MEMORANDUM OPINION
This Memorandum Opinion constitutes the Court’s findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052. The matter before the Court is a Motion To Dismiss Pursuant To Fed.R.Bankr.P. 7012 and Fed.R.Civ.P. 12(b)(6) (“Motion To Dismiss”), which has been filed by defendants Decision One Mortgage Company, LLC (“Decision One”) and HSBC Mortgage Services, Inc., (“HSBC Mortgage”). The Motion, insofar as it challenges the Plaintiffs standing to prosecute this Adversary proceeding, has been joined by defendant Countrywide Home Loans (“Countrywide”).
I.
In evaluating a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, as incorporated herein by Federal Rule of Bankruptcy Procedure 7012, the Court must assume the facts alleged in the Complaint to be true and draw all factual inferences in favor of the non-moving party.
In re Loranger Mfg. Corp.,
For the reasons set forth below, the Court finds that the Motion to Dismiss has merit. As a result, an Order will be entered which dismisses this Adversary Proceeding without prejudice to the Plaintiff filing a curative amendment within twenty (20) days.
II.
The causes of action in the Complaint consist primarily of various lender liability type claims against all of the defendants, including a claim for fraud (Count I), a claim for predatory lending (Count II), and a claim for alleged violations of the Penn
The factual allegations in the Complaint are not lengthy, and consist of the following:
• In early 2005, K-2 Mortgage solicited the Plaintiff about possibly refinancing the mortgage on Plaintiffs residence. (Docket No. 1, ¶ 14). 2
• At some point in either January or February of 2005, the Plaintiff agreed to a refinancing, and the Plaintiff understood that the proceeds of the refinancing were to be used to satisfy an existing mortgage on his residence in favor of Washington Mutual and to payoff a vehicle loan owing M & T Bank. (Id. at ¶¶ 15-18). The Plaintiff also understood that the amount of the refinancing would be such that he would have a surplus of funds, and that the surplus would be used by the Plaintiff to make repairs to his residence. (Id.).
• On or about Friday, February 4, 2005, 3 a representative of K-2 Mortgage visited Plaintiffs home for purposes of closing on the proposed refinancing. (Docket No. 1, ¶ 19). During this meeting, the Plaintiff was accompanied by an acquaintance of his, a woman named Margaret Helsel, who is a co-debtor with respect to the refinancing. (Id.); (see also Bankr. Case No. 06-70724-JAD, Docket No. 1, Sch. H).
• Ms. Helsel invited the representative into the Plaintiffs home so that the Plaintiff, Ms. Helsel, and the K-2 Mortgage representative could review and sign the necessary paperwork. (Docket No. 1, ¶ 19). Because the representative of K-2 Mortgage “was in a hurry,” Plaintiff was allegedly precluded by K-2 Mortgage from reviewing the loan documents or asking questions about their content. (Id.).
• The Plaintiff, and Ms. Helsel, nonetheless executed the loan documents. Once the documents were signed, the representative of K-2 Mortgage departed with the signed paperwork, and left unsigned copies with the Plaintiff. (Id.).
• Over the weekend, the Plaintiff and Ms. Helsel attempted to read and review the documents that they had just signed. (Id. at ¶ 20). On the following Monday, February 7, 2005, Ms. Helsel contacted K-2 Mortgage and allegedly orally requested a recision of the loan that she and the Plaintiff had agreed to just a few days earlier. (Id. at ¶ 21). She was allegedly advised by K-2 Mortgage that it was “too late” to rescind the transaction because the loan documents had already been “sent ... in fоr processing.” (Id.).
• The HUD-1 settlement statements attached to the Complaint are dated February 10, 2005 and list a disbursement date of February 15, 2005. (Docket No. 1, Exhibits 1 and 2).There is no explanation in the Complaint as to the varying dates between the HUD-1 settlement statement and the Plaintiffs allegation as to when the documentation provided by K-2 Mortgage was signed by the parties.
