Elliott v. Piazza (In re Piazza)

605 B.R. 332

IN RE: Vincent A. PIAZZA, III

Patricia Elliott, Plaintiff(s)

v.Vincent A. Piazza, III, Defendant(s)

Case No.: 5-18-bk-02300 RNO

Adversary No.: 5-18-ap-00101 RNO

United States Bankruptcy Court, M.D. Pennsylvania.

September 17, 2019

C. Stephen Gurdin, Jr., Wilkes-Barre, PA, for Plaintiff.

Mark J. Conway, Law Offices of Mark J Conway PC, Dunmore, PA, for Defendant.

OPINION ¹

Robert N. Opel, II, Chief Judge

This is a non-dischargeability action. A motion to dismiss the original complaint was previously granted, with leave to amend. The Plaintiff/Creditor filed an Amended Complaint and the Debtor/Defendant has moved to dismiss the Amended Complaint. For the reasons stated below, I will deny the Motion to Dismiss.

I. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).

II. Facts and Procedural History

Today, I write primarily for the benefit of the parties. There is a brief statement of facts and procedural history in the Court's Opinion concerning the grant of the motion to dismiss the original complaint. That decision is reported as In re Piazza , 2019 WL 1084203 (Bankr. M.D. Pa. Mar. 7, 2019) (" Piazza I").

An Amended Complaint was filed in this Adversary Proceeding on March 28, 2019 ("Amended Complaint"). ECF No. 12. The Amended Complaint contains a total of eighty-two numbered paragraphs and contains two counts. The complaint filed on September 4, 2018, was a single-count complaint containing a total of thirty-four numbered paragraphs ("Original Complaint"). ECF No. 1. Nine exhibits were attached to the Original Complaint; twenty-three exhibits were filed regarding the Amended Complaint.

A Motion to Dismiss the Amended Complaint was filed on April 18, 2019 ("Motion"). ECF No. 17. The Motion has been briefed and oral argument was heard on July 23, 2019. The Motion is now ripe for decision.

III. Discussion

A. Standard to Decide a Motion to Dismiss

Generally, a pleading that states a claim for relief must contain "a short and plain statement of the claim showing that the pleader is entitled to relief" pursuant to Federal Rule of Civil Procedure 8(a)(2), which is made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7008.

The Federal Rules of Civil Procedure establish a system of notice, rather than fact, pleadings. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 127 S. Ct. 1955, 1985, 167 L.Ed.2d 929 (2007) ; Phillips v. County of Allegheny , 515 F.3d 224, 231 (3d Cir. 2008) ; Bey v. U.S. Postal Service , 2014 WL 563388, at *2 (M.D. Pa. Feb. 11, 2014).

Pleading certain matters requires more particularity. There is a heightened pleading standard for averments of fraud; fraud is implicated by Counts I and II of the Amended Complaint.

Federal Rule of Civil Procedure 9(b) provides that an allegation of fraud must plead with particularity, the circumstances constituting fraud. That rule applies to this adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7009.

Where fraud is alleged, the complainant should accompany a pleading with the first paragraph of any news story – that is, the who, what, when, where, and how of the events at issue. In re Rockefeller Center Properties, Inc. Securities Litigation , 311 F.3d 198, 217 (3d Cir. 2002) (internal citations omitted).

The heightened pleading standard for allegations of fraud furthers three important purposes: (1) providing due notice to defendants; (2) providing increased protection from possibly defamatory statements; and, (3) decreasing the number of frivolous lawsuits. In re Adalian , 481 B.R. 290, 294 (Bankr. M.D. Pa. 2012) ; see also In re Glunk , 343 B.R. 754, 757 (Bankr. E.D. Pa. 2006).

For the Amended Complaint to withstand the Motion, it must contain enough factual content to allow me to draw the reasonable inference that any claim Patricia Elliott ("Elliott") holds against Vincent A. Piazza, III ("Piazza") is non-dischargeable. To survive a motion to dismiss, a pleading must state a plausible claim that a defendant acted unlawfully. Ashcroft v. Iqbal , 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Plausibility requires a showing of more than the mere possibility of a claim. However, the showing of a probable claim is not required. Rather, the requirement is to plead enough facts to raise a reasonable expectation that discovery will reveal evidence to support relief. Phillips , 515 F.3d at 234 ; In re Tronox, Inc. , 429 B.R. 73, 90 (Bankr. S.D.N.Y. 2010) ; In re Felt Mfg. Co., Inc. , 371 B.R. 589, 606 (Bankr. D.N.H. 2007) ("[A] plaintiff need not plead sufficient facts to establish a prima face case.").

In considering the Motion, I accept the Amended Complaint's well pled facts as true. However, there is no such assumption with respect to the legal conclusions stated in the Amended Complaint. It is important that a complaint show a plaintiff's entitlement to relief. Fowler v. UPMC Shadyside , 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations omitted); In re Brown , 591 B.R. 587, 591 (Bankr. M.D. Pa. 2018) ; see also In re EP Liquidation, LLC , 583 B.R. 304, 314 (Bankr. D. Del. 2018). I also may consider attached exhibits, as well as matters of public record. Pension Ben. Guar. Corp. v. White Consol. Indus., Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993) ; Uni-Marts, LLC v. NRC Realty Advisors, LLC , 426 B.R. 77, 82 (D. Del. 2010).

