Dennis v. Mojica (In re Mojica)

In re: NOEL SALVADOR MOJICA, NANCY MARIE MOJICA, Debtors.

JAMES GARDNER DENNIS, Plaintiff, v. NANCY MARIE MOJICA, Defendant.

Case No. 15-50128

Adv. P. No. 15-05011

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF VIRGINIA HARRISONBURG DIVISION

December 9, 2015

Chapter 7

MEMORANDUM OPINION

Before the Court are the defendant's motion to dismiss the plaintiff's second amended complaint in this adversary proceeding pursuant to Rule 12(b)(6)¹, and the plaintiff's response in opposition. ECF Doc. Nos. 25, 26. The Court held a hearing on the above matters on November 18, 2015, when counsel for the defendant, Nancy Marie Mojica ("Mojica"), and the plaintiff, James Gardner Dennis ("Dennis"), presented arguments in support of their respective positions. Following the hearing, the Court took the matters under advisement. For the reasons set forth below, the Court concludes that Dennis has failed to plead a claim upon which relief can be granted.

FINDINGS OF FACT

On April 16, 2008, Dennis granted Mojica² a general power of attorney over all his personal and financial affairs.³ ECF Doc. No. 26-4. On its face, this power of attorney gaveMojica unfettered discretion to borrow money in Dennis's name and to use and liquidate his personal assets. Id. Through February 2009, Mojica used this power of attorney to do just that as she moved over $287,000 of Dennis's personal assets into her own name.

Dennis and Mojica married sometime after Mojica transferred Dennis's money into her own accounts, and the parties divorced in 2013.⁴ On January 4, 2013, Dennis filed a pro se suit against Mojica in Augusta County Circuit Court, seeking over $287,000 in damages and asserting claims for breach of fiduciary duty and breach of contract. ECF Doc. No. 11-5. In a July 2, 2013 letter opinion, The Honorable Victor V. Ludwig, Judge, ruled that Dennis's breach of fiduciary duty claim was barred by the two-year statute of limitations and that Virginia's limited statutory tolling provisions were inapplicable. Id. at 4. Judge Ludwig also sustained Mojica's demurrer⁵ on the breach of contract count but granted Dennis leave to amend. Id.

Dennis timely amended his state court complaint,⁶ adding a claim for conversion⁷ in addition to the breach of contract count.⁸ ECF Doc. No. 23-1. In his March 27, 2014 letter opinion, Judge Ludwig concluded that Dennis was entitled to an opportunity to conduct discovery and produce the written contract he alleged existed. ECF Doc. No. 11-10 at 1, 5.

Before the state court lawsuit could be resolved, Mojica and her current husband filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code on February 7, 2015. Among her personal liabilities, Mojica disclosed Dennis's pending state court action against her. Mojica described her debt to Dennis as contingent, unliquidated, and disputed, and listed this debt as an unsecured, nonpriority claim on Schedule F. Dennis timely initiated this adversary proceeding on April 20, 2015, seeking to except his debt from Mojica's discharge. On September 29, 2015, Dennis filed his second amended complaint, which is the complaint pending before the Court. ECF Doc. No. 23. As his lone exhibit, Dennis attached a copy of his amended state court complaint. In his second amended complaint, Dennis seeks to have the debt Mojica owes him excepted from discharge under two sections of the Bankruptcy Code. First, Dennis states that this debt should be nondischargeable pursuant to section 523(a)(4) as the result of Mojica's defalcation while acting in a fiduciary capacity. In the alternative, Dennis asks the Court to find that this debt is excepted from discharge pursuant to section 523(a)(6) because it is the result of willful and malicious injury Mojica inflicted to his property.⁹

At the core of his complaint, Dennis alleges that from January 2008 to February 2009, Mojica abused her authority under the power of attorney by committing defalcation while serving as his fiduciary and by willfully and maliciously converting his property for her personal use. Dennis states that he never gave Mojica his express permission to liquidate his various accounts and claims that she only accounted for a scant portion of the money. At no point, however, in his pleadings or oral arguments did Dennis state that Mojica provided him with false accounting reports or attempted to mislead him in any way about the state of his finances.Indeed, Dennis claims that Mojica never told him she made the various transfers out of his personal accounts and that he only found out about the drastic reduction in his personal wealth during divorce proceedings.¹⁰

Mojica responded with a motion to dismiss Dennis's second amended complaint for failure to state a claim for which relief can be granted under either section 523(a)(4) or (a)(6). Pointing out that Dennis's complaint failed to state a plausible claim pursuant to Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), Mojica argued that Dennis failed to plead the required scienter under either count and that the debt was dischargeable.¹¹ Dennis filed a response in opposition, to which he attached the following documents for the first time: his declaration; the power of attorney; an excerpt from a deposition transcript during the parties' divorce proceeding in 2013; and multiple financial documents revealing Mojica's manipulation of funds in his various accounts during the critical dates. See ECF Doc. No. 26 (submitting declaration and seven exhibits). At the November 18, 2015 hearing the Court took the matters under advisement.

