Danbom et al v. Prewitt

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
JAMES PREWITT,
Debtor. 	No. 7-12-12682-TR
CHARLIE DANBOM and
LISA DANBOM,
Plaintiffs,
v. 	Adv. No. 12-1293-T
JAMES PREWITT,
Defendant.
MEMORANDUM OPINION ON DEFENDANT’S MOTION TO DISMISS
Plaintiffs brought this adversary proceeding pro se, alleging that Defendant stole
$12,496.37 from them by forging a joint insurance check, and asking that the debt be declared
nondischargeable. 	Defendant moved1 to dismiss the complaint for, inter alia, failure to state a
viable claim. 	For the reasons set forth below, the Court denies the Motion. 	This is a core
proceeding.
I. 	PLAINTIFFS’ COMPLAINT
Plaintiffs’ Complaint Objecting To Discharge Of Debtor (“Complaint”) alleges in full:
Comes now, the Danbom's file this Complaint Objecting to Discharge of debtors
pursuant to 11 U.S.C. § 727 and 11 U.S.C. § 1328. The Court has jurisdiction in
this matter pursuant to 28 U.S.C § 1334 and venue is proper pursuant to 28 U.S.C.
1 Motion to Dismiss “Complaint Objecting to Discharge of Debtor” and Memorandum in Support, filed
October 19, 2012, doc. 4 (the “Motion”). Plaintiffs filed a response October 29, 2012, doc. 6.
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§ 1409. This is a core proceeding pursuant to U.S.C. § 157(b)(2)(J). In support of
this Complaint, the Danbom's would show the Court as follows:
In September of 2005, we put in a claim to our insurance company for our skid
loader. 	They sent the check, dated September 16, 2005, to James Prewitt. 	The
check was made out to Prewitt Mobile Service and Charlie or Lisa Danbom.
We filed a lawsuit alleging that he committed forgery and stole our money. The
judge ruled in our favor granting us judgment in the amount of $12,496.37 @
8.75% until paid. Attached are copies of the lawsuit and judgment.
On September 21, 2005, he forged Charlie's signature on the check. 	He kept all
the money and did absolutely nothing to attempt to fix it. Because he knowingly
committed embezzlement, forgery and fraud and stole our money, we ask to be
dismissed 	from 	this 	bankruptcy 	case 	and/or 	Defendant 	not 	be 	allowed 	to
discharge this debt.
Both Plaintiffs signed the Complaint. Pages three and four of the Complaint are certified
copies of a complaint Plaintiffs filed in Roosevelt County Magistrate Court, commencing
Danbom v. Prewitt, No. M-44-CV-2011-00083, and a default judgment entered in that action.
The Complaint has a proper caption, a correct statement of jurisdiction, relevant dates,
and allegations that Defendant defrauded, forged, stole, and/or embezzled their joint insurance
check. Plaintiffs prayed for a judgment that the amounts owed be deemed non-dischargeable.
The Federal Rules of Civil Procedure have sample forms in an appendix.2 The sample
complaint for conversion of property (Form 15) is very short and simple. Plaintiff’s Complaint
satisfies all requirements of Form 15, as well as the additional elements needed to seek court
2 Fed.R.Civ.P. 84, captioned “Forms,” states: “The forms in the Appendix suffice under these rules and
illustrate the simplicity and brevity that these rules contemplate.” This rule was designed to “emphasize
that the forms contained in the Appendix of Forms are sufficient to withstand attack under the rules under
which they are drawn, and that the practitioner using them may rely on them to that extent.” 	See
Fed.R.Civ.P. 84 Advisory Committee Notes for 1946 amendment.
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determination of nondischargeability under 11 U.S.C. §523(a).3 The references in the Complaint
to §§ 727 and 1328 are incorrect, but the Complaint is sufficiently clear that Plaintiffs seek relief
under § 523.
II. 	THE COMPLAINT STATES A CLAIM
Defendant first argues that the Complaint fails to state a cause of action upon which relief
can be granted. Motion, ¶¶ 1, 4. The Court disagrees. Federal Rule of Civil Procedure 12(b)(6)
(made applicable by Bankruptcy Rule 7012) allows the Court to dismiss a complaint for “failure
to state a claim upon which relief can be granted.” “The nature of a Rule 12(b)(6) motion tests
the sufficiency of the allegations within the four corners of the complaint after taking those
allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10 th Cir. 1994). The sufficiency
of a complaint is a question of law, and when considering and addressing a Rule 12(b)(6)
motion, a court must accept as true all well-pleaded factual allegations in the complaint, view
those allegations in the light most favorable to the non-moving party, and draw all reasonable
inferences in the plaintiff's favor. Genesee County Employees’ Retirement System v. Thornburg
Mortgage Securities Trust 2006-3, 825 F. Supp. 2d 1082, 1120-21 (D.N.M. 2011), citing Tellabs,
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
3 Section 523 defines debts that are not discharged in Chapter 7. Relevant to this case are § 523(a)(2)(A)
(fraud); § 523(a)(4) (fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny);
and § 523(a)(6) (willful and malicious injury by the debtor to another entity or to the property of another
entity). 	Forgery is treated as fraud (523(a)(2)(A)). 	See Leiva v. Schenck (In re Schenck), 2010 WL
1257744, *3 (Bankr. E.D. La. 2010). 	“Stealing” can be larceny ((a)(4)) or willful and malicious
conversion ((a)(6)). See Dorr, Bentley & Pecha, CPA’s, P.C. v. Pasek (In re Pasek), 983 F.2d 1524, 1528
(10 th Cir. 1993) (conversion of another's property, done intentionally and without justification and excuse,
is a willful and malicious injury within the meaning of § 523(a)(6)).
