Holland v. Mannion (In re Mannion)

629 B.R. 783

IN RE Declan H. MANNION Jacinta M. Mannion, Debtors

Jamie Holland, Plaintiff

v.Declan H. Mannion, Jacinta M. Mannion, Defendants

Bky. No. 20-11073 ELF

Adv. No. 20-0197

United States Bankruptcy Court, E.D. Pennsylvania.

Signed June 7, 2021

Dave P. Adams, United States Trustee, Philadelphia, PA, for U.S. Trustee.

Frank S. Marinas, Maschmeyer Marinas P.C., Malvern, PA, for Debtor.

Robert W. Seitzer, Karalis PC, Philadelphia, PA, Christine C. Shubert, Ocean City, NJ, for Trustee.

ERIC L. FRANK, U.S. BANKRUPTCY JUDGE

I. INTRODUCTION

On February 2, 2020, Debtors Declan H. Mannion ("Mr. Mannion") and Jacinta M. Mannion ("Mrs. Mannion") (collectively, "the Debtors") filed a voluntary petition under chapter 7 of the Bankruptcy Code.

On June 5, 2020, Jamie Holland ("Holland"), acting pro se, filed an adversary complaint objecting to the Debtors’ discharge. By order dated October 15, 2020, I granted the Debtors’ motion to dismiss under Fed. R. Civ. P. 12(b)(6) (incorporated by Fed. R. Bankr. P. 7012 ), but granted Holland leave to file an amended complaint.

Holland filed an amended complaint ("the Amended Complaint") on November 6, 2020. The Debtors filed a motion to dismiss the Amended Complaint on December 4, 2020 ("the Motion"). The Motion is presently before the court.

As often occurs in cases with unrepresented litigants, Holland has filed pleadings and documents in support of her claim that are simultaneously voluminous, elliptical, rambling and unfocused. As a result, the responding parties and the court must interpret and analyze Holland's submissions within the framework of 11 U.S.C. § 727(a), the provision of the Bankruptcy Code that governs the denial of discharge in chapter 7 cases.

Essentially, in the Amended Complaint, Holland asserts that Mr. Mannion: (1) made false statements during the meeting of creditors, and in his bankruptcy schedules; (2) failed to disclose assets: and (3) purposefully failed to list Holland as a creditor.

For the reasons stated below, the Motion will be granted in part and denied in part.

II. BACKGROUND

The parties’ dispute emanates from a restaurant venture Mr. Mannion entered into with his business partner, Conor Cummins ("Cummins"). Mr. Mannion and Cummins owned and operated three (3) bar-restaurants in the Philadelphia suburbs known as Molly Maguires Restaurant and Pub. Each bar-restaurant was separately incorporated.

Beginning in 2010, Mr. Mannion and Cummins obtained financing for the restaurants through the Small Business Administration ("SBA"). Along with the Debtors and Cummins, Holland guaranteed the SBA loans.¹

In 2014, all three (3) restaurants filed chapter 11 bankruptcy cases in this court. See Bky. Nos. 14-15614, 14-15615, 15-15616. Subsequently, two (2) of the restaurants ceased operations and one (1) restaurant emerged from chapter 11 as a reorganized debtor. The individual guarantors remained liable on the SBA loans.

All the guarantors, except for Holland, have filed chapter 7 bankruptcy cases in this court. As of August 2018, the SBA claimed that Holland owed $739,837.10 on her guarantee. ( See Proof of Claim No. 6).

III. LEGAL STANDARD

The legal standard applied in deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6) is well established:

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the legal sufficiency of the factual allegations of a complaint, see Kost v. Kozakiewicz , 1 F.3d 176, 183 (3d Cir. 1993), and determines whether the plaintiff is entitled to offer evidence to support the claims, Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 563 n.8, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007). A defendant is entitled to dismissal of a complaint only if the plaintiff has not pled enough facts to state a claim to relief that is plausible on its face. Twombly , 550 U.S. at 547, 127 S. Ct. 1955. A claim is facially plausible where the facts set forth in the complaint allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009).

In evaluating the plausibility of the plaintiff's claim, the court conducts a context-specific evaluation of the complaint, drawing from its judicial experience and common sense. See, e.g. , Fowler v. UPMC Shadyside , 578 F.3d 203, 211 (3d Cir. 2009) ; Goldstein v. BRT, Inc. (In re Universal Mktg.) , 460 B.R. 828, 834 (Bankr. E.D. Pa. 2011) (citing authorities). In doing so, the court is required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, viewing them in the light most favorable to the plaintiff. See, e.g. , Hishon v. King & Spalding , 467 U.S. 69, 73, 104 S. Ct. 2229, 81 L.Ed.2d 59 (1984) ; Taliaferro v. Darby Township Zoning Board , 458 F.3d 181, 188 (3d Cir. 2006). But the court is not bound to accept as true a legal conclusion couched as a factual allegation. Twombly , 550 U.S. at 555, 127 S. Ct. 1955 ; Iqbal , 556 U.S. at 678, 129 S. Ct. 1937.

