In re American Business Financial Services, Inc.

Decision Date13 February 2007
Docket NumberAdversary No. A-06-50826 (MFW).,Bankruptcy No. 05-10203 (MFW).
PartiesIn re AMERICAN BUSINESS FINANCIAL SERVICES, INC., et al., Debtors. George L. Miller, Trustee, Plaintiff, v. Greenwich Capital Financial Products, Inc., Ocwen Loan Servicing, LLC, Wells Fargo Bank, N.A., Law Debenture Trust Company of New York, The Berkshire Group LP, Michael W. Trickey, Defendants.
CourtU.S. Bankruptcy Court — District of Delaware

Wilmington, DE, Bennett L. Spiegel, Esquire, R. Alexander Pilmer, Esquire, Kirkland & Ellis LLP, Los Angeles, CA, for Greenwich Capital Financial Products, Inc.

Steven M. Coren, Esquire, John W. Morris, Esquire, David Dormont, Esquire, Kaufman, Coren & Ress, P.C., Philadelphia, PA, Deirdre M. Richards, Esquire, Joseph J. McGovern, Esquire, Lawrence J. Tabas, Esquire, Obermayer, Rebman, Maxwell & Hippel LLP, Wilmington, DE, for the Trustee.

Derek C. Abbott, Esquire, Curtis S. Miller, Esquire, Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE, Joel L. Miller, Esquire, Adam J. Safer, Esquire, Matthew Z. Krusko, Esquire, Miller & Wrubel, P.C., New York, NY, for Ocwen Loan Servicing LLC.

Linda Richenderfer, Esquire, Chad J. Toms, Esquire, Bifferato, Gentilotti & Balick, LLC, Wilmington, DE, Michael LiPuma, Esquire, Law Office of Michael LiPuma, Philadelphia, PA, for The Berkshire Group LP and Michael W. Trickey.

Thomas B. Kinzler, Esquire, Eric B. Post, Esquire, Kelley Drye & Warren LLP, New York, NY, Frederick B. Rosner, Esquire, Duane Morris LLP, Wilmington, DE, for Wells Fargo Bank, N.A., as Indenture Trustee.

James S. O'Brien, Jr., Esquire, Pryor Cashman Sherman & Flynn LLP, New York, NY, Francis A. Monaco, Jr., Esquire, Monzack & Monaco, PA, Wilmington, DE, for Law Debenture Trust Company of New. York, as Indenture Trustee.

OPINION1

MARY F. WALRATH, Bankruptcy Judge.

Before the Court is the Motion of Greenwich Capital Financial Products, Inc. ("Greenwich") for dismissal of the above captioned complaint against it. For the reasons set forth below, the Court will grant the motion in part.

I. BACKGROUND

American Business Financial Services, Inc. ("the Debtor") and its subsidiaries operated as a financial services organization that originated and serviced mortgage loans primarily to credit-impaired borrowers. The Debtor raised capital by selling pools of these loans to special purpose entities created for securitization (the "Securitization SPEs"). The Securitization SPEs sold the pools of loans to mortgage loan trusts ("Securitization Trusts"). To raise cash for the purchase of the loans, the Securitization Trusts sold notes or trust certificates secured by the trust assets to investors. In exchange for the loans sold to the Securitization SPEs and Trusts, the Debtor received cash and certificates of beneficial interests in the Trusts that entitled it to receive certain cash flows generated by the Trusts (the "I/O Strips"). The Debtor also retained the right to service the pools of securitized loans for a fee.

On January 21, 2005, the Debtor and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. On January 24, 2005, the Debtor filed a Motion seeking debtor-in-possession financing, pursuant to which Greenwich2 agreed to provide a senior, secured, super-priority $500 million credit facility (the "DIP Facility") to the Debtor. The DIP Facility was secured by substantially all the Debtor's assets, including the I/O Strips which had a book value of $391 million. On March 10, 2005, the Court entered a Final Order approving the DIP Loan. Under the DIP Loan Agreement, the Debtor was required to sell the fee-producing future servicing rights.

