Smalis v. Huntington Bank & Its Predecessors-In-Interest PA Capital Bank (In re Smalis)

554 B.R. 757

In re: Despina Smalis, Debtor.

Ernest Smalis, Plaintiff

v.Huntington Bank and its Predecessors-in-Interest PA Capital Bank, Three Rivers Bank and Sky Bank, Defendants.

Bankruptcy No. 05-31587-CMB

Adversary No. 15-2174-CMB

United States Bankruptcy Court, W.D. Pennsylvania.

Signed August 17, 2016

Ernest Smalis, Pittsburgh, PA, pro se.

John R. O'Keefe, Jr., Justin M. Tuskan, Metz Lewis Brodman Must O'Keefe LLC, Pittsburgh, PA, for Defendants.

MEMORANDUM OPINION

Carlota M. Böhm, United States Bankruptcy Judge

The above-captioned adversary proceeding was commenced by Ernest Smalis, the former spouse of the Debtor, Despina Smalis. Upon review of Mr. Smalis' Adversary Complaint (“Complaint”), this Court issued an Order setting a hearing and advising that, at that time, the Court may dismiss the Complaint and/or impose sanctions on Mr. Smalis for the reasons set forth therein. Also pending before the Court are two motions filed by the Defendants: (1) Defendants' Motion to Dismiss (“Motion to Dismiss”) and (2) Defendants' Motion to Hold Plaintiff in Contempt of Court and for Sanctions (“Motion for Sanctions”). Mr. Smalis not only filed responses to the motions; he also filed Plaintiff's Motion to Vacate Judgment Order Pursuant to Rule 60. Relief from Judgment and Consent Order (“Motion to Vacate”). Ultimately, a hearing was held on these matters on July 26, 2016. For the reasons stated herein, the Complaint will be dismissed and Mr. Smalis will be enjoined from further filings related to this bankruptcy case unless he first obtains permission from this Court.

Background and Procedural History¹

The above-captioned bankruptcy case was commenced by Despina Smalis on September 2, 2005, by the filing of a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. Within Debtor's Schedule A, she identified her interest in numerous properties, including 3224 Boulevard of the Allies, Pittsburgh, Pennsylvania (hereinafter, the “Property”). At that time, the Property was co-owned by the Debtor, Mr. Smalis, and their two children. The Property was ultimately sold in 2006 by the Trustee in this bankruptcy case, and a distribution was made to Mr. Smalis as a co-owner. See Report of Sale, Adv. No. 05-3308, Doc. No. 23. Nonetheless, the Property has been the subject of numerous filings by Mr. Smalis prior to and after the sale.

Adversary Proceeding 05-3325

Prior to the sale, on November 29, 2005, Mr. Smalis commenced an adversary proceeding naming Labrisa Lofts, L.P. (“Labrisa Lofts”) and Pennsylvania Capital Bank and its successors, Three Rivers Bank and Sky Bank, among others, as defendants. See Adv. No. 05-3325 (hereinafter, the “Initial Proceeding”). The underlying dispute related to a foreclosure action commenced by Labrisa Lofts in the Court of Common Pleas of Allegheny County with respect to the Property. According to Mr. Smalis, the note and mortgage, originally with Pennsylvania Capital Bank, were ultimately assigned to Labrisa Lofts despite the fact that payment had previously been made in full. Notwithstanding this contention, a verdict was entered in favor of Labrisa Lofts in 2003 in state court. Mr. Smalis' efforts to appeal to the Pennsylvania Superior Court and then the Pennsylvania Supreme Court were unsuccessful.

Notwithstanding the foregoing, Mr. Smalis commenced the Initial Proceeding alleging that the defendants obtained judgment against him through fraud rendering said judgment void. See Adv. No. 05-3325, Doc. No. 1, at 1-2. Specifically, the complaint identified the following thirteen causes of action relating to the Property:

1. Violation of Article 9 of the Uniform Commercial Code;

2. Violation of rights protected by the 14th Amendment of the United States Constitution for deprivation of property without Due Process of Law;

3. Violation of the protections afforded by the 14th Amendment of the United States Constitution guaranteeing to all persons Equal Protection under the Law;

4. Violation of the Truth in Lending Act due to failure to make accurate disclosures and disposition of monies paid toward the principal of the mortgage;

5. Violation of the Real Estate Settlement Procedures Act by illegally routing monies paid to satisfy the mortgage;

6. Violation of the Racketeer Influenced and Corrupt Organizations Act;

7. Common law fraud;

8. Fraudulent transactions pursuant to 28 U.S.C. § 2410 ;

9. Violation of the Fair Debt Collection Practices Act and Consumer Credit Protection Act due to illegal debt collection practices;

10. Violation of 12 U.S.C. § 91 due to wrongful foreclosure;

11. Violation of 21 P.S. § 681 for failure to satisfy a mortgage;

12. Violation of 42 Pa.C.S. § 8104 for breach of duty by judgment creditor to enter satisfaction of judgment; and

13. Common law assumpsit/trespass and breach of contract.²

Although the Initial Proceeding was commenced by Mr. Smalis pro se, Robert Lampl, Esq., subsequently entered his appearance as counsel for Mr. Smalis. Following the filing of answers and motions to dismiss, a Consent Order of Court (“Consent Order”) was entered on May 19, 2006, resolving the matter. Attorney Lampl signed the Consent Order on behalf of Mr. Smalis.

