In re Padill, Bky. No. 98-18621ELF (Bankr. E.D. Pa. 6/30/2008), Bky. No. 98-18621ELF.

CourtU.S. Bankruptcy Court — Eastern District of Pennsylvania
Writing for the CourtEric L. Frank
PartiesIN RE: IRENE PADILL, Chapter 13, Debtor(s) IRENE PADILLA, Plaintiff v. GMAC MORTGAGE CORPORATION Defendant
Decision Date30 June 2008
Docket NumberAdv. No. 07-0156.,Bky. No. 98-18621ELF.

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IN RE: IRENE PADILL, Chapter 13, Debtor(s)
Bky. No. 98-18621ELF.
Adv. No. 07-0156.
United States Bankruptcy Court, E.D. Pennsylvania.
June 30, 2008.

ERIC L. FRANK, Bankruptcy Judge.

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Plaintiff-Debtor Irene Padilla ("the Debtor") initiated the above adversary proceeding against Defendant GMAC Mortgage Corporation ("GMACM ") as a class action. The Debtor alleges that GMACM, a mortgage servicer, violated, on a systemic basis, the rights of debtors in chapter 13 bankruptcy cases that were "confirmed, completed and discharged" in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. More specifically, the Debtor alleges that, after the entry of the debtors' chapter 13 discharges, GMACM regularly demanded payment of attorney's fees incurred: (1) prepetition and (2) postpetition/pre-confirmation. The Debtor complains that GMACM's conduct violates the Bankruptcy Code in various ways. The Debtor seeks restitution, disgorgement, interest, punitive damages, attorney's and costs. Presently pending before the court is GMACM's Motion to Dismiss the Amended Class Action Adversary Complaint, Or, In the Alternative, To Strike Class Claims" ("the Motion").

For the reasons explained below, the Motion will be granted in large part. All but one of the Debtor's claims will be dismissed and all of the class allegations will be stricken with respect to the dismissed claims. The Motion will be denied with respect to one (1) claim asserted by the Debtor and, in regard to that claim, the Debtor will be required to seek certification of a class "[a]t an early practicable time." See Fed. R. Civ. P. 23(c)(1)(A) (incorporated by Fed. R. Bankr. P. 7023).


On July 7, 1998, the Debtor filed this chapter 13 bankruptcy case. On February 23, 1999, the court entered an Order confirming the Debtor's proposed chapter 13 plan. On August 22,

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2002, the court entered an Order discharging the Debtor. The bankruptcy case was closed on August 27, 2002.

On July 8, 2005, nearly three (3) years after the case was closed, the Debtor filed a motion to reopen her chapter 13 bankruptcy case so that she might initiate an adversary proceeding against GMACM asserting various claims arising from GMACM's alleged violation of the terms of her confirmed plan and her chapter 13 discharge order. The Debtor also asserted that GMACM's alleged misconduct was pervasive, making it appropriate to permit the proposed adversary proceeding to proceed as a class action. GMACM filed a response to the motion on August 15, 2005. After several continuances, a hearing was held on September 13, 2005. By Order dated October 12, 2005, the court denied the motion to reopen.1 However, the court granted the Debtor the opportunity to conduct certain "narrowly tailored" discovery and to file an amended motion to reopen by January 11, 2006.

On January 11, 2006, the Debtor filed an amended motion to reopen this case. For unknown reasons, that motion was withdrawn and re-filed, again styled as an amended motion to reopen the case, on January 23, 2006. GMACM filed a response to the (second) amended motion. By Order dated March 26, 2007, after a hearing and extensive briefing, I granted the motion to reopen and gave the Debtor until April 20, 2007 in which to file an adversary complaint. See In re Padilla, 365 B.R. 492 (Bankr. E.D. Pa. 2007).

On April 19, 2007, the Debtor filed an adversary complaint asserting claims on her own behalf and on behalf of a purported class of former bankruptcy debtors. On July 19, 2007, after

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GMACM filed a motion to dismiss the complaint under Fed. R. Bankr. P. 7012 and Fed. R. Civ. P. 12(b)(6), the Debtor filed an amended complaint (hereafter, "the Amended Complaint"). On August 27, 2007, GMACM renewed its effort to terminate the litigation by filing the Motion. Both parties filed memoranda of law in support of their positions and a hearing on the Motion was held on October 25, 2007.


In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted, the court must accept all of the plaintiff's factual allegations as true and reasonable inferences therefrom in the light most favorable to the plaintiff. See Hishon v. King & Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984); Taliaferro v. Darby Township Zoning Board, 458 F.3d 181,188 (3d Cir. 2006). Dismissal is appropriate only if, accepting as true all facts alleged in the complaint, the plaintiff has not pled "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007).

One Court of Appeals has described the standards a complaint must satisfy as follows:

the complaint must [first] describe the claim in sufficient detail to give the defendant "fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 155, 1964 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, its allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a "speculative level"; if they do not, the plaintiff pleads itself out of court. Bell Atlantic, 127 S.Ct. at 165, 1973 n.14.

E.E.O.C. v. Concentra Health Servs, Inc., 496 F.3d 773, 776 (7th Cir. 2007); accord, Broadcom

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Corp. v. Qualcomm Inc., 501 F.3d 297, 317 (3d Cir. 2007).

The court's role in scrutinizing a plaintiff's complaint for Rule 12(b)(6) dismissal purposes is limited. The focus of the court's inquiry is not on whether the plaintiff will ultimately prevail, but "`whether the plaintiff is entitled to offer evidence in support of [her] claims.'" Unite Nat'l Ret. Fund v. Rosal Sportswear, Inc., 2007 WL 2713051, at *4 (M.D. Pa. Sept. 14, 2007).

In assessing a Rule 12(b)(6) motion to dismiss, a court may "consider the allegations in the complaint, exhibits attached to the complaint and matters of public record." Unite Nat'l Ret. Fund, 2007 WL 2713051, at *4 (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993), cert. denied, 510 U.S. 1042, 114 S.Ct. 687, 126 L.Ed.2d 655 (1994)). The court may also consider "`undisputedly authentic' documents" where the plaintiff's claims are based on documents and the defendant has attached copies of the documents to the motion to dismiss. Unite Nat'l Ret. Fund, 2007 WL 2713051, at *4.


A. The Facts

The Amended Complaint is prolix; its 59 paragraphs and sub-paragraphs meander for twenty-two (22) pages. Even so, the factual allegations underlying the dispute between the parties are relatively straightforward and are not difficult to summarize.

As previously stated, the Debtor commenced her chapter 13 bankruptcy case on July 7, 1998. At that time, she was the owner of the real property located at 5213 Whitaker Avenue, Philadelphia, PA ("the Property") subject to a mortgage serviced by GMACM ("the GMACM

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Mortgage"). When the bankruptcy case was filed, GMACM Mortgage was in default. The GMACM Mortgage contains a provision permitting GMACM to charge the Debtor for certain expenses it incurs in the event of a default or the existence of any legal proceeding that may significantly affect GMACM's rights in the Property. This provision makes express reference to bankruptcy proceedings. See Padilla, 365 B.R. at 495. According to the proof of claim filed by GMACM, the prepetition mortgage arrears totaled $5,904.31.2

The Debtor's First Modified Chapter 13 Plan ("the Confirmed Plan") was confirmed on February 23, 1999. The Confirmed Plan provided for, inter alia:

(1) the Debtor to pay the Chapter 13 Trustee ("the Trustee") $ 175/month for 39 months, for a total of $6,825.00;

(2) all prepetition arrears on the GMAC Mortgage Corporation ("GMACM") mortgage to be paid in full from the plan payments delivered to the Trustee (including late charges and legal expenses); and

(3) the Debtor to resume making regular monthly mortgage payments to GMACM "according to contract terms."

During the course of her chapter 13 bankruptcy case, the Debtor paid all of the required

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plan payments to the Trustee, as well as all required postpetition payments falling due on GMACM Mortgage. With respect to any attorney's fees or costs that may have been incurred after the commencement of the bankruptcy case, during the pendency of the case, GMACM did not file a proof of claim and made no application to the court for the allowance of attorney's fees or costs incurred postpetition.

The Debtor received her chapter 13 discharge on August 22, 2000. On August 23, 2002, the Debtor sold her residence, resulting in a payoff of the GMACM Mortgage. In connection with the sale of the Property, GMACM provided a payoff statement ("the Payoff Statement") to the Debtor by GMACM. The Payoff Statement included a demand for payment of the following charges ("the Disputed Charges"):

                 (1) bankruptcy costs $ 206.50
                 (2) attorney's fee $ 184.94
                 (3) bankruptcy fee $1,160.27
                 $1,551.71 TOTAL

The Debtor paid the Disputed Charges in connection with the sale transaction.

GMACM's demand for payment of the Disputed Charges is the wellspring of the claims asserted by the Debtor. Because the Debtor does not know precisely when the Disputed Charges were incurred, the Debtor alleges in the alternative that the charges were incurred: (1) prepetition; or (2) post-petition and pre-confirmation.3 (See Amended Complaint ¶¶7, 28, 30, 57,

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58.) Either way, the Debtor contends that GMACM's post-discharge demand for payment of these charges was unlawful.

B. The Claims

It is more difficult, however, to identify with precision the legal claims the Debtor is asserting. The Amended Complaint is hardly a model of clarity.4 Unlike most complaints...

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