Pergament v. Varela (In re Varela)

• Decision Date: 04 May 2015
• Docket Number: Case No. 813–73019–reg,Adv. Proc. No. 813–8146–reg
• Citation: 530 B.R. 573
• Parties: In re: Katya Varela a/k/a Katya D. Varela a/k/a Katia D. Varela, Debtor. Marc A. Pergament, as Chapter 7 Trustee of the Estate of Katya Varela a/k/a Katya D. Varela a/k/a Katia D. Varela, Plaintiff, v. Katya Varela, Debtor/Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

530 B.R. 573

In re: Katya Varela a/k/a Katya D. Varela a/k/a Katia D. Varela, Debtor.Marc A. Pergament, as Chapter 7 Trustee of the Estate of Katya Varela a/k/a Katya D. Varela a/k/a Katia D. Varela, Plaintiff

v.Katya Varela, Debtor/Defendant.

Case No. 813–73019–reg

Adv. Proc. No. 813–8146–reg

United States Bankruptcy Court, E.D. New York.

Signed May 4, 2015

Marc A. Pergament, Weinberg Gross & Pergament LLP, Garden City, NY, pro se.

George Bassias, George Bassias Attorney LLC, Astoria, NY, Karamvir Dahiya, Dahiya Law Offices, LLC, New York, NY, for Debtor/Defendant.

MEMORANDUM DECISION

(Re: Motion to Dismiss Counterclaims and Motion to Strike Affirmative Defenses)

Robert E. Grossman, United States Bankruptcy Judge

This matter is before the Court pursuant to an adversary proceeding commenced by Marc A. Pergament (the “Trustee” or “Plaintiff”), in his capacity as the trustee of the estate of Katya Varela (the “Debtor” or the “Defendant”), seeking to bar her discharge under § 727(a)(4)(A). In her second amended answer, the Debtor asserts counterclaims against the Trustee and affirmative defenses in response to the claims set forth in the Complaint. The counterclaims and affirmative defenses all relate to allegations that while the Debtor attempted to obtain a modification of her mortgage, the Trustee wrongfully demanded monthly payments from the Debtor in an amount equal to the mortgage payments, and commenced this adversary proceeding in retaliation when she refused to do so. The Debtor asserts four counterclaims: (1) removal of the Trustee pursuant to § 324; (2) interference with the Debtor's attempts to modify her mortgage; (3) bad faith and fraud in commencing this adversary proceeding; and (4) abuse of process. The Debtor asserts four affirmative defenses to the § 727(a)(4)(A) action: (1) failure to state a claim; (2) the Trustee has exceeded his authority and is proceeding in an unreasonable manner; (3) the Trustee was not entitled to seek postpetition mortgage payments; and (4) the Trustee lacks standing to demand the monthly payments. The Trustee moves to dismiss the counterclaims and to strike the affirmative defenses. The Trustee also moves for a protective order barring the Debtor from taking his deposition.

The Trustee asserts that he is entitled to quasi-judicial immunity when acting as a Chapter 7 trustee, and therefore all of the counterclaims must be dismissed as the alleged conduct falls within the zone of protection. The Debtor contends that the Trustee exceeded his statutory authority and used the adversary proceeding as a vehicle to obtain funds and retaliate against the Debtor and, therefore, is not afforded immunity. While the Court finds that all of the counterclaims must be dismissed pursuant to Fed. R. Civ. P. 12(b)(6), it is not for the reasons set forth by the Trustee. The First Counterclaim seeking removal of the Trustee must be dismissed because the Debtor failed to proceed by motion as required by the applicable Bankruptcy Rules. Even if the request for relief had been brought by motion, the grounds cited for removal of the Trustee do not appear to be sufficient under applicable Second Circuit authority. The Debtor must show that the Trustee has committed fraud and caused actual injury to the Debtor's estate. However, the Trustee's alleged acts concern injury to the Debtor individually, which do not constitute cause for his removal.

With respect to the remaining counterclaims, the Debtor seeks to hold the Trustee personally liable for his alleged conduct, but the Trustee did not commence this adversary proceeding in his personal capacity. Therefore, counterclaims two through four do not meet the “opposing party” requirement set forth in Fed. R. Civ. Proc. 13(b).

Even if the Debtor were to bring a separate action against the Trustee individually, the Trustee would be entitled to assert quasi-judicial immunity from personal liability so long as the Trustee acted within the scope of his statutory authority. Because objecting to the Debtor's discharge and marshaling estate assets are statutory obligations of the Trustee, it is not likely that the Trustee's conduct would subject him to personal liability. However, this does not mean that the Debtor, or any other party, is without recourse. The Office of the United States Trustee is well equipped to address complaints against panel trustees, and has the authority to investigate the Debtor's allegations regarding the Trustee's conduct.

