Vieira v. Oleksy (In re Oleksy)

• Citation: 646 B.R. 427
• Decision Date: 02 November 2022
• Docket Number: C/A No. 22-00172-EG,Adv. Pro. No. 22-80030-EG
• Parties: IN RE, Kevin M OLEKSY, Debtor(s). Michelle Vieira, Chapter 7 Trustee Plaintiff(s), v. Lori Marie Oleksy and Pentagon Federal Credit Union, Defendant(s).
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina

646 B.R. 427

IN RE, Kevin M OLEKSY, Debtor(s).

Michelle Vieira, Chapter 7 Trustee Plaintiff(s),

v.Lori Marie Oleksy and Pentagon Federal Credit Union, Defendant(s).

C/A No. 22-00172-EG

Adv. Pro. No. 22-80030-EG

United States Bankruptcy Court, D. South Carolina.

Signed November 2, 2022

Christine E. Brimm, Barton Brimm, PA, Myrtle Beach, SC, for Plaintiff.

Russell A. DeMott, DeMott Law Firm, P.A., Summerville, SC, for Defendant Lori Marie Oleksy.

Demetri K. Koutrakos, Callison Tighe & Robinson LLC, Columbia, SC, Travis E. Menk, Brock & Scott, PLLC, Charlotte, NC, for Defendant Pentagon Federal Credit Union.

ORDER

Elisabetta G. M. Gasparini, United States Bankruptcy Judge

THIS MATTER is before the Court on the Motions for Judgment on the Pleadings ("Motions") filed by the Defendants, Pentagon Federal Credit Union ("Pentagon") and Lori Oleksy ("Ms. Oleksy") (collectively, the "Defendants").¹ The Plaintiff, the Chapter 7 Trustee appointed in this case (the "Trustee"), filed an Objection to the Motions.² For the reasons set forth below, the Court denies the Motions.

STATEMENTS OF FACT ³

The Trustee alleges that on or about April 13, 2018, the Debtor, Kevin M. Oleksy, and his spouse, Ms. Oleksy, acquired property located at 164 Ocean Commons Drive, Surfside Beach, SC 29575 (the "House"). To acquire the House, the Debtor took money from one of his bank accounts for a down payment and received financing for the remainder of the purchase price. The Debtor executed a promissory note secured by a mortgage on the House. The mortgage was executed by the Debtor and Ms. Oleksy. Ms. Oleksy, however, did not sign the promissory note or otherwise contribute to the purchase price of the House, but was placed on the title to the House, as a joint owner. The Trustee alleges that Ms. Oleksy acquired a one-half undivided interest in the House for no consideration. The Debtor subsequently refinanced the mortgage in 2019, 2020, and 2021, and remained the only obligor on the loan. Following the most recent refinance, which occurred on or about July 22, 2021, the Trustee alleges that the mortgage was improperly indexed under the last name Olesky, instead of the Debtor's last name, Oleksy.

The Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on January 26, 2022 (the "Petition Date") (C/A No. 22-00172, ECF No. 1), and the Trustee was appointed to act as Chapter 7 Trustee in the bankruptcy case. On June 6, 2022, the Trustee filed the Complaint against the Defendants, alleging that the joint titling of the House in the name of the Debtor and Ms. Oleksy constitutes a transfer of an interest of the Debtor in property, which is avoidable by the Trustee pursuant to S.C. Code § 27-23-10 (the "Statute of Elizabeth") and 11 U.S.C. § 544(b), because the transfer was voluntary, was made without valuable consideration, and was made to a family member and insider of the Debtor at a time when the Debtor was indebted to one or more unsecured creditors with an allowable claim as of the Petition Date (ECF No. 1). The Trustee further alleges that the mortgage was not properly recorded and indexed in the name of the Debtor; thus, she argues that she can avoid the mortgage on the House pursuant to 11 U.S.C. § 544(a), standing in the shoes of a perfected lien creditor or bona fide purchaser. Finally, to the extent the foregoing transfers are avoided, the Trustee seeks to recover the property transferred for the benefit of the estate pursuant to 11 U.S.C. § 550 and preserve it for the estate pursuant to 11 U.S.C. § 551.

Both Pentagon and Ms. Oleksy filed an Answer to the Complaint (ECF Nos. 8 and 10). Ms. Oleksy subsequently filed an Amended Answer to the Complaint (ECF No. 21), in which she admitted that the proceeding is core by virtue of 28 U.S.C. § 157(b)(2)(A), (H), (K), and/or (O) but indicated she would not consent to the Court entering final orders or judgments in this matter. On August 3, 2022, Pentagon filed a proof of claim against the Debtor, asserting a secured claim in the amount of $263,342.91 (C/A No. 22-00172, Claim No. 7-1, as amended by Claim No. 7-2).

