First National Bank of Omaha v. Plisko

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/11/06
First National Bank of Omaha v. James Michael Plisko
04-01056
Memorandum Opinion re: [6-1] Motion To Dismiss Adversary Proceeding by James
Michael Plisko .
Received on: 2004-11-05 11:19:57.000
2004-11-05 00:00:00.000
2004-11-05 00:00:00.000
James Burke
Case 04-01056-s Doc 16 Filed 11/05/04 Entered 11/05/04 14:57:00 Page 1 of 11

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JAMES MICHAEL PLISKO,
Debtor. No. 7-03-19136 SR
FIRST NATIONAL BANK OF OMAHA,
Plaintiff,
v. Adv. No. 04-1056 S
JAMES MICHAEL PLISKO,
Defendant.
MEMORANDUM OPINION ON
MOTION TO DISMISS COMPLAINT
-and-
ORDER DENYING SAME
This matter is before the Court on Defendant’s Motion to
Dismiss Adversary Complaint (doc. 6), Plaintiff’s Response
(doc. 9) and Defendant’s Reply (doc. 12). Plaintiff appears
through its attorney Robert S. Cooper. Defendant appears
through his attorney Glen L. Houston. This is a core
proceeding. 28 U.S.C. § 157(b)(2)(I).
Debtor filed his Chapter 7 petition on December 4, 2003.
The deadline for filing complaints to determine
dischargeability under Rule 4007(c) was fixed as March 22,
2004. On March 22, 2004, Plaintiff filed this adversary
proceeding seeking a determination of the dischargeability of
its debt under Section 523(a)(2)(A). The Clerk entered
discharge and closed the bankruptcy case on March 29, 2004.
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1Rule 7004 provides, in part:
...
(b) Service by first class mail
Except as provided in subdivision (h), in addition to the
methods of service authorized by Rule 4(e)-(j) F.R.Civ.P.,
service may be made within the United States by first class
mail postage prepaid as follows:
(1) Upon an individual other than an infant or incompetent, by
mailing a copy of the summons and complaint to the
individual's dwelling house or usual place of abode or to the
(continued...)
Page -2-
The summons issued on March 30, 2004. Plaintiff served, by
first class mail, the Defendant, Defendant’s attorney, the
case trustee, and the United States Trustee, on April 2, 2004,
according to the Certificate of Service filed herein on April
6, 2004 (doc. 5).
Defendant moves to dismiss the adversary under two
theories: 1) lack of personal jurisdiction and laches, and 2)
failure to state a claim for relief under Section 523(a)(2)(A)
because there are insufficient allegations to establish a
presumption of nondischargeability under Section 523(a)(2)(C).
Both will be discussed.
LACK OF JURISDICTION AND LACHES
Defendant argues that the last charges on his account
were in October 2003, and that Plaintiff therefore had ample
time to file its adversary complaint and serve defendant
pursuant to Rule 7004(b)(9)1. He claims that because the
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1(...continued)
place where the individual regularly conducts a business or
profession.
...
(9) Upon the debtor, after a petition has been filed by or
served upon the debtor and until the case is dismissed or
closed, by mailing a copy of the summons and complaint to the
debtor at the address shown in the petition or statement of
affairs or to such other address as the debtor may designate
in a filed writing and, if the debtor is represented by an
attorney, to the attorney at the attorney's post-office
address.
...
(e) Summons: time limit for service within the United States
Service made under Rule 4(e), (g), (h)(1), (i), or (j)(2)
F.R.Civ.P. shall be by delivery of the summons and complaint
within 10 days after the summons is issued. If service is by
any authorized form of mail, the summons and complaint shall
be deposited in the mail within 10 days after the summons is
issued. If a summons is not timely delivered or mailed,
another summons shall be issued and served. This subdivision
does not apply to service in a foreign country.
(f) Personal jurisdiction
If the exercise of jurisdiction is consistent with the
Constitution and laws of the United States, serving a summons
or filing a waiver of service in accordance with this rule or
the subdivisions of Rule 4 F.R.Civ.P. made applicable by these
rules is effective to establish personal jurisdiction over the
person of any defendant with respect to a case under the Code
or a civil proceeding arising under the Code, or arising in or
related to a case under the Code.
