In re Bobo, C/A No. 07-01120-HB (Bankr. S.C. 1/17/2008)

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In re: Ernest Eugene Bobo, Chapter 7 Debtor Ernest Eugene Bobo, Plaintiff, v. Vanderbilt Mortgage and Finance, Inc., CMH Homes Inc. dba Luv Homes, Defendants.

C/A No. 07-01120-HB

Adv. Pro. No. 07-80057-HB

United States Bankruptcy Court, D. South Carolina.

January 17, 2008.

JUDGMENT

Based upon the Findings of Fact and Conclusions of Law set forth in the attached Order of the Court, the Court grants summary judgment for Defendants as to all of Plaintiff's claims.

IT IS SO ORDERED.

ORDER

This matter comes before the Court upon Defendants' Motion to Dismiss pursuant to Federal Rule of Bankruptcy Procedure 7012(b)(6) and Federal Rule of Civil Procedure 12(b)(6).¹ The following facts are not in dispute:

FINDINGS OF FACT

1. On May 10, 2004 Robin A. McDaniel purchased a new mobile home from Defendant CMH Homes Inc., which does business in the name of Luv Homes. The sale was financed by a Retail Installment Sales Contract (RISC) assigned to Defendant Vanderbilt Mortgage and Finance, Inc. Under the terms of the RISC, Ms. McDaniel promised to pay Vanderbilt the sum of $46,238.00 with interest at the rate of 11.49%. A lien in favor of Vanderbilt was placed on the mobile home purchased by Ms. McDaniel.

2. The Complaint in this adversary proceeding alleges the following regarding the relationship of the above captioned Defendants:

18. . . . Defendant CMH Inc does business in the name of Luv Homes, has a place of business in Spartanburg County, and was the selling merchant. . . and is the creditor of a consumer transaction.

19. Defendant Vanderbilt. . . is the assignee on the creditor transaction and is liable for all claims and defenses as against the selling merchant.

Defendants admitted these allegations of the Complaint. Plaintiff further asserts in Paragraph 20 of the Complaint that "the relation between Luv Homes and Vanderbilt is one of joint venturer or partner, and has common ownership."

3. The debt to Vanderbilt was further secured by a mortgage of real estate executed by Plaintiff Ernest Eugene Bobo. Mr. Bobo is Ms. McDaniel's father or grandfather. The Mortgage of Real Estate was executed on May 10, 2004 and involved real property located in Spartanburg County. The mortgage was recorded in the Office of Spartanburg County Register of Deeds on May 14, 2004.

4. The mobile home purchased by Ms. McDaniel was placed on the Spartanburg property owned by Mr. Bobo. Mr. Bobo's own manufactured home was also located on that property and has been his principal residence for several years.

5. On August 11, 2006 Vanderbilt filed a mortgage foreclosure action against the real property. Mr. Bobo was a named defendant in the foreclosure action and personal service was effected upon Mr. Bobo on August 19, 2006. Mr. Bobo did not appear or assert any defenses in the foreclosure action.

6. A Master's Order and Judgment of Foreclosure and Sale was filed on January 2, 2007 in the case of Vanderbilt Mortgage and Finance, Inc. v. Ernest Eugene Bobo, Robin A. McDaniel and the United States of America, Case No. 06-CP-42-2612 in the Court of Common Pleas for Spartanburg County. In the Master's Order, the master in equity held as follows:

7. For value received, Robin A. McDaniel made, executed and delivered a note, dated May 10, 2004, promising thereby to pay to the order of Vanderbilt Mortgage and Finance, Inc. the sum of $46,238.00, with interest at the rate of 11.49% per annum. . . .

8. To better secure the payment of said note and debt, a lien was placed upon the mobile home owned by the Defendant, Robin A. McDaniel, to wit: 2003 Clayton mobile home. . . .

9. To better secure the payment of the note described above, the said Ernest Eugene Bobo made, executed and delivered to Vanderbilt Mortgage and Finance, Inc. a mortgage, in writing, dated May 10, 2004, covering real property in Spartanburg County, which is the same as that described in the Complaint. . . .

10. This mortgage constitutes a first lien on the subject property.

11. The Plaintiff [Vanderbilt] in this action is the mortgagee and owner and holder of the note and mortgage it is seeking to foreclose.

12. The titleholders of record of the subject property as of the filing of the Lis Pendens in this action was [sic] Ernest Eugene Bobo and Robin A. McDaniel, who were the original mortgagors.

13. Payment due on the note has not been made as provided for therein, and the Plaintiff, as the holder thereof, has elected to accelerate payment of the entire indebtedness. . . .

. . . .

15. The amount due and owing on the note and mortgage . . . secured by the note and mortgage, is as follows: . . . Total Debt secured by note and mortgage, including interest to date: $50,808.75.