A court may take judicial notice of facts that are not reasonably subject to dispute. Fed. R. Evid. 201. A bankruptcy court may take judicial notice of the docket entries in a case and the contents of the bankruptcy schedules to determine the timing and status of case events and other events which are not reasonably in dispute. In re Harmony Holdings, LLC , 393 B.R. 409, 413 (Bankr. D.S.C. 2008) ; In re Paolino , 1991 WL 284107, at *12 n.19 (Bankr. E.D. Pa. Jan. 11, 1991).

I take judicial notice of the dockets in Piazza's underlying Chapter 7 case, and in this adversary proceeding. I also take judicial notice of the contents of the bankruptcy schedules and statements, which are not reasonably in dispute.

B. Dischargeability Generally Favored

One of the underlying purposes of the Bankruptcy Code is to allow a debtor a fresh start. A corollary to this purpose is that exceptions to discharge are strictly construed against creditors and liberally construed in favor of debtors. Ins. Co. of N. Am. v. Cohn (In re Cohn) , 54 F.3d 1108, 1113 (3d Cir. 1995) ; In re Gotwald , 488 B.R. 854, 865 (Bankr. E.D. Pa. 2013) ; Customers Bk. v. Osadchuk , 2018 WL 4562403, at *2 (D.N.J. Sept. 24, 2018).

C. What are the Required Steps to Prove a Non-Dischargeable Claim?

Generally, a bankruptcy court addresses multiple questions in a non-dischargeability action. First, has Elliott pled an enforceable obligation under state law? If she has, is the debt non-dischargeable under 11 U.S.C. § 523(a)(2)(A)² of the Bankruptcy Code, as alleged in Count I of the Amended Complaint? Or, is the debt non-dischargeable under § 523(a)(2)(B) of the Bankruptcy Code, as alleged in Count II? Black v. Gigliotti , 514 B.R. 439, 444 (E.D. Pa. 2014) ; In re August , 448 B.R. 331, 346 (Bankr. E.D. Pa. 2011).

In considering whether an enforceable claim has been pled, a bankruptcy court looks to state law to determine whether there is an enforceable claim against a debtor. Grogan v. Garner , 498 U.S. 279, 282-84, 111 S. Ct. 654, 657-58, 112 L.Ed.2d 755 (1991) ; In re Hazelton , 304 B.R. 145, 150 (Bankr. M.D. Pa. 2003).

The issue of whether any claim is non-dischargeable is a question of federal law governed by the provisions of the Bankruptcy Code. Grogan , 498 U.S. at 284, 111 S.Ct. 654 ; In re Pulvermacher , 567 B.R. 881, 886 (Bankr. W.D. Wis. 2017) ; In re Guest , 193 B.R. 745, 747 (Bankr. E.D. Pa. 1996).

In Piazza I, I concluded that Elliott had not stated an enforceable claim under state law. There are significant changes in the Amended Complaint which now require that I reach a different conclusion.

The basic factual nucleus of Elliott's claim concerns an agreement which allowed Piazza to use three of Elliott's credit cards. In Piazza I, I noted that the Original Complaint did not plead whether any agreement between the parties was oral or written. The Amended Complaint includes "[o]n or about 2001, Plaintiff [Elliott] entered into an oral contractual agreement (the Contract) with Defendant [Piazza] regarding the use of Plaintiff's Bank America Credit Cards." Am. Compl. ¶ 14, p. 9, ECF No. 12. The Amended Complaint also alleges that Piazza agreed to pay each credit card in full and on time at the end of each billing cycle. Am. Compl. ¶ 17(c), p. 9, ECF No. 12.

In Piazza I, I also expressed concerns about a purported judgment which was attached as an exhibit to the Original Complaint. I noted that the "final judgment" was undated and did not bear the signature of the Alaska state court judge whose named appeared on the judgment. Contrastingly, the Amended Complaint attaches as exhibits certified copies of three final judgments entered by the District Court for the State of Alaska, First Judicial District at Ketchikan. The total face amount of the three judgments is $82,766.06 ("State Court Judgments"). Am. Compl., Exs. C-E, ECF Nos. 12-3, 12-4 & 12-5. Elliott has acknowledged that Piazza is entitled to a credit of $11,684.09 against the amount claimed. This leaves an apparent claim in the amount of $71,081.97.

Generally, under the Constitution's Full Faith and Credit Clause, a final state court judgment qualifies for recognition throughout the sister states of the United States. Baker by Thomas v. General Motors Corp. , 522 U.S. 222, 118 S. Ct. 657, 663-64, 139 L.Ed.2d 580 (1998). Final state court judgments are generally entitled to full faith and credit in federal courts. 28 U.S.C. § 1738 ; In re Tulloch , 373 B.R. 370, 382 (Bankr. D.N.J. 2007) (absent an overriding precept, a state court judgment is to be given the same effect in ...