Compton v. Moschell (In re Moschell)

607 B.R. 487

IN RE: Meghan M. MOSCHELL, Debtor.

Cullen W. Compton, Plaintiff,

v.Meghan M. Moschell, Defendant.

Bankruptcy No. 19-21819-JAD

Adversary No. 19-02104-JAD

United States Bankruptcy Court, W.D. Pennsylvania.

Signed October 25, 2019

Case Administrator to Serve: Kathryn L. Harrison, Esq., attorney for Ms. Meghan Moschell

Cullen W. Compton, Pro Se

MEMORANDUM OPINION

The Honorable Jeffrey A. Deller, United States Bankruptcy Judge

This adversary proceeding is a nondischargeability action filed by Cullen W. Compton ("Mr. Compton" or the "Plaintiff" ), pro se , against the debtor, Meghan W. Moschell ("Ms. Moschell" or the "Debtor" or the "Defendant"). Civil actions concerning dischargeability of particular debts are core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(I) and (J), and this Court has the requisite subject-matter jurisdiction to hear and decide this matter pursuant to both 28 U.S.C. § 1334(b) and the standing order of reference issued by the United States District Court for the Western District of Pennsylvania. See Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc dated October 16, 1984.

By this action, Mr. Compton seeks a determination that his claim against Ms. Moschell, which sounds in nature of the tort conversion, is nondischargeable.

Ms. Moschell has moved to dismiss (the "Motion to Dismiss") the Plaintiff's complaint (the "Complaint") pursuant to Fed.R.Civ.P. 8, 9 and 12(b)(6), as such rules are incorporated into bankruptcy adversary proceedings by operation of Fed.R.Bankr.P. 7008, 7009, and 7012.

Specifically, Ms. Moschell contends that this adversary proceeding should be dismissed because Mr. Compton's claim for conversion does not fall within the ambit of nondischargeable claims for "actual fraud" for purposes of 11 U.S.C. § 523(a)(2)(A). Ms. Moschell further contends that Mr. Compton's claim for conversion does not constitute a nondischargeable claim for fiduciary "defalcation," "larceny," or "embezzlement" for purposes of 11 U.S.C. § 523(a)(4). Moreover, after inquiry by the Court during oral argument, Ms. Moschell argues that Mr. Compton's claim for conversion does not constitute a nondischargeable claim for "willful and malicious injury to property" for purposes of 11 U.S.C. § 523(a)(6).

Even if Mr. Compton's claim could conceivably fall within the scope of nondischargeable claims under 11 U.S.C. § 523, Ms. Moschell seeks dismissal of the adversary proceeding contending that Mr. Compton's Complaint lacks sufficient specificity to put Ms. Moschell on notice of the basis by which the claim could be determined nondischargeable.

For the reasons set forth below, the Court concludes that Mr. Compton's pleading is specific enough, and states a claim for relief pursuant to not only 11 U.S.C. §§ 523(a)(2) and 523(a)(4), but also pursuant to 11 U.S.C. § 523(a)(6). As such, an order shall be entered which denies the Motion to Dismiss.

I.Procedural Posture & Summary of Allegations

The background of this adversary proceeding concerns Ms. Moschell's unauthorized cashing of a check and retention of funds belonging to the Plaintiff. The procedural posture and allegations asserted by the Plaintiff in his Complaint can be summarized as follows:

1. The Plaintiff and the Debtor purchased realty located at 1604 Carmela Drive, Pittsburgh, PA 15227 (the "Property") in January 2009. See Complaint, ECF No. 1, at ¶ 1.

2. The Plaintiff and the Debtor were jointly listed on both the deed to the Properly and the mortgage encumbering the same. See January 2, 2019 Opinion and Order of Court entered in the Allegheny County Court of Common Pleas (the "Judge O'Brien Opinion"), Ex. 7 to the Complaint, page 4.

3. Shortly after purchasing the Property, the Debtor vacated it. See Complaint at ¶ 3. See also Judge O'Brien Opinion at page 4.

4. Several years later, on August 16, 2012, the Debtor executed a quit claim deed transferring ownership of the Property to the Plaintiff.¹ The Debtor received compensation relative to the execution of the quit claim deed. See Complaint at ¶¶ 4-5. SeealsoQuit Claim Deed , Ex. 1 to Complaint, and Judge O'Brien Opinion at page 4.

5. The Plaintiff then listed the Property for sale in the spring of 2015 and the property sold on July 18, 2016. See Complaint at ¶ 7 & 9, and Judge O'Brien Opinion at page 4.

6. Without the Plaintiff's consent, and prior to the sale (i.e., sometime between May and July 2016), the Debtor changed the mailing address on file with the mortgage company (SunTrust Mortgage) from the Plaintiff's address to her address at 312 Cape May Avenue, Pittsburgh, PA 15216. See Complaint at ¶ 8.

7. Shortly after the sale of the Property, SunTrust Mortgage then sent an escrow check in the amount of $1,991.09 to the Cape May Avenue address, which the Debtor cashed without the Plaintiff's consent or knowledge. See Complaint at ¶ 11-12, and Judge O'Brien Opinion at pages 4-5.