. . . .

I, therefore, conclude as follows:

1. The Plaintiff should have judgment of foreclosure of its mortgage; and the mortgaged property should be ordered sold at public auction after due advertisement.

7. A sale of the real property was scheduled for March 5, 2007. Mr. Bobo filed his bankruptcy petition on March 3, and the sale was cancelled.

8. Mr. Bobo filed this Adversary Complaint on April 26, 2007 against the above named defendants alleging causes of action based on the South Carolina homestead exemption, the federal Truth In Lending Act, 15 U.S.C. §§ 1601-1667f (TILA) for failure to provide right of rescission (15 U.S.C. § 1635(a)), and under the state Consumer Protection Code, S.C. Code Ann. §§ 37-1-101 to 37-25-80, for "overreaching," unconscionability, and violation of the attorney preference provision.

9. As to the homestead exemption, Plaintiff/Debtor seeks the relief in the form of denial of the motion for relief from stay filed by Defendant Vanderbilt pursuant to 11 U.S.C. § 362 in Plaintiff's bankruptcy case and an award of costs and attorney's fees "in objecting to the Claim."

10. As to the TILA claim for relief, Plaintiff seeks rescission of the mortgage under 15 U.S.C. § 1635(a), based on the allegation that he was not provided with a three-day right to rescind the transaction as required by this section.

11. As to the state Consumer Protection Code claim, Plaintiff's Complaint seeks the following: a finding that the mortgage was unconscionable based on absence of disclosures, attorney preference and setting up of a mobile home on a lot already occupied by Plaintiff's home;² "to reform the financing, specifically to void the mortgage pursuant to § 37-10-102 [attorney preference] and 105";³ actual and statutory damages pursuant to § 37-10-105 and "damages" pursuant to § 37-5-202(8) (which provides for an award of attorney's fees if a creditor is found to violate Title 37).

12. Defendants filed a joint Answer to the Complaint in this adversary proceeding on May 22, 2007.

13. On September 5, 2007 Defendants filed a joint Motion to Dismiss pursuant to Fed. R. Bankr. P. 7012(b)(6) and Fed. R. Civ. P. 12(b)(6), asserting that the Complaint should be dismissed because all of Plaintiff's claims are barred by res judicata and collateral estoppel as a result of the Master's Order and Judgment of Foreclosure and Sale.

CONCLUSIONS OF LAW

Procedural Issues

According to Rule 12(b), "a motion asserting any of these defenses [12(b)(1)-(7)] must be made before pleading if a responsive pleading is allowed." Defendants' Answer having been filed previously, a motion to dismiss for failure to state a claim upon which relief can be granted is now inappropriate under Rule 12(b). Litwhiler v. Hidlay, 429 F. Supp. 984, 986 (D.C. Pa. 1977); Shabazz v. C. R. Odum, 591 F. Supp. 1513, 1514 n.1 (M.D. Pa. 1984). The typical solution is to treat the motion as a motion for summary judgment under Rule 56. Litwhiler, 429 F. Supp. at 986; Shabazz, 591 F. Supp. at 1514 n.1; Dickun v. United States, 490 F. Supp. 136, 137 (W.D. Pa. 1980).

For an additional reason, Rule 12(d) further dictates that this be done in the present case. Defendants attached to their Motion several documents, including a mortgage contract signed by Plaintiff and a Retail Installment Contract-Security Agreement signed by Ms. McDaniel. Rule 12(d) provides that "[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." See also Dickun, 490 F. Supp. at 137 (where movant asked the court to consider an insurance release signed by the plaintiff motion must be treated as summary judgment motion); Peagler v. Peagler (In re Peagler), No. 01-80021-W, 2001 WL 1806976, at *5 n.8 (Bankr. D.S.C. June 1, 2001) (applying Rule 56 rather than Rule 12(b)(6) where parties relied on and court took into consideration documents outside the pleadings). The documents attached to the motion are "matters outside the pleadings" and they were not excluded by the Court. Accordingly, for the dual reasons that (1) the motion to dismiss was filed after a responsive pleading and (2) matters outside the pleadings were presented and not excluded, the Court will treat Defendants' motion as a motion for summary judgment under Rule 56. Dickun, 490 F. Supp. at 137; Litwhiler, 429 F. Supp. at 986. See also Bosiger v. U.S. Airways, No. 06-2085, 2007 WL 4357194, at *6 (4^th Cir. Dec. 14, 2007) ("It is well settled that district courts may convert a Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment.")

Summary Judgment Standard

Summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by to Rule 7056 of the Federal Rules of Bankruptcy Procedure, is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Bankr. P. 7056 (making Fed. R. Civ. P. 56 applicable to adversary proceedings in a bankruptcy case). The Court must construe any underlying facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio...