Docket: Bankruptcy Case No. 10-05226-dd; Adv. Pro. No. 12-80238-dd
Court: United States Bankruptcy Court, D. South Carolina; September 4, 2014; Us Bankruptcy; United States Bankruptcy Court
The Court, presided over by Chief U.S. Bankruptcy Judge David R. Duncan, granted summary judgment in favor of defendants Price, Pyles, Dangle, Parmer, Rooks, P.C. (PPDPR) and CertusBank National Association while denying plaintiff Michelle L. Vieira's motion to amend the scheduling order. The Court considered motions for summary judgment filed by the defendants in May and June 2014 and the plaintiff's opposition, along with a motion to amend the scheduling order filed shortly thereafter. After a hearing on June 24, 2014, and reviewing relevant law, arguments, and evidence, the Court ruled in favor of the defendants.
The dispute arose from multiple loan agreements involving the Ladds and First Georgia Banking Company. Key loans included an April 6, 2004 note for $58,959.98 for an Infiniti automobile, and an October 31, 2005 note for $72,901.55 for a Chevy Tahoe, neither of which was mentioned in the plaintiff's second amended complaint. A third loan, referred to as 'Loan 1', was secured by a Cadillac Catera and dated September 12, 2005, while a fourth, 'Loan 2', dated May 25, 2006, had a principal amount of $77,053.35. Chris Ladd expressed uncertainty about the details of Loan 2, including its terms and whether he received all pages of the agreement before signing. The proceeds from Loan 2 were used to pay off Loan X, and the plaintiff alleges that First Georgia misrepresented the security for Loan 2 and that there were forgeries of the Ladds' signatures on related documents, including a security deed for property owned by the Ladds.
Plaintiff claims that First Georgia misrepresented to the Ladds that Loan 1 would be consolidated into Loan 2. Chris Ladd testified that he did not sign a security deed, asserting that his signature was forged, while Donna Ladd also denied signing a security deed or recalling seeing one. Both Ladds indicated that their purported signatures on various documents related to Loan 2, including a notice of right of rescission and a settlement statement, were not genuine. Donna Ladd expressed uncertainty about her signature on a notice of right to copy of the appraisal report and mentioned that she did not recall seeing a consumer security agreement for Loan 2.
On May 17, 2006, the Ladds accepted an offer for the sale of their Newnan property and conveyed it on June 8, 2006. The allegedly forged security deed related to this property was recorded on July 10, 2006. The plaintiff identifies Loan 3 as a closed-end consumer loan agreement for $21,139.70, dated June 8, 2006, with a Bayliner boat as collateral. Chris Ladd initially identified his signature on this agreement but later expressed uncertainty due to the absence of a date.
In a letter dated May 12, 2007, Chris Ladd acknowledged First Georgia's claim that the Newnan property secured Loan 2, stating he was unaware of this tie when selling the property. The Ladds entered into a forbearance agreement with First Georgia on July 2, 2007, where Chris Ladd recognized his initials and signature but suspected forgery on one page. Donna Ladd confirmed she also initialed and signed the forbearance agreement.
The forbearance agreement, initialed by the Ladds, specifies the loan numbers, dates, and amounts for three loans. It states that the Ladds are in default due to their failure to make required monthly payments and the sale of collateral for Loan 2. On February 10, 2009, First Georgia sued the Ladds in Carroll County, Georgia, alleging default on Loans 1, 2, and 3 due to non-payment and the sale of the Newnan property. First Georgia's claims included breach of promissory note, conversion, and attorney fees, with PPDPR representing them. The Ladds did not file counterclaims or defenses in this action. They filed for Chapter 7 bankruptcy on July 22, 2010, receiving a discharge on October 29, 2010. It is alleged that Chris Ladd, who was serving in the military at the time of the lawsuit, lost his security clearance and missed a promotion as a result. First Georgia, through PPDPR, filed a proof of claim for $147,196.13 in the bankruptcy on February 7, 2011. CertusBank later acquired First Georgia's operations on May 20, 2011. A letter from First Georgia's attorney on July 5, 2011, detailed the unsecured indebtedness due to the Ladds' sale of the pledged property shortly after executing the security deed, resulting in a civil action for conversion. The bankruptcy was filed prior to any judgment in the previous case. An adversary proceeding was filed by the Plaintiff on October 29, 2012, with an amended complaint on November 9, 2012, asserting violations of the Fair Debt Collection Practices Act, the Soldiers’ and Sailors’ Civil Relief Act, abuse of process, and claims against both CertusBank and PPDPR for violations of the Georgia Residential Mortgages Act, forgery, and conspiracy.
The plaintiff alleged multiple causes of action against CertusBank, including fraudulent and negligent misrepresentation, breach of contract by fraudulent act, and conversion, and requested a jury trial. CertusBank failed to timely respond to the amended complaint, resulting in a default. It later sought relief from this default, leading to a Consent Order that allowed additional time to respond. Prior to this, PPDPR filed for judgment on the pleadings, which CertusBank supported. On August 12, 2013, the Court granted judgment on the pleadings regarding certain claims and identified deficiencies in the amended complaint, giving the plaintiff fourteen days to file a second amended complaint. The plaintiff missed this deadline but filed the second amended complaint later that same day, asserting various causes of action including FDCPA violations, abuse of process, conspiracy, wrongful foreclosure, and several claims against CertusBank, while again requesting a jury trial. Defendants PPDPR and CertusBank moved to strike or dismiss this second amended complaint. On December 12, 2013, the Court struck the abuse of process claim related to Donna Ladd’s estate and dismissed the wrongful foreclosure claim, yet denied the other motions. CertusBank and PPDPR subsequently answered the second amended complaint, both asserting the proceeding is non-core but consenting to a final judgment by the Court. The Court confirmed its jurisdiction over the matter under 28 U.S.C. 1334 and venue under 28 U.S.C. 1409, noting that all parties consented to the Court entering a final judgment.
Plaintiff filed a motion to amend the scheduling order on the same day her response to defendants’ motions for summary judgment was due, providing limited facts and no legal authority. She cited an inability to depose relevant individuals prior to the discovery deadline, which had passed. The circumstances surrounding her motion were clarified through defendants' responses and Plaintiff's reply. Plaintiff's counsel had issued notices for depositions scheduled for April 24 and 25, 2014, but after a dispute over deposition topics, these were rescheduled to May 1 and 2 due to defense counsel's conflicts. On April 23, PPDPR’s counsel requested another rescheduling, which led to Plaintiff's counsel agreeing to postpone the depositions. However, Plaintiff's counsel did not follow up on rescheduling until June 12, 2014. Subsequently, PPDPR filed a motion for summary judgment on May 8, requesting modifications to the scheduling order and an expedited hearing, which the Court denied on May 13. CertusBank filed its own summary judgment motion on May 14, and Plaintiff sought permission to file a joint response to both motions on May 21.
The Court issued an order establishing deadlines for motions for summary judgment, with motions due by June 6, 2014, and responses by June 13, 2014. The plaintiff was permitted to submit a joint response addressing both pending motions and any additional motions or supplements filed by the June 6 deadline. On June 6, both defendants submitted supplements to their motions, and the plaintiff filed a motion to amend the scheduling order along with her response on June 13.
The scheduling order was based on a joint request from all parties for 120 days of discovery and a subsequent pretrial, resulting in a discovery deadline of May 30, 2014, and a dispositive motions deadline of June 6, 2014. The plaintiff's motion to amend the scheduling order was filed after the discovery deadline had passed. The applicable standard for amending the scheduling order was debated, with the defendants referencing Federal Rule of Bankruptcy Procedure 9006(b)(1) and the plaintiff citing Federal Rule of Civil Procedure 16(b)(4) as requiring good cause for modification.
