Symonies v. Sobol (In re Sobol)

545 B.R. 477

In re: James Peter Sobol, Debtor

Richard Symonies, Plaintiff

v.James Peter Sobol, Defendant

CASE NO. 5:13–bk–06352–RNO

ADVERSARY NO. 5:15–ap–00030–RNO

United States Bankruptcy Court, M.D. Pennsylvania.

Signed February 8, 2016

Jill M. Spott, Sheils Law Associates, PC, Clarks Summit, PA, for Plaintiff.

Mark J. Conway, Law Offices of Mark J. Conway PC, Dunmore, PA, for Defendant.

OPINION¹

Robert N. Opel, II, Bankruptcy Judge

Pending before the Court is a Motion to Dismiss Plaintiff's Amended Complaint. Defendant's, James Peter Sobol ("Sobol"), Motion to Dismiss was filed on October 16, 2015 ("Motion"). For the reasons stated below, the Motion is granted in part and denied in part.

I. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and (J).

II. Facts and Procedural History

A Voluntary Petition under Chapter 7 of the Bankruptcy Code was filed on December 12, 2013, by Sobol. Chapter 7 Voluntary Petition, December 12, 2013, ECF No. 1 (hereinafter "Petition"). Bankruptcy Schedules were filed on February 10, 2014. Schedules A through J and Summary of Schedules, February 10, 2014, ECF No. 13 (hereinafter "Schedules"). Included on Schedule F (Creditors Holding Unsecured Nonpriority Claims) is an entry for Richard Symonies ("Symonies"), the Plaintiff in this Adversary Proceeding, which lists a judgment against Sobol in the amount of $285,109.48. Schedules, ECF No. 13. Symonies' has not filed a proof of claim in the underlying bankruptcy case. After a hearing held in the underlying bankruptcy case on September 10, 2015, this Court granted Sobol's motion to avoid the judicial lien held by Symonies.

The deadline to object to discharge and to file a complaint to obtain a determination of the dischargeability of any debt was originally April 8, 2014. Symonies filed six motions to extend the time to object to discharge. The final extension was granted, extending the deadline to object to discharge until March 26, 2015. The deadline to file a complaint to determine the dischargeability of any debt remained April 8, 2014.

The present Adversary Proceeding was commenced by what appeared to be a one count Complaint filed on February 18, 2015. Sobol filed a Motion to Dismiss the Complaint on March 20, 2015. After a hearing on September 10, 2015, I granted, from the bench, Sobol's Motion to Dismiss the Complaint and allowed Symonies twenty-one days to file an amended complaint. I also dismissed Kenneth Symonies, Symonies' son, who was named as a plaintiff, from the original complaint because he was not a creditor of Sobol.

Symonies filed a two count Amended Complaint on September 25, 2015 ("Amended Complaint"). Amended Complaint, September 25, 2015, ECF No. 20 (hereinafter "Amended Complaint"). Sobol filed a Motion to Dismiss the Amended Complaint on October 16, 2015. Motion to Dismiss Adversary Proceeding, October 16, 2015, ECF No. 21 (hereinafter "Motion to Dismiss"). On the same day, Sobol filed an Amended Voluntary Chapter 7 Petition to correct and remove any reference to his doing business as S & S Specialized Transport, LLC ("S & S").

Count I of the Amended Complaint alleges that Symonies' claim is nondischargeable under 11 U.S.C. § 523(a)(2)(A)² and (a)(4) of the Bankruptcy Code. Amended Complaint, ¶¶ 20–29. Essentially, Symonies alleges that under § 523(a)(2)(A) Sobol is not entitled to the discharge of Symonies' claim because, prior to the bankruptcy filing and within one year of the petition date, Sobol transferred a truck which was jointly owned with Symonies through their business, S & S, to Sobol's girlfriend's newly formed business, Cartellino Specialized Trucking, Inc. Amended Complaint, ¶ 25.

The Amended Complaint also alleges a claim under § 523(a)(4). Symonies asserts that prior to the bankruptcy filing, and within one year of the petition date, Sobol transferred funds from S & S's bank account to both himself and his girlfriend Renee Tagliaterra on several occasions. This allegedly rises to the level of a debt for fraud or defalcation while acting in a fiduciary capacity with S & S. Amended Complaint, ¶ 27.

