Dolfi v. Dolfi (In re Dolfi)

605 B.R. 385

IN RE: Candace Lynn DOLFI, Debtor.

Brett Dolfi, Sr. and Brian Dolfi, Plaintiffs,

v.Candace Lynn Dolfi, Defendant.

Bankruptcy No. 17-24680-CMB

Adversary No. 18-2018-CMB

United States Bankruptcy Court, W.D. Pennsylvania.

Signed October 3, 2019

Keri P. Ebeck, Esq., for Plaintiffs

Dennis J. Spyra, Esq., Pittsburgh, for Debtor/Defendant

MEMORANDUM OPINION

Carlota M. Böhm, Chief United States Bankruptcy Judge

The issue before the Court is whether the Amended Complaint to Determine Non-Dischargeability of Debt Pursuant to 11 U.S.C. § 523(a)(2)(A) ("Amended Complaint," Doc. No. 42¹ ) was timely filed.² Candace Lynn Dolfi (the "Debtor") raised the issue of timeliness as an affirmative defense in her Answer (Doc. No. 47). While Debtor asserts the time to pursue the action expired, Brett Dolfi, Sr., and Brian Dolfi (together, the "Plaintiffs") contend that the Amended Complaint is timely as it relates back to the prior pleading. The Court has determined that resolution of this issue at this juncture is necessary as it has created an impasse for any potential settlement discussions or good faith efforts to mediate. For the reasons set forth herein, this Court finds that the Amended Complaint is untimely and must be dismissed.

Background and Procedural History

The Debtor commenced her bankruptcy case on November 20, 2017, by filing a petition for relief under Chapter 13 of the Bankruptcy Code. The Notice of Chapter 13 Bankruptcy Case ("Notice") advised creditors of the deadline to file a complaint to challenge the dischargeability of certain debts. See Case No. 17-24680, Doc. No. 13. The Notice specifically identified March 23, 2018, as the deadline to file a complaint to have a particular debt excepted from discharge under 11 U.S.C. § 523(a)(2).³

The Original Complaint

On February 19, 2018, Plaintiffs filed a Complaint to Determine Non-Dischargeability of Debt Pursuant to 11 U.S.C. § 523(a)(6) and (a)(15) ("Original Complaint"). Without making any determinations as to the truth of the facts alleged, the allegations are recited herein.

Brett Dolfi, Sr., ("Plaintiff Brett") and Debtor are former spouses. Prior to their divorce, the couple entered into a promissory note (the "Promissory Note") with Brian Dolfi ("Plaintiff Brian") in February of 2014 to enable them to purchase a vehicle around that same time. Pursuant to the Promissory Note, the couple promised to pay Plaintiff Brian $35,000.00 by making monthly payments of $550.00. Plaintiff Brian was to be paid in full by April 2017.

On September 14, 2014, approximately seven months after the loan, Plaintiff Brett commenced divorce proceedings against Debtor. Nearly one year after the loan, in January of 2015, Plaintiff Brian commenced an action in state court against Plaintiff Brett and Debtor for failure to make payments pursuant to the Promissory Note. On or around March 3, 2015, a judgment in the amount of $30,600.00 was entered against Plaintiff Brett and Debtor in that action. Several months later, in July 2015, Plaintiff Brett and Debtor entered into a Property Settlement, Separation and Support Agreement ("Property Agreement"), which addressed the vehicle and the debt owed to Plaintiff Brian. Pursuant thereto, Debtor received the vehicle; became solely responsible for the repayment of the debt; and agreed to indemnify, defend, and hold harmless Plaintiff Brett with respect to the debt.⁴ Accordingly, Plaintiffs aver that Debtor should have known that she reaffirmed the debt after execution of the Property Agreement.

Despite execution of the Property Agreement in 2015, Debtor has not made any payments to Plaintiff Brian since September of 2017. Around this same time, Plaintiffs allege that Debtor sold or traded-in the vehicle with the intent of ceasing payments to Plaintiff Brian. Plaintiffs assert that Debtor is liable to the Plaintiffs in the amount of $24,000.00, plus fees and costs.

Based on the foregoing allegations, the Original Complaint sought relief under § 523(a)(6) and (15). In Count I, pursuant to § 523(a)(6), Plaintiffs asserted the debt was non-dischargeable as a debt for willful and malicious injury by the Debtor to another entity or to the property of another entity. Specifically, Plaintiffs alleged that Debtor willfully and maliciously traded-in the vehicle with the intent of ceasing payments and with substantial certainty that harm would result.⁵ With respect to Count II pursuant to § 523(a)(15), Plaintiffs contended that the debt was nondischargeable as a debt to a former spouse pursuant to the Property Agreement with Plaintiff Brett.