The Third Circuit Court of Appeals has condensed these principles into a three (3) part test:

First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pled factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.

Santiago v. Warminster Twp. , 629 F.3d 121, 130 (3d Cir. 2010) (quotations and citations omitted).

In assessing a Rule 12(b)(6) motion, the court may "consider the allegations in the complaint, exhibits attached to the complaint and matters of public record ... [as well as] 'undisputedly authentic' documents where the plaintiff's claims are based on the documents and the defendant has attached a copy of the document to the motion to dismiss." Unite Nat'l Ret. Fund v. Rosal Sportswear, Inc. , 2007 U.S. Dist. LEXIS 68110, 2007 WL 2713051, at *4 (M.D. Pa. Sept. 14, 2007) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc. , 998 F.2d 1192, 1196 (3d Cir. 1993) ); see also Angulo v. Emigrant Mortg. Co. , 2010 Bankr. LEXIS 1402, 2010 WL 1727999, at *12 n.1 (Bankr. E.D. Pa. Apr. 23, 2010).

In re Boltz-Rubinstein , 574 B.R. 542, 547-48 (Bankr. E.D. Pa. 2017).

IV. DISCUSSION

A.

The Amended Complaint consists of five (5) paragraphs, accompanied by various exhibits. These exhibits include copies of documents filed in the bankruptcy case and screenshots of a Facebook page named "Molly's Shebeen," self-described as a food truck/caterer.

In her response to the Motion, (titled "Plea to Grant the Original Motion Objecting to Discharge of Debt"), Holland offered no additional factual allegations, but she appended another set of documents. Those documents, randomly sequenced, include copies the SBA loan documents (including the individual guarantees), a download from the Pennsylvania Corporations Bureau website appearing to show the existence of a legal entity created on August 17, 2017 called Molly's Shebeen Pub, LLC, photographs of a food truck with "Molly's Shebeen" signage, and some other documents filed in the Debtors’ bankruptcy case, most notably, Holland's proof of claim.

Holland also attached a memorandum of law that reads largely as a stream of consciousness; it is difficult to understand. At bottom, the memorandum of law provided no further context or clarity regarding the basis of Holland's objection to the Debtors’ discharge.

After reviewing all of this material, I have attempted to winnow Holland's submissions down to the concrete factual allegations that might justify the denial of discharge under the Code provision that Holland appears to invoke. That Code provision is 11 U.S.C. §§ 727(a)(4)(A).²

B.

Section 727(a)(4) of the Bankruptcy Code, 11 U.S.C. § 727(a)(4)(A), provides that a debtor may be denied a discharge if "the debtor knowingly and fraudulently, in or in connection with the case ... made a false oath or account."

1 Congress designed § 727(a)(4)(A) to ensure that the debtor provides honest and reliable information to the trustee and others interested in the administration of the bankruptcy estate without their having to conduct costly investigations to discover the debtor's true financial condition. In re Singh , 433 B.R. 139, 154 (Bankr. E.D. Pa. 2010) (collecting cases); accord In re Von Kiel , 461 B.R. 323, 340 (Bankr. E.D. Pa. 2012), aff'd , 550 F. App'x 105 (3d Cir. 2013).

23 A party objecting to a debtor's discharge under § 727(a)(4)(A) must prove by a preponderance of the evidence that:

(1) the debtor made a false statement under oath;

(2) the debtor knew the statement was false;

(3) the debtor made the statement with the intent to deceive; and

(4) the statement was material to the bankruptcy case.

Singh , 433 B.R. at 154.

456 An omission is material under § 727(a)(4) when the subject bears a relationship to the bankrupt's business transactions or estate, or concerns the discovery of assets, business dealings, or existence and disposition of property. E.g., In re Tzabari , 622 B.R. 332, 341 (Bankr. E.D. Pa. 2020). Materiality may turn on the degree to which, if any, that the misstatement (or omission) impeded the proper administration of the bankruptcy case. However, the plaintiff need not demonstrate proof of actual harm to creditors. Id.

With these principles in mind, I consider the allegations in the Amended Complaint.

C.

1.

7 Paragraphs 1 and 2 of the Amended Complaint can be considered together.

Paragraph 1 alleges that the Debtor failed to disclose a stream of rental income derived from "the apartments above the Fenix Nightclub establishment of which [Mr. Mannion] is the co-owner." In the Motion, the Debtors do not provide any further details regarding "the Fenix Nightclub" or the income stream referenced in the Amended Complaint, but they do assert that the apartments and rental income referenced in...