In re Lanciaux
| Decision Date | 27 July 1987 |
| Docket Number | Adv. No. 860110.,Bankruptcy No. 8600428 |
| Citation | 76 BR 254 |
| Parties | In re Anita Marguerite LANCIAUX, Debtor. REALTY DATA, INC., Plaintiff, v. Anita Marguerite LANCIAUX, Defendant/Third Party Plaintiff, v. Henri R. LANCIAUX and Michele T. Lanciaux, Third Party Defendants/Fourth Party Plaintiffs, v. COMMONWEALTH LAND TITLE & INSURANCE COMPANY, Fourth Party Defendant. |
| Court | U.S. Bankruptcy Court — District of Rhode Island |
George M. Prescott, Oster, Groff & Prescott, Lincoln, R.I., for trustee.
Peter G. Berman, Raskin & Berman, Providence, R.I., for Henri and Michele Lanciaux.
Alfred G. Thibodeau, Providence, R.I., for Realty Data.
Mark H. Burnham, Providence, R.I., for Commonwealth Land Title Ins. Co.
DECISION AND ORDER DENYING THIRD-PARTY DEFENDANTS' MOTION TO DISMISS AND MOTION TO ABSTAIN
Heard on the trustee's objection1 to the motion to dismiss the third-party complaint against Henri and Michelle Lanciaux. The third-party complaint being challenged is closely related (as are the defendants) to the complaint filed by Realty Data, Inc. against the debtor, which seeks a determination that the debt owed to Realty Data is nondischargeable, pursuant to 11 U.S.C. § 523(a)(2).
The relevant facts are as follows: Debtor, the mother of third-party defendant Henri Lanciaux, sold her house to her son and daughter-in-law on April 17, 1985, for $30,000. The trustee alleges that the selling price was below the fair market value, while the debtor answers that she was motivated by familial considerations in accepting such a low price from her son and his wife. The trustee also alleges that at the closing the debtor received a check in the amount of $28,000, but that the third-party defendants improperly induced her to endorse the check (which was subsequently negotiated), and that most of the funds were converted by the third-party defendants to their own use.
By oversight, the title examiner, Realty Data, missed the mortgage of Aetna Finance Company. As a result of that error, Aetna was not paid at the closing, and the mortgage remained as an encumbrance when the debtor transferred the property to her son and daughter-in-law by warranty deed. Realty Data had been engaged by Henri Lanciaux as the title examiner-agent, and had obtained an owners' title insurance policy, as well as a mortgagee's title insurance policy for the financing bank. The title insurance policies were obtained by Realty Data as the issuing agent of Commonwealth Land Title Insurance Company. When Aetna Finance Company became aware that the property had been sold without payment of its mortgage, it threatened foreclosure. Thereupon, Realty Data purchased the note and mortgage from Aetna to prevent foreclosure on property for which it had obtained title insurance. Subsequently, Realty Data brought suit on the mortgage note against the debtor in Providence County Superior Court, C.A. No. 86-1100, for $17,000, and the debtor filed the instant Chapter 7 petition on June 19, 1986. Thereafter, Realty Data brought a complaint under § 523(a)(2) seeking a determination of nondischargeability, and for judgment on the debt.
Third-party defendants Henri and Michele Lanciaux have moved to dismiss the third-party complaint against them. They argue that the complaint is not related to the dischargeability issue, that it asserts state law causes of action against them for monetary damages and recision of the real estate transfer, and that they are not subject to the jurisdiction of this Court. The trustee argues that the facts and circumstances of the transfer of the subject property are so intertwined with the issue of dischargeability that this Court has ancillary jurisdiction over the claims against the third-party defendants.
A bankruptcy court may exercise jurisdiction over a third-party complaint if it is related to a case under Title 11. See Dogpatch Properties, Inc. v. Dogpatch U.S.A., Inc. (In re Dogpatch, U.S.A., Inc.), 810 F.2d 782, 786 (8th Cir.1987). In ruling on a motion to dismiss, "whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). Obviously, the issue of dischargeability of a debt is within our jurisdiction as a core proceeding, 28 U.S.C. § 157(b)(2)(I) and the third-party defendants have not questioned that proposition. The issue then, is whether the third-party complaint arises under Title 11 or is related to a case under Title 11.
"An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d.Cir.1984). Construing the allegations of the amended complaint most favorably to the trustee, Scheuer v. Rhodes, supra, it is clear that the questions of fact involving the conduct of the debtor and the third-party defendants are common, and affect both the issues of dischargeability and any potential recovery for the estate. If the debt of $14,309.32 is found nondischargeable, the debtor will remain liable to Realty Data, which will have a judgment for that amount. Count II of the amended complaint alleges that the third-party defendants induced the debtor to engage in conduct which forms the basis of Realty Data's complaint under § 523(a)(2). Count I of the amended complaint seeks damages from the third-party defendants. Any recovery would benefit all creditors, including Realty Data. To hold that the alleged acts of the third-party defendants are not related to this bankruptcy case, would ignore the plain reality that the...
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