Staines v. Engines, Inc et al

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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re: 	:
KEITH STAINES, 	: 	Case No. 05-27224REF
Debtor 	: 	Chapter 7
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KEITH STAINES, 	:
Plaintiff 	:
:
v. 	: 	Adv. No. 06-2108
:
ENGINES, INC., 	:
Defendant 	:
M E M O R A N D U M 	O P I N I O N
I. INTRODUCTION AND BACKGROUND
Before me for disposition is Defendant’s Motion To Dismiss Plaintiff’s Amended
Complaint. Plaintiff’s Amended Complaint alleges that prior to the date Plaintiff filed his
Chapter 7 bankruptcy petition, Defendant performed unsatisfactory repair work on Plaintiff’s
1994 tractor trailer and misrepresented the following matters: The cost of repair; payment
arrangements for the repair bill; the use of after market parts used in the repair; the existence of a
warranty; and the cause of problems that Plaintiff experienced with the tractor trailer after
Defendant performed the original repair work. See Amended Complaint, ¶¶9-14, 20-28, 30-37,
40-55, 61-66, 71-73, 75-77. As a result, Plaintiff alleges that he was unable to use the tractor
trailer for 16 weeks, resulting in a loss of $40,000 in income. Plaintiff also alleges that he was
required to replace the 1994 tractor trailer with a 2001 tractor trailer and that he suffered the
following additional damages: $11,181.49 that he was wrongfully required to pay Defendant for
the original faulty repair work; $2,040 that he was wrongfully required to pay Defendant for the
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second repair work; $445 in towing expenses; $73,302, which represents the difference between
the amount due on Plaintiff’s loan for the 2001 tractor trailer and the amount remaining due on
Plaintiff’s loan for the1994 tractor trailer (“loan payment difference”); and various other
expenses including storage fees, fees for the transfer of tags and title, transportation expenses for
the inspection of the parts used by Defendant in the original repair, and increased insurance
premiums. Counts II through VI of the Amended Complaint seek to recover these damages as
well as punitive damages on the following theories: Count II: fraud (relating to original rebuild);
Count III: fraud (regarding alleged denial of warranty); Count IV: negligent misrepresentation
(original rebuild); Count V: negligent misrepresentation (purported Cummins warranty denial);
and Count VI: breach of interference with access to warranty.
In addition, Count I of the Amended Complaint alleges that Defendant willfully violated
the automatic stay by contacting Plaintiff on numerous occasions, knowing that Plaintiff had
filed a bankruptcy petition, and demanding that Plaintiff pay the balance of the pre-petition
repair bill. Plaintiff alleges that he “incurred mental suffering, and inconvenience, unliquidated
but in excess of the amount requiring compulsory judicial arbitration referral” as a result of
Defendant’s conduct. See Plaintiff’s Amended Complaint, ¶42. Plaintiff also seeks to recover
attorneys’ fees and the “loan payment difference” under Count I of the Amended Complaint.
II. DISCUSSION: DISMISSAL OF COUNT I
Defendant argues that Count I of the Amended Complaint must be dismissed under Fed.
R. Civ. P. 12(b)(6) because it fails to state a claim upon which relief may be granted.
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is made applicable to adversary proceedings
in bankruptcy cases by Fed. R. Bankr. P. 7012(b). When ruling on a motion to dismiss, I must
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accept the facts alleged in the complaint as true and I must also accept all reasonable inferences
that can be drawn therefrom. After viewing those facts and inferences in the light most favorable
to Plaintiff, I may grant the motion and dismiss the complaint only if it appears that Plaintiff can
show no set of facts in support of the claim that would entitle him to relief. Conley v. Gibson,
355 U.S. 41 (1957); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990);
Angelastro v. Prudential- Bache Securities, Inc., 764 F.2d 939, 944 (3d Cir. 1985); John L.
Motley Associates, Inc. v. Rumbaugh, 104 B.R. 683, 685 (E.D. Pa. 1989); Waslow v. Grant
Thornton, LLP (In re Jack Greenberg, Inc.), 212 B.R. 76, 81 (Bankr. E.D. Pa. 1997).
Moreover, the burden is on Defendant, as the moving party, to show the legal
insufficiency of the claim. Jack Greenberg, 212 B.R. at 81. In addition, the liberal requirements
of notice pleading contained in Fed. R. Civ. P. 8(a), which is made applicable to adversary
proceedings in bankruptcy cases by Fed. R. Bankr. P. 7008(a), require only that “a complaint put
the defendant on notice of the claims against him.” Ginley v. E.B. Mahoney Builders, Inc., No.
Civ. A. 04-1986, 2005 WL 27534 at *1 (E.D. Pa. January 5, 2005)(citing Seville Indus. Mach.
Corp. v. Southmost Mach. Corp., 742 F.2d 786, 790 (3d Cir. 1984); see also Millar v. Windsor
Twp., No. Civ. A. 1:04-CV-2529, 2005 WL 1513120 at *2 (M.D. Pa. June 24, 2005) (“Federal
notice pleading rules do not require plaintiffs to allege affirmatively every aspect of their claims,
but only to present sufficient facts to allow the opposing party to conduct discovery and prepare
a defense.”).
A. Mental Suffering and Inconvenience
Defendant argues that Count I of the Amended Complaint should be dismissed because
Plaintiff fails to allege that he sustained an actual injury as a result of Defendant’s alleged willful
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1Section 362(h) was amended, and renumbered as Section 362(k), by the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). This amendment and
renumbering, however, apply only to cases filed on October 17, 2005 and thereafter. Because
Plaintiff filed his Chapter 7 bankruptcy petition on October 12, 2005, the amendments made to,
and the renumbering of, Section 362(h) by BAPCPA do not apply to this case.
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violation of the automatic stay. Specifically, Defendant maintains that the allegation contained
in Count I , paragraph 42 of the Amended Complaint that Plaintiff “incurred mental suffering
and inconvenience, unliquidated but in excess of the amount requiring compulsory judicial
arbitration referral” as a result of Defendant’s alleged willful violation of the automatic stay is
insufficient to state a claim for damages under Section 362(h).1 Defendant further maintains that
because its conduct was not of such an egregious or extreme nature that emotional distress could
be expected to occur, Plaintiff must allege corroborating evidence in the Amended Complaint to
state a claim under Section 362(h) based upon emotional distress. I disagree. As stated earlier,
the liberal rules of federal notice pleading require only that “a complaint put the defendant on
notice of the claims against him.” Ginley, 2005 WL 27534, at *1; see also Millar, 2005 WL
1513120, at *2, and do not require that a plaintiff affirmatively allege every bit of evidence
supporting his claim. A plaintiff need only present sufficient facts to allow the defendant to
conduct discovery and prepare a defense. Millar, 2005 WL 1513120, at *2.
I also agree with the approach taken by my colleague, the Honorable Diane Weiss
Sigmund in Patterson v. Chrylser Fin’l. Co. (In re Patterson), 263 B.R. 82, 97 (Bankr. E.D. Pa.
2001), that a debtor may seek damages for emotional distress caused by a creditor’s willful
violation of the automatic stay, but that the emotional injury must be proven at trial. See also
Rosas v. Monroe County Tax Claim Bureau (In re Rosas), 323 B.R. 893, 901 (Bankr. M.D. Pa.
2004); Wagner v. Ivory (In re Wagner), 74 B.R. 898, 905 (Bankr. E.D. Pa. 1987). 	I find,
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therefore, that Defendant’s argument that Count I of Plaintiff’s Amended Complaint must allege
corroborating evidence of the emotional injury caused by the willful violation of automatic stay
in order to state a claim under Section 362(h) is erroneous. Clearly, Plaintiff must establish the
emotional injury at trial, but it is premature for Defendant to raise the issue in the context of a
pre-trial motion. Accordingly, I conclude that Count I of the Amended Complaint alleges facts
sufficient to state a claim for relief for emotional distress based upon Defendant’s alleged willful
violation of the automatic stay. Therefore, I deny Defendants’ Motion To Dismiss Count I of the
Amended Complaint to the extent that it is based on Debtor’s request for recovery for emotional
distress as an element of damages for Defendant’s alleged willful violation of the automatic stay.
B. Loan Payment Difference
Defendant also argues that the Amended Complaint does not allege a sufficient nexus
between Defendant’s alleged willful stay violation and Plaintiff’s need to replace the 1994
tractor trailer to recover the “loan payment difference” as an element of damages under Count I.
Specifically, paragraphs 43 and 44 of the Amended Complaint allege that:
43. Plaintiff did not have the money to pay for the repairs afer
[D]efendant reported that Cummins would not honor the warranty,
among other things, because [D]efendant was still pressing for
repayment of the bill on the Original Rebuild on a 1994
Freightliner FLD 120.
44. Accordingly, [P]laintiff had to shop for a replacement tractor.
He and his fiancé have incurred additional debt to replace the
ruined tractor with another Freightliner, 2001 Century Class. That
debt that exceeds the remaining debt on the loan secured by the
ruined truck by an amount that exceeds the amount requiring
compulsory referral for judicial arbitration, as follows:
a. Total of payments on loan to repay cost of
$28,000 for replacement tractor: $84,325, payable
to Wells Fargo Financial.
