Cervantes v. HBLC, Inc. (In re Cervantes)

503 B.R. 689
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedMay 9, 2013
DocketNos. 12 B 26295, 12 A 01630
StatusPublished
Cited by2 cases

This text of 503 B.R. 689 (Cervantes v. HBLC, Inc. (In re Cervantes)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cervantes v. HBLC, Inc. (In re Cervantes), 503 B.R. 689 (Ill. 2013).

Opinion

MEMORANDUM OPINION

JANET S. BAER, Bankruptcy Judge.

Mercedes Cervantes (“Debtor”) commenced the above-captioned adversary proceeding by filing a complaint under § 547 of the Bankruptcy Code to avoid a preferential transfer of alleged exempt property (the “Complaint”).1 This matter is before the Court on Defendant HBLC, Inc.’s (“HBLC”) motion to dismiss the adversary proceeding for failure to state a claim upon which relief can be granted. For the reasons set forth below, the Court will grant the motion to dismiss.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(B) and (F).

Background

The following facts are drawn from the Complaint and are accepted as true for purposes of the motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), made applicable to adversary proceedings by Rule 7012(b). Appert v. Morgan Stanley Dean Witter, Inc., 673 F.3d 609, 622 (7th Cir.2012). In addition, the Court takes judicial notice of the docket in this case, including all documents and pleadings filed, all orders entered, and all arguments made at the hearings held before the Court during the pendency of this case. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice”); In re Brent, 458 B.R. 444, 455 n. 5 (Bankr.N.D.Ill.2011) (authorizing a bankruptcy court to take judicial notice of its own docket).

The Debtor filed a chapter 7 petition for relief on June 29, 2012. In her schedule of exempt property, the Debtor claimed a personal property exemption of $634.92, pursuant to 735 ILCS 5/12-1001 (b), for “wages withheld in 90 days prior to petition.” In her Statement of Financial Affairs, under Section 4, titled “Suits and administrative proceedings, executions, garnishments and attachments,” the Debtor listed a collection suit styled “HBLC v. Cervantes, 2011 M1 182680.” She represented the status as: “Judgment entered, citation to discover assets issued.” Pursuant to a citation to discover assets, and an order for installment payment of judgment, money was withheld from Debtor’s wages starting with the pay period ending April 13,2012.

On Schedules D, E, and F, the Debtor ostensibly scheduled all creditors holding claims. Curiously, though, the Debtor failed to schedule HBLC as a claimant. As a result, it appears that HBLC was not sent and did not receive a copy of the schedules or any notice of the bankruptcy case through the Court’s notice system or a separate notice of filing.

The Debtor filed an amended schedule of exempt property on September 13, 2012, in which she again claimed the $634.92 exemption for “wages withheld in 90 days prior to petition.” The creditors’ meeting was held on the same day. The chapter 7 [692]*692trastee filed a no-asset report on September 14, 2012, discharge was entered on October 30, 2012, and the case was closed on November 2, 2012.

Prior to the closing of the case, the Debtor filed a “Notice of Filing” of Amended Schedules B and C. The notice was served on October 5, 2012 on the United States Trustee, the chapter 7 trustee, and the creditor mailing matrix. HBLC did not receive the notice because it was omitted from the matrix. On October 24, 2012, the Debtor filed the Complaint. Summons was issued on HBLC, but no proof of service has been filed as to the summons. Nonetheless, HBLC filed the instant Motion to Dismiss in Lieu of Answer. The Debtor filed a response, HBLC a reply, and the Court took the matter under advisement.

DISCUSSION

For the reasons set forth herein, HBLC’s motion will be granted. The Complaint fails to state a claim under §§ 522 and 547 of the Bankruptcy Code and Chapter 735, Act 5, Section 12-1001 of the Illinois Compiled Statutes.

The standards for deciding a 12(b)(6) motion to dismiss are well-established and will not be repeated here. See In re Braverman, 463 B.R. 115, 118-19 (Bankr.N.D.Ill.2011). To determine whether the Complaint passes muster, the Court turns to the Bankruptcy Code and Rules and applicable provisions of state law.

Avoidance of Exempted Preferential Transfers

The filing of a chapter 7 petition creates an estate comprised of, among other things, “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Subject to exceptions not relevant here, § 547 of the Bankruptcy Code empowers the bankruptcy trustee to avoid certain transfers made prior to the petition date. The Code allows a debtor to avoid a transfer under § 547 if the trustee has not done so. Section 522(h) provides:

The debtor may avoid a transfer of property of the debtor or recover a set-off to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if—
(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and
(2) the trustee does not attempt to avoid such transfer.

11 U.S.C. § 522(h). For a debtor to avoid a transfer under § 522(h), the transfer must be avoidable by the trustee pursuant to § 522(g)(1), which provides in relevant part:

[T]he debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if—
(1)(A) such transfer was not a voluntary transfer of such property by the debtor; and
(B) the debtor did not conceal such property!)]

11 U.S.C. § 522(g)(1) (emphasis added).

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Bluebook (online)
503 B.R. 689, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cervantes-v-hblc-inc-in-re-cervantes-ilnb-2013.