• The refinancing was in the form of two loans. In the settlement statements, Decision One Mortgage Company, LLC is identified as the lender and The Real Estate Closing Company is identified as the settlement agent for both loans. (Id.).
• With respect to the first loan, it was for $78,400.00, and settlement charges of $7,108.26 were incurred with respect to the closing of the same. (Docket No. 1, Exhibit 1). However, at closing two disbursements were actually to be made (one to Washington Mutual and one to M & T Bank) totaling $89,421.37 in aggregate. 4 (Id.). The settlement statement with respect to the first loan states that the Borrowers, (ie., the Debtor and Ms. Hel-sel) would have to disburse $18,129.63. This sum is essentially the shortfall between the amount of the first loan and the aggregate amount of the settlement charges coupled with the amounts owing to Washington Mutual and M & T Bank. 5 (M).
• With respect to the shortfall, the Plaintiff funded it with the second loan. The second loan amount was for $19,600.00 with a total settlement charge of $1,470.37. (Docket No. 1, Exhibit 2). Once the settlement charges were deducted from the total amount of the loan, there was a total amount of $18,129.63 remaining. (Id.). This amount was disbursed to The Real Estate Closing Company as indicated in Section M of the settlement statement entitled “Disbursement To Others.” (Id.). There is no explanation in the Complaint as to why the transaction was structured as two loans as opposed to just one loan; and it is apparent from the Complaint that no loan funds were left over for the Plaintiff to make repairs to his property.
• Prior to the closing on the loans, representatives of K-2 Mortgage allegedly promised the Plaintiff, among other things, that the loan would be an “affordable fixed rate mortgage.” (Id. at ¶ 14). However, from the inception of the closing on the two loans, Plaintiff was unable to maintain payments on these obligations. (Id. at ¶ 22). The Plaintiff therefore alleges that K-2 Mortgage “knew or should have known that the Plaintiff and his friend would be unable to sustain the debt load inflicted by the transaction described above.” (Id. at ¶ 27).
III.
In addition to the factual allegations set forth in the Complaint, the Court notes that on September 21, 2006, the Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code. (Bankruptcy No. 06-70724JAD, Doc. No. 1). The Plaintiff proposed a repayment plan in his Chapter 13 case, and the plan form utilized by the Plaintiff states that “[pjroperty of the estate shall not re-vest in the Debtor until the bankruptcy case is closed.”
(Id.
at Doc. 8). This plan was confirmed on an
The instant adversary proceeding was commenced upon the Plaintiff filing the Complaint against the six named defendants on July 15, 2007, which was more than two years after the closing of the loans at issue. (Docket No. 1). The Defendants Decision One and HSBC Mortgage filed their Motion To Dismiss on August 17, 2007. 6 (Docket No. 7). A hearing was held on the Motion To Dismiss on January 18, 2008.
At the hearing on the Motion to Dismiss, the Plaintiff acknowledged that K-2 Mortgage was not an agent of Decision One with respect to the matters set forth in the Complaint, and that Decision One’s role in this case is that it was merely the entity that made the loans to the Plaintiff. The Plaintiff, through counsel, however suggested that the defendants acted “in concert” with K-2 Mortgage and, as a result are equally liable for any alleged claims.
It also is not disputed by the Plaintiff that Defendants HSBC Mortgage and Countrywide had no involvement with the loans at issue. Rather, subsequent to the closing of the Decision One loans, both HSBC Mortgage and Countrywide merely obtained an assignment of the Plaintiffs first and second mortgage, respectively. It was also acknowledged at the hearing on the Motion to Dismiss that the lawsuit in question is property of the bankruptcy estate.
At the January 18, 2008 hearing, the Court requested that the parties file supplemental briefs in support of their respective positions. Because some of the defenses raised by Decision One and HSBC Mortgage brought into question the ability of Chapter 13 debtors to commence suit against creditors when such claims are property of the estate, the Court also authorized the Chapter 13 Trustee to intervene on a limited basis to solely be heard on the issue of whether Chapter 13 debtors have the requisite standing to commence lawsuits such as the one before the Court. Defendant Countrywide also joined, in part, in the Motion to Dismiss filed by Decision One and HSBC Mortgage. The parties completed their briefing on April 14, 2008, and this matter is now ripe for decision.