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2Plaintiff clearly has standing to pursue the cause of action alleged in Count I of the
Amended Complaint, which seeks to recover damages under 11 U.S.C. §362(h) allegedly caused
by Defendant’s alleged willful violation of the automatic stay. Greene v. Wilson-Greene (In re
Greene), Adv. No. 98-0831 (Case No. 98-35663DWS), 1999 WL 138905, at *4, n.8 (Bankr.
E.D. Pa. March 5, 1999); 11 U.S.C. §362(h).
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b. 	Less of payments on loan payable to American
General, for 1994 tractor, $12,023, equals damages
of $72,302.
I agree with Defendant that the Amended Complaint does not link Plaintiff’s need to replace the
1994 tractor with Defendant’s alleged willful violation of the automatic stay, and I therefore
grant Defendant’s Motion To Dismiss Count I of the Amended Complaint to the extent that
Count I seeks to recover the “loan payment difference” as an element of damages for
Defendant’s alleged willful violation of the automatic stay.
III. DISCUSSION: DISMISSAL OF COUNTS II - VI
I now address Defendant’s Motion To Dismiss Counts II through VI of the Amended
Complaint. Defendant argues that these Counts must be dismissed because Plaintiff lacks
standing to pursue these claims. 2 For the reasons that follow, I agree.
Plaintiff’s Amended Complaint seeks damages for two distinct periods of time in which
Plaintiff allegedly could not use the 1994 tractor trailer: (1) the period running from February 2,
2005 through March 18, 2005 (which was prior to the date Plaintiff filed his Chapter 7 petition
on October 12, 2005) (“pre-petition causes of action”); and (2) the period running from
December of 2005 through January 30, 2006 (which was after Plaintiff filed his Chapter 7
petition) (“post-petition causes of action”).
Turning to those portions of Counts II through VI of the Amended Complaint that seek
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3Plaintiff may not cure this aspect of his lack of standing by purporting to name the
Chapter 7 Trustee as an additional plaintiff. The causes of action alleged in Counts II through VI
belong to the bankruptcy estate and must be actively prosecuted by the Chapter 7 Trustee. They
may not be prosecuted by Plaintiff, the Chapter 7 debtor, purporting to act on the Chapter 7
Trustee’s behalf simply by naming the Chapter 7 Trustee as a nominal plaintiff, without even
obtaining the Chapter 7 Trustee’s consent. Finally, I note that even if Plaintiff obtained the
Chapter 7 Trustee’s consent to name her as an additional plaintiff, Plaintiff would lack standing
to prosecute this adversary proceeding because the causes of action belong to the bankruptcy
estate, not to Plaintiff, and it is the Chapter 7 Trustee, not Plaintiff, who must prosecute this
adversary proceeding for the benefit of the bankruptcy estate.
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to recover damages sustained by Plaintiff based upon the pre-petition causes of action, I note that
such pre-petition causes of action are property of the estate that, unless abandoned by the
Trustee, may only be prosecuted by the Chapter 7 Trustee.3 As succinctly explained by another
Court:
The bankruptcy estate encompasses, inter alia, “all legal and
equitable interests of the Debtor in property as of the
commencement of the case.” 11 U.S.C. §541(a)(1). Section 541
must be read broadly in determining what constitutes property of
the bankruptcy estate.
“Courts have uniformly held that the broad scope of §541
encompasses causes of action existing at the time” the bankruptcy
action commences. (citations omitted).
Upon the filing of a Chapter 7 petition, an interim Trustee is
appointed to administer, inter alia, the property of the estate. See
11 U.S.C. §701. The Trustee is the sole representative of the
estate. See 11 U.S.C. §323(a). As such, the Trustee has the
exclusive right to prosecute causes of action that are property of
the bankruptcy estate. (citations omitted). Thus, after a Trustee is
appointed, a Chapter 7 debtor no longer has standing to pursue a
cause of action which accrued at the time the Chapter 7 petition
was filed because “[o]nly the trustee ... has the authority to
prosecute and/or settle such causes of action.” (citation omitted).
A debtor may regain standing to pursue a cause of action if it is
abandoned by the Trustee. Under 11 U.S.C. §554(a), the Trustee
may abandon property which is burdensome to the estate or that is
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of inconsequential value to the estate. However, under 11 U.S.C.
§554(c), a cause of action that was never scheduled cannot be
abandoned to the debtor. (citations omitted). An unscheduled
cause of action thus remains property of the estate pursuant to 11
U.S.C. §554(d).