The motion to strike the First Affirmative Defense—failure to state a claim—is denied, and is granted as to the Second, Third, and Fourth Affirmative Defenses. Inclusion of the First Affirmative Defense does not prejudice the Plaintiff and serves as a general denial of the allegations in the complaint. Therefore, the Court sees no reason to strike the First Affirmative Defense. The Second Affirmative Defense shall be stricken because the Trustee is plainly authorized to commence an action to bar the Debtor's discharge. The Third and Fourth Affirmative Defenses have no connection to the factual allegations in the Complaint, and even if true, would not preclude entering judgment in favor of the Trustee on the Complaint. Furthermore, permitting these remaining affirmative defenses to go forward would prejudice the Trustee by needlessly complicating discovery and the trial in this § 727 action.

Finally, the Court grants the Trustee's motion for a protective order prohibiting the deposition of the Trustee. Because all of the counterclaims are being dismissed and the substantive affirmative defenses are being stricken, a deposition of the Trustee is not reasonably calculated to lead to discoverable evidence relevant to the remaining issues in this adversary proceeding.

PROCEDURAL HISTORY

On June 5, 2013, the Debtor, represented by George Bassias (“Bassias”), filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The Debtor simultaneously filed her schedules and statements. The Trustee conducted the initial meeting of the creditors on July 10, 2013 (“341 Meeting”). Shortly after the 341 Meeting, the Debtor filed amended schedules on July 23, 2013. On September 5, 2013, the Trustee commenced this adversary proceeding objecting to the Debtor's discharge pursuant to § 727(a)(4)(A).

On September 9, 2013, the Debtor filed her Answer, Counterclaims and Affirmative Defenses. Answer and Countercls., ECF No. 4. The Debtor served a notice seeking to examine the Trustee and a request for admissions on December 12, 2013. The Trustee moved to dismiss the counterclaims pursuant to Rule 12(b)(6), to strike the Affirmative Defenses pursuant to Rule 12(f), and to prohibit the Debtor from taking the deposition of the Trustee (the “First Motion”) on January 6, 2014. A hearing on the First Motion was held on February 5, 2014, and the Court directed the Debtor to specify the statutory or legal bases for the relief sought in the counterclaims. The Court deferred making a decision on the request to prohibit the deposition of the Trustee until after a decision on whether the counterclaims should be dismissed was rendered. At the March 5, 2014 hearing, the Debtor was given additional time to amend the counterclaims.

The Debtor then filed the Second Amended Answer and Counterclaims (the operative answer, counterclaims, and affirmative defenses) on March 7, 2014. Second Am. Answer and Countercls., ECF No. 24. On March 27, 2014, the Trustee filed the instant motion (“Second Motion”). Karamvir Dahiya (“Dahiya”) filed a notice of appearance as co-counsel to the Debtor on April 4, 2014. On April 11, 2014, the Debtor, now represented by Bassias and Dahiya, filed two separate briefs in opposition to the Second Motion (the “Bassias Opposition” and “Dahiya Opposition”, respectively). The Trustee filed his reply in further support of the Second Motion on April 17, 2014, and a hearing on the Second Motion was held on April 21, 2014.

FACTS

The facts alleged in the Second Amended Answer and Counterclaims, presented in the light most favorable to the Debtor, are assumed to be true for purposes of making substantive rulings on the Second Motion to Dismiss. The Debtor based such facts primarily on the Trustee's examination of the Debtor at the 341 Meeting and a series of letters between the Trustee and the Debtor's counsel after the 341 Meeting.

According to the Debtor, she filed for bankruptcy relief to become eligible to seek a modification of the mortgage on her residence. Apparently, Wells Fargo, the mortgagee, would only consider entering into a modification agreement if the recorded judgments on the Debtor's residence could be removed.¹ 341 Meeting Tr., at 8:12–20. During this process, the Debtor was not making mortgage payments to Wells Fargo. The Trustee, upon examination of the Debtor's schedules, calculated the Debtor had $1,500 to $1,600 in disposable income, Id. at 7:21–25, and the Trustee requested the Debtor turn these funds over to him until she completed the process of obtaining the mortgage modification. Id., at 8:21–25, 9:1–3, 11:8–11. The Debtor then informed the Trustee that she needed to amend her schedules to include additional expenses that she had overlooked. Id., at 9:4–11, 12:10–11.

At the 341 Meeting, in response to the statement by the Debtor's counsel that the schedules could be amended, the Trustee stated: “Oh, really? You could do a lot of things, sir. You could do whatever you'd like to do, and I could object to discharge and say it's a false bankruptcy.” Id., at 12:12–16. At the 341 Meeting, the Trustee also requested that the Debtor provide proof of the expenses the Debtor sought to add to Schedule J. Id. 18:15–25, 9:1–5.

By letter dated July 31, 2013 (the “July 31 Letter”), the Trustee wrote: “I still have several difficulties in this case and I would like to resolve the case and at the same time, give the Debtor an opportunity to try to save her home.” Bassias Affirm. Opp'n, ECF No. 30, Ex. B. The Trustee also...