IV.
Decision One, HSBC Mortgage and Countrywide contend that all of the counts of the Complaint should be dismissed becаuse the causes of action asserted by the Plaintiff constitute property of the estate solely “vested” with the Chapter 13 Trustee, and that the Plaintiff allegedly lacks the requisite standing to prosecute this case. The Court disagrees, and holds that the Plaintiff indeed has the requisite standing to prosecute this civil action.
There is no question that a debt- or’s pre-petition cause of action is property of the bankruptcy estate.
See
11 U.S.C. § 541(a) (all “legal and equitable” interests of the debtor constitute property of the estate);
see also In re Tippins,
The only way to “use” a cause of action is to bring suit upon it or settle it. Therefore, it follows that a Chapter 13 debtor has standing to prosecute pre-petition causes of action that constitute property of the estate.
See Maritime Elec. Co., Inc. v. United Jersey Bank,
It is true that the confirmed Chapter 13 plan in this case provides that “[property of the estate shall not re-vest in the Debt- or until the bankruptcy case is closed.” This plan provision does not change the Court’s analysis.
The Bankruptcy Code provides that upon the commencement of the Chapter 13 case, and unless provided for in a confirmed plan or an order confirming a plan, the debtor remains in possession of all property of the estate. 11 U.S.C. § 1306(b). Neither the confirmed plan at issue, nor any order of the Court, has removed the Plaintiff from possession of estate property. Thus, the Plaintiff remains a debtor-in-possession of property of the estate.
The confirmed plan in this case provides that estate property is “not re-vested in the Debtor until the bankruptcy case is closed.” This provision means that all of the legal and equitable interests of the debtor remain property of the bankruptcy estate (as opposed to merely property of the debtor) until his bankruptcy case has been administered. This is the “belts and suspender” language used in this District’s form Chapter 13 plan which is utilized to insure that the estate’s interests have not been abandoned by virtue of the cоnfirmation of the Chapter 13 plan. This is an important provision in our District’s confirmed plan because if the assets were to be abandoned, then the Chapter 13 trustee would be powerless to realize the assets for the benefit of creditors if the need should arise throughout the administration of the bankruptcy case.
Moreover, Bankruptcy Judge Stinnett has pointed out that possession of estate property and vesting of rights in property are two entirely different concepts.
In re York,
A look at the legislative history of 11 U.S.C. § 1303 further emphasizes the fact that Congress intended for a Chapter 13 debtor to have the ability to sue on behalf of the estate. The legislative history states in relevant part that 11 U.S.C. § 1303 “does not imply that the debtor does not also possess other powers concurrently with the trustee. For example, although section 1323[sic] is not specified in section 1303, certainly it is intended that the debtor has the power to sue and be sued.”
7
In re Griner,
Subsection (b) grants the trustee the capacity to sue and be sued. If the debtor remains in possession in a Chapter 11 case, section 1107 gives the debt- or in possession these rights of the trustee: the debtor in possession becomes the representative of the estate, and may sue and be sued. The same applies in a Chapter 13 case.
S.Rep. No. 95-989 at 37 (July 14, 1978); H.R. 95-595 at 326 (Sept. 8, 1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5823, 5963, 6282-83 (emphasis added).
The Court also notes that there are prudential reasons for giving debtor standing to prosecute causes of action on behalf of the bankruptcy estate. One such prudential reason is the fact that the debtor, as opposed to the trustee is better equipped to bring such actions. In addition, some causes of action might very well be personal in nature to the debtor, and as such the trustee might be precluded as a matter of non-bankruptcy law from pursuing them.