In both instances, Symonies asserts that Sobol did not list these preferential transfers or payments on Sobol's "Statement of Financial Affairs Number 13(c) [sic]." The Amended Complaint seeks an order declaring Sobol's obligation to Symonies in the amount of $278,489.20, plus attorney's fees to be nondischargeable under § 523(a)(2)(A) and (a)(4) of the Bankruptcy Code. Amended Complaint, ¶¶ 20–29.

Count II of the Amended Complaint alleges that Sobol is not entitled to a discharge under § 727(a)(2)-(5) and (a)(7). First, Symonies maintains that a discharge should be denied under § 727(a)(2) because Sobol transferred a vehicle owned by S & S to an insider, his girlfriend Renee Tagliaterra, less than three months prior to filing for bankruptcy. Second, under § 727(a)(3), Sobol allegedly failed to provide documents in response to Symonies' discovery requests by indicating that he was unable to locate the items requested. Third, Symonies alleges that Sobol violated § 727(a)(4) by making a false oath or account of preferential transfers and payments to insiders within one year of his bankruptcy filing because there is no such information on Sobol's Schedules. Fourth, Symonies states that Sobol violated § 727(a)(5) by failing to satisfactorily explain any loss of assets or deficiency of assets to meet Sobol's liabilities. Fifth, that Sobol allegedly violated § 727(a)(7) by committing the acts detailed above for § 727(a)(2)-(5) within one year before the date of filing the Petition, concerning an insider. Again, the Amended Complaint requests that this Court enter judgment in Symonies' favor and against Sobol "in the amount of $278,489.20 in non-dischargeable debt under the Bankruptcy Code [sic]." Amended Complaint, ¶¶ 30–41.

Briefs having been submitted in support of, and in opposition to, the Motion and after a hearing held on January 28, 2016, the Motion is now ripe for decision.

III. Discussion

A. Standard to Decide Motions to Dismiss Under F.R.B.P. 7012(b)

The Motion to Dismiss the Amended Complaint alleges that Symonies has failed to state a claim upon which relief can be granted. Federal Rule of Bankruptcy Procedure 7012(b) incorporates, and makes applicable to bankruptcy adversary proceedings, Rules 12(b)–(i) of the Federal Rules of Civil Procedure. Rule 12(b)(6) requires dismissal of a complaint which fails to state a claim upon which relief can be granted. The complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). Factual allegations in the complaint should be treated as true and construed in the light most favorable to the non-moving party. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1410 (3d Cir.1991).

The Supreme Court's language in both Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), inform our analysis at the motion-to-dismiss stage. The Court stated in Twombly that although detailed factual allegations are not needed in a complaint, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Two years later, the Iqbal Court described "facial plausibility" in this way:

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. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.

Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (internal citations and quotations omitted).

It is important to remember that only the alleged facts are viewed in a light most favorable to Symonies. Legal conclusions are not assumed to be correct at the motion to dismiss stage. Id. In Iqbal, Justice Kennedy wrote:

While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Id. at 679, 129 S.Ct. 1937. The United States Court of Appeals for the Third Circuit summarized the above points:

The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to "show" such entitlement with its facts.

Fowler v. UPMC Shadyside , 578 F.3d 203, 210–11 (3d Cir.2009) (internal citations omitted).

Complaints grounded in fraud are governed by the heightened pleading requirements of F.R.B.P. 7009, which makes applicable to adversary proceedings F.R.C.P. 9(b). The Amended Complaint alleges fraud under § 523(a) and § 727(a), which therefore requires a heightened pleading requirement. Fed.R.Civ.P. 9(b) ; Kwasnik v. Permahos, 2011 WL 748144, at *2 (Bankr.D.N.J. Feb. 24, 2011) ; In re Glunk, 343 B.R. 754, 757–58 (Bankr.E.D.Pa.2006) ; In re Kilroy, 354 B.R. 476, 488 (Bankr.S.D.Tex.2006) aff'd sub nom. Kilroy v. Guerriero, No. 06–3320, 2007 WL 1456006 (S.D.Tex. May 15, 2007). Federal Rule of Civil Procedure 9(b) requires a party alleging fraud to "state with...