Matter of Sams

• Decision Date: 30 August 1989
• Docket Number: Adv. No. 3-89-0038.,Bankruptcy No. 3-88-04283
• Citation: 106 BR 485
• Parties: In the Matter of William SAMS, Debtor. George W. LEDFORD, Chapter 13 Trustee, Plaintiff, v. John TIEDGE, Timothy Kelhoffer, William Sams, Ernest Hase, Nancy Hase, Gary Haines and Pat Meyers, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

106 B.R. 485 (1989)

In the Matter of William SAMS, Debtor George W. LEDFORD, Chapter 13 Trustee, Plaintiff, v. John TIEDGE, Timothy Kelhoffer, William Sams, Ernest Hase, Nancy Hase, Gary Haines and Pat Meyers, Defendants.

Bankruptcy No. 3-88-04283, Adv. No. 3-89-0038.

United States Bankruptcy Court, S.D. Ohio, W.D.

August 30, 1989.

George W. Ledford, Trustee, Englewood, Ohio.

John E. Breidenbach, Dayton, Ohio, for trustee, George W. Ledford.

William H. Wolff, Sr., Dayton, Ohio, for Pat Meyers and Gary Haines.

David P. Strub, Dayton, Ohio, for debtor.

John Tiedge, Dayton, Ohio, pro se and for Timothy Kelhoffer.

THOMAS F. WALDRON, Bankruptcy Judge.

This proceeding, which arises under 28 U.S.C. § 1334(b) in a case referred to this court by the Standing Order Of Reference entered in this district on July 30, 1984, is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A)—matters concerning the administration of the estate (C)—counterclaims by the estate against persons filing claims against the estate and (O)—proceedings affecting the adjustment of the debtor-creditor relationship.

PROCEDURAL AND FACTUAL BACKGROUND

The pleadings and admissions in this proceeding establish a number of material facts, not in dispute among the parties. These undisputed material facts are summarized by the court in the following paragraph.

William Sams, the debtor, filed a petition under Chapter 13 of the Bankruptcy Code on December 27, 1988 and listed real estate located at 1013 Lea Avenue, (the property) in his schedules. Prior to the filing of the debtor's petition, the defendant, Timothy Kelhoffer, through his counsel, the defendant John Tiedge, obtained a judgment in the amount of thirty-nine thousand, one hundred fifty-three dollars ($39,153.00) against the debtor. The debtor listed the defendant Timothy Kelhoffer and Kelhoffer's attorney, John Tiedge, in the schedules filed with the bankruptcy petition. Prior to the filing this Chapter 13 case, defendant Tiedge had commenced on behalf of his client, defendant Kelhoffer, a State Court collection action against the debtor to foreclose a judgment lien in favor of the defendant Kelhoffer against the debtor's property. On November 21, 1988, Tiedge filed a Praecipe in the State Court forclosure action for the execution and sale of the debtor's property. The Sheriff of Montgomery County held a public auction on February 3, 1989 and the debtor's real estate was sold to the defendant, Ernest Hase and Nancy Hase, for approximately sixty-four thousand, five hundred dollars ($64,500.00). It is undisputed that the defendants, Kelhoffer and Tiedge, had actual notice of the filing of the debtor's Chapter 13 Petition prior to the date of the proposed sale of the debtor's property. The defendants admitted such in their pleadings and on January 31, 1989 filed an Objection To Confirmation Of Plan (Doc. 10, Case No. 3-88-04283).

George W. Ledford, the Chapter 13 Trustee filed a Complaint on February 9, 1989 against Tiedge, Kelhoffer, the debtor, Ernest and Nancy Hase, the purchasers of the real estate, the Sheriff of Montgomery County and the Clerk of the Montgomery County Court of Common Pleas. The trustee's complaint requested that the sale of the debtor's property be avoided pursuant to 11 U.S.C. § 549(a), that the State Court records be purged of the sale of the subject real estate and that sanctions for violation of the automatic stay be imposed against the defendants Tiedge and Kelhoffer for the sale price of the real estate— sixty four thousand, five hundred dollars ($64,500.00). The debtor filed an answer to the trustee's complaint and a cross-claim against the defendants Kelhoffer and Tiedge and demanded, in addition to the relief sought by the Trustee for violation of the automatic stay, that the debt due the defendant Kelhoffer be discharged and that punitive damages and attorney fees be assessed against defendants Tiedge and Kelhoffer (Doc. 9).

A number of the causes of action asserted by the trustee and the debtor have been concluded. The court has avoided the sale of the debtor's real estate (Doc. 22) and excused several of the defendants from further participation in this proceeding (Doc. 30) pending the resolution of the trustee's and the debtor's causes of action against the defendants Kelhoffer and Tiedge.

