Reger v. Essex Bank (In re Landes)

627 B.R. 144

IN RE William A. LANDES, Debtor.

John Reger, Plaintiff,

v.Essex Bank, Defendant.

Essex Bank, Counter-Claimant,

v.John Reger, Counter-Opposing Trustee.

Case No. 17-22481-E-7

Adv. Proc. No. 20-2130

Docket Control No. MPD-2

United States Bankruptcy Court, E.D. California.

Signed April 01, 2021

Douglas B. Jacobs, Esq., Chico, CA, Attorney for the Debtor.

Michael P. Dacquisto, Esq., Redding, CA, Attorney for the Plaintiff/Bankruptcy Trustee/Counter-Opposing Trustee.

Stephen G. Opperwall, Esq., Pleasanton, CA, Attorney for the Defendant/Counter-Plaintiff.

MEMORANDUM OPINION AND DECISION

Ronald H. Sargis, United States Bankruptcy Judge

John Reger ("Counter-Opposing Trustee") moves for the court to dismiss as provided in Federal Rule of Civil Procedure 12(b)(6) the Counterclaim filed by Essex Bank ("Counter-Claimant") and to strike portions of the Counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(7).

The court begins its consideration with a review of the Counterclaim, then the grounds provided by Counter-Opposing Trustee, and Opposition of the Counter-Claimant.

REVIEW OF THE COUNTERCLAIM

The Counter-Claimant filed the Counterclaim (Dckt. 55) on January 11, 2021, in conjunction with filing its Answer to the Complaint ("Answer") (Dckt. 54). FED. R. CIV. P. 13, Fed. R. Bankr. P. 7013. The Counterclaim, which must provide the "short and plain statement of the claim showing that the pleader is entitled to relief" ( FED. R. CIV. P. 8(a), Fed. R. Bankr. P. 7008 ), provides the following for such required statement:

A. Any and all allegations in the Answer "are incorporated by reference as though fully set forth herein." Counterclaim, ¶ 2; Dckt. 55.

The court reads this to state that whatever is in the Answer, relevant or not, are shoveled into the Counterclaim.

B. Any and all allegations, as well as "other matters that are set forth in the Bankruptcy Court file since the date of the filing of [Counter-Opposing Trustee's] motion regarding the sale of guns and artwork is referred to and incorporated by reference." Id ., ¶ 3.

The court reads this incorporation to indiscriminately shovel whatever relevant and irrelevant materials are in the Bankruptcy Court file since the October 29, 2018 filing of the Motion to Sell in the William Landes Chapter 7 Case, 17-22481 (the "Related Bankruptcy Case"). 17-22481; Motion For Authorization to Sell, Dckt. 63.

In the two years and five months since that Motion to Sell was filed in the Related Bankruptcy Case, there have been 73 docket entry filings, with scores and scores of "allegations" and "other matters."

C. Any and all allegations "and other matters" "which are set forth in the appeal to the BAP in this case are referred to and incorporated by reference." Counterclaim, ¶ 4; Dckt. 55.

Counter-Claimant then directs the court to whatever, any, and all allegations and "other matters" in other documents in another court to consider whether this court can piece together a "short and plain statement" for the claim(s) that Counter-Claimant seeks to assert.

D. In the First Claim for Relief, Counter-Claimant seeks "Declaratory Relief," stating:

1. "A controversy exists about the $20,000 from the transaction between [Counter-Opposing Trustee] and Marie Landes [Debtor's separated spouse], ...." Id ., ¶ 5.

2. A controversy exists "about the $13,000 of funds from the transaction between Reger and William Landes [the Debtor in the Related Bankruptcy Case]. ..." Id .

3. A controversy exists "[a]bout [Counter-Claimant's] claim that it would be awarded attorneys' fees for the litigation in this bankruptcy case and Adversary Proceeding that relates to the controversy." Id .

E. Counter-Claimant alleges that Counter-Opposing Trustee owes Counter-Claimant "[$]20,000 from the Marie Landes transaction. ..." Id ., ¶ 6.

F. Counter-Claimant alleges that Counter-Opposing Trustee owes Counter-Claimant "[t]he $13,000 from the William Landes transaction, ...." Id .

G. Counter-Claimant alleges that Counter-Opposing Trustee owes Counter-Claimant "[a]ttorneys' fees and costs for litigating everything relating to those matters." Id .

As discussed below, it does not appear that this is a "declaratory relief" cause of action as Congress permits under federal law. Rather, it appears that all actions have been taken, rights fixed, and the actual ownership rights, interests, and claims need to be finally adjudicated. Further, the "allegations" are conclusions of relief desired, not plain statements showing why Counter-Claimant is entitled to such relief.

H. Counter-Claimant repeats in Paragraph 8 of the Counterclaim, "[Counter-Claimant] is entitled to the $20,000 from the transaction between [Counter-Opposing Trustee] and Marie Landes, and the $13,000 from the transaction between [Counter-Opposing Trustee] and William Landes." Id .

I. Counter-Claimant asserts that it is entitled to attorney's fees and costs:

1. "[f]or litigating those matters that were initiated without good cause and in bad faith ...." Id ., ¶ 9;

2. "[b]ased on contractual provisions and [Debtor], which binds Marie Landes based on community property law, ...." Id . 3. "[w]hich also binds [Counter-Opposing Trustee] because he stands in the shoes of the Debtor ...." Id .

Again, Counter-Claimant states the relief it requests, without providing a short and plain basis upon which such relief is based. Counter-Claimant does reference some contract (with no contract or agreement identified) and that it asserts some identified principles of community property law result in Debtor's separated spouse having personal contractual liability to Counter-Claimant imposed on her merely because of marriage.

J. Counter-Claimant continues asserting that,

The transaction [not specifying which in the almost two and one half years of filings in the Related Bankruptcy Case, Bankruptcy Appellate Panel appeal, and this Adversary Proceeding] was expressly subject to [Counter-Claimant's] rights, and that can't be changed after the fact as [Counter-Opposing Trustee] is attempting to do.

Id ., ¶ 10.

It is not stated what "rights" are asserted and what "change" is asserted by the Counter-Opposing Trustee.

K. Counter-Claimant then drops in a reference to 11 U.S.C. § 502(d), without stating how it is applicable to the Counterclaim, that:

11 U.S.C. Section 502(d) is not for circumstances like this, and has not been applied to a situation involving a Notice of Lien. [Counter-Claimant] has no money or property to surrender or give back.

Id ., ¶ 11.

The court has addressed the 11 U.S.C. § 502(d) issues in connection with the Motion for Summary Judgment on the Complaint filed by John Reger, the Plaintiff-Trustee and Counter-Opposing Trustee for this Counterclaim, which decision was not entered until after the Counterclaim was filed (and therefore Counter-Claimant did not have the benefit of that Decision when filing the Counterclaim). As discussed in that Memorandum Opinion and Decision, Counter-Claimant ignores plain and clear provisions of the Bankruptcy Code and established case law that liens are transfers of interests in a debtor's property, that obtaining liens are subject to the avoiding powers of a trustee, and that when a lien is avoided, such a lien is statutorily preserved ( 11 U.S.C. § 551 ) for the benefit of the bankruptcy estate.

L. Counter-Claimant asserts that it is a third-party beneficiary of the contract that the Counter-Opposing Trustee had with the Debtor and the contract with Marie Landes. Id ., ¶ 12.

No short and plain statement of the basis for this legal conclusion is stated in the Counterclaim.

M. Finally, there is the conclusion that "The actions by [Counter-Opposing Trustee] have been in violation of [Counter-Claimant's] rights as a creditor." Id . ¶ 13.

As with the other conclusions, Counter-Claimant does not provide a short and plain statement for this conclusion.

REVIEW OF MOTION TO DISMISS

The Motion to Dismiss asserts that the Counterclaim in general restates the claims that are the subject of the Complaint in this Adversary Proceeding to determine the extent, validity, priority, and amount of the security interest of Counter-Claimant in the $13,000.00 relating to the sale of the Bankruptcy Estate's interest in the non-exempt equity in the two vehicles and the turn over of monies from a bank account by the Debtor in the Related Bankruptcy Case. Further, the Motion to Dismiss asserts:

A. The Counterclaim fails to state a claim on which relief can be granted.

B. The litigation privilege under California Civil Code § 47 protects the actions taken by Trustee in both the $13,000.00 transaction and the $20,000.00 transaction as these are actions that were properly undertaken by Counter-Opposing Trustee to accomplish his chapter 7 administrative duties.

C. The Anti Slapp doctrine under California Code of Civil Procedure § 425.16 also protects the actions taken by the Trustee in both the $13,000.00 transaction and the $20,000.00 transaction as these are actions that were properly undertaken by Counter-Opposing Trustee to accomplish his chapter 7 administrative duties.

D. The doctrine of judicial immunity, through the doctrine of derived quasi judicial immunity, protects Mr. John Reger's actions brought against him in his capacity as Chapter 7 Trustee, given that the counterclaim fails to allege personal liability against Reger in his personal capacity. The doctrine of judicial immunity, through the doctrine of derived quasi judicial immunity, also protects the actions taken by Trustee in both the $13,000.00 transaction and the $20,000.00 transaction as the related actions were properly noticed to [Counter-Claimant] and disclosed to the bankruptcy court.

E. The Rule 12(b)(7) grounds to strike is directed at the attorney's fee request assering: (1) there is no statutory or contractual basis to request or to award attorney's fees in favor of Counter-Claimant and against the Counter-Objecting Trustee, and (2) those allegations are redundant and immaterial. Counter-Opposing Trustee argues

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