Int'l Bank of Commerce v. Saenz (In re Saenz)

516 B.R. 423

In re Humberto SAENZ, Jr.; fdba Pizza Patron Inc.; fdba Estrella Ventures, Inc. dba Pizza Patron; aka Saenz; fdba Armar Enterprises Inc., Delma Jean Saenz, Debtor(s).International Bank of Commerce, Plaintiff(s)

v.Humberto Saenz, Jr., et al., Defendant(s).

Bankruptcy No. 13–70423.

Adversary No. 13–07028.

United States Bankruptcy Court,

S.D. Texas,

McAllen Division.

Signed Aug. 8, 2014.

Antonio Villeda, Attorney at Law, McAllen, TX, for Debtor.

MEMORANDUM OPINION

MARVIN ISGUR, Bankruptcy Judge.

On March 7, 2014, Humberto Saenz, Jr. filed a motion to dismiss International Bank of Commerce's (“IBC”) Complaint for Determination of Non–Dischargeable Debt. (Case No. 13–7028, ECF No. 1). IBC fails to state a direct fraud claim for an exception to discharge under § 523(a)(2). IBC also fails to state a derivative fraud claim under § 523(a)(2).

IBC may be given an opportunity to replead its derivative fraud claim under § 523(a)(2). If Gomez attempts to replead his § 523(a)(2) claim, then IBC will be granted leave to amend its equitable subrogation claim under § 523(a)(2). IBC's claims for direct fraud and indemnification under § 523(a)(2) are dismissed. Accordingly, the motion is granted in part and denied in part.

Procedural Background

In December of 2012, Jose Gomez and JMG JMG Ventures, LLC (“Gomez”) filed an amended petition in their state court lawsuit against Saenz, Pizza Patron Inc. (“PPI”), Lone Star National Bank and International Bank of Commerce (“IBC”). The lawsuit arises from a business transaction between Gomez and Saenz. On November 26, 2013, IBC filed a Complaint for Determination of Non-dischargeable Debt under 11 U.S.C. § 523(a)(2)(A). (ECF No. 1). Gomez's amended state court lawsuit is attached as an Exhibit to the Complaint.

On March 7, 2014, Saenz filed a motion to dismiss IBC's complaint. (ECF No. 19). On March 28, 2014, IBC filed (i) its First Amended Complaint and (ii) a response to Saenz's motion to dismiss. (ECF No. 21; ECF No. 22). On April 2, 2014, Saenz filed (i) a reply to IBC's response and (ii) a motion to strike IBC's First Amended Complaint. (ECF No. 23). On June 20, 2014, IBC filed a response to Saenz's motion to strike. (ECF No. 24). On June 24, 2014, Saenz filed a reply to IBC's response. (ECF No. 25). Finally, on July 15, 2014, IBC filed a reply to Saenz's reply. (ECF No. 26).

Background Facts

On October 15, 2009, Gomez signed a Purchase–Sale Agreement for the purchase of Saenz's equipment and inventory, and for the Pizza Patron franchise in Rio Grande City. On February 8, 2010, Gomez obtained a $287,200.00 loan from Lone Star Bank in connection with the purchase. Gomez contends that Saenz and IBC Bank created false profit and loss reports for the franchise and presented them to Gomez prior to the sale in order to induce him to buy the franchise and help him secure financing with Lone Star Bank. Specifically, Gomez claims that IBC's loan officer, Elizabeth Goana, “created Good Will Value along with the Profit and Loss documents that were provided to Plaintiffs in order to induce the Plaintiffs to purchase the franchise and thereby pay off the balance of the loan of the business.” (ECF No. 1–1 at 10).

In IBC's Original Complaint, it admits that it created Profit and Loss reports for the Pizza Patron franchise, but alleges that it relied on numbers provided to them by Saenz. (ECF No. 1 at 3). In its Amended Complaint, IBC alleges that it simply provided Saenz with blank financial statement forms. (ECF No. 21 at 4). IBC further alleges that “Saenz represented to IBC that he needed a finance statement and IBC may have provided him a blank one. Saenz then presented a filled out Finance Statement which he alleged was filled out by IBC. IBC was injured as a result of this misrepresentation by Saenz to Gomez and IBC.” (ECF No. 21 at 4).

IBC requests a declaration that (i) “the Saenz Defendants, jointly and severally, are liable to IBC for any liability assessed against IBC in favor of the Gomez Plaintiffs” and (ii) that the Court declare “that the judgment debt awarded to IBC as to Saenz, including attorneys['] fees and costs, is non-dischargeable under section 523(a)(2)(A) of the Bankruptcy Code.” (ECF No 1 at 6).

