Landmark Credit Union v. Sharp (In re Sharp)

• Decision Date: 21 October 2016
• Docket Number: No. 16 B 9845,No. 16 A 248,16 B 9845,16 A 248
• Parties: In re: Angelique M. Sharp, Debtor. Landmark Credit Union, Plaintiff, v. Angelique M. Sharp, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

561 B.R. 673

In re: Angelique M. Sharp, Debtor.Landmark Credit Union, Plaintiff,

v.Angelique M. Sharp, Defendant.

No. 16 B 9845

No. 16 A 248

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

October 21, 2016

Attorney for plaintiff Landmark Credit Union: Andrea Marie Lang, Lang Law, Ltd., Crystal Lake, IL

Attorney for defendant Angelique M. Sharp: James J. Burns. Jr., The Burns Law Firm P.C., Chicago, IL

MEMORANDUM OPINION

A. Benjamin Goldgar, United States Bankruptcy Judge

Before the court for ruling is the motion of defendant Angelique M. Sharp ("Sharp") to dismiss the four-count adversary complaint of plaintiff Landmark Credit Union ("Landmark"). The complaint alleges that Sharp fraudulently induced Landmark to make a car loan, never made a payment on the loan, and then hid the car in another state when Landmark tried to recover it. Landmark objects to Sharp's discharge. Alternatively, Landmark objects to the dischargeability of her debt.

For the following reasons, Sharp's motion to dismiss the complaint will be denied.

1. Jurisdiction

The court has subject matter jurisdiction under 28 U.S.C. § 1334(b) and the district court's Internal Operating Procedure 15(a). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(I).

2. Background

On a Rule 12(b)(6) motion, all well-pleaded allegations in the complaint are taken as true, and all reasonable inferences are drawn in favor of the non-movant. Chicago Bldg. Design, P.C. v. Mongolian House, Inc. , 770 F.3d 610, 612 (7th Cir. 2014). Exhibits attached to the complaint are also considered on the motion. Bogie v. Rosenberg , 705 F.3d 603, 609 (7th Cir. 2013) ; see Fed. R. Civ. P. 10(c) (made applicable by Fed. R. Bankr. P. 7010 ) (stating that exhibits to a pleading are "part of the pleading for all purposes").

The complaint and exhibits allege the following facts. On June 15, 2015, Sharp bought a 2016 Dodge Viper from Liberty Auto City, executing a retail installment contract. (Compl. ¶ 4; Ex. A). The sale price was $89,000. (Compl. Ex. A). Sharp made a down payment of $3,000 and financed the rest with a loan from Landmark. (Compl. ¶ 10; Ex. A). To obtain the loan, Sharp filled out a credit application, submitting it to Landmark. (Compl. ¶¶ 6–10).

On the application, Sharp represented that she lived at 409 Lincoln Avenue, Ingleside, Illinois, and had lived there for seven years. (Compl. ¶ 9; Ex. C). She represented that she had neither a rent nor a mortgage payment. (Compl. ¶ 9; Ex. C). As proof of the Lincoln Avenue address, she provided a driver's license showing it as her home address. (Compl. ¶ 9).

Sharp also represented that she had been employed for eleven years as a manager at Crossroads of Ivanhoe, Inc. (presumably a restaurant or tavern) in Mundelein, Illinois, and had an annual salary of $175,000. (Compl. ¶¶ 6, 7; Exs. C, D). As proof of her employment and salary, she submitted what purported to be an "earnings statement" from Crossroads showing gross pay of $3,625 for the week of May 18–24, 2015. (Compl. ¶ 8; Ex. D).

In reliance on the application, the driver's license, and the "earnings statement," Landmark extended credit to Sharp to buy the car. (Compl. ¶¶ 10, 37). Sharp's monthly payment on the loan was $1,585. (Compl. Ex. A).

Sharp's representations to Landmark were false. Sharp did not live on Lincoln Avenue in Ingleside; she lived at 4424 N. Christina Avenue in Chicago. (Compl. ¶ 23). Far from having no mortgage or rent payments, she had a $160,000 mortgage on the Christina Avenue property with a $1,620 monthly payment. (Id. ¶ 22). She was not employed as a manager at Crossroads of Ivanhoe but worked there as a server. (Id. ¶ 20). Her salary was not $175,000 but was about $13,000 (her net pay was $10,236). (Id. ¶ 20). In 2014 and 2015, she had earned $14,000 and $13,134, respectively. (Id. ¶ 31).

Sharp knew her representations to Landmark were false—she had to know the truth about her employment, salary, address, and mortgage payment, and she had to know her gross monthly pay of $1,053 (and certainly her net pay of $897) was insufficient to make a $1,585 monthly car payment—and she made the representations with an intent to deceive Landmark into making the loan. (Id. ¶¶ 24, 36). Within days of her purchase of the Dodge Viper, Sharp also bought a 2015 Cadillac Escalade and a 2015 Dodge Ram 2500. (Id. ¶¶ 17, 36). (She already owned a 2013 Ford Edge and a 2013 Yamaha SX190 boat and trailer. (Id. ¶ 17)).

