Bolyar v. Brownlee

IN THE U NITED S TATES B ANKRUPTCY C OURT
F OR THE E ASTERN D ISTRICT OF P ENNSYLVANIA
I N RE : 	: CHAPTER 13
:
TRINA LORRRAINE BOLYAR , 	:
:
DEBTOR ( S ) 	: BANKRUPTCY NO . 08-10378 SR
:
TRINA LORRAINE BOLYAR , 	:
:
PLAINTIFF , 	:
VS . 	:
:
DARIN BROWNLEE AND J AMES BENSON , 	: ADV . NO . 08-00210
:
DEFENDANTS . 	:
:
OPINION
BY : STEPHEN RASLAVICH , CHIEF UNITED STATES BANKRUPTCY J UDGE .
INTRODUCTION
The plaintiff in this adversary proceeding, Trina Lorraine Boylar (“Debtor”), filed a
three-count complaint against the defendants seeking declaratory relief regarding three pieces of
real property (the “Properties”) and a judgment setting aside and avoiding the transfer of one of
the Properties. Darin Brownlee filed an answer to the complaint wherein he included four
counterclaims against the Debtor. In response, the Debtor filed a motion to dismiss the
counterclaims on the grounds that: (i) the counterclaims were filed after the bar date had passed
for filing proofs of claim; and (ii) the counterclaims are barred by the automatic stay. 	Following
a hearing on the Debtor’s motion, the Court took the matter under advisement. For the reasons
set forth below, Debtor’s motion to dismiss shall be granted without prejudice to Brownlee filing
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a curative amendment within twenty (20) days to set forth his counterclaims against the Debtor
in accordance with 11 U.S.C. §523(a)(3).
BACKGROUND
The Debtor filed her Chapter 13 bankruptcy case on January 16, 2008. She did not list
Brownlee as a creditor. Proofs of claims in the Debtor’s bankruptcy case were due on or before
June 26, 2008.
On August 8, 2008, the Debtor commenced this adversary proceeding by filing her
complaint. In the complaint, she alleges that Brownlee and she “engaged in a de facto
partnership to purchase and re-sell certain real estate in the Spring and Summer of 2006” and
that, in furtherance of this partnership, they purchased the Properties and had them titled jointly
in their names. Complaint ¶ 4. 	The Properties are located at: (1) 1717 North 26 th Street,
Philadelphia, Pennsylvania (the “Cedar Property”); (2) 1804 North 28 th Street, Philadelphia,
Pennsylvania; and (3) 1826 North Natrona Street, Philadelphia, Pennsylvania (the “Natrona
Property”). 	Id. According to the Debtor, Brownlee’s financial contributions toward the
purchase and upkeep of the Properties have been minimal. Id. ¶¶ 5-6.
On or about July 17, 2007, the Debtor and Brownlee allegedly agreed to sell the Natrona
Property to Michele Brown. Id. ¶ 7. As part of this transaction, the Debtor contacted the
mortgagee of the Natrona Property to request a payoff figure therefor, but she accidentally
confused the mortgage on the Natrona Property with the mortgage held on the Cedar Property.
Id. ¶ 8. Consequently, at the closing on the Natrona Property, the mortgage on the Cedar
Property was satisfied rather than the mortgage on the Natrona Property, which “resulted in a
claim” against the Debtor and Brownlee by Brown, the mortgagee company and the title
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company which had insured the title on the Natrona Property on Brown’s behalf. Id. ¶¶ 8-9.
On or about October of 2007, the Debtor transferred the Cedar Property to Brownlee
allegedly in exchange for his “promise to make certain that he would resolve the difficulties
which arose with respect to the Natrona Property transfer.” Id. ¶ 10. Brownlee purportedly
made no effort to resolve the problems with respect to the Natrona Property transfer. Id. ¶11.
After receiving the Cedar Property from the Debtor, Brownlee allegedly transferred it to his
brother, Benson “to make it more difficult” for the Debtor to rescind the transfer to Brownlee.
Id.
Based on the aforementioned allegations, Debtor seeks the following relief in her
complaint: (i) a declaration that she is the sole owner of the Properties due to the alleged
minimal contributions of Brownlee toward the purchase and upkeep of the Properties (Count I);
(ii) a declaration that she “alone may rent or sell the Properties free and clear of any liens
pursuant to 11 U.S.C. § 363(b) & (c) (Count II); and (iii) a judgment setting aside and avoiding
the transfers of the Cedar Property from Brownlee to Benson and from the Debtor to Brownlee
(Count III).
