Marchand v. Piraneo (In re Simpson)
| Decision Date | 16 October 2015 |
| Docket Number | ADV. PRO. NO. 15-01934 (JNP),CASE NO. 14-16173 (JNP) |
| Parties | In Re: JOSEPH F. SIMPSON, Debtor. JOSEPH D. MARCHAND, CHAPTER 7 TRUSTEE, Plaintiff, v. JOSEPH PIRANEO and MICHELLE PIRANEO, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NOT FOR PUBLICATION
APPEARANCES:
Paul Pflumm, Esq.
Joseph A. McCormick, Jr., P.A.
76 Euclid Avenue-Suite 103
Haddonfield, NJ 08033
Attorney for Plaintiff, Chapter 7 Trustee
Lisa R. Bouckenooghe, Esq.
David DiSabato, Esq.
DiSabato & Bouckenooghe LLC
4 Hilltop Road
Mendham, NJ 07945
Attorneys for Defendants, Joseph Piraneo and Michelle Piraneo
This matter is before the Court upon the Defendants' motion to dismiss (the "Motion to Dismiss") the adversary proceeding (the "Adversary Proceeding") filed by the Chapter 7 Trustee. The Court also asked the parties to brief whether mandatory or permissive abstention applies to this Adversary Proceeding. For the reasons set forth below, the Motion to Dismiss is denied, and the Court will not abstain. However, the Adversary Proceeding shall be stayed pending the resolution of the State Court Action.
For the purposes of ruling on the Motion to Dismiss, the Court accepts as true the facts set forth in the Trustee's adversary complaint (the "Complaint"). Joseph and Michelle Piraneo (the "Defendants") are married individuals residing at property located at 2 Briarwood Road, Long Valley, NJ 07852 (the "Property"). Complaint ¶ 2. On March 31, 2014 (the "Petition Date"), Joseph F. Simpson (the "Debtor") filed for bankruptcy. Id. ¶ 7. Prior to the Petition Date, the Defendants leased the Property from the Debtor pursuant to a Residential Lease Purchase Agreement (the "Agreement"). Id. ¶ 9. According to the Debtor, as of May 7, 2015, the total rent due from the Defendants amounted to $442,500, and unpaid rent continues to accrue. Id. ¶ 12.
The Motion to Dismiss sets forth additional factual allegations, which the Court considered solely as background. On or around 2008, the Defendants sought assistance in order to prevent losing the Property as a result of foreclosure. Memorandum of Law in Support of Motion to Dismiss at 3. Sean Niell, under the auspices of Citizens Financial, LLC, told the Defendants that the only way they could save the Property was to deed the Property to theDebtor, who would refinance the home using his credit score. Id. In exchange, the Defendants would rent the Property for a one year period, and the Debtor would make the mortgage payments. Id. At the end of the one year period, the Property would be sold back to the Defendants. Id. The Agreement memorialized these terms, and was executed on March 7, 2008. Id. On or around January 2009, the Debtor stopped making mortgage payments. Id.
The Agreement also contained a buy and sell provision in the amount of $560,000. Id. at 4. However, the HUD-1 listed the contract sales price at $670,000. Id. At the time the Property was sold to the Debtor, the Defendants' existing loan had a balance of $236,338.68. Id. The Debtor took out a mortgage on the Property from JP Morgan Chase Bank ("Chase Bank") in the amount of $569,500, which was a $306,161.32 increase over the Defendants' previous obligation. Id. In taking out this mortgage, the Debtor effectively stripped all of the equity out of the Property. Id.
Despite the terms of the Agreement, the Property was not sold back to the Defendants. Id. In March 2010, the Debtor sent the Defendants a rent-demand letter, asserting that the Defendants defaulted as of May 1, 2009. Id.
On February 28, 2014, the Defendants filed an action in state court (the "State Court Action") against the Debtor, Chase Bank, and other defendants. The State Court Action contained eleven counts, including one to quiet title.
On March 31, 2014, the Debtor filed a Chapter 13 petition; the case was converted to Chapter 7 on September 3, 2014. Joseph D. Marchand, Esq. was appointed as the Chapter 7Trustee (the "Trustee"). The Defendants filed a proof of claim in the amount of $406,661.31, to which they attached a copy of the state court complaint.
