Rivera v. JP Morgan Chase Bank (In re Rivera)

In re: ELISA RIVERA DebtorELISA RIVERA Plaintiff v. JP MORGAN CHASE BANK Defendant

Case No. 13-14351-BFK

Adversary Proceeding No. 13-01280

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF VIRGINIA Alexandria Division

Date: January 27, 2014

Chapter 13

MEMORANDUM OPINION ON DEFENDANT'S

MOTION TO DISMISS COMPLAINT

This matter comes before the Court on the Motion of Defendant, JP Morgan Chase Bank, N.A. ("Chase"), to Dismiss the Plaintiff's Complaint pursuant to Bankruptcy Rule 7012 (incorporating F.R. Civ. P. 12(b)(6)). Docket Nos. 9 and 10. The Plaintiff has filed an Opposition. Docket No. 18. The Court heard the arguments of the parties on December 17, 2013. For the reasons stated below, the Court will grant the Motion.¹

The Standard to be Applied on a Motion to Dismiss

Under the Supreme Court's decisions in Twombly and Iqbal, to survive a motion to dismiss under Rule 12(b)(6), the complaint must state a claim that is plausible on its face. SeeBell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Twombly, 550 U.S. at 556. In Iqbal, the Court held:"[W]hether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." 556 U.S. at 679.

The Court accepts as true all well-pleaded facts in the Complaint, but is not required to accept allegations that are legal conclusions. Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) ("[A]lthough a court must accept as true all factual allegations contained in a complaint, such deference is not accorded to legal conclusions stated therein. The mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6)") (citing Iqbal, 556 U.S. at 678).

Because the Plaintiff is pro se, the Court reviews her Complaint liberally, to ensure that any potentially valid claims do not fail for a lack of legal specificity. Gordon v. Leeke, 574 F.2d 1147, 1151 (4th Cir. 1978).

The Facts as Alleged by the Plaintiff

The Plaintiff alleges that she was the owner of property located at 8106 Horseshoe Cottage Circle, Lorton, Virginia ("the Property"). She alleges that she refinanced the loan with Chase on August 18, 2005. Id., ¶ 15. She alleges that the loan was an adjustable rate loan, and that in September 2007, the loan payments suddenly and dramatically increased. Id., ¶¶ 16-18.

The Plaintiff alleges that she had certain discussions with Chase about the loan, in which Chase represented to her in 2007 that "if you stop paying for 3 consecutive months, we guarantee you that you will receive a loan modification and fix this problem." Id., ¶ 20(emphasis in original). She alleges that she relied on this promise, and applied for a modification, but that "on or about July 20, 2011, plaintiff was flatly and unequivocally denied." Id., ¶ 21. Chase thereafter notified the Plaintiff of a default, and began foreclosure proceedings. Id., ¶ 23. The Plaintiff alleges that Chase wrongfully foreclosed on the Property on August 15, 2013. Complaint, ¶¶ 5 and 13.

The Plaintiff states in her Complaint that she has been a debtor in bankruptcy before. She alleges that she filed a Chapter 13 petition in this Court on October 17, 2008 (Case No. 08-16415-RGM), but that the case was later dismissed. Id., ¶ 24. She alleges further that she filed for relief under Chapter 7 on November 12, 2012. Case No. 12-16723-BFK. She acknowledges that she received a discharge and that the case was closed. Id., ¶26. Chase obtained relief from the automatic stay in the Plaintiff's Chapter 7 case, and re-started its foreclosure proceedings against the Property.²

The Plaintiff alleges that a foreclosure sale was conducted on May 28, 2013, and that a Trustee's Deed conveying the Property to Venus Properties was recorded on August 15, 2013. Id., ¶ 30.

Discussion

Chase essentially makes two arguments in support of its Motion to Dismiss. First, Chase argues that the Plaintiff lacks standing because she did not list in her Chapter 7 bankruptcy case any of the claims that she now asserts (or alternatively that the Debtor is estopped from asserting these claims for failure to list them in her Chapter 7 case). Second, Chase argues that each of theclaims alleged by the Plaintiff fails to state a legally cognizable claim for relief. The Court will address each of these arguments, in turn.³

I. Standing and Estoppel.

Chase raises its standing and estoppel arguments in three forms. First, Chase argues that the Debtor lacks standing because the Chapter 7 Trustee from the Debtor's prior bankruptcy case is the rightful owner of the claims, not the Debtor. Second, Chase argues that the Debtor is judicially estopped from asserting the claims stated in her Complaint, because she failed to list them in her Chapter 7 case. Third, Chase argues that the Debtor is collaterally estopped because the Order in the Debtor's present bankruptcy case granting Venus Properties relief from the automatic stay found that there was a "properly conducted" foreclosure sale.

