In the Matter of Young, Case No. 07-32071 HCD (Bankr.N.D.Ind. 6/26/2008)
| Decision Date | 26 June 2008 |
| Docket Number | Case No. 07-32071 HCD.,Proc. No. 07-3136. |
| Parties | IN THE MATTER OF STEPHEN L. YOUNG and DEBRA A. YOUNG, Chapter 7, Debtors. JEROME (JERRY) OSBORN, BRAD PIERSON and MARK A. COOPER, Plaintiffs, v. DEBRA A. YOUNG and UNITED STATES TRUSTEE, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
Brad Pierson, pro se plaintiff, Mishawaka, Indiana.
Mark Cooper, pro se plaintiff, South Bend, Indiana.
Debra Voltz-Miller, Esq., counsel for defendant Debra A. Young, South Bend, Indiana.
United States Trustee, defendant, South Bend, Indiana and Jacqueline S. Homann, Chapter 7 Trustee, putative defendant, South Bend, Indiana.
Before the court are two motions in this adversary proceeding. The first is a Motion to Dismiss Pursuant to Rule 12(b)(6), filed by Debra Young, debtor and defendant herein ("defendant"). It asks for dismissal of the Complaint filed against her and the United States Trustee ("second defendant") by three plaintiffs, Jerome (Jerry) Osborn, Brad Pierson, and Mark A. Cooper ("plaintiffs"), representing themselves ("pro se"). The second is a Motion to Substitute Defendant filed by the plaintiffs, seeking to remove the United States Trustee and to substitute the Chapter 7 Trustee, Jacqueline S. Homann, as the second defendant in the Complaint. For the reasons that follow, the court grants the Motion to Dismiss and denies the Motion to Substitute Defendant.
Pursuant to 28 U.S.C. § 157(a) and Northern District of Indiana Local Rule 200.1, the United States District Court for the Northern District of Indiana has referred this case to this court for hearing and determination. After reviewing the record, the court determines that the matter before it is a core proceeding within the meaning of § 157(b)(2)(I) over which the court has jurisdiction pursuant to 28 U.S.C. §§ 157(b)(1) and 1334. This entry shall serve as findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52, made applicable in this proceeding by Federal Rules of Bankruptcy Procedure 7052 and 9014. Any conclusion of law more properly classified as a factual finding shall be deemed a fact, and any finding of fact more properly classified as a legal conclusion shall be deemed a conclusion of law.
In the related bankruptcy, Debra A. Young and Stephen L. Young filed their voluntary chapter 7 petition on August 14, 2007. On Schedule A, the debtors listed 20 rental properties. On their Statement of Intention, they declared their intent to surrender 18 of the rental properties and reaffirmed the mortgage of their residential real estate. Two rental properties in South Bend, Indiana — at 54427 Quince Road and at 741 27th Street — were not included in that Statement. Plaintiff Osborn was listed on Schedule F and on the debtors' matrix as an unsecured creditor holding a promissory note in the amount of $23,000.00.1 Plaintiffs Pierson and Cooper were not named as creditors in the Youngs' bankruptcy case. On November 19, 2007, the debtors received a discharge. On January 2, 2008, the plaintiffs filed proofs of claim as unsecured creditors in the Youngs' bankruptcy: Osborn's claim was in the amount of $30,000.00; Cooper's claim was $16.84; and Pierson's was $24,000.00. See Claims 8, 9, and 10, Case No. 07-32071.
On November 13, 2007, the three plaintiffs filed a Complaint to Determine Dischargeability of Debt and Objection to Debtor's Discharge. See R. 1. In recognition of the pro se plaintiffs' status, the court describes the pleading in detail and holds it to a less exacting standard than one prepared by counsel. See Greer v. Board of Education of City of Chicago, Ill., 267 F.3d 723, 727 (7th Cir. 2001) (). The Complaint contained numerous broad allegations as background and one count of nondischargeability. It alleged that the defendant2 was a real estate agent with Trinity Century 21 Real Estate Company, Inc., who "took an active part in the fraudulent activities entered into by Trinity and those other persons and entities acting together and in concert with Trinity with respect to alleged real estate sales and transfers, financial counseling and mortgage lending fraud." Id. at ¶ 12. Those fraudulent activities included "alleged fraudulent real estate, fraud counseling and lending and mortgage activities" and "residential properties that mainly were in a `distressed' condition or otherwise valued in a low amount."3 Id. ¶¶ 13, 14. The "Factual Background" of the Complaint presented this specific allegation of the defendant's fraudulent activity:
Defendant in the instant action counseled Plaintiff Osborn in fraudulent methods to convert and shelter assets from his alleged creditors by Quit Claim Deed, filed, on the 13th day of July, 2006, with the St. Joseph County Recorder, for a parcel of real estate property commonly known as 741 26th Street, South Bend, Indiana 46615 (see Exhibit `1a') to and for Defendant's personal enjoyment and potential profit and/or others acting in concert with Defendant. Defendant admitted this fraudulent activity in open court at the 1st Meeting of Creditors.
Id. ¶ 15. It also alleged that the defendant worked in concert with Title Express, Inc., to prepare the Quit Claim Deed.4 Finally, after describing Osborn, aged 74, as elderly, with only a 6th grade education, and mentally challenged because of a head injury he suffered in June 2002, it alleged that the defendant took advantage of him as one who is protected under the Older Americans Act, 42 U.S.C.A. § 3001. See id. ¶¶ 17, 33.
The Complaint's "Fraudulent and Unlawful Conduct" background section alleged that the defendant acted in concert with others when she "made false representations and/or omissions and otherwise engaged in conduct for the purpose of undertaking the fraudulent purchase for sale of the residence in question and to misappropriate funds from such transaction to her and others working in concert from this transaction to her own use, enjoyment and benefit." Id. ¶ 27. It further alleged that (a) the defendant (along with others) knew that her representations were false; (b) the plaintiffs reasonably relied on the misrepresentations; and (c) the plaintiffs suffered damages. Id. ¶ 27-¶ 30. This prefatory section of the Complaint listed, without explication, state law claims of property conversion, criminal deception, and criminal conversion against the defendant and those acting in concert with her, in violation of Indiana Code 35-43-5-3(a)(2) and (3) and Indiana Code 35-43-4-3. Id. ¶¶ 31-32. It also alleged a violation of the Older Americans Act and added (again with no comment) the citation of Indiana's Bureau of Aging Services, Indiana Code 12-10-1 to -5.
The sole count of the Complaint charged that the defendant's" debt to plaintiffs is not dischargeable pursuant U.S.C.A. et. seq; U.S.C.A. § 523(a)" for the following reason:
Defendant and other[s] working in concert with her in their individual capacity by fraud and criminal conduct. Misappropriated the aforesaid real property with intent to deprive plaintiff of its enjoyment and usage of Plaintiff Osborn by engaging in act of false pretense, false representation, false credit counseling and actual fraud. Defendant and others working in concert with her engaged in conduct involving wilful and malicious injury to plaintiffs.
Id. ¶ 35-¶ 36. The court takes notice that, although the title of the Complaint included an "Objection to Debtor's Discharge," no count in that pleading raised a charge under § 727 of the Bankruptcy Code, and there are no allegations objecting to the debtor's discharge. The court therefore construes the Complaint as one brought solely under 11 U.S.C. § 523(a). In addition, it notes that only in the final prayer for relief was the second defendant, the United States Trustee, named:
That the U.S. Trustee be order[ed] by Declaratory Judgment not to sell Plaintiffs' Real Estate for the benefit of Creditors in this instant bankruptcy and Plaintiff allowed to replevin said real estate.
Id. ¶ 36(c). The prayer of the Complaint requested an order that the defendant's debt to the plaintiffs be non-dischargeable, that the Trustee not sell the property, and that costs be assessed to the defendant. The Complaint also sought joinder to and certification of a class action pending in state court. It described the class as "a nationwide class of all `victims of Trinity Century 21 and Title Express, Inc.' which is defined as consumers of defendants' real estate, mortgage, title and closing service (and the instant claim of fraudulent Credit Counseling and conversion to defraud creditors)." Id. at ¶ 20.
The defendant Young, by counsel, filed an Answer to the Complaint on February 13, 2008. See R. 18. She admitted that she had been a real estate agent working for Trinity Century 21, but denied or was without information concerning the other allegations. She denied all allegations of fraudulent conduct. As one of her affirmative defenses, the defendant asserted that the complaint failed to state a claim under Federal Rule of Civil Procedure 12(b)(6). She also filed a Motion to Dismiss on that ground. See R. 15, 16 (Motion, Memorandum of Law). In it, she asserted the following reasons for dismissal: (a) insufficient factual allegations to support a claim of nondischargeability; (b) failure to meet the notice pleading requirements of Federal Rule of Civil Procedure 8 or the fraud particularity requirements of Federal Rule 9; (c) the plaintiffs' lack of standing to bring this case by relying on a St. Joseph Superior Court case and an adversary proceeding to which they were not parties; (d) lack of jurisdiction to determine issues under the Older Americans Act; and (e) failure to meet the...
To continue reading
Request your trial