Less than a month later, on April 4, 2005, the Debtor publicly announced that a reorganization was not possible. On the same day, the Court approved the terms and conditions of a sale of the Debtor's fee-producing future servicing rights to Ocwen Loan Servicing, LLC ("Ocwen") for approximately $21 million. To consummate the sale, Ocwen and the Debtors executed a Servicing Rights Transfer Agreement (the "Transfer Agreement") on or about April 13, 2005, and a Servicing Agreement on May 1, 2005.

On May 13, 2005, Greenwich declared a default on the DIP Loan. As a result, the bankruptcy case was converted to chapter 7 and George L. Miller was appointed trustee (the "Trustee").

On July 20, 2005, the Trustee and Greenwich entered into a Conditional Consent and Undertaking (the "Consent Agreement") whereby the Trustee agreed to sell certain whole loan assets of the Debtor (which were collateral of Greenwich) pursuant to section 363 of the Bankruptcy Code. Under the Consent Agreement, the Trustee would receive $300,000 of the sale proceeds for the benefit of the Debtor's estate. The Trustee, on behalf of the Debtor, agreed to release Greenwich from any and all claims. On August 19, 2005, the Court approved the Consent Agreement and the sale of the whole loan assets to Credit-Based Asset Servicing and Securitization, LLC for $29,626,846.

Thereafter, Greenwich foreclosed on thirteen I/O Strips which it sold at public auction on June 28, 2006, pursuant to Article 9 of the Uniform Commercial Code. The I/O Strips were sold to Ocwen3 for $5.1 million.

On September 13, 2006, the Trustee filed a Complaint against Greenwich, Ocwen, Michael W. Trickey, The Berkshire Group, LP, and Wells Fargo Bank, N.A. and Law Debenture Trust Company of New York (collectively, the "Indenture Trustees"). The Trustee asserts the following twelve claims against Greenwich: (1) turnover; (2) fraudulent transfer avoidance and recovery under the Bankruptcy Code; (3) fraudulent transfer avoidance and recovery under state law; (4) request for an accounting; (5) breach of fiduciary duty; (6) aiding and abetting a breach of fiduciary duty; (7) breach of contract; (8) common law fraud; (9) civil conspiracy; (10) conversion; (11) objections to and subordination of Greenwich's claims; and (12) declaratory relief.

A Motion to dismiss the Complaint was filed by Greenwich on October 13, 2006. The Trustee opposes the Motion. Briefing on the Motion is complete, and the matter is now ripe for decision.

II. JURISDICTION

The Court has subject matter jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) & 157(b)(1). Many of the counts are core matters pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (E), (H), (K), & (0).

III. DISCUSSION

Greenwich moves for dismissal of the claims against it under Rule 12(b)(6) and Rule 9(b) of the Federal Rules of Civil Procedure, which are made applicable to adversary proceedings by Rules 7012(b) and 7009 of the Federal Rules of Bankruptcy Procedure, respectively. Specifically, Greenwich argues that the Trustee's Complaint fails to state a claim for which relief can be granted and fails to plead fraud with particularity.

A. Standard of Review
1. Rule 12(b)(6) Dismissal

A Rule 12(b)(6) motion serves to test the sufficiency of the factual allegations in the plaintiffs complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993). To succeed on a Rule 12(b)(6) motion to dismiss, the movant must establish "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); City of Phila. v. Lead Indus. Ass'n, Inc., 994 F.2d 112, 118 (3d Cir.1993). "In deciding a motion to dismiss, we must accept all well-pleaded allegations in the complaint as true, and view them in the light most favorable to the plaintiff." Carino v. Stefan, 376 F.3d 156, 159 (3d Cir.2004). All reasonable inferences are drawn in favor of the plaintiff. Kost, 1 F.3d at 183. "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). See also Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir.2000); In re OODC, LLC, 321 B.R. 128, 134 (Bankr.D.Del.2005) ("Granting a motion to dismiss is a `disfavored' practice.").

