the deed of trust, the latter of which signature was notarized by the Bank's loan officer, Monte Rife, three years earlier. Compl. ¶¶ 9-11. The Debtor contends the statute of limitations has expired on this note.

The Bank filed Claim 2 as secured in the amount of $12,537.16 based upon a promissory note dated August 10, 2005 made by the Debtor's mother and stepfather in the original principal amount of $85,471.98, payable with interest of 6.5% per annum for five years, then converting to a variable rate, in monthly payments of $753.00, with a final payment of unpaid principal and accrued interest due August 14, 2020.³ This note is secured by a deed of trust on property then owned by the Debtor's mother, but now owned by the Debtor. The Debtor does not dispute this debt. Compl. ¶ 12.

The Bank filed Claim 3 as secured in the amount of $129,122.28 based upon a promissory note dated March 25, 2008 in the original principal amount of $139,000.00, payable with interest of 7.710% per annum in monthly payments of $1,307.26, with a final payment of unpaid principal and accrued interest due April 6, 2023. This note is made by the Debtor and secured by a deed of trust of the same date on property which the Debtor contends he did not own at the time the property was conveyed.⁴ The Debtor contends the statute of limitations has expired on this note.

Claim 4 is filed by the Bank in the amount of $91,653.18 as secured by property based upon a revolving line of credit agreement dated May 11, 2010 in the original principal amount of $100,000.00, payable monthly with interest as set forth in the agreement, with a final payment ofunpaid principal and accrued interest due May 11, 2030.⁵ This agreement was signed by the Debtor as Power of Attorney for his mother and secured by property then owned by her but now owned by the Debtor.⁶ The Debtor also signed the deed of trust securing repayment of this obligation as Power of Attorney for his mother. The Debtor disputes this claim as a fraudulent transfer. No statute of limitations claim is asserted by the Debtor on this obligation, although the Debtor asserts the deed of trust was "potentially" a fraudulent transfer as he used an invalid power of attorney at the suggestion of the Bank to increase the amount of the credit line deed of trust after his mother died. Compl. ¶ 21.

Finally, the Bank filed Claim 5 as secured in the amount of $40,298.43 also based upon a credit agreement, this one dated February 7, 2014, in the original principal amount of $33,900.00. It requires monthly payments of principal and interest based on a percentage of the outstanding balance on the line, with unpaid principal and interest due at maturity on February 7, 2034. It is secured by a deed of trust of even date on property owned by the Debtor and his wife. The Debtor seeks a declaratory judgment that this note is barred by the statute of limitations, but the Complaint does not say why. The Debtor also claims the note and deed of trust were for past consideration, and may be a fraudulent conveyance. Compl. ¶ 22.

There are no allegations of fact in the Complaint that any of the notes are actually in default, that any note was accelerated, that demand for payment was made on any note, or that any specific statute of limitations has actually begun to run on any specific obligation. Yet, the Complaint, in part, "prays that the court examine each of the proofs of claim and determine ifany of them are barred by the applicable statute [of] limitations. . . ." Compl., at 7. Despite this language, the Complaint, at best, only alleges that Claims 1, 3, and 5 are barred by the applicable statute of limitations.

ARGUMENT

This Court has jurisdiction of this matter by virtue of the provisions of 28 U.S.C. §§ 1334(a) and 157(a) and the referral made to this Court by Order from the District Court on December 6, 1994 and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. This Court further concludes that this matter is a "core" bankruptcy proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A).

I. The Applicable Legal Standard

As stated in Quality Properties Asset Management Co. v. Trump Virginia Acquisitions, LLC, No. 3:11-cv-00053, 2012 WL 3542527, at *2 (W.D. Va. Aug. 16, 2012), "[a] motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) may be made 'after the pleadings are closed but early enough not to delay trial.' Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings is appropriate when there are no genuine issues of material fact, and 'only questions of law remain.' Virginia Imports v. Kirin Brewery of America, 296 F.Supp.2d 691, 695 (E.D. Va. 2003)." Further, the standard of review for a Rule 12(c) motion is the same as the standard for a motion to dismiss under Rule 12(b)(6). See Burbach Broadcasting Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 406 (4th Cir. 2002).

Quality Properties further observed that "[w]hile extrinsic evidence is generally not to be considered at the Rule 12(b)(6) stage, 'a court may consider official public records, documents central to plaintiff's claim, and documents sufficiently referred to in the complaint so long as theauthenticity of these documents is not disputed.' Witthohn v. Fed. Ins. Co., 164 Fed. App'x. 395, 396-97 (4th Cir. 2006); see also Blankenship v. Manchin, 471 F.3d 523, 526 n. 1 (4th Cir. 2006) (citations omitted). Factual admissions by parties are, as a general rule, binding as judicial admissions, see New...