A. Chase's Argument that the Debtor Lacks Standing.

When a debtor files a bankruptcy petition, an estate is created. 11 U.S.C. § 541(a). Property of the estate includes all legal or equitable interests of the debtor in property as of the commencement of the case. 11 U.S.C. § 541(a)(1). This definition of property of the estate is broad enough to encompass all causes of action owned by the debtor as of the filing of her petition in bankruptcy. Wilson v. Dollar General Corp., 717 F.3d 337, 342-43 (4th Cir. 2013); Nat'l Am. Ins. Co. v. Ruppert Landscaping Co., 187 F.3d 439, 441 (4th Cir. 1999) ("[i]f a causeof action is part of the estate of the bankrupt then the trustee alone has standing to bring that claim"); Vanderheyden v. Peninsula Airport Com'n, 2013 WL 30065, at *8-9 (E.D. Va. 2013).⁴

The Debtor has the affirmative duty to disclose all causes of action, in her Schedules. 11 U.S.C. § 521(a)(1)(B). "A debtor's full and complete compliance with her disclosure obligation 'is required to preserve the integrity of the judicial function of bankruptcy courts' because both the court and creditors rely on the accuracy of such disclosures in determining how to proceed in a bankruptcy action." Vanderheyden, 2013 WL 30065, at *8 (quoting USinternetworking, Inc. v. Gen. Growth Mgmt., Inc. (In re USinternetworking, Inc.), 310 B.R. 274, 282 (Bankr. D. Md. 2004)). Causes of action that were not disclosed in the Debtor's Schedules have not been administered or abandoned by the Chapter 7 Trustee. Therefore, only the Chapter 7 Trustee has standing to maintain such claims. Nat'l Am. Ins. Co., 187 F.3d at 441; Robertson v. Flowers Baking Co. of Lynchburg, LLC, 2012 WL 830097, at *4 (W.D. Va. 2012).

The timing of the events is critical in this case because the Debtor lacks standing only as to causes of action that had accrued as of the filing date of her prior Chapter 7 petition. Ahteshamuddin v. Residential Credit Solutions Inc., 2011 WL 4345060, at *2 (D. Md. 2011) ("When a debtor files for bankruptcy, all of his interests in any causes of action that have accrued prior to the filing of bankruptcy will become a part of the bankruptcy estate..."); Harms v. Cigna Ins. Companies, 421 F. Supp. 2d 1225, 1230 (D.S.D. 2006). To determine whether a cause of action has accrued for standing purposes, the Court looks to applicable non-bankruptcy law. Borlo v. Navy Federal Credit Union, 458 B.R. 228, 232 (D. Md. 2011).

Although the Debtor asserts that the alleged fraudulent misrepresentation ("if you stop paying for 3 consecutive months, we guarantee that you will receive a loan modification and fix this problem") occurred in 2007, she further alleges that the foreclosure did not occur until May 28, 2013, some 3 months after she was discharged and her Chapter 7 case was closed. While the Plaintiff asserts a variety of causes of action, virtually all of the harm claimed in each cause of action is that her home was foreclosed wrongfully in May 2013. See Complaint, ¶ 41 ("Plaintiff seeks to quiet title against all persons or entities and have any deed of trust [sic] declared void as a matter of law as of the date title first vested in plaintiff [sic] on or about August 18, 2005"); ¶ 62 ("Plaintiff alleges in the alternative, that in spite of the quiet title action, that she was defrauded out of thousands of dollars in payments proximately caused by such deceit and fraud, and the wrongful foreclosure"); ¶ 70 ("Chase wrongfully and by a corrupt scheme wrongfully foreclosed upon the property"); ¶ 76 ("Plaintiff seeks restoration of title in her name by setting aside the illegal wrongful foreclosure").

In order to prove a claim for actual fraud, the Plaintiff must show: "'(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled.'" Bank of America, N.A. v. Sands, 488 Fed.Appx. 704, 708 (4th Cir. 2012) (quoting Nationwide Ins. Co. v. Patterson, 229 Va. 627, 331 S.E.2d 490, 492 (1985)) (emphasis added). Had the Plaintiff's causes of action been disclosed to the Chapter 7 Trustee, the Trustee could not have brought any of the claims because the Plaintiff had not yet suffered the harm occasioned by the foreclosure. Notably, the Plaintiff does not allege any causes of action arising out of the closing on her loan in 2007. For example, the Plaintiff does not seek to maintain any claims under the Truth in Lending Act arising from her mortgage loan. Nor does she allege that she suffered any creditreporting harm under the Fair Credit Reporting Act when the loan went into default. Rather,...