From the commencement of the adversary proceeding, issues arose with respect to the Original Complaint. Notably, the exceptions to discharge identified under § 523(a)(6) and (15) are not exceptions to the discharge received by a Chapter 13 debtor pursuant to § 1328(a) after completion of all payments under the plan. The Court raised this issue in an Order dated September 12, 2018 (Doc. No. 26), as an item to address at a status conference scheduled on October 10, 2018. Resolution of the issue, however, was ultimately not required as the Original Complaint was later amended to remove § 523(a)(6) and (15).

Motion for Leave to File Amended Complaint

On September 27, 2018, Plaintiffs filed their Motion for Leave to File Amended Complaint ("Motion to Amend," Doc. No. 28). Within the Motion to Amend, Plaintiffs sought approval to add a claim relating to whether the debt is non-dischargeable as a domestic support obligation pursuant to § 523(a)(5) and exclude the prior counts under § 523(a)(6) and (15). See Motion to Amend, at ¶¶15-16. Plaintiffs argued that a count under § 523(a)(5) asserts a claim that arose out of the Property Agreement as set forth in the Original Complaint and relates back to the Original Complaint.

Debtor filed a Response stating as follows:

Initially, the Debtor could request that the Court deny Plaintiffs' request for leave to amend because they have had more than six (6) months since the filing of their original Complaint to add any colorable claim to their cause of action. Even though Bankr. R.Civ.P. 4007(b) permits a creditor under 523(a)(5) to bring a dischargeability action at any time, it does not allow a creditor to file a Complaint and then keep adding different counts until they find one that might actually apply.... However, since denial of leave to amend the Complaint herein would arguably leave the Plaintiffs with the ability to bring a claim under 11 U.S.C. 523(a)(5) at a later date under Bankr. R.Civ.P. 4007(b), the Debtor asks the Court to grant Plaintiffs leave to amend the Complaint , and further requests that this Court make the determination that 11 U.S.C. Section 523 (a)(5) does not render the claims in question herein non-dischargeable.

See Response, Doc. No. 36, at 4-5 (emphasis added). Based upon the Response, the Plaintiffs' Motion to Amend was granted by Order entered December 11, 2018 (Doc. No. 37).

Amended Complaint

On December 21, 2018, Plaintiffs filed their Amended Complaint. Notably, the one-count complaint did not include a count pursuant to § 523(a)(5) as requested in the Motion to Amend; rather, the Plaintiffs alleged non-dischargeability pursuant to § 523(a)(2)(A).⁶ In the Amended Complaint, the Plaintiffs assert that a finding of non-dischargeability is appropriate as Debtor obtained money and property by false pretenses, false representations, and/or actual fraud.

Although many of the factual allegations in the Original Complaint are restated in the Amended Complaint, additional allegations are made. These new facts are generally contained under the statement of Count I. Without making any determination as to the truth of the facts alleged, new allegations were made as follows:

• Debtor obtained money and property by false pretenses, false representations, and/or actual fraud. See Amended Complaint, at ¶29.

• Debtor and Plaintiff Brett separated on August 3, 2014. See Amended Complaint, at ¶35.

• At the time of the agreement, Debtor should have known that, upon a potential divorce, repayment would not take place. See Amended Complaint, at ¶36.

• Plaintiff Brian relied upon the relationship that Debtor had with Plaintiff Brett to loan the funds. See Amended Complaint, at ¶37.

• Debtor "made material omissions of fact that induced Plaintiff Brian into loaning monies pursuant to the Promissory Note, specifically that the [Debtor] and Plaintiff Brett were having marital issues and that a [sic] parties were separating." See Amended Complaint, at ¶38.

• When she executed the Promissory Note, Debtor "falsely represented that she would make payments until paid in full or until April 2017 when the entire amount became due and owing." See Amended Complaint, at ¶39.

• Further, after judgment was obtained by Plaintiff Brian in 2015, Debtor entered into a renewal agreement with Plaintiff Brian for repayment of the Promissory Note, pursuant to which the monthly payments were reduced to $300.00 per month. See Amended Complaint, at ¶40.

Based on the allegations within the Amended Complaint, Plaintiffs aver that Debtor "obtained money and property by false pretenses, false representations and/or actual fraud...." See Amended Complaint, at ¶29 (emphasis added). Among the denials and other defenses asserted within Debtor's Answer, Debtor asserts as an affirmative defense that the statute of limitations expired under Fed.R.Bankr.P. 4007. See Doc. No. 47, at ¶46.

At the pretrial conference held April 10, 2019, the Court found mediation to be appropriate, especially as the parties' disputes were not limited to the adversary proceeding.⁷ A Mediation Order was entered April 12, 2019 (Doc. No. 54) directing the parties to attend mediation with the object of fully resolving all of their disputes. Shortly thereafter, Debtor filed a Motion for Reconsideration of Order Dated April 12, 2019 (Doc. No. 57) stating Debtor's opposition to mediation of the parties' disputes. Among the arguments raised,...