The Court noted that regardless of which standard applied, the plaintiff did not demonstrate entitlement to relief. Plaintiff’s counsel delayed in addressing deposition rescheduling until the day before the response deadline, and the defendants had filed their motions and supplements in adherence to established deadlines. The Court emphasized that the filing of a motion for summary judgment typically indicates that the discovery period is concluding. While the plaintiff expressed frustration over the lack of cooperation from the defendants regarding an extension, the defendants were not obligated to remind the plaintiff’s counsel of deadlines or rescheduling needs.
Plaintiff's counsel has repeatedly missed deadlines, specifically failing to file a second amended complaint by the deadline established in the August 12, 2013 Order, which led to a rule to show cause. The only justification provided was an electronic calendaring error, deemed insufficient to demonstrate diligence or warrant relief. Consequently, the motion to amend the scheduling order was denied.
Under Federal Rule of Civil Procedure 56(a), a party is entitled to summary judgment if there are no genuine disputes regarding material facts. The moving party must initially present evidence indicating the absence of such disputes, while the nonmoving party must then provide specific facts to demonstrate a genuine issue for trial. Mere speculation or minimal evidence is inadequate to oppose a summary judgment motion. The court will view facts favorably to the nonmoving party only if genuine disputes exist.
In the analysis section, defendants argue that all of Plaintiff's claims are barred by statutes of limitation. The applicable statutes are not disputed, and regardless of whether South Carolina or Georgia law applies, South Carolina's statutes govern due to their procedural nature.
The statutes of limitation for Plaintiff's state law causes of action are established as three years, per S.C.Code Ann. 15-3-530(1) and 15-3-530(5). For the FDCPA cause of action, the limitation is one year from the date of the violation (15 U.S.C. 1692k(d)). Under S.C.Code Ann. 15-3-535, actions must be initiated within three years from when the injured party knew or should have known of the cause of action. Most of Plaintiff's state law claims, except possibly for a breach of contract by fraudulent act, fall under section 15-3-530(5).
The discovery rule dictates that the statute of limitations begins when the injured party is aware or should be aware of the wrongful conduct, not when they seek legal advice or fully develop their recovery theory. Plaintiff incorrectly argues that the inquiry should focus on her knowledge as trustee; however, as trustee, she assumes the rights and limitations of the Ladds, the original debtors. The bankruptcy estate includes all legal interests of the debtor at the case's commencement (11 U.S.C. 541(a)(1)), and the trustee can only assert the rights that the debtor possessed, along with any defenses available against the debtor.
Plaintiff concedes that the cause of action accrued upon filing the Carroll County action, which involved a forged security deed, asserting that the statute of limitations would not start until July 2, 2009, when Christopher Ladd lost his security clearance. However, the statute commenced with the filing of the Carroll County complaint, which indicates that the Ladds had knowledge of the security deed and the related claims against First Georgia concerning Loan 2.
First Georgia contends that Loan 1 remains outstanding and that Loan 2 did not pay off Loan 1. The statute of limitations may have begun when Chris Ladd acknowledged First Georgia's lien in a May 12, 2007 letter or when the Ladds signed a forbearance agreement on July 2, 2007. However, the court will use July 2, 2009, the date Chris Ladd lost his security clearance, for its analysis. Without the bankruptcy filing on July 22, 2010, the statute of limitations would have expired on all of the Plaintiff's claims by early July 2012. Under 11 U.S.C. § 108(a), the trustee may initiate actions within the earlier of the original limitation period or two years after bankruptcy relief. Even considering this provision, the statute of limitations would have lapsed on the Plaintiff’s Fair Debt Collection Practices Act (FDCPA) claim before the bankruptcy and on state law claims two years post-bankruptcy. The adversary proceeding commenced on October 29, 2012. The Plaintiff cites the Servicemembers Civil Relief Act (SCRA) tolling provision, which suspends the limitation period for servicemembers during their military service. Military service is defined to include active duty in the armed forces, certain National Guard service, and periods of absence due to lawful causes. Plaintiff argues that Chris Ladd was on active duty per 10 U.S.C. § 101(d)(1) during the relevant time frame.