The fact that the debtor is most often better equipped to prosecute pre-petition causes of action is particularly acute in a jurisdiction such as ours where the Chapter 13 Trustee is the sole standing trustee that has assumed the role of disbursing agent in thousands of cases. In this District, the Chapter 13 Trustee is simply not staffed in such a way to prosecute all of the pre-petition causes of action that could be valuable assets to the Chapter 13 bankruptcy estate. In this regard, the Bankruptcy Code recognizes this dichotomy between the role of a debtor-in-possession and the role of the Trustee in Chapter 13.
Thus, the Court’s reading of the Bankruptcy Code, and the confirmed plan, is such that (a) the Chapter 13 debtor, as a debtor-in-possession, may use the estate’s asset (i.e., the lawsuit) by prosecuting it; and (b) the lawsuit is estate property, of which the ultimate proceeds may not be utilized by the debtor without regard to his or her obligations to creditors under the confirmed plan. The Court therefore finds Judge Stinnett’s opinion in
In re York, supra
to be very persuasive and will follow this decisions here.
See also Smith v. Rockett,
Closely tied to the issue of the Plaintiffs standing is whether some or all of the claims аsserted by the Plaintiff are barred by the applicable statute of limitations. For example, Decision One and HSBC Mortgage contend that Count I (Fraud) of the Plaintiffs Complaint is barred by the applicable statute of limitations.
The statute of limitations on common law fraud in Pennsylvania is two years. 42 Pa.C.S.A. § 5524(7). The alleged fraudulent conduct of the defendants occurred sometime between January and February 2005, some two years and five months before the filing of the complaint in this matter. The Bankruptcy Code, at 11 U.S.C. § 108, contains a tolling provision which serves to toll statutes of limitation upon the filing of a bankruptcy petition. The parties concede that if 11 U.S.C. § 108 applies, then the lawsuit filed by the Plaintiff is timely. Dеcision One and HSBC Mortgage assert that Section 108 of the Bankruptcy Code does not apply because only a bankruptcy trustee may invoke its provisions. The Court disagrees.
Section 108(a) of the Bankruptcy Code states that
If applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) two years after the order for relief.
11 U.S.C. § 108(a). It is this Court’s oрinion that Section 108(a) cannot be read in insolation in deciding whether it will apply to pre-petition causes of action that a Chapter 13 debtor prosecutes on behalf of the bankruptcy estate as a debtor-in-possession.
By way of analogy, various courts have looked at the provisions of Chapter 11 and have concluded that Chapter 11 debtors-in-possession have the same rights as a trustee under Section 108(a).
See In re Flying “S” Land & Cattle Co.,
Although less clear than in the Chapter 11 context, there is no reason why Section
In the context of Chapter 13, the term “debtor-in-possession” is not specifically used. However, pursuant to § 1306(b) of the Bankruptcy Code “the debtor shall remain in possession of all property of the estate” except as provided for in a confirmed plan or order confirming the plan. 11 U.S.C. § 1306(b) (emphasis added). This provision of the Code unequivocally makes the debtor in a Chapter 13 case a debtor-in-possession. To hold that a Chapter 13 debtor is not a debtor-in-possession simply because those three words do not appear in succession in Chapter 13 of the Bankruptcy Code makes no logical sense in light of this language found in 11 U.S.C. § 1306(b).
The difference between a debtors-in-possession in Chapter 13 cases and debtors-in-possession in Chapters 11 and 12 cases is that unlike debtors in Chapters 11 or 12, Chapter 13 debtors are not debtors-in-possession vested, generally, with
all
of the powers of a trustee.
In re Dawson,
Adv. No. 04-10083,
The power to sue on behalf of property of the estate, as stated previously, is vested with the debtor by way of 11 U.S.C. §§ 1303, 363(b), and 323. The debtor, then, is implicitly vested with a trustee’s capacity to sue on those causes of action.
In re Dawson,
It is evident that Congress intended to grant a debtor under Chapter 13 the same ability to sue on behalf of the estate as a trustee, Chapter 11 debtor-in-possession, and a Chapter 12 debtor-in-possession. To read Section 108(a) so narrowly that it applies to every other entity “in
VI.
Decision One and HSBC Mortgage allege that the Complaint fails because it contains no allegations whatsoever regarding any conduct of Decision One and HSBC Mortgage. A reading of the complaint indeed seems to indicate that the crux of the allegations stem from the actions of K-2 Mortgage and their “successors in interest.” It is admittedly unclear whether Decision One and HSBC Mortgage are successors in interest to K-2 Mortgagе, and nowhere in the Complaint does the Plaintiff even allege that these defendants are “successors in interest” to K-2 Mortgage.
At the hearing on the Motion to Dismiss, counsel for the Plaintiff suggested that the defendants other than K-2 Mortgage “acted in concert” with K-2 Mortgage, and are thus eo-liable for any claims. However, the Complaint is devoid of any allegations relating to conspiracy, aiding and abetting or other similar theories. Absent such allegations, the defendants have no knowledge as to the Plaintiffs claims and it is manifestly unfair to make them frame a response when the Court itself is unable to even understand the Plaintiffs complaint. The Motion to Dismiss will therefore be granted insofar аs the Plaintiff claims defendants, other than K-2 Mortgage, are somehow co-liable. In addition, there are other deficiencies in the Complaint that are set forth more fully below. Dismissal, however, is without prejudice as the Plaintiff will have 20 days to file a curative amendment to identify and assert its theory of co-liability.
A.
Looking to the specific Counts of the Complaint, the defendants further contend that Count I should be dismissed because, even if a common law fraud claim is not time barred, the Plaintiffs Complaint fails to state a claim for fraud under Pennsylvania law.
This Court has previously held in
In re Balko,
Particularity requires the plaintiff to state more than conclusory allegations of fraud, and instead requires the plaintiff to specifically identify the time, place, and substance of each defendant’s fraudulent conduct.
In re Balko,
In the matter sub judice the plaintiff has alleged that “[t]he actions of K-2 Mortgage’s Successors in Interest ... in not reviewing the mortgages prior to purchasing the rights to the same constitute Common Law Fraud.” (Docket No. 1, ¶ 38). A careful reading of the entire complaint does not reference any alleged wrongdoing on the part of Decision One or HSBC Mortgage, or any other defendant save K-2 Mortgage. The facts set forth in the body of the Complaint revolve around the conduct of K-2 Mortgage and their field representatives, and not the other defendants. Again, there are no allegations of conspiracy or aiding and abetting, so the Court does not see any claims for co-liability in the present form of the Complaint.
Moreover, the complaint is silent as to what a review of the mortgage would have shown K-2 Mortgage’s “successors in interest” and how such alleged facts would give rise to a claim for fraud. The Complaint does not allege that any of the other defendants made misrepresentations to the Plaintiff about refinancing his mortgage, and the Complaint does not allege how the Plaintiff reasonably relied upon those misrepresentations. Nor does the Complaint state exactly how an assignee of the mortgage would be personally liable for any conduct of K-2 Mortgage (and the Plaintiffs response to the Motion to Dismiss is silent on this issue as well).
The Complаint clearly does not meet the heightened pleading standard of Fed.R.Civ.P. 9(b) because the pleading is devoid of the substance of each defendant’s alleged fraudulent conduct (namely, exactly what representations were made by each defendant? When were they made, and to whom? Also, who relied on such statements and to what extent?). The only defendant named in which the pleadings have met the required particularity is K-2 Mortgage. As the Complaint stands today, as to Count One for common law fraud, the Court must dismiss the Complaint as to all defendants save K-2 Mortgage. Dismissal is without prejudice to the Plaintiff filing a curative amendment within twenty (20) days.
B.
With respect to Count II of Plaintiffs Complaint, Decision One and HSBC Mortgage urges the Court to dismiss it due to the fact that no generic “Predatory Lending” cause of action exists under Pennsylvania law.
As an initial matter, the Court acknowledges that there is no common law cause of action for “predatory lending.” Any claim for relief for predatory lending practices must be supported by some statutory basis, and the Plaintiff has not articulated any in its Complaint; nor has the Plaintiff articulated its legal theory in its response to the Motion to Dismiss.