2. Rule 8(a)

Rule 8(a) of the Federal Rules of Civil Procedure requires only that a Complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). The statement must provide the defendant with fair notice of the claim filed against it. See, e.g., Williams v. Potter, 384 F.Supp.2d 730, 733 (D.Del.2005) ("Vague and conclusory factual allegations do not provide fair notice to a defendant.") citing United States v. City of Phila., 644 F.2d 187, 204 (3d Cir.1980).

3. Rule 9(b) Dismissal

Where a complaint asserts a claim for fraud, however, the standard for pleading is higher. The complaint must set forth facts with sufficient particularity to apprise the defendant of the charges against him so that he may prepare an adequate answer. In re Global Link Telecom Corp., 327 B.R. 711, 718 (Bankr.D.Del. 2005). To provide fair notice the complainant must go beyond merely parroting statutory language: Id. See also In re Circle Y of Yoakum, Texas, 354 B.R. 349, 356 (Bankr.D.Del.2006). A bankruptcy trustee, as a third party outsider to the debtor's transactions, is generally afforded greater liberality in pleading fraud. Global Link, 327 B.R. at 717.

B. Greenwich's Motion to Dismiss
1. Release Provision in the Consent Agreement

Greenwich first argues that the release provision in the Consent Agreement bars all the Trustee's asserted claims against it. Fox v. Rodel, Inc., No. 98-531-SLR, 1999 WL 588293, at *8 (D.Del. July 14, 1999) ("Under Delaware law, a release is valid and binding when there has been a meeting of the minds of the parties, when the release is supported by consideration, and when there has been no fraud,...

To continue reading

Request your trial
26 cases
  • Miller v. Black Diamond Capital Mgmt., L.L.C. (In re Bayou Steel BD Holdings, L.L.C.)
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • 3 Agosto 2022
    ...and other unquantifiable benefits that did not constitute reasonably equivalent value); Miller v. Greenwich Cap. Fin. Prods., Inc. (In re Am. Bus. Fin. Servs., Inc.) , 361 B.R. 747, 760 (acknowledging defendant's argument that a transfer on account of an antecedent debt may be an exchange o......
  • In re American Home Mortg. Holdings, Inc.
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • 23 Mayo 2008
    ...turnover claim because it seeks the turnover of a debt which is in dispute. In support of this argument, the Defendants cite American Business Financial Services.133 The debtor in American Business Financial Services was in the business of originating and servicing mortgage loans. The debto......
  • Richard W. Barry, for the Estates of Liberty State Benefits of Del., Inc. v. Santander Bank, N.A. (In re Liberty State Benefits of Del., Inc.)
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • 26 Octubre 2015
    ...bankruptcy trustees bringing claims of fraud on behalf of the debtor and its creditors. See Miller v. Greenwich Capital Fin. Prods. (In re Am. Bus. Fin. Servs.),361 B.R. 747, 753 (Bankr.D.Del.2007)(citing Global Link Liquidating Trust v. Avantel, S.A. (In re Global Link Telecom Corp.),327 B......
  • In re Bay Vista of Virginia, Inc., Case No. 07-71213-SCS (Bankr. E.D.Va. 2/2/2009)
    • United States
    • United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia
    • 2 Febrero 2009
    ...as a turnover proceeding under the core jurisdiction of the bankruptcy court."); Miller v. Greenwich Capital Fin. Prods., Inc. (In re Am. Bus. Fin. Servs., Inc.), 361 B.R. 747, 761 (Bankr. D. Del. 2007); D. E. Frey Group, Inc. v. FAS Holdings, Inc. (In re D. E. Frey Group, Inc.), No. 04-119......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT