Zutrau v. Zutrau (In re Zutrau)

482 B.R. 704, 2012 WL 5498025, 2012 Bankr. LEXIS 5289
CourtUnited States Bankruptcy Court, D. Massachusetts
DecidedNovember 13, 2012
DocketBankruptcy No. 11-11815-FJB; Adversary No. 11-1183
StatusPublished
Cited by3 cases

This text of 482 B.R. 704 (Zutrau v. Zutrau (In re Zutrau)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Zutrau v. Zutrau (In re Zutrau), 482 B.R. 704, 2012 WL 5498025, 2012 Bankr. LEXIS 5289 (Mass. 2012).

Opinion

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS COMPLAINT AND ON PLAINTIFF’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

FRANK J. BAILEY, Bankruptcy Judge.

By her amended complaint in this adversary proceeding, Leilani Zutrau, sister of debtor and defendant Eric Zutrau, seeks a determination that the balance he owes her on five promissory notes, totaling $427,522.90, is excepted from discharge under 11 U.S.C. § 523(a)(2)(A) as debt arising from fraud or false representations and under 11 U.S.C. § 523(a)(6) as debt for willful and malicious injury. The amended complaint also purports to assert objections to discharge under 11 U.S.C. § 727(a)(2), (3), and (4). Eric has now moved to dismiss the § 523 counts for failure to state a claim on which relief can be granted; and Leilani has moved for leave to amend her complaint to add facts that she contends would support her objections to discharge.

Procedural History

On March 3, 2011, Eric filed a petition for relief under chapter 7 of the Bankruptcy Code. The first date set for the first meeting of creditors was April 5, 2011, and accordingly the deadline for filing complaints to object to discharge or to determine the dischargeability of a debt was June 6, 2011. On that day, Leilani, acting pro se, filed the complaint commencing this adversary proceeding. The original complaint sought a determination of non-dischargeability under § 523(a)(2)(A) and (a)(6). It did not purport to constitute an objection to discharge, did not request a denial of discharge, and made no reference to § 727(a). Eric filed an answer on June 22, 2011. Thirteen days later, on July 5, 2011, Leilani filed an amended complaint (“Amended Complaint”) in which, for the first time, she purported to object to Eric’s discharge under § 727(a)(2), (3), and (4). The Amended Complaint included new allegations of fact but failed to specify which of the alleged facts constituted the factual basis for each objection to discharge.

Eric then filed a Rule 12(b)(6) motion to dismiss the complaint for failure to state a basis for excepting the debt from discharge under § 523(a)(2)(A) or (a)(6). The motion is directed at the original complaint, but, with respect to nondischarge-ability under § 523(a)(2)(A) and (a)(6), the original and amended complaints are the same.1 Leilani has opposed the motion. In her opposition and at a hearing on the motion, Leilani further specified her allegations under § 523(a)(2)(A) and (a)(6).

No objection to discharge having been filed by the deadline for doing so, the Court entered a discharge in favor of Eric on August 16, 2011.

On February 29, 2012, Leilani filed a second amended complaint and a motion for leave to file the same. The stated purpose of the second amendment is to cite facts and information in support of Leilani’s objections to discharge under § 727(a)(2), (3), and (4). Eric opposes the motion to amend, arguing that any objection to discharge that it amends is untime[708]*708ly and therefore that the proposed amendment is futile.

Jurisdiction

The matters before the court concern a complaint to determine the dischargeability of a debt under 11 U.S.C. § 528(a) and to deny the debtor a discharge under 11 U.S.C. § 727(a). In both parts, the complaint concerns a discharge in bankruptcy, arises under the Bankruptcy Code and in a bankruptcy case, and therefore falls within the jurisdiction given the district court in 28 U.S.C. § 1334(b) and, by standing order of reference,2 referred to the bankruptcy court pursuant to 28 U.S.C. § 157(a). The counts for determination of dischargeability and for denial of discharge are core proceedings within the meaning of 28 U.S.C. § 157(b)(1).3 The bankruptcy court accordingly has authority to enter final orders on them.

Motion to Dismiss Complaint for Determination that Debt is Excepted from Discharge

a. Standard of Review

When presented with a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court must “accept as true all well-pleaded facts set forth in the complaint and draw all reasonable inferences therefrom in the pleader’s favor.” Artuso v. Vertex Pharmaceuticals, Inc., 637 F.3d 1, 5 (1st Cir.2011). Subject to certain exceptions, a complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Id., citing Fed.R.Civ.P. 8(a)(2).

Although there is no need for “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal [556 U.S. 662], 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). Accordingly, a complaint must include more than a rote recital of the elements of a cause of action; it must include “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “If the factual allegations in the complaint are too meager, vague, or conclusory to remove the possibility of relief from the realm of mere conjecture, the complaint is open to dismissal.” [S.E.C. v.] Tambone, 597 F.3d [436] at 442 [ (1st Cir.2010) ] (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

Artuso, 637 F.3d at 5.

b. Facts

The Amended Complaint makes the following allegations of fact.

1. Leilani is Eric’s sister. By a deed recorded in 2003, they are the co-owners, as tenants in common, of property in Oak Bluffs, Massachusetts (the “Oak Bluffs Property”). They agreed to improve the property, a single family home, for personal and investment purposes and to share equally the costs of developing and carrying the property.

2. In 2006, Eric identified real property in Brookline, Massachusetts (“the Brookline Property”) that he believed would be a profitable condominium conversion venture. He approached Leilani for financing and told her that if she assisted [709]*709with financing the property, he would be able to repay monies she advanced upon sale of the Brookline Property.

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Cite This Page — Counsel Stack

Bluebook (online)
482 B.R. 704, 2012 WL 5498025, 2012 Bankr. LEXIS 5289, Counsel Stack Legal Research, https://law.counselstack.com/opinion/zutrau-v-zutrau-in-re-zutrau-mab-2012.