On October 16, 2008, Brownlee filed his answer to the complaint asserting his four
counterclaims therein. In his answer, Brownlee alleges that Debtor and he “entered into a
partnership to acquire properties, lease them and later sell them as they appreciated in value in
order to acquire additional properties in the spring and summer of 2006.” Answer of Defendant
Darin Brownlee to Complaint of Plaintiff, Trina Lorraine Bolyar (“Answer”) ¶ 4 (underlining in
original). He further alleges that the Debtor and he bought not only the Properties listed in the
complaint but also purchased an additional property located at 3712 Carlisle Street in
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Philadelphia, Pennsylvania. Id. Brownlee denies the Debtor’s allegation that his contribution to
the Properties have been minimal and alleges, to the contrary, that both he and Debtor
contributed $18,300 to acquire title to the Properties and that he put “manpower[,] supplies and
expertise into renovating the [P]roperties which enhanced their value and made them habitable.”
Id. ¶¶ 5- 6, 18. Browlee also denies that Debtor attempted to contact him regarding the Cedar
Property and denies that Benson is his brother. Brownlee contends that he “is entitled to a
declaration that he is the owner of the [P]roperties as the result of [Debtor’s] ineptitude and
failure to abide by the agreement.” Answer ¶ 21.
Brownlee’s counterclaims to the complaint consist of the following: (1) Count I – fraud
for putting two other properties which the de facto partnership acquired into Debtor’s sole name
rather than in the names of both Debtor and Brownlee; (2) Count II – negligence for Debtor’s
actions which caused the mortgage on the Cedar Property to be satisfied rather than the mortgage
on the Natrona property; (3) Count III – conversion for money which Brownlee contends
rightfully belongs to him arising from the Properties and the rental of the same; and (4) Count IV
– breach of contract based on Debtor failure to perform the duties which she owed to the
partnership.
At the hearing on Debtor’s motion to dismiss, each party presented oral argument but
neither party sought to make an evidentiary record. Consequently, there is no evidence in the
record regarding Brownlee’s knowledge of the Debtor’s bankruptcy case.
DISCUSSION
As the Court noted above, Debtor’s motion to dismiss asserts that Brownlee’s
counterclaims should be stricken because they were filed after the bar date for filing proofs of
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claim in the Debtor’s bankruptcy case and they are barred by the automatic stay.1
I. Standard of Review
When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),
the court may consider the allegations contained in the pleading, exhibits attached thereto and
matters of public record. Pension Benefit Guaranty Corporation v. White Consolidated
Industries, Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The court must accept the factual
allegations in the pleading as true, Erickson v. Pardus, 551 U.S. 89, ___, 127 S. Ct. 2197, 2200
(2007), and view all reasonable factual inferences in the light most favorable to the non-moving
party, Angelastro v. Purdential-Bache Securities, Inc., 764 F.2d 939, 944 (3d Cir. 1985).
“Dismissal is warranted if the allegations”of a pleading “are not ‘enough to raise a right to relief
above the speculative level ... on the assumption that all the allegations in the [pleadings] are true
(even if doubtful in fact).’” Access Insurance Holdings, Inc. v. Lincoln General Insurance
Company, 2008 WL 859222, at *1 (E.D. Pa. March 28, 2008) (quoting Bell Atlantic Corp. v.
Twombly, 127 S.Ct. 1955, 1965 (2007) (citations omitted)). However, even when a dismissal is
warranted, the non-movant should generally be granted the opportunity to amend his or pleading
unless the amendment would be inequitable or futile. Williams-Murray v. Anthropologie, Inc.,
290 Fed.Appx. 484, 487 (3d Cir. 2008); Miller v. Dutil (In re Total Containment), 335 B.R. 589,
601 (Bankr. E.D. Pa. 2005).
1 To the extent the Debtor’s Motion to Dismiss also raises the argument that Brownlee
should have sought relief from the stay prior to asserting the counterclaims, the argument lacks
merit. Brownlee’s counterclaims “may be considered the logical equivalent of a request for
relief from the stay to prosecute” the counterclaims. R.C.R. Services, Inc. V. Sciortino (In re
Sciortino), 114 B.R. 423, 427 (Bankr. E.D. Pa. 1990). See also Creative Conservation, Inc. v.
Northern Lehigh School District (In re Creative Conservation, Inc.), 1991 WL 261706, at *1
(Bankr. E.D. Pa. Dec. 5, 1991)(ruling that filing of counterclaim is the equivalent of filing a
motion for relief from the automatic stay to assert the counterclaim).
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II. 	Whether Browlee’s counterclaims should be dismissed because they
were filed after the Bar Date had passed?
The bar date in Debtor’s bankruptcy case was June 26, 2008. Since Brownlee did not file
his answer to the complaint until October 16, 2008, the counterclaims which he asserts therein
were filed after the bar date had passed. In a Chapter 13 case, the bar date “is a strict and non-
negotiable deadline” for filing proofs of claims. In re Brooks, 2009 WL 189849 (Bankr. E.D.
