Roggio v. Roggio (In re Roggio)

• Decision Date: 28 February 2020
• Docket Number: Case No.: 5-17-bk-02119 RNO,Adversary No.: 5-19-ap-00099 RNO
• Citation: 612 B.R. 655
• Parties: IN RE: Ross William ROGGIO, Debtor 1 Ross William Roggio, Soon Ja Roggio, Plaintiff(s) v. Kristy Lynn Roggio aka Kristy Merring, Defendant(s)
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

612 B.R. 655

IN RE: Ross William ROGGIO, Debtor 1Ross William Roggio, Soon Ja Roggio, Plaintiff(s)

v.Kristy Lynn Roggio aka Kristy Merring, Defendant(s)

Case No.: 5-17-bk-02119 RNO

Adversary No.: 5-19-ap-00099 RNO

United States Bankruptcy Court, M.D. Pennsylvania.

February 28, 2020

Patrick James Best, ARM Lawyers, J. Zac Christman, Stroudsburg, PA, for Plaintiff(s).

Stephen G. Bresset, Bresset & Santora, LLC, Honesdale, PA, for Defendant(s).

Nature of Proceeding: Motion to Dismiss

OPINION ¹

Robert N. Opel, II, Bankruptcy Judge

The Chapter 7 Debtor and his mother filed a five-count Complaint against his estranged wife. A Motion to Dismiss Pursuant to Rules 12 and 20, F.R.C.P. was filed by the Defendant. Count I of the Complaint will be dismissed, with leave to amend. The Court will permissively abstain from hearing Counts II through V. The Co-Plaintiff will be dropped as a party.

I. Procedural History

Ross William Roggio ("Ross") filed a voluntary petition under Chapter 13 of the Bankruptcy Code on May 22, 2017. Ross' filing was converted to a case under Chapter 7 of the Bankruptcy Code on December 10, 2018. The conversion was ordered after Ross elected to convert from Chapter 13 to Chapter 7. 5-17-bk-02119-RNO, ECF No. 184.

The subject Adversary Proceeding was commenced by the filing of a five-count Complaint on September 18, 2019. 5-19-ap-00099-RNO, ECF No. 1. The Plaintiffs are the Debtor, Ross, and his mother, Soon Ja Roggio ("Soon Ja"). The sole Defendant is Kristy Lynn Roggio a/k/a Kristy Merring ("Kristy"). Ross and Kristy are estranged spouses.

Kristy replied to the Complaint by filing a Motion to Dismiss ("Motion"). The Motion asserts that Soon Ja is not a proper party plaintiff. The Motion also seeks to dismiss the Adversary Proceeding for lack of jurisdiction and for failure to state a claim upon which relief can be granted. The Motion has been briefed by the parties and oral argument was heard on January 16, 2020.

The underlying Chapter 7 case was reassigned to me on February 13, 2019, due to the untimely passing of my colleague, the Honorable John J. Thomas. It is noted that this is the sixth adversary proceeding filed in this Chapter 7 case. The five prior adversary proceedings have all been closed. Further, on February 7, 2020, the Chapter 7 Trustee, John J. Martin, filed a Chapter 7 Trustee's Final Report. 5-17-bk-02119-RNO, ECF No. 315.

II. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. Count I is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G). Counts II through V are non-core proceedings.

III. Discussion

The Counts of the Complaint will be discussed in seriatim.

A. Count I – Violation of Automatic Stay

Count I of the Complaint alleges that on December 12, 2012, Ross and Kristy were married. 5-19-ap-00099-RNO, ECF No. 1, ¶ 6. It is further alleged that Ross and Kristy entered into a separation agreement on November 28, 2016. A copy of a separation agreement of that date is attached as Exhibit 1 to the Complaint.

The Complaint further alleges that Ross and Kristy are parties to "domestic litigation" in the Court of Common Pleas of Monroe County, Pennsylvania. It is alleged that the state court litigation was commenced prior to the Chapter 13 petition and that the state court matters are docketed to 9149-CV-2016 and 1272-DR-2016 ("State Court Proceedings").

The Complaint makes reference to an order entered in the State Court Proceedings. The order is dated March 1, 2017, and a copy is attached as Exhibit 2 to the Complaint. Count I of the Complaint alleges, in summary fashion, that Kristy has failed to turn over to Ross certain non-marital property. The Complaint alleges that Kristy, "has ‘exercise[d] control over property of the estate’ in violation of the automatic stay." 5-19-ap-00099-RNO, ECF No. 1, ¶ 41 (citation omitted).

The Motion questions the Court's jurisdiction to hear the Adversary Proceeding. Bankruptcy jurisdiction extends to four types of proceedings: (1) cases under Title 11; (2) proceedings arising under Title 11; (3) proceedings arising in a bankruptcy case; and (4) proceedings related to a bankruptcy case. 28 U.S.C. § 1334(b) ; In re Combustion Eng'g, Inc. , 391 F.3d 190, 225 (3d Cir. 2004) (citations omitted). A bankruptcy court has the power to hear, decide and enter final orders and judgments in the first three categories of proceedings. 28 U.S.C. § 157(b)(1). However, with respect to the fourth category, "related to" proceedings, the bankruptcy court can hear the matter, but it can only submit proposed findings of fact and conclusions of law for de novo review by the district court. 28 U.S.C. § 157(c)(1) ; Halper v. Halper , 164 F.3d 830, 836 (3d Cir. 1999) ; In re Millennium Lab Holdings II, LLC , 575 B.R. 252, 261 (Bankr. D. Del. 2017).