Defendants Kelhoffer and Tiedge filed answers to the complaint and the cross-claim (Docs. 13 and 14). On April 12, 1989, Defendants Tiedge and Kelhoffer filed a Motion To Dismiss On Behalf Of John Tiedge And Timothy Kelhoffer (Doc. 18). Counsel for the trustee filed a Memorandum Of Chapter 13 Trustee/Plaintiff Contra Motion To Dismiss On Behalf Of Defendants, John Tiedge and Timothy Kelhoffer (Doc. 20). Debtor then filed a Memorandum Of Defendant, William Sams, Contra To Motion To Dismiss On Behalf Of Defendants, John Tiedge and Timothy Kelhoffer; Motion To Strike Motion To Dismiss (Doc. 23). Defendant Tiedge then filed Response To Trustee's Memorandum Contra; Motion For Summary Judgment On Behalf Of John Tiedge And Timothy Kelhoffer (Doc. 26). The debtor filed a request that the court overrule the Defendants' Motion For Summary Judgment (Doc. 28). The trustee filed a Memorandum Of Chapter 13 Trustee/Plaintiff Contra Motion For Summary Judgment On Behalf Of Tiedge And Timothy Kelhoffer (Doc. 29).

ARGUMENTS OF THE PARTIES

The defendants' contention in support of both of their motions is that the automatic stay (11 U.S.C. § 362(a)) does not impose any affirmative duty on creditors to halt or reverse the consequences of any pending collection actions that were instituted prior to the filing of the bankruptcy petition. The defendants argue that any such actions are the responsibility of the debtor or the Chapter 13 Trustee. The defendants further argue that the automatic stay requires that creditors refrain from taking any action, which would include action to prevent the continuation of any pending collection actions that were instituted prior to the filing of the bankruptcy petition. In the context of this adversary proceeding, the defendants argue that, as a matter of law, the automatic stay prevented them from halting the State Court foreclosure sale of the debtor's property.

The defendants further argue that the debtor's property was in the "constructive possession" of the sheriff of Montgomery County and that the sheriff "acted pursuant to the order of the Common Pleas Court, and not the Order of the defendants" (Doc. 18).

The Trustee in contrast, contends that "once Tiedge, as Kelhoffer's attorney, became aware of the pendency of the debtor's Chapter 13 Petition, there devolved upon Tiedge and Kelhoffer an affirmative legal obligation to take necessary and appropriate steps to withdraw, cancel and dissolve the praecipe for the sheriff's sale and to restore the status quo" (Doc. 20). Similarly, the debtor contends that the defendants failure to prevent the sale they had initiated and facilitated by allowing it to continue to sale is tantamount to a willful violation of the Automatic Stay. The debtor argues that "despite receiving actual notice of the filing of the Chapter 13 Petition and filing an Objection To Confirmation, Tiedge and Kelhoffer allowed a chain of events they created to travel to the obvious logical conclusion while denying any wrong-doing, and shifting the blame for the sale to the Sheriff and Clerk for obeying the praecipe they filed." (Docs. 23 and 28).

QUESTIONS PRESENTED

The defendants filed two motions in this case, a Motion To Dismiss (Doc. 18) followed by a Motion For Summary Judgment (Doc. 26), presenting the following issues:

(1) Do the trustee's complaint (Doc. 1) and the debtor's cross-claim (Doc. 9) state causes of action against the defendants for violations of the provisions of 11 U.S.C. § 362(a)?

(2) If the trustee's complaint and the debtor's cross claim do state causes of action against the defendants for violations of the provisions of 11 U.S.C. § 362(a), are the defendants entitled to summary judgment in their favor on the basis of the undisputed material facts in this proceeding?

(3) If the defendants are not entitled to summary judgment in their favor, can partial summary judgment be entered in favor of the trustee and the debtor on the basis of the undisputed material facts in this proceeding?

DECISION

Pursuant to F.R.Civ.P. 12(b)(6), which is made applicable to this proceeding by Bankr.R. 7012(b), a motion to dismiss a complaint may be filed for "failure to state a claim upon which relief can be granted." A motion to dismiss is an attack upon the legal sufficiency of the complaint and the court is restricted to the pleadings. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Roth Steel Products v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir.1983). The general rule is "that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Davis H. Elliot Co., Inc. v. Caribbean Utilities Co., Ltd., 513 F.2d 1176, 1182 (6th Cir.1975). Courts generally disfavor granting a motion to dismiss "because dismissal of an action constitutes a judgment on the merits and is accorded preclusive effect." Matter of Schwartzman, 63 B.R. 348, 355 (Bankr.S. D.Ohio 1986).

Although the defendants' Motion To Dismiss could be dismissed as untimely because Rule 7012 contemplates that such motions will be filed before a responsive pleading, and, in this proceeding, the defendants answered both the complaint and the cross-claim before filing their Motion To Dismiss, the more significant basis for denying the motion is that the trustee's complaint and the debtor's cross-claim do state legally cognizable claims.

The complaint and the cross-claim allege that the...