Pa. Jan. 27, 2009). See also In re Latimer, 2008 WL 5102868, at *1 (D. Colo. Oct. 6, 2008); In
re Moniz, 2007 WL 2225926, at *2 (Bankr. D. Idaho Aug. 2, 2007); In re Jensen, 333 B.R. 906,
909 (Bankr. M.D. Fla. 2005); In re Kristiniak, 208 B.R. 132, 135 (Bankr. E.D. Pa. 1997) (“[W]e
are compelled to conclude that extending the bar date in a Chapter 13 case is not authorized by
the Code or Rules.”). A court’s ability to extend the deadline is limited to specific
circumstances, none of which are present in the instant matter. See Fed.R.Bankr.P. 9006(b)(3);
Fed.R.Bankr.P. 3002(c). 2
2 Rule 9006(b)(3) authorizes a court to extend the time deadline for filing proofs of
claims in a Chapter 13 case “only to the extent and under the conditions stated” in Rule 3002(c).
This subsection of Rule 3002 lists the extent and circumstances under which the bar deadline in a
Chapter 13 case may be extended, stating in relevant part:
(1) A proof of claim filed by a governmental unit, other than for a claim
resulting from a tax return filed under § 1308, is timely filed if it is filed not later
than 180 days after the date of the order for relief. A proof of claim filed by a
governmental unit for a claim resulting from a tax return filed under § 1308 is
timely filed if it is filed no later than 180 days after the date of the order for relief
or 60 days after the date of the filing of the tax return. The court may, for cause,
enlarge the time for a governmental unit to file a proof of claim only upon motion
of the governmental unit made before expiration of the period for filing a timely
proof of claim.
(2) In the interest of justice and if it will not unduly delay the
administration of the case, the court may extend the time for filing a proof of
claim by an infant or incompetent person or the representative of either.
(continued...)
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Since the bar date passed before Brownlee asserted his counterclaims, they cannot and do
not constitute proofs of claims in the Debtor’s bankruptcy case and he cannot share in any
distributions made in the case. However, since Debtor failed to list Brownlee as a creditor in her
bankruptcy case, the fact that he asserted his counterclaims after the bar date had passed does not
automatically mean that he is barred from asserting them.
Pursuant to 11 U.S.C. § 523(a)(3), debts which are not listed or scheduled by a debtor in
a Chapter 13 case may determined to be nondischargeable. Subsection 523(a)(3) provides, in
pertinent part:
A discharge under section .... 1328(b) of this title does not
discharge an individual debtor from any debt --
2(...continued)
(3) An unsecured claim which arises in favor of an entity or becomes
allowable as a result of a judgment may be filed within 30 days after the judgment
becomes final if the judgment is for the recovery of money or property from that
entity or denies or avoids the entity's interest in property. If the judgment imposes
a liability which is not satisfied, or a duty which is not performed within such
period or such further time as the court may permit, the claim shall not be
allowed.
(4) A claim arising from the rejection of an executory contract or
unexpired lease of the debtor may be filed within such time as the court may
direct.
(5) If notice of insufficient assets to pay a dividend was given to creditors
under Rule 2002(e), and subsequently the trustee notifies the court that payment
of a dividend appears possible, the clerk shall give at least 90 days' notice by mail
to creditors of that fact and of the date by which proofs of claim must be filed.
(6) If notice of the time to file a proof of claim has been mailed to a
creditor at a foreign address, on motion filed by the creditor before or after the
expiration of the time, the court may extend the time by not more than 60 days if
the court finds that the notice was insufficient under the circumstances to give the
creditor a reasonable time to file a proof of claim.
Fed.R.Bankr.P. 3002(c).
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(3) neither listed nor scheduled under section 521(1) of this
title, with the name, if known to the debtor, of the creditor to
whom such debt is owed, in time to permit--
(A) if such debt is not of a kind specified in
paragraph (2), (4), or (6) of this subsection, timely filing of a proof
of claim, unless such creditor had notice or actual knowledge of
the case in time for such timely filing; or
(B) if such debt is of a kind specified in paragraph
(2), (4), or (6) of this subsection, timely filing of a proof of claim
and timely request for a determination of dischargeability of such
debt under one of such paragraphs, unless such creditor had notice
or actual knowledge of the case in time for such timely filing and
request;
11 U.S.C . § 523(a)(3). Since Debtor failed to list or schedule Brownlee as a creditor in her
bankruptcy case, her debt to Brownlee, if any, may be nondischargeable under §523(a)(3)(A)
and/or §523(a)(3)(B). While Brownlee has not asserted his counterclaims within the framework
of §523(a)(3), it is plausible that he can do so. If he successfully pleads his counterclaims under
§523(a)(3), then he will be entitled to pursue them despite having asserted them after the bar date
has passed. Moreover, if Brownlee obtains judgment in his favor on the counterclaims, Debtor’s
debt to him will be excepted from discharge pursuant to §1328(b).
