Ohnmacht v. Commercial Credit Grp. Inc. (In re Ohnmacht)

Decision Date03 November 2017
Docket NumberCASE NO. 09-08106-8-DMW,ADVERSARY PROCEEDING NO. 14-00213-8-DMW
CourtU.S. Bankruptcy Court — Eastern District of North Carolina

This matter comes before the court upon the Motion for Dismissal of Plaintiffs' Seven Claims for Relief for Lack of Subject Matter Jurisdiction (with Incorporated Memorandum of Law) ("Motion to Dismiss") filed by Commercial Credit Group Inc. ("Defendant") on April 18, 2017 and the Response thereto filed by Charles T. Ohnmacht, Sr. and Carolyn G. Ohnmacht ("Plaintiffs") on May 17, 2017. In the Motion to Dismiss, the Defendant requests dismissal of claims for relief presented within this adversary proceeding pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.1

The court conducted a hearing on June 29, 2017 in Raleigh, North Carolina. Douglas R. Ghidina, Esq. and Robert G. Qulia, Esq ("Qulia") appeared for the Defendant, and Matthew W. Buckmiller, Esq. appeared for the Plaintiffs. Based upon the evidence presented and arguments of counsel, the court grants the Motion to Dismiss for the reasons set forth herein.

A. Plaintiffs' Chapter 11 Case
1. Plaintiffs' Debt to Defendants.

The Plaintiffs filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on September 18, 2009 and scheduled the Defendant as a secured creditor in the case. On October 20, 2009, the Defendant filed a proof of claim asserting that on the date of the Plaintiffs' petition, the Plaintiffs owed the Defendant the amount of $113,473.26. The Defendant's claim arose from a judgment ("Judgment") entered against the Plaintiffs and in favor of the Defendant on July 23, 2009 by the Superior Court of Mecklenburg County, North Carolina for the amount of $110,368.28, plus attorneys' fees and interest. On August 24, 2009, the Judgment was transcribed to New Hanover County, North Carolina, creating a lien ("Judgment Lien") upon real property owned by the Plaintiffs in New Hanover County.

2. Preference Adversary Proceeding

On January 27, 2010, the Plaintiffs initiated an adversary proceeding ("Preference AP") against the Defendant, seeking to avoid the Judgment as a preferential transfer pursuant to 11U.S.C. § 547(b). On August 18, 2010, the court entered summary judgment in favor of the Plaintiffs and avoided not the Judgment but the Judgment Lien. In its decision (the court's written adjudication will be referred to collectively as the "Preference Judgment"), the court found that original entry of the Judgment in Mecklenburg County did not create a lien or transfer subject to avoidance under 11 U.S.C. § 547, because the Plaintiffs at that time owned no real property in Mecklenburg County.

3. Plan of Reorganization.

On May 4, 2010, while the Preference AP was pending, the court entered an Order Confirming Plan ("Confirmation Order"), which confirmed the Plaintiffs' Plan of Reorganization ("Plan") filed on January 18, 2010. The Plan named the Defendant as the sole Class 5 creditor and provided as follows:

(1) Description of Debt. The [Plaintiffs are] indebted to this creditor pursuant to a judgment filed in New Hanover County, North Carolina. This creditor filed Claim No. 12 in the amount of $113,473.26.
(2) Impairment. This class will be impaired.
(3) Treatment. The creditor's judgment was filed within ninety (90) days prior to the filing of the petition. The [Plaintiffs have] filed an adversary proceeding that seeks to void this judgment as an avoidable preference. This claim will be treated as an unsecured claim.

The Plan designated the Plaintiffs' unsecured creditors, including the Defendant pursuant to the Class 5 treatment, as Class 14 with the following treatment:

The [Plaintiffs] shall pay allowed general unsecured claims a total of $10,000.00, in quarterly installments of $500.00, commencing the earlier of January 15, April 15, July 15, or October 15 following 60 days after the Effective Date and shall continue quarterly thereafter for five (5) years. All payments to this class shall be distributed pro rata.

Article XIII of the Plan, titled "RETENTION OF JURISDICTION," includes the following provisions:

The Bankruptcy Court shall retain jurisdiction of these proceedings pursuant to and for the purposes of Section 105(a) and 1127 of the Code and for, without limitation, the following purposes, interalia:
. . .
to determine all controversies and disputes arising under or in connection with the Plan;
. . .
to effectuate payments under, and performance of, the provisions of the Plan
. . .
to determine such other matters and for such other purposes as may be provided for in the confirmation order . . . .