Anderson v. Acme Markets, Inc., 287 B.R. 624, 628-29 (E.D. Pa. 2002). See also Lambert v.
Fuller Co., Inc., 122 B.R. 243, 246 (E.D. Pa. 1990); Cain v. Hyatt, 101 B.R. 440, 441-42 (E.D.
Pa. 1989); Greene v. Wilson-Greene (In re Greene), Adv. No. 98-0831 (Case No. 98-
35663DWS), 1999 WL 138905, at *4 (Bankr. E.D. Pa. March 5, 1999).
Here, Plaintiff never scheduled the causes alleged in Counts II through VI of the
Amended Complaint in his bankruptcy schedules, and therefore, these causes of action cannot be
abandoned to Plaintiff by the Chapter 7 Trustee. Even if they had been scheduled, however, and
the Chapter 7 Trustee chose to abandon them, Plaintiff would be unable to pursue these causes of
action in this bankruptcy court because I would lack subject matter jurisdiction over them
because they could not “conceivably have any effect on the estate being administered in
bankruptcy.” Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984); Reed v. Phila. Housing
Auth. (In re Reed), 94 B.R. 48, 52-53 (E.D. Pa. 1988).
As for the post-petition causes of action alleged in Counts II through VI of the Amended
Complaint, to the extent that these causes of action involve post-petition damage sustained to the
1994 tractor trailer, which was property of the estate, the causes of action are property of the
estate. Reed, 94 B.R. at 52-53; see also O’Dowd v. Trueger (In re O’Dowd), 233 F.3d 1997, 204
(3d Cir. 2000). Hence, these causes of action belong to the Chapter 7 Trustee and have not been
abandoned to Plaintiff. Plaintiff, therefore, lacks standing to pursue these causes of action.
Anderson, 287 B.R. at 628-29; Lambert, 122 B.R. at 246; Cain, 101 B.R. at 441-42). As above,
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to the extent that these post-petition causes of action are not property of the estate, they could not
“conceivably have any effect on the estate being administered in bankruptcy,” Pacor, 743 F.2d at
994, and therefore, I would lack subject matter jurisdiction. Pacor, 743 F.2d at 994; Reed, 94
B.R. at 52. For all of these reasons, I grant Defendant’s Motion To Dismiss Counts II, III, IV, V
and VI of the Amended Complaint
Accordingly, I shall issue an appropriate Order that (1) denies Defendant’s Motion To
Dismiss Count I of the Amended Complaint to the extent that it seeks recovery for emotional
distress as an element of damages for Defendant’s alleged willful violation of the automatic stay,
(2) grants Defendant’s Motion To Dismiss Count I of the Amended Complaint to the extent that
it seeks to recover the “loan payment difference” as an element of damages for Defendant’s
alleged willful violation of the automatic stay, and (3) grants Defendant’s Motion To Dismiss
Counts II, III, IV, V and VI of the Amended Complaint.
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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
In re: 	:
KEITH STAINES, 	: 	Case No. 05-27224REF
Debtor 	: 	Chapter 7
--------------------------------------------------------------------------------------------------------------------
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KEITH STAINES, 	:
Plaintiff 	:
:
v. 	: 	Adv. No. 06-2108
:
ENGINES, INC., 	:
Defendant 	:
O R D E R
AND NOW, this 28 th day of August, 2006, upon my consideration of
Defendant’s Motion To Dismiss Plaintiff’s Amended Complaint, the Response thereto filed by
Plaintiff, and the briefs filed by the parties, and based upon the discussion contained in the
accompanying Memorandum Opinion, IT IS HEREBY ORDERED that Defendant’s Motion To
Dismiss Plaintiff’s Amended Complaint is GRANTED IN PART and DENIED IN PART, as
follows:
(1) Defendant’s Motion To Dismiss Count I of Plaintiff’s Amended Complaint is
DENIED except to the extent that it seeks to recover the “loan payment difference” as an
element of damages for Defendant’s alleged willful violation of the automatic stay; and
(2) Defendant’s Motion To Dismiss Count I of Plaintiff’s Amended Complaint is
GRANTED to the extent that it seeks to recover the “loan payment difference” as an element of
damages for Defendant’s alleged willful violation of the automatic stay, and
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(3) Defendant’s Motion To Dismiss Counts II, III, IV, V and VI of the Amended
Complaint is GRANTED.
IT IS FURTHER ORDERED that Defendant shall file an Answer to Count I of
the Amended Complaint within twenty (20) days of the date of this Order.
BY THE COURT
RICHARD E. FEHLING
United States Bankruptcy Judge
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