In the Third Circuit, courts follow a two-step test to determine whether or not a claim is a core proceeding. First, the Court considers whether the claim falls under the "illustrative list" in 28 U.S.C. § 157(b) ; Halper , 164 F.3d at 836. Secondly, a core proceeding is one that either invokes a substantive right provided by the Bankruptcy Code or is a proceeding that, by its nature, could arise only in the context of a bankruptcy case. Artesanias Hacienda Real S.A. de C.V. v. N. Mill Capital LLC , 607 B.R. 189, 197 (E.D. Pa. 2019). 11 U.S.C. § 363(k)² provides that an individual injured by a willful violation of the automatic stay imposed by a bankruptcy filing may recover certain damages. Since Count I alleges a violation of the automatic stay, it is a core proceeding in that it invokes a substantive right provided by the Bankruptcy Code. Further, it is the type of claim that could only arise in a bankruptcy proceeding. To the extent the Motion questions the jurisdiction of the Court with respect to Count I, it is denied.

The automatic stay is one of the fundamental protections provided to debtors when they file for bankruptcy. As noted above, a willful violation of the automatic stay provides a cause of action for an award of damages. In re Aleckna , 543 B.R. 717, 720 (Bankr. M.D. Pa. 2016).

The Motion also alleges that the Complaint fails to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). Federal Rule of Bankruptcy Procedure 7012(b) makes Federal Rule of Civil Procedure 12(b)(6) applicable to adversary proceedings. To withstand a Rule 7012(b)(6) motion, a complaint must plead a plausible claim for relief. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S. Ct. 1955, 1966, 167 L.Ed.2d 929 (2007) ; Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). In considering the Motion, the alleged facts are viewed in the light most favorable to Ross. In contrast, pled legal conclusions are not assumed to be correct at this stage. Id. at 678-79, 129 S. Ct. 1937.

The instant Complaint is rather vague as to what action by Kristy allegedly violated the automatic stay. Paragraph 36 of the Complaint states, "[t]o date, Merring [Kristy] has not turnover [sic] over [sic] the expensive king size bedroom set with sentimental value to Debtor [Ross], despite demand." 5-19-ap-00099-RNO, ECF No. 1. Ross has not plausibly pled a claim for a violation of the automatic stay. General assertions of his ownership of items of personal property will not suffice. Further, the Court views the allegation of Kristy's refusal to "turnover" as a legal conclusion for which factual context must be pled in order state a plausible claim.

Developing case law in the Third Circuit calls into question whether or not maintaining passive possession of property which a third party took into possession pre-petition violates the automatic stay. Recently, the Third Circuit considered whether a creditor's retention of a vehicle which it repossessed pre-petition was a violation of the automatic stay. A Third Circuit panel found that passive retention of a vehicle did not qualify as an act to exercise control over property of the estate. The court noted that retention of the subject vehicle maintained the status quo between the subject debtor and his creditors. It therefore affirmed the District Court's denial of the debtor's requested sanctions for an alleged automatic stay violation. In re Denby-Peterson , 941 F.3d 115, 126 (3d Cir. 2019). Similarly, the subject Complaint fails to allege sufficient facts to support the pled conclusion that Kristy violated the automatic stay.

The Motion to Dismiss Count I of the Complaint is granted for failure to state a claim upon which relief can be granted. Since this is the original Complaint, the Court is loath to find that allowing for amendment would be futile. Therefore, Ross is granted leave of twenty-one days to file an amended complaint as to Count I only.

B. Count II – Fraudulent Inducement

Count II of the Complaint alleges that Kristy failed to pay Soon Ja $25,000.00 from the proceeds of the sale of Ross and Kristy's former marital residence. Judicial notice is taken that on April 9, 2019, the Court entered an Amended Order approving the Chapter 7 Trustee's sale of the subject real property. 5-17-bk-02119-RNO, ECF No. 251. The Court Order provides for the payment of certain claims; conspicuously absent is any provision for a payment to Soon Ja.

The Complaint does allege that Ross' attorney offered to Kristy's attorney that the sale settlement be conditioned upon the agreement that Kristy pay Soon Ja $25,000.00, from the sale proceeds. It is further alleged that Kristy's attorney accepted the offer on her behalf. 5-19-ap-00099-RNO, ECF No. 1, ¶¶ 25 & 26. It is alleged that Kristy has not paid the $25,000.00, "despite demand." 5-19-ap-00099-RNO, ECF No. 1, ¶ 47. The Complaint further alleges that Kristy intentionally misrepresented to Soon Ja that $25,000.00 would be repaid from the sale of the former marital residence. 5-19-ap-00099-RNO, ECF No. 1, ¶ 49.

During the January 16, 2020, oral argument regarding the Motion, the Court sua...