On July 7, 2014, the Defendants filed an adversary proceeding (the "First Adversary Proceeding") against the Debtor, Chase Bank, and other defendants, with the same eleven counts that were set forth in the State Court Action. Chase Bank filed a motion to dismiss or alternatively, for abstention over the adversary. Based on the understanding that the Trustee was going to abandon interest in the Property, the Court entered an order on October 24, 2014, dismissing the First Adversary Proceeding without prejudice. The order stated that "[t]he Court hereby abstains from exercising jurisdiction over this adversary proceeding and it is hereby dismissed in its entirety, without prejudice." Order Granting Motion to Dismiss the First Adversary Proceeding, Adv. Pro. No. 14-01610, Doc. No. 16. Shortly thereafter, the Trustee abandoned his interest in the Property.
On January 14, 2015, the Defendants voluntarily dismissed all of the counts against the Debtor in the State Court Action, with the exception of the count seeking to quiet title as to the Property. In their submissions and at the Court's hearing to consider the Motion to Dismiss on September 15, 2015, the Defendants acknowledged that the parties to the State Court Action have already exchanged and responded to written discovery; fact discovery was completed on July 31, 2015; and the parties will conclude expert discovery by December 15, 2015.
On February 6, 2015, the Trustee sent a letter to the Defendants demanding the payment of rental proceeds in the amount of $401,200. On May 15, 2015, the Trustee filed the Adversary Complaint, initiating this Adversary Proceeding against the Defendants, seeking the rental proceeds.
On June 16, 2015, the Defendants filed the Motion to Dismiss, which the Trustee opposed. In response to the Trustee's opposition, the Defendants filed a reply brief which argued, inter alia, that the Court should abstain from hearing the matter. On July 31, 2015, the Court issued a letter to the parties requesting briefing as to the issue of abstention.
The Court has jurisdiction over this Adversary Proceeding under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. §§ 157(b)(2)(A), (C) and (O). Venue is proper in this Court pursuant to 28 U.S.C. § 1408. The following constitutes the Court's findings of fact and conclusions of law as required by Fed. R. Bankr. P. 7052.1
The Motion to Dismiss asserts that the Trustee's Complaint fails to state a claim under Federal Rule of Civil Procedure 12(b)(6), made applicable by Federal Rule of Bankruptcy Procedure 7012(b). Pursuant to Rule 12(b)(6), the Court may dismiss a complaint for failure to state a claim upon which relief may be granted. In re Student Fin. Corp., 335 B.R. 539, 545 (D. Del. 2005) (citing Fed. R. Civ. P. 12(b)(6)). Recently, "pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiffto plead more than the possibility of relief to survive a motion to dismiss" under Rule 12(b)(6). Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 677, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1973 (2007)). A complaint is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." In re Magna Entm't Corp., 438 B.R. 380, 386 (Bankr. D. Del. 2010) (citing Iqbal, 556 U.S. at 677, 129 S. Ct. at 1949) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. at 1973 (2007)). "Determining whether a complaint is facially plausible is a 'context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Id.
To evaluate a complaint in light of a motion to dismiss, the court must complete a two part analysis to determine whether dismissal is proper. First, the court must "distinguish between factual allegations and legal conclusions in the complaint." Culinary Serv. of Del. Valley, Inc. v. Borough of Yardley, 385 Fed. App'x. 135, 140 (3d Cir. 2010) (citing Phillips v. County of Allegheny, 515 F.3d 224, 233-234 (3d Cir. 2008); Iqbal, 556 U.S. at 678-84, 129 S. Ct. at 1950-53 (2009)). Second, if the complaint sets forth well-pleaded factual allegations, the court may assume their veracity and draw inferences favorable to the non-moving party, but then must determine whether the factual allegations show an entitlement to relief. Id.
The Court concludes that the Complaint has set forth a sufficient set of circumstances under which the Trustee may prevail, and therefore can survive the Motion to Dismiss. The Motion to Dismiss asserts that: (1) the action is time barred; (2) the rents are not property of theestate and the Trustee lacks standing to pursue the claims asserted; (3) the Complaint is barred by the doctrine of res judicata; and (4) the Complaint is barred by the Entire Controversy Doctrine.
First, the action is not time barred. While a six year statute of limitations would apply pursuant to N.J.S.A. 2A:14-1, § 108(a) of the Bankruptcy Code provides for the limitations period to be the later of the state law deadline or two years after the petition date. See 11 U.S.C. § 108(a). Since the Debtor filed for bankruptcy in March 2014, the deadline to file the...
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