JURISDICTION

Mojica is a debtor in this Court. The Court has subject matter jurisdiction under 28 U.S.C. § 1334(a) and authority to hear the case under 28 U.S.C. § 157(a), with the delegation made to this Court by Order of Reference from the District Court entered on December 6, 1994, and Rule 3 of the Local Rules of the United States District Court for the Western District of Virginia. The Court is faced with the question whether Dennis has stated a plausible claim in hissecond amended complaint that the debt Mojica owes him is nondischargeable under either section 523(a)(4) or (a)(6). This matter is a "core" bankruptcy proceeding under 28 U.S.C. § 157(b)(2)(I).

CONCLUSIONS OF LAW

(a) Rule 12(b)(6) motions

Standard of review

When evaluating a Rule 12(b)(6) motion to dismiss, a court must accept as true all of the plaintiff's well-pleaded factual allegations and view the complaint in the light most favorable to the non-moving party. T.G. Slater & Son, Inc. v. Donald P. & Patricia A. Brennan, LLC, 385 F.3d 836, 841 (4th Cir. 2004). Because the motion challenges a complaint's sufficiency, the merits of claims or defenses are irrelevant to a court's analysis. Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992); see also Raub v. Bowen, 960 F. Supp. 2d 602, 607 (E.D. Va. 2013) (explaining disputed facts are not resolved but viewed in favor of plaintiff).

Although a complaint need not assert "detailed factual allegations" to survive a Rule 12(b)(6) motion, it must contain "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The core test is whether the well-pleaded facts state a claim that is "plausible on its face," rather than speculative or merely conceivable. Twombly, 550 U.S. at 570.¹²

"A claim is 'plausible' when the plaintiff pleads facts sufficient to allow the court to draw the reasonable inference that the defendant is liable for the alleged misconduct." Atkins v. FedEx Freight, Inc., No. 3:14CV505, 2015 WL 3444870, at *8-9 (E.D. Va. May 28, 2015) (citingTwombly, 550 U.S. at 556). As long as the well-pleaded allegations of a complaint delineate a plausible claim for relief, a court "must deny a Rule 12(b)(6) motion to dismiss." Id. But a "court should grant a motion to dismiss where the allegations are nothing more than legal conclusions, or where they permit a court to infer no more than a possibility of misconduct." Id.; see also Stambaugh v. Stambaugh (In re Stambaugh), 533 B.R. 449, 459 (Bankr. M.D. Pa. 2015) ("[L]egal conclusions should be buttressed by well pled facts . . . . [to] bridge the divide between a claim which is merely possible, and one that is plausible.").

Because a Rule 12(b)(6) motion challenges whether the plaintiff has pled a plausible claim for relief, the "Court's analysis at this stage is informed and constrained by the four corners of the Complaint." Raub, 960 F. Supp. 2d at 604. As a result, the plaintiff cannot supplement a deficient pleading by filing documents and adding facts in response to a motion to dismiss for failure to state a plausible claim. In the event a court determines it is appropriate to consider matters outside the complaint in a motion to dismiss, Rule 12(d) requires that the defendant's motion to dismiss be treated as a motion for summary judgment. Gasner v. Cty. of Dinwiddie, 162 F.R.D. 280, 281-82 (E.D. Va. 1995); see also Fed. R. Civ. P. 12(d) (affording a court the option to exclude documents outside the pleadings in order to rule on the motion to dismiss).

A court may consider certain documents outside the complaint when examining the legal sufficiency of a complaint pursuant to a motion under Rule 12(b)(6) without converting it into a motion for summary judgment. Gasner, 162 F.R.D. at 282 (collecting cases). Such documents beyond the four corners of the complaint must have been "integral to the complaint and authentic." Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007); accord Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir.1999) (stating it is proper toconsider documents "integral to and explicitly relied on in the complaint"); see also Dittmer Props., L.P. v. F.D.I.C., 708 F.3d 1011, 1021 (8th Cir. 2013) (finding district court appropriately...