Rule 12(b)(6) Standard

Saenz's motion to dismiss for failure to state a claim for which relief can be granted is filed under Fed. R. Bankr.P. 7012, which incorporates Fed. R. Civ. P. 12(b)(6). The Court reviews motions under Rule 12(b)(6) by “accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiffs.” Stokes v. Gann, 498 F.3d 483, 484 (5th Cir.2007) (per curiam). However, the Court “will not strain to find inferences favorable to the plaintiff.” Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 361 (5th Cir.2004) (internal quotations omitted).

To avoid dismissal for failure to state a claim, a plaintiff must meet Fed.R.Civ.P. 8(a)(2)'s pleading requirements. Rule 8(a)(2) requires a plaintiff to plead “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a). In Ashcroft v. Iqbal, the Supreme Court held that Rule 8(a)(2) requires that “the well-pleaded facts” must “permit the court to infer more than the mere possibility of misconduct.” 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Rule 8(a)(2)). “Only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “[A] complaint does not need detailed factual allegations, but must provide the plaintiff's grounds for entitlement to relief—including factual allegations that when assumed to be true raise a right to relief above the speculative level.” Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir.2009) (internal quotation marks removed).

Rule 9

Fraud claims must, in addition, meet Fed.R.Civ.P. 9(b)'s heightened pleading requirements. Under Rule 9(b), fraud claims must be alleged with particularity concerning the circumstances of the fraud. Fed.R.Civ.P. 9(b). See Oppenheimer v. Prudential Sec. Inc., 94 F.3d 189, 195 (5th Cir.1996) (upholding district court's dismissal of fraud claims where the plaintiff failed to allege when an allegedly fraudulent sales charge was incurred or the extent of her damages); Red Rock v. JAFCO Ltd., 1996 WL 97549, at *3 (5th Cir.1996) (holding that the plaintiff's allegations did not satisfy Rule 9(b) where they failed to allege the time, place, or content of any misrepresentations). “To plead fraud adequately, the plaintiff must ‘specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.’ ” Sullivan v. Leor Energy, LLC, 600 F.3d 542, 551 (5th Cir.2010) (quoting ABC Arbitrage v. Tchuruk, 291 F.3d 336, 350 (5th Cir.2002)).

Saenz's Motion to Strike

On April 2, 2014, Saenz filed a motion to strike IBC's First Amended Complaint arguing that (i) the amended complaint was filed after the deadline for complaints to determine the dischargeability of debt and (ii) IBC's amendment is futile on the basis of judicial estoppel. (ECF No. 23).

The Bankruptcy Rule that establishes the deadline for seeking an exception to a debtor's discharge (i.e., Federal Rule of Bankruptcy Procedure 4007(c)) operates in conjunction with Bankruptcy Rule 7015, which incorporates Federal Rule 15. In re Huggard, 510 B.R. 668 (Bankr.D.Mass.2014). Bankruptcy Rule 7015 states that Federal Rule 15 applies in adversary proceedings. Id. Under Federal Rule 15(a), leave of court is required to amend a pleading when the amendment is sought beyond 21 days after the filing of a responsive pleading or 21 days after service of a motion under Rule 12(b). Id. The record shows that IBC filed its First Amended Complaint (March 28, 2014) exactly 21 days after Saenz filed his motion to dismiss (March 7, 2014). Accordingly, IBC was not required to seek leave of court to file its amended complaint.

However, Rule 15(a)'s “matter of course” right to amend does not exempt a creditor from complying with Rule 4007(c)'s deadline. See In re Brown, 2013 WL 3353829 (Bankr.N.D.Okla. July 3, 2013) (holding that creditor's Rule 15(a) “matter of course” right to amend is “relevant only to the issue of whether [creditor] had to request leave of court before filing the Amended Complaint, and has no bearing on whether the claims asserted in the amended pleading are time-barred.”).

Rule 4007(c) requires that complaints to determine exceptions to discharge must be filed no later than 60 days after the first date set for the § 341 creditors' meeting. Fed. R. Bankr.P. 4007(c). In this case, the first date set for the § 341 creditors' meeting was September 27, 2013. Accordingly, the deadline to file a complaint seeking an exception to discharge was November 26, 2013.

Courts generally adhere to the strict deadlines for filing discharge complaints. However, some courts, including courts in the Fifth Circuit, have allowed a party to amend his complaint from one § 523(a) subsection to another under § 523(a) subsection when the actions involved in both arise out of the same events. When allowed, the new § 523(a) claim must relate back to the date of the original § 523(a) claim. See In re Fondren, 119 B.R. 101, 104 (Bankr.S.D.Miss.1990) (“Under the facts of this case, the allegations upon which the proposed amendment under section 523(a)(6) are based are the very same as those presented in the original complaint which alleged a violation under section 523(a)(2). Therefore, under Rule 15(c) ... the requested amendment here is allowable and will relate back to the date of the original complaint.”). IBC can file an Amended Complaint so long as it establishes relation back under Rule 15(c).

An amendment to a pleading relates back to the date of the original pleading when the...