In re Soto
| Decision Date | 30 April 1998 |
| Docket Number | Adversary No. 97-0684.,Bankruptcy No. 96-31439DWS |
| Parties | In re Minerva SOTO, Debtor. Minerva SOTO, Plaintiff, v. PNC BANK, Edward Sparkman, Chapter 7 Trustee, Defendants. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Elizabeth Goodell, Philadelphia, PA, for Plaintiff.
Jonathan J. Bart, Philadelphia, PA, for PNC Bank.
Edward Sparkman, Philadelphia, PA, Chapter 13 Trustee.
Dave P. Adams, Philadelphia, PA, U.S. Trustee.
Before the Court is the Motion of Defendant PNC Bank, N.A. (the "Bank") for Judgment on the Pleadings ("Motion"). A hearing on the Motion was held at which the parties presented oral argument. At the close of the hearing, the parties were granted the opportunity to file supplemental briefs with a two week deadline imposed for that purpose. Plaintiff, Minerva Soto ("Debtor") filed such a brief; the Bank did not.1 The matter is now ripe for decision. Upon consideration, I grant the Motion in part and deny it in part.
On or about July 29, 1991, Debtor's nephew, Luis Maldonado ("Luis"), obtained a loan in the amount of $16,036.91 from the Bank. Complaint ¶ 8 & Exhibit B.3 He executed an installment note ("Note") evidencing the terms of the loan. The Note is included in the same document as the Bank's Truth-In-Lending Act ("TILA") disclosures. Id.
As security for the aforementioned loan to Luis, Debtor granted PNC a mortgage ("Mortgage") on her house at 1610 South Orkney Street in Philadelphia, Pennsylvania. Complaint ¶ 8 & Exhibit A. Debtor, who speaks little English and cannot read it, was told by her nephew that signing the Mortgage meant that "she was helping him purchase a car and that she incurred no risk at all by signing the document." Complaint ¶¶ 9, 10. No one at the Bank ever informed Debtor that signing the Mortgage meant that her house was being put up as security for Luis' loan or that she risked losing the home if Luis failed to comply with the terms of the Note. Id. ¶ 11. Moreover, the Bank never provided Debtor with a copy of the Mortgage, any TILA disclosure documents or any notices of rescission/right to cancel. Id. ¶ 14. None of the proceeds from the loan benefited Debtor. Id. ¶ 12.
The Bank subsequently instituted a mortgage foreclosure action in state court ("State Court") against Debtor alleging that Luis defaulted on his payments under the Note. Id. ¶ 15. After five attempts to serve Debtor with the Complaint at her home, the Bank filed a motion requesting the State Court to, inter alia, enter an order pursuant to Rule 430(a) of the Pennsylvania Rules of Civil Procedure directing service of the Complaint by ordinary mail. Exhibit E to Motion. This motion was granted by Order dated June 25, 1996. Id. Shortly thereafter, a default judgment (the "Judgment") was granted in favor of the Bank. Complaint ¶ 15.
A Sheriff's Sale of Debtor's home was scheduled for December 2, 1996. Id. ¶ 16. Approximately one week before the scheduled sale, Debtor filed a Voluntary Petition for Relief under Chapter 13 of the Bankruptcy Code. Id. ¶ 17.
On or about January 6, 1997, the Bank filed a Proof of Claim for $4,166.86. Complaint ¶ 19 & Exhibit C thereto. The total amount of the claim is listed as secured. Id.
Debtor subsequently filed the Complaint which contains seven counts. These counts are labeled: Count I-Objection; Count II-Merger; Count III-Act No. 6 of 1974, 41 P.S. § 401 et seq.; Count IV-Truth-In-Lending, 15 U.S.C. § 1601 et seq.; Count V-Unfair & Deceptive Acts & Practices, 73 P.S. § 201-1 et seq.; Count VI-Fraud; and Count VII-Fraud in the Factum. The Bank filed its Answer asserting as affirmative defenses that Debtor's claims are barred by: (i) the doctrine of res judicata; (ii) the statute of limitations; and (iii) the doctrines of ratification, waiver and estoppel.
Thereafter, the Bank filed its Motion and Debtor responded thereto.4 After the hearing on the Motion, Debtor filed her supplemental brief.
In the Motion, the Bank contends that Counts I-III and V-VII are barred by the doctrine of res judicata because the Judgment is res judicata to all claims constituting a defense to such judgment. The Bank also asserts that Debtor's claim in Count II lacks merit and that her claim in Count III is irrelevant because it has not sought attorney's fees in this action. As to Count IV which asserts a claim for TILA violations, the Bank contends this claim is barred by the statute of limitations and, further, that since Debtor was neither an applicant for credit nor the recipient of an extension of credit, she was not entitled to receive TILA disclosures.
In response, the Debtor argues that the Motion should be treated as a motion for summary judgment because the Bank submitted matters outside of the pleadings in support thereof. As to the Bank's res judicata argument, the Debtor contends that the Judgment is not res judicata as to her claims because the State Court lacked personal and subject matter jurisdiction in the foreclosure action. The Debtor further argues that, even if the Judgment is not void, her claims under the TILA and Pennsylvania's Unfair Trade Practices law are not barred by res judicata because: (i) these claims constituted permissive counterclaims in the foreclosure action; and (ii) her TILA claims may be raised in recoupment. Lastly, Debtor argues that she was entitled to receive TILA disclosures from the Bank because "each person who has a right to rescind a consumer credit transaction under 15 U.S.C. § 1635 must be given rescission forms and the material disclosures required by the TILA generally." Memorandum of Law in Opposition to Defendant's Motion for Judgment on the Pleadings and In Support of Plaintiff's Cross Motion for Partial Summary Judgment ("Debtor's Brief") at 23.
As a preliminary matter, Debtor contends that the Bank's Motion should be treated as a motion for summary judgment since the Bank has submitted matters outside the record for my consideration. In support of this contention, Debtor cites to Rule 12(c) of the Federal Rules of Civil Procedure which is made applicable hereto by Fed.R.Bankr.P. 7012(b). Rule 12(c) provides, in pertinent part:
If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.
The only matters outside of the pleadings upon which the Bank is relying in support of its Motion and, consequently, the only matters which I am considering outside of the pleadings, are the documents contained in Exhibits D and E to its Motion.5 These documents are from the record in the State Court Litigation.6 I can take judicial notice of these documents, see U.S. ex rel. Geisler v. Walters, 510 F.2d 887, 890 n. 4 (3d Cir.1975) (); Commonwealth v. Brown, 373 F.2d 771, 778 (3d Cir.1967) (), and my consideration of them does not require me to convert the Bank's Motion into a motion for summary judgment, see DiNicola v. DiPaolo, 945 F.Supp. 848, 855 n. 2 (W.D.Pa.1996) (); see also Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017-18 (5th Cir.1996) (); United States v. Wood, 925 F.2d 1580, 1582 (7th Cir.1991) (). Accordingly, the Bank's Motion will be treated as a motion for judgment on the pleadings.
In ruling on a motion for judgment on the pleadings, the court must view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. Jablonski v. Pan American World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir.1988). This requires the court to accept the allegations in the complaint as true even if they are in conflict with the defendant's answer. Tudor Development Group, Inc. v. United States Fidelity & Guaranty Company, 768 F.Supp. 493, 495 (M.D.Pa.1991). Judgment will not be granted "`unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.'" Jablonski, supra, at 290 (quoting Society Hill Civic Association v. Harris, 632 F.2d 1045, 1054 (3d Cir.1980)); Collier-Higginbotham v. Philadelphia Child Guidance Center, 1997 WL 381759, at *1 (E.D.Pa. June 27, 1997).
The Bank contends that all counts of the Complaint except for Count IV are barred by the doctrine of res judicata by reason of the Judgment which it obtained in the foreclosure action in State Court.7 Debtor disagrees, arguing that res judicata does not apply because the State Court lacked both personal and subject matter jurisdiction in that action.
The Bank supports its position with two cases, namely In re Siciliano, 167 B.R. 999 (Bankr.E.D.Pa.1994), and Garafano v. Trustees of the Amalgamated Insurance Fund (In re Garafano), 99 B.R. 624 (Bankr.E.D.Pa. 1989). Neither of these cases involved the defense being raised here.8
In the former case, the debtor sought to collaterally attack the amount of attorney's fees and costs recovered against him in a prepetition mortgage foreclosure action which he failed to contest in state court. The bankruptcy judge held that the debtor's claims were barred by res judicata. Siciliano, supra, 167 B.R. at 1013.9 However, the debtor did not argue, as the Debtor is doing here, that the state court...
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