Page -3-
summons and complaint were not served until after the
bankruptcy case was closed, he was no longer amenable to
service under Rule 7004(b)(9) and that the Court lost
jurisdiction over the adversary proceeding. Although the
Motion to Dismiss alleges laches, it does not allege any
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Page -4-
prejudice that has resulted or explained how a complaint
timely filed under Rule 4007(c) should be construed to, as a
matter of law, constitute prejudice.
Turning first to the laches argument, generally when a
limitation period is set by statute, laches will not be
invoked to shorten that period. United States v. Rodriguez-
Aguirre, 264 F.3d 1195, 1207-08 (10th Cir. 2001). Courts do
recognize an exception to this general rule in “rare cases”,
however, if the defendant can demonstrate “an unreasonable
delay in asserting the claim and that the defendant was
materially prejudiced by the delay.” Id. at 1208 (Citation
omitted. Emphasis in original.)
Defendant has not alleged or shown that this is one of
those rare cases. Plaintiff timely filed its action within
the statute of limitations set out in Rule 4007(c). See also
Lucero v. Montes (In re Montes), 177 B.R. 325, 332 (Bankr.
C.D. Cal. 1994)(Adversary filed within time prescribed by Rule
4007(c) not barred by laches.)
The Court will next address the service issue. The Court
does not read Rule 7004(b)(9) as establishing a deadline that
must be met to perfect service. Rather, 7004(b) describes who
must be served when service is by mail. Rule 7004(e) sets
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Page -5-
time limits for service on a defendant located within the
United States. That subsection only requires that the summons
be mailed within 10 days of issuance. In this case, the
summons was so mailed. See also Western Surety Co. v. Daly
(In re Daly), 247 B.R. 369, 375-76 (Bankr. S.D. N.Y.
2000)(Service of adversary need not be complete within the
Rule 4007(c) time limit as long as summons is served within 10
days of issuance.)
Furthermore, even assuming Rule 7004(b)(9) did establish
a “time limit,” technically Rule 7004(b)(9) no longer applied
after the case was closed, and therefore Plaintiff could have
served Defendant as an individual under Rule 7004(b)(1) (which
has no “time limit”), which it did.
Finally, Rule 7004(f) resolves Defendant’s personal
jurisdiction argument. The summons and complaint were served
according to the Rules, so the Court has jurisdiction. Also,
the Debtor voluntarily submitted himself to the jurisdiction
of the Bankruptcy Court by filing the petition, and the Court
has jurisdiction over complaints to determine dischargeability
of debts.
SECTION 523(A)(2)
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2Section 523(a) provides, in part:
Exceptions to discharge
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or
1328(b) of this title does not discharge an individual debtor
from any debt--
...
(2) for money, property, services, or an extension, renewal,
or refinancing of credit, to the extent obtained by--
(A) false pretenses, a false representation, or actual fraud,
other than a statement respecting the debtor's or an insider's
financial condition;
(B) use of a statement in writing--
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial
condition;
(iii) on which the creditor to whom the debtor is liable for
such money, property, services, or credit reasonably relied;
and
(iv) that the debtor caused to be made or published with
intent to deceive; or
(C) for purposes of subparagraph (A) of this paragraph,
consumer debts owed to a single creditor and aggregating more
than $1,150 for "luxury goods or services" incurred by an
individual debtor on or within 60 days before the order for
relief under this title, or cash advances aggregating more
than $1,150 that are extensions of consumer credit under an
open end credit plan obtained by an individual debtor on or
within 60 days before the order for relief under this title,
are presumed to be nondischargeable; "luxury goods or
services" do not include goods or services reasonably acquired
for the support or maintenance of the debtor or a dependent of
the debtor; an extension of consumer credit under an open end
credit plan is to be defined for purposes of this subparagraph
as it is defined in the Consumer Credit Protection Act.