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Pro se complaints are held to less stringent standards than formal pleadings drafted by
lawyers. 	Haines v. Kerner, 404 U.S. 519, 520 (1972). 	Citing Haines, the Tenth Circuit
explained:
A pro se litigant's pleadings are to be construed liberally and held to a less
stringent standard than formal pleadings drafted by lawyers. 	Haines v. Kerner,
404 U.S. 519, 520-21, 92 S. Ct. 594, 30 L.Ed.2d 652 (1972); see also Estelle v.
Gamble, 429 U.S. 97, 106, 97 S. Ct. 285, 292, 50 L.Ed.2d 251 (1976); Gillihan v.
Shillinger, 872 F.2d 935, 938 (10th Cir. 1989). 	We believe that this rule means
that if the court can reasonably read the pleadings to state a valid claim on which
the plaintiff could prevail, it should do so despite the plaintiff's failure to cite
proper legal authority, his confusion of various legal theories, his poor syntax and
sentence construction, or his unfamiliarity with pleading requirements.. At the
same time, we do not believe it is the proper function of the district court to
assume the role of advocate for the pro se litigant.
Hall v. Bellmon, 935 F.2d 1106, 1110, n.3 (10 th Cir. 1991) (footnote omitted).
Two Supreme Court rulings since Haines changed the test for determining whether a
pleading is sufficient under Rule 12(b)(6). 	In Bell Atlantic Corp. v. Twombly, 550 U.S. 544
(2007), the Supreme Court replaced the ‘no set of facts’ standard of Conley v. Gibson, 355 U.S.
41, 45-46 (1957), 4 with the new standard of “enough facts to state a claim to relief that is
plausible on its face.” 	550 U.S. at 570. 	In Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009), the
Supreme Court held that to survive a motion to dismiss, “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ [citation
omitted]. A claim has facial plausibility when the plaintiff pleads factual content that allows the
4 The Conley standard was that “a complaint should not be dismissed for failure to state a claim unless it
appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” 355 U.S. at 45-46.
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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Id. at 678.
Since Bell Atlantic and Iqbal were handed down, the six circuits that have addressed the
issue have ruled that pro se complaints should continue to be liberally construed, albeit using the
new Bell Atlantic/Iqbal standard. See, e.g., Casanova v. Ulibarri, 595 F.3d 1120, 1124 n.2 (10 th
Cir. 2010); Hebbe v. Pliler, 627 F.3d 338, 342 n.7 (9th Cir. 2010).
Construing the pro se Complaint liberally, the Court finds that it states a valid claim to
have the subject debt declared nondischargeable under §§ 523(a)(2)(A), 523(a)(4) and/or 523
(a)(6).
III. 	THE COMPLAINT NEED NOT REFER TO SECTION 523(a)
Defendant next argues that the Complaint does not state a proper statutory exception to
discharge. 	Motion, ¶ 2. 	If Defendant contends a complaint must cite to § 523 or a subsection
thereof, the argument is not well taken.5 Fed.R.Civ.P. 8 (made applicable by Bankruptcy Rule
7008) has no such requirement. 	Furthermore, it is clear from reading the Complaint and the
attached state court documents what relief Plaintiffs’ seek, and therefore what Bankruptcy Code
sections apply. 	The pro se Plaintiffs are not required to name specific statutory subsections in
their Complaint.
IV. 	THE COMPLAINT IS SUFFICIENTLY CLEAR ABOUT THE THEORY FOR RELIEF
5 If Defendant argues that a § 727 action is not properly plead, he is on firmer ground. The facts alleged
do not support a denial of the general discharge. 	However, the prayer for relief seeks only to hold
Plaintiffs’ debt nondischargeable; it does not seek denial of the general discharge. The Court will treat
this adversary proceeding as a § 523 nondischargeability action, not a § 727 action.