On July 25, 2022, the Court entered an Order (the "Adversary Report Order") requiring the parties to confer pursuant to Fed. R. Civ. P. 26 and requiring them to file an Adversary Proceeding Report by August 15, 2022 (ECF No. 13). Subsequently, the Court entered a Consent Order holding all discovery in abeyance and setting a briefing schedule for the anticipated motions for judgment on the pleadings (ECF No. 26).

On September 6, 2022, Defendants filed the Motions (ECF Nos. 28 and 29). The Trustee filed an Objection to the Motions on September 19, 2022 (ECF No. 30), and a hearing to hear the legal arguments was held on October 13, 2022.

CONCLUSIONS OF LAW

I. JURISDICTION & AUTHORITY TO ENTER FINAL ORDER

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a). Ms. Oleksy has not consented to the Court entering final judgments in this matter. This Court has previously concluded that entry of a final order or judgment on a fraudulent conveyance cause of action against a party who has not filed a claim against the bankruptcy estate without the express consent of the parties would be inconsistent with Article III of the United States Constitution. In re Pigg , 515 B.R. 274, 277 (Bankr. D.S.C. 2014) (citing Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) ), aff'd , C/A No. 3:14-cv-03210-JFA, 2014 WL 4536642 (D.S.C. Sept. 9, 2014) ; Granfinanciera v. Nordberg , 492 U.S. 33, 43–47, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) ; Off. Comm. of Unsecured Creditors v. Nat'l Patent Dev. Corp. (In re TMG Liquidation Co.) , C/A No. 7:12-629-TMC, 2012 WL 1986526, at *2 (D.S.C. June 4, 2012). "[W]hen a bankruptcy court is presented with [a claim designated for final adjudication in the bankruptcy court as a statutory matter but prohibited from proceeding in that way as a constitutional matter], the proper course is to issue proposed findings of fact and conclusions of law. The district court will then review the claim de novo and enter judgment. This approach accords with the bankruptcy statute and does not implicate the constitutional defect identified by Stern ." Exec. Benefits Ins. Agency v. Arkison , 573 U.S. 25, 31, 134 S.Ct. 2165, 189 L.Ed.2d 83 (2014).

In light of the denial of the motions for judgment on the pleadings, which is an interlocutory order, the Court concludes that the submission of proposed findings of fact and conclusions of law to the district court is not necessary at this stage of the proceedings. Tisdale v. South Carolina , 157 F. App'x 593, 593 (4th Cir. 2005) (concluding that an order denying motion for judgment on the pleadings was neither a final order nor an appealable interlocutory or collateral order); In re Belmonte , 551 B.R. 723, 726 (Bankr. E.D.N.Y. 2016) (finding that an order denying the defendants’ motion for judgment on the pleadings was interlocutory, not final, and as such, proposed findings of fact and conclusions of law need not be submitted to the district court).

II. RULE 12(c) STANDARD

Fed. R. Bankr. P. 7012(b) provides that Fed. R. Civ. P. 12(b) – (i) applies to adversary proceedings. In turn, Fed. R. Civ. P. 12(c) provides that "[a]fter the pleadings are closed – but early enough not to delay trial – a party may move for judgment on the pleadings." A judgment on the pleadings is warranted if " ‘the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.’ "

Fowler v. State Farm Mut. Auto. Ins. Co ., 300 F. Supp. 3d 751, 755 (D.S.C. 2017) (quotation omitted), aff'd , 759 F. App'x 160 (4th Cir. 2019) ; Thomas Daniels Agency, Inc. v. Nationwide Ins. Co. of Am. , 122 F. Supp. 3d 448, 450 (D.S.C. 2015) (quotation omitted). Said differently, motions for judgment on the pleadings "operate to ‘dispose of cases in which there is no substantive dispute that warrants the litigants and the court proceeding further.’ " Id. Under Fed. R. Civ. P. 12(c), a motion for judgment on the pleadings is "intended to test the legal sufficiency of the complaint and will operate to dispose of claims" where material facts are undisputed and a judgment on the merits is possible merely by considering the contents of the pleadings." Middleton v. Andino , 474 F. Supp. 3d 768, 771 (D.S.C. 2020).

A motion for judgment on the pleadings is decided under the same standard as a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Deutsche Bank Nat'l Trust Co. v. IRS , 361 F. App'x 527, 529 (4th Cir. 2010). Like motions filed under Rule 12(b)(6), motions pursuant to Rule 12(c) call for the pleadings to be construed in the light most favorable to the non-moving party – in this case, the Plaintiff. See Thomas Daniels Agency, Inc. v. Nationwide Ins. Co. of Am. , 122 F. Supp. 3d at 451 (citing Burbach Broad. Co. v. Elkins Radio Corp ., 278 F.3d 401, 405-06 (4th Cir. 2002) ). "To 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, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). The one key difference between a motion to dismiss under Fed. R. Civ. P. 12(b)(6) and a motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) is that in the latter, the court considers the answer, the complaint, and documents incorporated by reference in the pleadings. Id. As the Fourth Circuit has noted, in resolving a motion for judgment on the pleadings, a court cannot consider...