Copeland v. Ostler (In re Copeland)

In re: Bruce Dwain Copeland, Debtor.

Bruce Dwain Copeland, Plaintiff, v. Brian C. Ostler, Esq. Defendant

Case No. 18-13948-JDL

Adv. No. 19-01019-JDL

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF OKLAHOMA

March 12, 2019

The following is ORDERED:

Ch. 13

ORDER DISMISSING CASE WITH PREJUDICE

I. Introduction

This is an adversary proceeding brought by Debtor Bruce Dwain Copeland ("Copeland") against an attorney who allegedly forged his endorsement on a check almost seventeen years ago. This matter is before the Court for consideration sua sponte upon Copeland's Complaint for; Forgery, Fraud, Unjust Enrichment, Deceptive Trade Practices (sic) filed on February 13, 2019 (the "Complaint") [Doc. 1].

II. Jurisdiction

This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1334(b) as a matter arising in or related to a case under Title 11.¹

III. Background

A. The Allegations of Copeland's Complaint

The Complaint alleges that in 2001 Mark Shapiro retained Copeland, a public adjuster, to assist him with the adjustment and presentation of his claim to Century National Insurance Company for fire damage to Shapiro's home in San Bernardino, California. While negotiating with the insurance company, Copeland loaned Shapiro money on three different occasions to avoid the family from being removed from the home. Because Century National was delaying in paying the claim, Copeland advised Shapiro to retain legal counsel. Shapiro and Copeland agreed that legal counsel rather than Copeland should adjust the insurance claim. Shapiro and Copeland agreed to cancel their existing agreement, and that Shapiro would repay the "loan" he had received from Copeland at the time he, Shapiro, received payment on his insurance claim.

Shapiro hired Defendant Brian C. Ostler ("Ostler") to represent him in resolving the claim with Century National. On April 15, 2002, Century National forwarded a check to Ostler in the amount $24,828.24. The Complaint alleges that Ostler forged the endorsements on the check of both Copeland and Countrywide Mortgage, as loss payee,and kept the proceeds for himself. It is alleged that by virtue of Countrywide Mortgage not receiving the proceeds from the insurance settlement, it foreclosed on Shapiro's property.

The Complaint alleges that Ostler filed suit against Copeland "in June 2004 to cover his (Ostler's) fraud and theft of the insurance proceeds." In 2009 Copeland moved from California to Oklahoma. In 2010, Copeland received notice that Ostler had placed a lien on Copeland's brokerage account in the amount of $80,000. In 2011, Copeland received pleadings in which he was named in a quiet title suit filed by Bank of America regarding Copeland's former home in California. It was at this time that Copeland alleges that he "discovered the fraud and theft committed by (defendant) Ostler."

Copeland's Complaint alleges four counts:

(1) Count 1 Forgery: "Ostler forged his name and signature to a draft issued by Century National Ins. Company. (and Ostler's) actions has now cause (sic) Copeland harm."

(2) Count 2 Fraud: "Copeland alleges and believes that Ostlers (sic) committed fraud and have caused Copeland to suffer harm."

(3) Count 3 Unjust Enrichment: "Copeland alleges and believes that (Ostler) has been unjustly enriched and has caused (Copeland) harm."

(4) Count 4 Deceptive Trade Practices: Copeland "alleges and believes Ostler (sic) actions violated California's deceptive trade practice act and caused (Copeland) harm."

B. The California Bankruptcy

In 2005 Copeland filed bankruptcy in the United States Bankruptcy Court for the Central District of California (Case No. 05-11844).² In that bankruptcy proceeding, on July1, 2015, Copeland filed an adversary proceeding against nine Defendants including Ostler and the Law Offices of Ostler.³ As against Defendant Ostler, Copeland asserted twelve (12) Causes of Action, asserting claims of slander of title, unfair and deceptive business practices (fraud, forgery, conspiracy and theft), negligence, gross negligence, conspiracy, fraud, actual fraud, extrinsic fraud, fraud upon the court, forgery, intentional infliction of emotional distress and abuse of process.⁴ The basis of all the Causes of Action against Ostler in the California adversary were the allegations that (1) he forged the signatures of Copeland and Bank of America on the insurance check from Century National to cover Shapiro's fire loss and (2) he had wrongfully garnished funds belonging to Copeland. These are the identical allegations, at least as can be discerned by this Court, as the claims made by Copeland in the present adversary proceeding.

On March 10, 2016, after notice to Copeland and a hearing on the same, theCalifornia Bankruptcy Court entered its Order Dismissing Complaint With Prejudice as to several defendants, including Ostler and The Law Offices of Brian C. Ostler.⁵ No appeal was taken from that decision.