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Defendant argues the Complaint does not establish whether it is for fraud, defalcation
while acting in a fiduciary capacity, embezzlement, or larceny. Motion, ¶ 3. Defendant is right
that the Complaint does not specify which § 523(a) subsection(s) Plaintiffs rely upon, but that
does not mean the Complaint is fatally flawed. Pro se plaintiffs may not know their exact legal
theories. However, “A claim has facial plausibility when the pleaded factual content allows the
court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 	129 	S. 	Ct. 	at 	1949. 	The 	facts 	Plaintiffs 	allege 	can 	be 	construed 	easily 	as 	a
nondischargeability claim under §§ 523(a)(2)(A), 523(a)(4), and/or 523 (a)(6).6
V. 	THE COMPLAINT SATISFIED THE PLEADING REQUIREMENTS FOR FRAUD
Defendant urges that the Complaint be dismissed because claims for fraud are subject to
heightened pleading requirements. Motion, ¶ 5.
Fed.R.Civ.P. 9(b) (made applicable by Bankruptcy Rule 7009) requires that “[i]n alleging
fraud or mistake, a party must state with particularity the circumstances constituting fraud or
mistake.” 	“The requirements of Rule 9(b) must be read in conjunction with the principles of
Rule 8, which calls for pleadings to be “simple, concise, and direct, ... and to be construed as to
do substantial justice. 	Schwartz v. Celestial Seasonings, Inc., 124 F.3d 1246, 1252 (10 th Cir.
1997). 	Rule 9(b) requires only the identification of the “circumstances constituting fraud”; it
does not require “any particularity in connection with an averment of intent, knowledge or
condition of mind.” Id.
6 See e.g. Pistorius v. Deornellas (In re Deornellas), 293 B.R. 450, 452 (Bankr. C.D. Ill. 2003) (plaintiff
alleged facts that could give rise to causes of action under §§ 523(a)(2)(A), 523(a)(4), and 523(a)(6), but
the complaint only referred to § 523 without designating any specific subsection; after trial, the court
analyzed the evidence under each relevant § 523 subsection).
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[There is a] distinction between the pleading of the “circumstances of the fraud,”
as required by the rule, and the pleading of “facts.” Although circumstances may
consist of facts, the obligation to plead circumstances should not be treated as
requiring allegations of facts in the pleading, and neither Rule 8 nor Rule 9(b)
requires fact pleading, although, realistically, that often will be the easiest way to
present the necessary material regarding the alleged fraud.
5A Wright, Miller, Kane and Marcus, Fed. Prac. & Proc. Civ. § 1298 (text accompanying note
18). 	“Simply stated, a complaint must set forth the time, place and contents of the false
representation, the identity of the party making the false statements and the consequences
thereof.” Schwartz, 124 F.3d at 1252 (citations and quotation marks omitted). See also DiLeo v.
Ernst & Young, 901 F.2d 624, 627 (7 th Cir. 1990), cert. denied, 498 U.S. 941 (1990) (although
states of mind may be pleaded generally, the circumstances or the “who, what, when, where, and
how” must be pleaded in detail).
The purpose of Rule 9(b) is to afford a defendant fair notice of the plaintiff’s claims and
the factual ground upon which they are based. 	United States ex rel. Lemmon v. Envirocare of
Utah, Inc., 614 F.3d 1163, 1172 (10th Cir. 2010). “[T]he most basic consideration for a federal
court in making a judgment as to the sufficiency of a pleading for purposes of Rule 9(b) ... is the
determination of how much detail is necessary to give adequate notice to an adverse party and
enable that party to prepare a responsive pleading.” 	Id., quoting 5A Wright & Miller § 1298
(text accompanying note 38).
Here, the basic facts and requested relief are readily ascertainable from the Complaint.
Defendant has full knowledge of what this adversary proceeding is about and whether none,
some, or all of the allegations are true. The allegations are sufficient to enable Defendant to file
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an answer and defend himself. 	The Court finds that the Complaint states the circumstances of
alleged fraud with sufficient particularity.
VI. 	THE “STRICT CONSTRUCTION” RULE IS SATISFIED AT THIS STAGE OF THE
PROCEEDINGS
Finally, Defendant argues that exceptions to discharge are to be “strictly construed
against the creditor and liberally in favor of the debtor.” 	Motion, ¶ 6. 	That is true. 	However,
Plaintiffs’ allegations come well within one or more of the § 523(a) exceptions, however strictly
construed. 	Defendant’s argument might be better made after the close of trial, if Defendant
believes 	that 	Plaintiff’s 	evidence 	falls 	short 	of 	proving 	a 	“strictly 	construed” 	§ 	523(a)
nondischargeability claim.
VII. 	CONCLUSION
For the reasons stated herein, the Court will deny the Motion. 	A separate order will be
entered.
Honorable David T. Thuma
United States Bankruptcy Judge
Date entered on docket: January 29, 2013.
Copies to:
Charlie Danbom
Lisa Danbom
1820 South Roosevelt Road AN
Elida, NM 88116
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Eric D Dixon
301 South Avenue A.
Portales, NM 88130-6288
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