Medina v. PNC Bank (In re Medina)

PAUL M. GLENN United States Bankruptcy Judge

Chapter 7 ORDER ON DEFENDANT PNC BANK, N.A.'S SECOND AMENDED MOTION TO DISMISS

THIS CASE came before the Court for hearing to consider Defendant PNC Bank, N.A.'s Second Amended Motion to Dismiss the Debtor's Complaint. (Doc. 19).

To survive a motion to dismiss, a complaint must contain sufficient factual allegations to state a claim for relief that is plausible on its face.

In this case, the Debtor alleges in the Complaint that Orders were entered in her Chapter 7 case which (1) stripped PNC Bank's second lien on her residence, and (2) disallowed PNC Bank's claim. The Debtor also alleges that PNC Bank attempted to collect the amount of the second lien after she received her Chapter 7 Discharge, and that the collection efforts constitute a violation of the discharge injunction.

The Court finds that the Complaint states a claim for relief that is plausible on its face, and that the Motion to Dismiss the Complaint should be denied.

Background

On July 31, 2012, the Debtor filed a petition under Chapter 7 of the Bankruptcy Code.

On January 9, 2018, the Debtor filed a Complaint for contempt and injunctive relief against PNC Bank. (Doc. 1). The Complaint contains the following allegations:

1. On the petition date, the Debtor owned her residential real property located at 2604 Seagate Lane North, St. Augustine, Florida. (Complaint, ¶ 9).

2. On August 13, 2012, the Debtor filed a Motion to Determine Secured Status of PNC Bank and to Strip Lien Effective upon Discharge, and served the Motion on the Bank. (Complaint, ¶ 11; Main Case, Doc. 7).

3. On September 20, 2012, the Court entered an Order determining that PNC Bank's claim would be treated as unsecured, and that the Bank's second mortgage would be extinguished upon entry of the Debtor's discharge. (Complaint, ¶¶ 13, 14; Main Case, Doc. 10).

4. On November 27, 2012, the Court entered a Discharge of Debtor in the Chapter 7 case. (Complaint, ¶ 15; Main Case, Doc. 26).

5. On August 28, 2013, the Chapter 7 Trustee filed an Objection to Claim No. 4 of PNC Bank. (Complaint, ¶ 16; Main Case, Doc. 44).

6. On September 30, 2013, the Court entered an Order sustaining the Trustee's Objection and disallowing the claim. (Complaint, ¶ 17; Main Case, Doc. 47).

7. In 2017, PNC Bank attempted to collect the amount of the second mortgage. (Complaint, ¶ 19).

Copies of three letters from PNC Bank to the Debtor are attached to the Complaint as evidence of the Bank's collection efforts: (1) a letter dated November 29, 2017, which contains an offer of settlement "for a one time payment," (2) a letter dated December 8, 2017, which states that the Debtor "may be eligible for a liquidation option," and (3) a letter dated December 9, 2017, which states that the Debtor is in default and that the Bank has "a right to invoke foreclosure." (Complaint, Composite Exhibit 1).

On May 15, 2018, the Bank filed a Second Amended Motion to Dismiss the Debtor's Complaint. (Doc. 19). In the Motion, the Bank primarily contends that the residential property did not belong to the Debtor at the time that the Order stripping its lien was entered, because the Debtor had not claimed the property as exempt on her bankruptcy schedules. Consequently, the Bank asserts that the Debtor lacked standing to file the Motion to Determine Secured Status, and that the Order stripping the Bank's lien is invalid.

Discussion

The Bank's Motion to Dismiss the Debtor's Complaint is brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure, as made applicable to this proceeding by Rule 7012 of the Federal Rules of Bankruptcy Procedure. (See Doc. 19, ¶ 19).

In evaluating a motion to dismiss under Rule 12(b)(6), the Court must accept the plaintiff's factual allegations as true and construe them in the light most favorable to the plaintiff.

"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, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)(quoting Bell Atlantic 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." Ashcroft v. Iqbal, 129 S.Ct. at 1949(citing Bell Atlantic Corp. v. Twombly, 550 U.S. at 556, 127 S.Ct. 1955). In other words, the relevant question for purposes of a motion to dismiss under Rule 12(b)(6) is "whether, assuming the factual allegations are true, the plaintiff has stated a ground for relief that is plausible." Ashcroft v. Iqbal, 129 S.Ct. at 1959(quoted in In re Bill Heard Enterprises, Inc. 406 B.R. 98, 102 (Bankr. N.D. Ala. 2009)).

In this case, the Debtor alleges in the Complaint that Orders were entered in her Chapter 7 case which (1) stripped PNC Bank's second lien on her residence, (2) determined that the second lien would be treated as an unsecured claim, and (3) disallowed PNC Bank's claim in its entirety. (Complaint, ¶¶ 13, 14, 17; Main Case, Docs. 10, 47). Additionally, the Debtor alleges that she received her Chapter 7 Discharge on November 27, 2012. (Complaint, ¶ 15; Main Case, Doc. 26).

Finally, the Debtor alleges that PNC Bank attempted to collect the amount of the second lien after the Discharge was entered. (Complaint, ¶ 19). Copies of three collection letters allegedly sent by the Bank are attached to the Complaint as a composite exhibit.

The factual allegations contained in the Complaint, accepted as true for purposes of the Bank's Motion, state a claim for violation of the discharge injunction that is plausible on its face, and PNC Bank's Motion to Dismiss the Complaint should be denied.

In its Motion, the Bank primarily contends that the Order stripping its lien is not a valid Order, because the Debtor lacked standing to strip the lien at the time that she filed the Motion to Determine Secured Status. According to the Bank, the Debtor had not claimed the underlying property as exempt on her bankruptcy schedules, and the property therefore belonged to the Chapter 7 estate, not the Debtor, when the Motion was filed. (Motion to Dismiss, Doc. 19, ¶¶ 11, 18).

The Order stripping the Bank's lien and the Order disallowing the Bank's claim, however, are Court Orders that were entered in the main bankruptcy case, and may be cited by the Debtor to support her claim for violation of the discharge injunction. See In re Kilbourne, 507 B.R. 219 (Bankr. S.D. Ohio)(A debtor's complaint stated a claim for violation of the discharge injunction, where it alleged the entry of a "Deem Mortgage Current Order" in the main bankruptcy case.).

In this case, for example, the Court entered an Order on September 20, 2012, that stripped the Bank's lien and determined that the Bank's second mortgage "shall be treated as an unsecured claim." No objection was asserted to the Order stripping the Bank's lien, no motion for reconsideration of the Order was filed by any party, and no appeal of the Order was taken.

Additionally, the Debtor's discharge was entered on November 27, 2012, and the Discharge has not been revoked or set aside pursuant to §727 of the Bankruptcy Code.

Consequently, the Discharge of Debtor and the Order stripping the Bank's lien appear as final Orders in the Debtor's main bankruptcy case, and may be alleged by the Debtor to state a claim for violation of the discharge injunction. See In re Luca, 422 B.R. 772 (Bankr. M.D. Fla. 2010)(A creditor's dischargeability complaint that recited a series of prior court orders was sufficient to defeat the debtor's motion to dismiss under Rule 12(b)(6).).

Accordingly:

IT IS ORDERED that Defendant PNC Bank, N.A.'s Second Amended Motion to Dismiss is denied.

DATED this 11 day of July, 2018.

BY THE COURT

Paul M. Glenn

PAUL M. GLENN

United States Bankruptcy Judge