IV. The Standards for a Motion to Dismiss

A motion to dismiss for "failure to state a claim upon which relief can be granted" is governed by Rule 12(b)(6) of the Fed.R.Civ.P., made applicable to adversary proceedings by Fed.R.Bankr.P. 7012.⁶ The purpose of a motion to dismiss under Rule 12(b)(6) is to test "the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true." Mobley v. McCormick, 40 F.3d 337, 340 (10^th Cir. 1994). In considering a motion to dismiss, the Court must construe a complaint in the light most favorable to the plaintiff, taken as true all factual allegations and making all reasonable inferences in the plaintiff's favor that can be drawn from the pleadings. Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10^th Cir. 2010); Moore v. Guthrie, 438 F.3d 1036, 1039 (10^th Cir. 2006). "That the Court accepts them as true, however, does not mean the allegations in a complaint are in fact true; a plaintiff is not required to prove his case at the pleading stage." Higginbottom v. Mid-Del School District, et al., 2016 WL 951691 (W.D. Okla. 2016). The Court must not "weigh potential evidence that the parties might present at trial" in order to test the sufficiency of the complaint. Sutton v. Utah State School for the Deaf And Blind, 173 F.3d 1226, 1236 (10^th Cir. 1999). It is well recognized that "granting a motion todismiss is a harsh remedy and must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleadings but also to protect the interests of justice". Dias v. City and County of Denver, 567 F.3d 1169, 1178 (10^th Cir. 2009).

To survive a motion to dismiss under Rule 12(b)(6), the complaint must contain enough facts to state a cause of action that is "plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955 (2007). In Twombly, the Supreme Court ruled that a complaint "does not need detailed factual allegations," but must contain "enough facts to state a claim to relief that is plausible on its face." Id.(Emphasis added); In other words, the plaintiff must "nudge [his] claims across the line from conceivable to plausible." Id. Thus, in Twombly, the Supreme Court formulated a "plausibility standard" for evaluating whether a complaint survives a motion to dismiss. In re Ward, 589 B.R. 424, 427 (Bankr. W.D. Okla. 2018).

In applying Twombly's "plausibility standard", the Tenth Circuit has held that the standard lies as a middle ground between "heightened fact pleading" and "formulaic recitation of the elements of a cause of action." Robbins v. Oklahoma, ex rel., Department of Human Services, 519 F.3d 1242, 1247 (10^th Cir. 2008). See also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937 (2009) ("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."); Cook v. Baca, 512 Fed.Appx. 810, 821 (10^th Cir. 2013); Lamar v. Boyd, 508 Fed.Appx. 711, 713-14 (10^th Cir. 2013); Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10^th Cir. 2007) (a complaint must give the court reason to believe the plaintiff has a reasonable likelihood of mustering factualsupport for the claims raised).

A. Sua Sponte Order of Dismissal

Although dismissals under Rule 12(b)(6) typically follow a motion to dismiss, giving the plaintiff notice and opportunity to amend his complaint, a court may dismiss a case sua sponte "when it is 'patently obvious' that the plaintiff could not prevail on the facts alleged, and allowing him an opportunity to amend his complaint would be futile." McKinney v. State of Oklahoma, Department of Human Services, Shawnee, OK, 925 F.2d 363, 365 (10^th Cir. 1991); Whitney v. State of New Mexico, 113 F.3d 1170, 1173 (10^th Cir. 1997); Hall v. Bellmon, 935 F.2d 1106, 1109-10 (10^th Cir. 1991); Curley v. Perry, 246 F.3d 1278, 1284 (10^th Cir. 2001) ("sua sponte dismissal of a meritless complaint that cannot be salvaged by amendment comports with due process and does not infringe the right of access to the courts."). "A court may raise the issue of res judicata sua sponte if it is on notice that it has previously decided the underlined substantive issue in dispute. This result is consistent with one of the policies underlying res judicata: the avoidance of unnecessary judicial waste." In re Ginter, 349 B.R.193, 197 (8^th Cir. BAP 2006) (quoting Arizona v. California, 530 U.S. 392, 412, 120 S.Ct. 2304 (2000)); United States v. Sioux Nation of Indians, 448 U.S. 371, 432 (1980) (Although a court's authority to dismiss a complaint sua sponte is limited, this situation fits squarely within the exception to the rule because "the court is on notice it has previously decided the issue presented."

B. Claim and Issue Preclusion (Res Judicata).

This Court uses the terms "claim preclusion" and "issue preclusion" rather than "res judicata" and "collateral estoppel." "Claim preclusion works to preclude relitigation ofmatters that have already been decided as well...