Sharp made no payments to Landmark on the loan (id. ¶ 11), and on July 30 Landmark declared the loan in default (id. ¶ 12). But when Landmark demanded the car's return, Sharp refused to return it. (Id. ¶¶ 12, 40). Instead, she moved the car to Missouri and hid it there. (Id. ¶¶ 14, 41, 44). Repeated attempts by Landmark to locate the car met with failure until November 2015, when Landmark was at last able to recover the car through information obtained from a third party related to Sharp who said he did not "wish to be a party to [her] criminal scheme." (Id. ¶¶ 42–43).¹

As of March 2016, Sharp owed Landmark $21,677.95 on the contract. (Id. ¶ 16).²

On March 22, 2016, Sharp filed a chapter 7 bankruptcy petition, and Landmark commenced this adversary proceeding. Landmark's complaint has four counts. Counts I and II are fraud claims. Count I alleges that Sharp owes Landmark a debt nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A). Count II alleges that the debt is nondischargeable under section 523(a)(2)(B), 11 U.S.C. § 523(a)(2)(B). Count III is an objection to Sharp's discharge under section 727(a)(2)(A), 11 U.S.C. § 727(a)(2)(A). Count IV is a claim for attorney fees under Landmark's contract with Sharp and under the Illinois Motor Vehicle Act.

Sharp now moves to dismiss the complaint. The motion consists of twelve numbered paragraphs and is not directed to any particular count. (The complaint's counts are never mentioned.) It appears, however, that Sharp is arguing that Counts I–III should be dismissed under Rule 12(b)(6) Fed. R. Civ. P. 12(b)(6) (made applicable by Fed. R. Bankr. P. 7012(b) ), for failure to state a claim. (The claim in Count IV is not discussed). Sharp also appears to argue that Counts I and II should be dismissed for failure to plead fraud with particularity under Rule 9(b), Fed. R. Civ. P. 9(b) (made applicable by Fed. R. Bankr. P. 7009 ), although she never cites the rule.

Landmark opposes the motion.

3. Discussion

Sharp's motion will be denied. The complaint rather obviously states a claim that Sharp owes Landmark a debt for money obtained through fraudulent misrepresentations. Although Landmark cannot maintain a claim under both section 523(a)(2)(A) and section 523(a)(2)(B) based on the same written misrepresentations, Landmark has a claim under one or the other, and nothing required Landmark to plead legal theories in any event. The fraud claim is also pled with enough particularity to satisfy Rule 9(b). As for Count III, that count plainly states a claim under section 727(a)(3).

a. Counts I and II

Counts I and II state claims. The underlying claim is based on a debt for money obtained through fraud, and that claim is perfectly well pled. The two counts allege inconsistent legal theories, and Landmark will not be able to prevail on both. But since the underlying claim (in the relevant sense of the underlying facts) is sufficient, there is no reason to decide at the pleading stage which legal theory is likely to be successful. Landmark has stated a claim under either section 523(a)(2)(A) or section 523(a)(2)(B), and the claim is pled in enough detail for Rule 9(b) purposes.

i. Rule 12(b)(6)

To survive a Rule 12(b)(6) motion, a complaint need only clear two "easy-to-clear hurdles." EEOC v. Concentra Health Servs., Inc. , 496 F.3d 773, 776 (7th Cir. 2007). First, the complaint must contain enough factual detail to give the defendant fair notice of the claim under Rule 8(a). "[A] formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Specific facts are unnecessary, Olson v. Champaign County , 784 F.3d 1093, 1098 (7th Cir. 2015), but some facts must support each element of the claim, Ashcroft v. Iqbal , 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Defender Sec. Co. v. First Mercury Ins. Co. , 803 F.3d 327, 334 (7th Cir. 2015) ; Swanson v. Citibank, N.A. , 614 F.3d 400, 405 (7th Cir. 2010).

Second, the claim must be plausible—meaning the allegations must raise the plaintiff's right to relief above a "speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; see also Kubiak v. City of Chicago , 810 F.3d 476, 480 (7th Cir. 2016). To establish plausibility, a plaintiff need only "include enough details about the subject-matter of the case to present a story that holds together." Runnion v. Girl Scouts of Greater Chi. , 786 F.3d 510, 526 (7th Cir. 2015) (internal quotations omitted). Plausibility "simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence supporting the allegations." Huri v. Office of the Chief Judge , 804 F.3d 826, 833 (7th Cir. 2015).

ii. The Section 523(a)(2) Theories

The complaint here alleges a single nondischargeability claim: that Sharp obtained a loan from Landmark to buy a car by knowingly and intentionally making false written representations in her credit application, and a portion of the loan remains unpaid. Although this is a single claim (since a "claim" consists of the "underlying factual events" rather than "the legal theories advanced," Matrix IV, Inc. v. American Nat. Bank & Trust Co. , 649 F.3d 539, 548 (7th Cir. 2011) ), the claim is alleged in two separate counts: one that invokes section 523(a)(2)(A), another that invokes section 523(a)(2)(B).

Landmark's two theories bear some similarities to each other, but in fact they are separate as well as inconsistent. Section 523(a)(2)(A) excepts from...