Page -6-
For a creditor to prevail on a Section 523(a)(2)(A)2 cause
of action, it must prove all five elements of traditional
common law fraud:
(1) The debtor made representations;
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Page -7-
(2) knowing the representations were false at the
time they were made;
(3) with the intent to deceive the creditor;
(4) the creditor justifiably relied on the
representations; and
(5) the creditor’s loss was the proximate result of
the misrepresentation having been made.
AT&T Universal Card Services Corp. v. Reynolds (In re
Reynolds), 221 B.R. 828, 834 (Bankr. N.D. Ala. 1998).
Sections 523(a)(2)(A), (B) and (C) are stated in the
disjunctive. Therefore, a creditor can meet its burden to
prove a debt nondischargeable under (A) without reference to
sections (B) or (C).
Subsection (C) creates a special presumption to aid
creditors in their task of proving entitlement to relief under
subsection (A). That is, debts for luxury goods and services
and cash advances over $1,150 incurred by an individual debtor
on or within 60 days before the order for relief are presumed
to be nondischargeable. “We now know that case authority
establishes that the presumption affects only the proof of the
third of the five elements of a § 523(a)(2)(A) action, i.e.,
the debtor’s fraudulent intent.” Bank One Columbus, N.A. v.
Fulginiti (In re Fulginiti), 201 B.R. 730, 733 (Bankr. E.D.
Pa. 1996)(Citations omitted.)
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Page -8-
Therefore, if a creditor/plaintiff fails to make
allegations to support reliance on subsection (C), that
creditor is not entitled to the presumption and must prove all
five elements. The failure does not result in dismissal of
the Section 523(a)(2)(A) claim for failure to state a claim.
Defendant’s motion to dismiss on this ground is therefore not
well taken.
Finally, the Court has reviewed the complaint to
determine if it in fact has alleged all five elements of its
cause of action. In a motion to dismiss, the Court takes all
well-pleaded facts and nonconclusory allegations of the
Plaintiff as true. Maher v. Durango Metals, Inc., 144 F.3d
1302, 1304 (10th Cir. 1998). Dismissal is proper only if "it
appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to
relief." Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-46
(1957)). The complaint alleges as follows:
1. Representations.
When Debtor opened the credit account he agreed to abide
by the terms of the account agreement. (Complaint (“C.”) 15).
When he incurred charges he represented he had the intent and
ability to pay. (C. 17).
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Page -9-
2. Knowledge of falsity.
Paragraphs 9 through 14 of the Complaint describe
Debtor’s general financial condition preceding the bankruptcy.
(C. 9-14). When he incurred charges he was unable to meet his
existing financial obligations as they became due. (C. 21).
He also knew or should have known that he lacked this ability.
(C. 22).
3. Intent.
Defendant intended to deceive Plaintiff. (C. 22).
4. Justifiable reliance.
Paragraphs 18 through 20 describe Plaintiff’s justifiable
reliance. (C. 18-20).
5. Proximate result.
Plaintiff allowed Defendant to make charges on the card.
(C. 18). These charges resulted in a claim of $7,338.89 (C.
23).
CONCLUSION
Defendant’s Motion to Dismiss on the grounds of laches
and improper service is not well taken and will be denied.
Defendant’s alternative Motion to Dismiss for failure to state
a claim is not well taken because the complaint alleges all
required elements for relief under Section 523(a)(2)(A).
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Page -10-
ORDER
For the reasons set forth above, the Court ORDERS that
Defendant’s Motion to Dismiss (doc. 6) is DENIED.
IT IS FURTHER ORDERED that Defendant shall file an answer
to the complaint within 20 days of the entry of this Order.
Honorable James S. Starzynski
United States Bankruptcy Judge
I hereby certify that on November 5, 2004, a true and correct
copy of the foregoing was electronically transmitted, faxed,
delivered, or mailed to the listed counsel and/or parties.
Robert S Cooper
1425 Jefferson Rd
Rochester, NY 14623-3139
Glen L Houston
1304 W Broadway Pl
Hobbs, NM 88240-5508
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