8. The escrow check was made payable to both the Plaintiff and the Debtor. See Judge O'Brien Opinion at pp. 4-5, and Letter from SunTrust Mortgage, Ex. 3 to the Complaint, page 3.

9. After receiving notice of the Debtor's actions, the Plaintiff commenced suit against the Debtor. See Complaint at ¶ 13.

10. At the local magisterial district court, judgment was awarded in favor of the Plaintiff and against the Debtor in the amount of $2,321.59. SeeNotice of Judgment/Transcript Civil Case , Ex. 4 to the Complaint, page 2. The Debtor appealed that judgment to the Court of Common Pleas of Allegheny County which assigned the matter to its Board of Arbitrators.

11. On appeal, the Board of Arbitrators found in favor of the Plaintiff and awarded him $ 1,991.09 against Ms. Moschell. See Ruling from Board of Arbitrators, Ex. 5 to the Complaint, page 3.

12. The Debtor also appealed that ruling and on September 18, 2018, Judge O'Brien of the Court of Common Pleas of Allegheny County, Pennsylvania entered a non-jury verdict in favor of the Plaintiff and against the Debtor in the amount of $1,991.09. SeeNon-Jury Verdict , Ex. 6 to the Complaint, page 3.

13. The Debtor filed a motion seeking post-trial relief from Judge O'Brien's award. See Judge O'Brien Opinion at page 3.

14. On January 2, 2019, Judge O'Brien entered an Opinion and Order of Court , wherein he found that the Plaintiff credibly testified that, inter alia , only the Plaintiff made mortgage payments while the Property was jointly owned by the parties and after the Plaintiff became the sole owner. See Judge O'Brien Opinion at page 4. And thus, Judge O'Brien concluded that the Plaintiff was the "sole source of the funds" subject of the escrow check. See id. Also, Judge O'Brien concluded that the Debtor impermissibly cashed the escrow check and retained the funds to the detriment of the Plaintiff. See id. at page 5.

15. Judge O'Brien further found that the Plaintiff's claim sounded in "conversion"² and "[t]he fact that the check representing the escrowed funds was made out to both [the Plaintiff and the Debtor] did not establish any right to the check in [the Debtor]. Quite simply, it was [the Plaintiff's] money and [the Debtor] took it without his consent and without lawful justification." See Judge O'Brien Opinion at page 5.

16. Judge O 'Brien entered an order denying the post-trial relief and entered judgment against the Debtor and in favor of the Plaintiff in the amount of $ 1,991.01, plus interest "at the legal rate" from September 18, 2018, and record costs.

17. On May 2, 2019, the Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code ( 11 U.S.C. § 101 et seq. ). SeeVoluntary Petition for Individuals Filing for Bankruptcy , 19-21819-JAD, ECF No. 1.

18. On June 3, 2019, the Plaintiff commenced this Adversary Proceeding.

19. In the Adversary Proceeding Cover Sheet filed with this Court, (ECF No. 1, page 1), the Plaintiff identified himself as a creditor of the Debtor and described as his cause of action the following: "Ms. Moschell acted in conversion, fraud, and theft when she stole an escrow closing check in 2016. 523(a)(2)(4)." The Plaintiff additionally selected as the "Nature of Suit" the following: " § 523(a)(2), false pretenses, false representation, actual fraud[;]" " § 523(a)(4), fraud as fiduciary, embezzlement, larceny;" and "[r]ecovery of money/property - other[.]"³ The Plaintiff also made a demand of $2,321.59 plus costs. See ECF No. 1, page1.

20. In addition to what is set forth in the Adversary Proceeding Cover Sheet, the caption of the adversary Complaint solely identifies " 11 U.S.C. § 523(a)(2)(4)" as the basis for the suit.

21. In the body of the adversary Complaint, the Plaintiff summarized his allegations as follows: "Ms. Moschell changed the mailing address of a mortgage account and cashed an escrow closing check of which she had no lawful rights." The adversary Complaint also alleges that "Ms. Moschell acted in conversion and with intent to defraud." The adversary Complaint therefore requested that the debt due Mr. Compton be found nondischargeable "due to [Ms. Moschell's] act of conversion, fraud, and theft." Complaint, ECF No. 1 at page 4.

II.Legal Standard for Stating a Claim

Fed. R. Civ. P. 12(b)(6), made applicable to adversary proceedings by Fed. R. Bankr. P. 7012(b), provides that complaints may be dismissed for "failure to state a claim on which relief can be granted."

In deciding such a motion, the Court "may consider material which is properly submitted as part of the complaint... without converting the motion to dismiss into a motion for summary judgment." Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).

The Court may also consider: documents the complaint incorporates by reference or are otherwise integral to the claim (see Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1178 (10th Cir. 2012), Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th Cir. 2012), Building Indus. Elec. Contractors Ass'n v. City of New York, 678 F.3d 184, 187 (2d Cir. 2012) ), information subject to judicial notice (s...