III. The Automatic Stay
The automatic stay bars a creditor from proceeding on a claim against the debtor that
arose pre-petition. See 11 U.S.C. §362(a)(1) & (6).3 However, it does not, bar a creditor from
3 Section 362(a) states, in pertinent part:
(a) Except as provided in subsection (b) of this section, a petition
filed under section 301, 302, or 303 of this title ...operates as a
stay, applicable to all entities, of--
(1) 	the commencement or continuation, including the
(continued...)
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commencing an adversary action to have the dischargeability of a debt determined.4 Rein v.
Providian Financial Corporation, 270 F.3d 895, 904-05 (9th Cir. 2001). Bankruptcy Rule
4007(b) provides that a complaint to determine the dischargeability of a debt under §523(a)(3)
may be filed at any time. In addition, Bankruptcy Rule 7001 of the Federal Rules of Bankruptcy
Procedure recognizes that a proceeding to determine the dischargeability of a debt is an
adversary proceeding.
Since the automatic stay does not bar a creditor from commencing an adversary
proceeding to have the dischargeability of a debt determined, it is logical to conclude that the
automatic stay will not bar Brownlee from asserting counterclaims under §523(a) that are based
on the same transactions and occurrences as the Debtor’s claims against him in this adversary
proceeding. Therefore, assuming Brownlee successfully amends his counterclaims to state
claims under §523(a)(3), they will not be barred by the automatic stay.
3(...continued)
issuance or employment of process, of a judicial, administrative, or
other action or proceeding against the debtor that was or could
have been commenced before the commencement of the case
under this title, or to recover a claim against the debtor that arose
before the commencement of the case under this title;
* * *
(6) any act to collect, assess, or recover a claim against the
debtor that arose before the commencement of the case under this
title[.]
11 U.S.C. §362(a)(1) & (6).
4 In ruling upon a claim under §523(a), a court decides whether a debt is due and owing
and, if so, in what amount. See Cardillo v. Moore-Handley, Inc. (In re Cardillo), 172 B.R. 146,
150 (Bankr. N.D. Ga. 1994). The court also determines whether the debt is nondischargeable.
Id.
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SUMMARY
Based on the reasons set forth above, Debtor’s motion to dismiss shall be granted
without prejudice. Brownlee shall be granted leave to file an amended answer within a required
period of time setting forth his counterclaims within the framework of §523(a)(3).
By the Court:
Stephen Raslavich
Chief U.S. Bankruptcy Judge
Dated: March 12, 2009
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IN THE U NITED S TATES B ANKRUPTCY C OURT
F OR THE E ASTERN D ISTRICT OF P ENNSYLVANIA
I N RE : 	: CHAPTER 13
:
TRINA LORRRAINE BOLYAR , 	:
DEBTOR ( S ) 	: BANKRUPTCY NO . 08-10378 SR
TRINA LORRAINE BOLYAR , 	:
PLAINTIFF , 	:
VS . 	:
DARIN BROWNLEE AND J AMES BENSON , 	: ADV . NO . 08-00210
DEFENDANTS . 	:
:
ORDER
AND NOW, upon consideration of the Motion to Dismiss Counterclaims of Defendant
Darin Brownlee (the “Motion”) and the Answer of Defendant to Plaintiff’s Motion to Dismiss
Counterclaims, and after a hearing with notice, it is hereby O RDERED that:
1. 	The Motion is granted without prejudice.
2. 	Defendant’s counterclaims are dismissed without prejudice
to his filing an answer amending his counterclaims to assert
his claims consistent with 11 U.S.C. §523(a)(3). The
answer amending Defendant’s counterclaims shall be filed
within twenty (20) days of the date of this Order. The
failure of the Debtor to file an answer amending his
counterclaims within the aforementioned time period, or to
obtain an extension of time for cause shown, may result in
the counterclaims being dismissed with prejudice.
By the Court:
Stephen Raslavich
Chief U.S. Bankruptcy Judge
Dated: March 12, 2009
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Counsel for the Plaintiff/Debtor
David A. Scholl, Esquire
Regional Bankruptcy Center of SE PA
Law Office of David A. Scholl
6 St Albans Avenue
Newtown Square, PA 19073
Counsel for Defendant
Harriet L. Hornick, Esquire
Two Penn Center
1500 JFK Blvd.
Suite 1020
Philadelphia, PA 19102
Chapter 13 Trustee
Frederick J. Reigle, Esquire
Chapter 13 Trustee
2901 St. Lawrence Ave
P.O. Box 4010
Reading PA 19606
U.S. Trustee
George Conway, Esquire
Office of the United States Trustee
833 Chestnut Street
Suite 500
Philadelphia PA 19106
Nancy Mulvehill, Courtroom Deputy to Judge Raslavich
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