Article XV of the Plan, titled "DISCHARGE," provides as follows:

Upon completion of payments, the [Plaintiffs] and the Estate will be discharged from all Claims and Liens and Liens [sic] expressly provided for in the Plan. The discharge will be fully effective against all Creditors regardless of whether they have voted to accept or reject the Plan and regardless of whether the Plan is confirmed by consent or by resort to the provisions of section 1129(b) of the Bankruptcy Code. However, even though no discharge will be entered until all payments are completed, the [Plaintiffs] will seek to have the case closed upon substantial consummation under § 1101(2). Further, the [Plaintiffs] will seek to have the cause automatically re-opened pursuant to § 350(b) without the payment of a fee, upon the filing and service on all creditors and the Bankruptcy Administrator, of a Notice of Completion of Plan Payments and Request for Entry of Discharge, allowing all parties 20 days to file a response.

In the Plan, the term "substantial consummation" is defined in accordance with 11 U.S.C. § 1101(2)2 to "mean the time the reorganized [Plaintiffs have] commenced the distribution of initial Plan payments to all creditor classes."

4. Completion of Case and Discharge.

On October 14, 2010, the Plaintiffs filed a Final Report and Chapter 11 Application for Final Decree, reporting that they had commenced distribution under the Plan. On December 10, 2010, the court entered a Final Decree which held that the Plan had been substantially consummated as provided in 11 U.S.C. § 1101(2) and ordered the case closed. The court reopened the case on June 14, 2012,3 and on August 24, 2012, the Plaintiffs filed a Report of Completion of Plan Payments and Request for Entry of Discharge. On September 27, 2012, the court entered a Discharge of Individual Debtor in a Chapter 11 Case ("Discharge Order"), which granted the Plaintiffs a discharge pursuant to 11 U.S.C. § 1141(d), and an Order Closing Case.

B. Plaintiffs' Demand for Cancelation of Judgment

On August 22, 2014, the Plaintiffs' counsel sent a letter ("Demand Letter") to Qulia, the Defendant's general counsel, notifying Qulia that the Judgment remained on the public record in Mecklenburg County and demanding that the Defendant "cancel and mark paid the judicial lien . . . ." On August 28, 2014, Qulia responded to the Demand Letter and declined to cancel the Judgment. Qulia acknowledged that the court's decision entered in the Preference AP avoided the Judgment Lien created by the Judgment but denied that either the Plaintiffs requested, the court directed, or applicable law required the Defendant "to do, or not do, any particular act."4

C. Adversary Proceeding Sub Judice Against Defendant
1. Claims for Relief

On October 23, 2014, the Plaintiff's bankruptcy case was reopened for a third time.5 On October 24, 2014, the Plaintiffs initiated this adversary proceeding by filing a Complaint for Injunctive Relief, Declaratory Relief, Civil Penalties, Sanctions and Damages ("Complaint"), subsequently amended by a First Amended Complaint for Injunctive Relief, Declaratory Relief, Civil Penalties, Sanctions and Damages ("Amended Complaint")6 filed on May 30, 2017. The Amended Complaint alleges that the Defendant was obligated to cancel the Judgment and sets forth seven claims for relief ("Claims for Relief") allegedly arising from the Defendant's failure to cancel the Judgment:

1. Breach of Contract;
2. Violation of N.C. Gen. Stat. § 1-239;
3. Violation of North Carolina's Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1 et seq;
4. Intentional Infliction of Emotional Distress;
5. Negligent Infliction of Emotion Distress (Alternative Claim for Relief);
6. Negligence (Alternative Claim for Relief); and
7. Federal Declaratory Judgment Act ("FDJA"), 28 U.S.C. § 2201(a).

The first six Claims for Relief seek damages under North Carolina common and statutory law, whereas the seventh Claim for Relief requests this federal court to make a declaratory judgment that the Defendant violated N.C. Gen. Stat. § 1-239 and the UDTPA.

In addition to the Claims for Relief, the Amended Complaint contains a Motion for Contempt and Sanctions ("Contempt Motion") which requests the court to hold the Defendant in civil contempt and impose sanctions against the Defendant for alleged violation of provisions the Preference Judgment, the Plan, and Confirmation Order, and the Discharge Order.

2. Jurisdictional Allegations

The Amended Complaint contains the following allegations:

This Court has personal and subject-matter jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334, 151, and 157, as well as the Standing Order of Reference entered by the United States District Court for the Eastern District of North Carolina on August 3, 1984. Likewise, this Court retained jurisdiction over this matter pursuant to the Plan of Reorganization, which was proposed by the [Plaintiffs] and confirmed upon entry of the Confirmation Order.

The Defendant denied these allegations in the Defendant's Answer to Plaintiffs' Amended and Restated Complaint filed...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT