Pasley v. Biggs (In re Pasley)

596 B.R. 577

IN RE: Jeffrey W. PASLEY, Debtor(s)

Jeffrey W. Pasley, Plaintiff

v.Gary Franklin BiggsandJudith A. Rosenberg

and

Michael R. Gosnell

and

Weber & Rose Professional Service Corporation, Defendants

Case No. 16-33769

AP No. 17-3075

United States Bankruptcy Court, W.D. Kentucky.

Signed January 24, 2019

John W. Bauman, Louisville, KY, for Plaintiff.

Michael R. Gosnell, Louisville, KY, for Defendant.

MEMORANDUM

Alan C. Stout, United States Bankruptcy JudgeThis adversary proceeding came before the Court for an evidentiary hearing on December 4, 2018, on the Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6) (the "Motion") filed by the Defendants, Gary Franklin Biggs, Judith A. Rosenberg, Michael R. Gosnell, and Weber & Rose, Professional Service Corporation (hereinafter collectively referred to as the "Defendants"). The Plaintiff, Jeffrey W. Pasley, appeared pro se . The Defendants also appeared, and were represented by counsel. Upon consideration of the Motion, the response filed by the Plaintiff, the evidence presented at the evidentiary hearing, and the post hearing briefs, the Court will grant the Motion in part.

I. FACTS

Beginning in 2004, the Defendant Gary Biggs ("Biggs") and the Plaintiff were associates engaged in transactions involving real estate and investment contracting. Numerous loans were made by Biggs to the Plaintiff and to corporate entities controlled by the Plaintiff. The first loan, dated June 7, 2004, was entered into by Biggs and J P Properties, LLC, a Kentucky Limited Liability Company, by Jeffrey W. Pasley, Member and Jeffrey W. Pasley, individually. With this loan and mortgage, the Plaintiff signed a Residency Certification stating that the real property collateral for the loan was not his primary residence.

The second transaction, dated December 27, 2004, involved Biggs and 4J's Coin Laundry, LLC, a Kentucky Limited Liability Company, by Jeffrey W. Pasley, Member and Jeffrey W. Pasley, individually. The Plaintiff also signed a Residency Certification with respect to this loan and mortgage, indicating the collateral was not his primary residence.

The same parties from the second transaction entered into a third transaction, dated March 4, 2005. The collateral for this loan consisted on equipment for the operation of a laundry (washers, dryers, change machine, laundry carts, water heater, and other items).

The fourth transaction, dated April 28, 2005, was entered between Biggs and J P Properties, LLC, a Kentucky Limited Liability Company, by Jeffrey W. Pasley, Member and Jeffrey W. Pasley, individually. As with the other real estate transactions, the Plaintiff signed a Residency Certification indicating the collateral was not his primary residence.

The fifth and sixth transactions, dated July 14, 2006 and August 22, 2007 respectively, were of a similar nature as the forth transaction, with the same parties and a Residency Certification.

The relationship soured and on February 18, 2015, Defendant Biggs filed suit against the Plaintiff in state court. Defendant Biggs was granted Summary Judgment on November 27, 2016. Defendant Gosnell, represented Defendant Biggs in the state court litigation. Defendant Gosnell filed a Notice of Judgment Lien ("Judgment Lien") on real estate on December 15,2016. That Judgment Lien listed Defendant Rosenberg rather than Defendant Biggs as the judgment creditor.

Due to the threat of foreclosure, Plaintiff filed for Chapter 7 Bankruptcy protection, on December 19, 2016. That bankruptcy case is still ongoing.

On December 13, 2017, Plaintiff filed the adversary proceeding currently before the Court. The Plaintiff included seven separate counts in his complaint, consisting of the following claims: 1)Violation of the Fair Debt Collection Practices Act ("FDCPA"); 2) Lack of Standing; 3) Slander of Title; 4) Quiet Title; 5) Fraud/Misrepresentation; 6) Respondeat Superior Liability; and 7) Intentional Infliction of Emotional Distress. All these claims derive from the same factual event, the erroneous Judgment Lien listing Defendant Rosenberg as judgment creditor.

On the same date of the filing of the complaint, December 13, 2017, the Clerk of Court issued a Summons and Scheduling Order. On January 8, 2018, the Plaintiff filed a Certificate of Service indicating that the Defendants were served with the Summons and Scheduling Order on December 26, 2017. The date of service, December 26, 2017, was thirteen (13) days after the issuance of the Summons and Scheduling Order, and six (6) days after the time allowed for service in Fed. R. Bankr. P. 7004(e).¹

On January 20, 2018, the Defendants filed a Motion to Quash Summons, arguing that the Plaintiff did not timely serve the summons and complaint as required by Fed. R. Bankr. P. 7004(e). On January 30, 2018, the Court entered an order granting the Motion to Quash, and further ordered that the Clerk of Court issue a new summons for service by the Plaintiff. A new summons was issued on January 30, 2018, and served upon the Defendants on January 31, 2018.

Defendants did not answer, but instead filed the Motion currently before the Court. In the Motion, the Defendants sought dismissal pursuant to Fed.R. Civ. P. 12(b)(1) and (6).² In their Motion, the Defendants asserted three separate grounds for dismissal. First, the Defendants argued that the Court lacked subject matter jurisdiction because these claims belonged to the Chapter 7 Trustee rather than to the Plaintiff. Second, the Defendants argued that the Plaintiff's claims failed to state any claim against the Defendants. Specifically, the Defendants argue that "all the claims involved in the within proceeding filed by [Plaintiff] have a one year statute of limitations." Finally, the Defendants also argue the claim based upon the FDCPA is not available to the Plaintiff because the debts involved were not consumer related.

II. LEGAL ANALYSIS

A. Jurisdiction

This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(a) and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(E) and (O).

B. Standard For A Motion to Dismiss Under FRCP 12(b)(1)

A motion to dismiss under Fed. R. Bankr. P. 12(b)(1) challenges the court's subject matter jurisdiction. "A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exits." DLX, Inc. v. Kentucky , 381 F.3d 511, 516 (6th Cir.2004), citing, RMI Titanium Co. v. Westinghouse Elec. Corp. , 78 F.3d 1125, 1133–35 (6th Cir.1996).

As noted above, a motion to dismiss pursuant to Fed. R. Bankr. P. 12(b)(1) for lack of subject matter jurisdiction may refer to the evidence without converting the motion into one for summary judgment. League of Women Voters v. Brunner , 548 F.3d 463, 475, fn. 15 (6th Cir.2008) (internal citation omitted). In addition, on a Fed. R. Bankr. P. 12(b)(1) motion, the court is empowered to resolve factual disputes. Ernst v. Rising , 427 F.3d 351, 372 (6th Cir.2005), citing Rogers v. Stratton Indus., Inc. , 798 F.2d 913, 915 (6th Cir.1986) ("[W]here subject matter jurisdiction is challenged under Rule 12(b)(1), as it was here, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Perhaps even more importantly, when a Rule 12(b)(6) motion is converted to a Rule 56 motion for summary judgment, the court, upon finding genuine issues as to material facts, must deny the motion; whereas on a Rule 12(b)(1) challenge to subject matter jurisdiction, the court is empowered to resolve factual disputes.").

C. Standing

The first ground for dismissal cited by the Defendants was that the Plaintiff lacked standing to bring these claims. At the evidentiary hearing, the Defendants acknowledged that this was no longer a viable argument in light of the fact that the Chapter 7 Trustee had abandoned all of these claims.³ With the abandonment, the claims reverted back to the Plaintiff, thereby conferring standing back to the Plaintiff to bring these claims.

D. Statute of Limitations

The Court will next turn to the statute of limitations defense. As mentioned above, the Defendants argue that the state law claims asserted by the Plaintiff should be dismissed because this action was not timely commenced. Specifically, because the summons and complaint were not served within the limitations period, the Defendants argue the claims must be dismissed.⁴ The Defendants cite KRS 413.140(1)(a) and (d) and 15 U.S.C. § 1692k(d) in support of their argument. Here, because the Judgment Lien was recorded on December 15, 2016, pursuant to KRS 413.140(1)(a) and (d) as well as 15 U.S.C. § 1692k(d), this action should have been filed no later than December 15, 2017.⁵

Defendants admit that Plaintiff did file this action on December 13, 2017, within the statute of limitations. However, the initial attempt to serve was initiated on December 26, 2017, eleven days after the statute of limitations ran. Moreover, due to the Plaintiff's failure to timely serve the summons and complaint, the original summons was quashed by Court order. While a new summons was issued on January 30, 2018, these summons were not served until January 31, 2018, forty-seven days after the running of the statute of limitations. Defendants cited Gibson v. EPI Corp. , 940 S.W.2d 912 (Ky. App. 1997) and Whittinghill v. Smith , 562 S.W.2d 649, 650-651 (Ky. App. 1977) in support of their argument.

In the case of Gibson v. EPI Corp. , a plaintiff brought a premises liability action against a building owner and provider of security services. 940 S.W.2d 912, 912 (Ky. App. 1997). On the date that the suit was filed, the clerk's office issued a summons. The plaintiff's counsel then accepted the summons and retained it himself. Id. at 912–13. Notably, settlement...