According to the Consent Order, the proceeding was “fully and finally SETTLED AND DISCONTINUED WITH PREJUDICE ....” See Adv. No. 05-3325, Doc. No. 34. The Consent Order further provided as follows:

That with the settlement and discontinuance with prejudice of Adversary Proceeding 05-03325-BM, and with entry of this CONSENT ORDER, the Debtor, Co-Owners Ernest Smalis, Maria Smalis Sfanos and Michael Smalis, their heirs, administrators, agents, successors and assigns, the Trustee, LaBrisa Lofts, L.P., its predecessors, successors, agents, attorneys and assigns, Pennsylvania Capital Bank and its successors, Three Rivers Bank and Sky Bank, their Attorney and Agents, Joseph Augustine, V.P. Sky Bank, and Vince Zappa, Esquire, HEREBY RELEASE each other from each and every claim which they have or may have had against each other regarding the Mortgage and Note recorded in the Recorder's Office of Allegheny County Pennsylvania at MBV. 13523, page 546, and Assigned to LaBrisa Lofts, L.P., and regarding or in any way relating to any and all documentation concerning the subject property, said Mortgage, Note and/or Assignment and regarding any and all litigation surrounding said Mortgage, Note and /or Assignment whether in state or federal court or any other jurisdiction.

Id. The Consent Order also provided for the distribution of funds by the Trustee to the General Partner of Labrisa Lofts, and the Trustee's Report of Sale dated August 8, 2006, identifies a disbursement paying off the mortgage. See Adv. No. 05-3308, Doc. No. 23. Although the Initial Proceeding has remained closed since the filing of the Consent Order in 2006, this Court has addressed the Consent Order on prior occasions due to Mr. Smalis' subsequent filings.

Adversary Proceeding 13-2362

In 2013, Mr. Smalis commenced another adversary proceeding alleging violations of the Racketeer Influenced and Corrupt Organizations Act. Within that proceeding, Mr. Smalis contended once again that the mortgage on the Property was paid in full and further that he was never given the opportunity to litigate these issues in the Initial Proceeding. See Adv. No. 13-2362, Doc. No. 64. Although Mr. Smalis asserted that the Initial Proceeding was settled without his permission, this Court found that Mr. Smalis was aware of and authorized settlement:

[Mr. Smalis'] assertion that he was not aware of the resolution of Adversary Proceeding 05-3325 until 2014 is not credible based on his past involvement. Furthermore, based upon a review of the docket, the Consent Order of Court dated May 19, 2006, resolving the adversary proceeding was served through the Bankruptcy Noticing Center on Ernest Smalis by first class mail on May 21, 2006, at “FH5830, PO Box 1000, Houtzdale, PA 16698-1000.” See Adv. No. 05-3325, Doc. No. 36. This is the same address provided by Mr. Smalis himself on his pro se Complaint commencing [Adversary Proceeding 05-3325].

See Memorandum Order dated March 3, 2014, Adv. No. 13-2362, Doc. No. 89. Although Mr. Smalis sought reconsideration of the Court's decision with respect to this matter, reconsideration was denied. See Memorandum Order dated April 10, 2014, Adv. No. 13-2362, Doc. No. 103. Thereafter, Mr. Smalis filed an appeal. On appeal, the District Court affirmed this Court's Orders and observed that “... Appellant's primary goal in filing his numerous motions, including his Motion to Reconsider and the appeal thereof, is to collaterally attack the determinations of other judicial and administrative bodies that were never within the jurisdiction of Judge Böhm.” See Memorandum Order dated February 13, 2015, Adv. No. 13-2362, Doc. No. 147, at 6.

Adversary Proceeding 15-2174

Not to be deterred by prior orders, the above-captioned adversary proceeding was commenced by Mr. Smalis on August 31, 2015. Therein, Mr. Smalis recites a number of allegations which he has raised previously. In fact, the causes of action identified in this Complaint are nearly identical to those set forth in his complaint in the Initial Proceeding. Based on this Court's extensive familiarity with this case and the record, on September 16, 2015, this Court entered an Order setting a hearing and advising that the Complaint may be dismissed at that time for the reasons set forth therein. In particular, the Order directed as follows:

The parties shall be prepared to address the following issues at the Hearing: (1) whether this Court has subject matter jurisdiction over this dispute among non-debtors; (2) whether the dispute was resolved by prior orders, including a consent order; (3) the potential applicability of res judicata and/or collateral estoppel; (4) whether the imposition of sanctions upon Mr. Smalis is appropriate in the event that the filing of the Complaint is determined to be a violation of Fed.R.Bankr.P. 9011 ; and (

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