A court in this district has noted:
Typically when the term “predatory” is associated with “lending” as part of the allegations in an adversary proceeding, such phraseology conjures up notions of violation of the Fair Debt Colleсtion Practices Act, 15 U.S.C. § 1692, et seq. or possibly some other federal or state unfair trade practice/consumer protection act violation.
In re Holler,
Without indicating the statute that is alleged to have been violated, Count Two of the Complaint does not even meet the lax notice pleading requirements under Fed. R.Civ.P. 8(a)(2). A plaintiff is merely required to give “a short and plain statement of the claim showing that pleader is entitlеd to relief.” Fed.R.Civ.P. 8(a)(2). This manner of pleading does not require that the plaintiff set out detailed facts of the basis of his claim.
Conley v. Gibson,
C.
As to Count IV of Plaintiffs Complaint, the defendants’ contend that this count should be dismissed because the Complaint does not establish a prima facie case under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (the “Unfair Trade Practices Act”). The defendants’ also argue that Count IV is legally insufficient in that it does not cite to a specific statutory reference.
Under the Fourth Count of the Complaint, the Plaintiff alleges, generally, violations of the Unfair Trade Practices Act.
8
This Court has held in the past that allegations based upon violatiоns of the Pennsylvania Unfair Trade Practices And Consumer Protection Act are subject to the heightened pleading standards of Fed. R.Civ.P. 9(b).
In re Balko,
Moreover, the broad statement that the actions of the defendants “constitute violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law” is insufficient to even satisfy the more liberal pleading standard under Fed. R.Civ.P. 8.
See e.g., Bell Atlantic Corp. v. Twombly,
— U.S. —, —,
VII.
For the reasons stated above, the Court denies the Motion to Dismiss insofar as the defendants suggested that the Plaintiff lacks standing or that the claims are barred by the statute of limitations. The remaining contentions of the defendants are well founded, and the Motion to Dismiss is GRANTED. As to all defendants (except K-2 Mortgage), Count I of the Complaint is dismissed. With respect to Counts II and IV, these counts are dismissed as to all defendants and Count III was withdrawn. Dismissal is without prejudice to the Plaintiff filing a curative amendment within twenty (20) days. The failure of the Plaintiff to file a curative amendment within 20 days, or obtain a further extension of time for cause shown, will result in the Complaint being dismissed in its entirеty as to all defendants (except K-2 Mortgage as to Count I) without further notice and/or hearing.
Notes
. The lawsuit also included a cause of action seeking a determination that certain mortgagees against the Plaintiffs were unsecured because an assignment of mortgage was not recorded. (See Count III of the Complaint). The Plaintiff, however, has withdrawn that count of the Complaint voluntarily.
. The docket in this case refers to the docket of Adversary Proceeding No. 07-07034JAD, unless otherwise specified in the citation. Though not identified in the Complaint, the Court takes judicial notice that the residence referenced in the Complaint is located at RR2, Box 766, Altoona, PA. (See Bankr.Case No. 06-70724-JAD, Docket No. 1, Schedule A).
.The Complaint contains a typographical error, and states that the year was 2004, when it was in-fact 2005.
. This number is reflected on the loan document as the aggregate of the $71,051.37 given to Washington Mutual and the $18,370.00 given to M & T Bank.
. This number was calculated by taking the total loan amount ($78,400.00) and subtracting the settlement charges ($7108.26) and the total disbursements to Washington Mutual and M & T Bank ($89,421.37).
. A Motion To Dismiss was originally filed at Doc. No. 6 on August 17, 2007. The Defendants filed an amended Motion To Dismiss on the same day at Docket No. 7.
. The "section 1323" referenced in Congressional Record and cited in
In re Griner,
. Though not specifically referenced in the complaint, the Pennsylvania Unfair Trade Practices and Consumer Protection Law can be found at 73 P.S. § 201-1 et seq.