Active duty is defined under 10 U.S.C. 101(d)(1) as full-time military service, which includes full-time training and attendance at designated military schools, but excludes full-time National Guard duty. The plaintiff must prove whether the statute of limitations for her claims should be tolled, as established in Lukenas v. Bryce’s Mountain Resort, Inc. and Hooper v. Ebenezer Senior Serv. Rehab. Ctr. During the relevant period, Chris Ladd received multiple military orders. On September 12, 2008, he was ordered to full-time National Guard duty (FTNGD) in Active Guard/Reserve (AGR) status for three years, effective September 16, 2008, with the authority cited as 32 USC 502(f). A subsequent order on November 21, 2008, confirmed his active duty status in AGR for a permanent change of station for three years, starting September 16, 2008. On August 3, 2011, he received another FTNGD order for a period of five years, starting September 17, 2011, with similar stipulations regarding automatic termination of AGR status if called to federal active duty. A fourth order dated May 3, 2012, indicated he was on active duty in AGR status for a change of station lasting four years, nine months, and seven days. In her argument, the plaintiff asserts that Chris Ladd was on active duty based on 10 U.S.C. 101(b)(16), which defines “Active Guard and Reserve” as a member of a reserve component on active duty as specified under relevant statutes.
Plaintiff argues that Chris Ladd's service qualifies as "active Guard and Reserve duty" under 10 U.S.C. § 101(d)(6)(A), which defines this term as active duty by reserve component members for over 180 consecutive days for specific military purposes. However, the military orders relevant to Chris Ladd's service classify him under full-time National Guard duty, which is explicitly excluded from the definition of "active duty" in 10 U.S.C. § 101(d)(1). The September 12, 2008, and August 3, 2011, orders indicate he was on "32 USC 502(f) AGR status," reaffirming that he did not meet the criteria for active duty. Subsequent orders only changed his station without altering his status.
Additionally, while Plaintiff cites 10 U.S.C. § 12602(a)(2) to argue that Ladd's full-time National Guard duty should be considered active duty for the purposes of the Servicemembers Civil Relief Act (SCRA), this section applies solely to benefits for Army National Guard members and does not override the definition of active duty in § 101(d)(1). The SCRA's definition of "military service" incorporates the active duty definition that excludes full-time National Guard duty, as supported by case law. Furthermore, Plaintiff claims that a letter from an attorney at PPDPR dated July 5, 2011, regarding the Ladds' bankruptcy violated the Fair Debt Collection Practices Act (FDCPA). She also contends that Vieira, the estate representative, was first informed of a potential claim during a meeting on September 16, 2010.
The July 5, 2011 letter does not introduce new allegations against the Ladds that aren’t already included in the Carroll County complaint, and therefore, it does not trigger a new Fair Debt Collection Practices Act (FDCPA) cause of action. Even if the letter were considered a separate basis for a claim, the court finds the FDCPA claim untimely, as the one-year statute of limitations under 15 U.S.C. § 1692k(d) began on July 2, 2009, when Christopher Ladd lost his security clearance. The extension provided by 11 U.S.C. § 108(a) does not apply to claims arising after a bankruptcy petition is filed. Additionally, the filing of First Georgia’s proof of claim on February 7, 2011, does not reset the limitations period for the FDCPA claim.
Regarding the FDCPA claim against PPDPR, the court concludes that PPDPR is entitled to summary judgment not only due to the statute of limitations but also because of the "bona fide error" defense under 15 U.S.C. § 1692k(c). An affidavit from PPDPR's attorney and his former secretary confirms that they did not forge signatures or alter documents related to the Carroll County action, and there is no evidence from the plaintiff to contradict this. The Fourth Circuit has ruled that attorneys engaged in regular debt collection are not subject to an increased duty of investigation under the FDCPA, allowing PPDPR to rely on client representations. The Ladds’ uncertain testimony about the forgery does not create a material fact dispute sufficient to challenge the bona fide error defense. Thus, summary judgment is warranted for PPDPR on the FDCPA claim.
For fraudulent and negligent misrepresentation claims under South Carolina and Georgia law, it is essential that the defendant made a false representation. The plaintiff alleges two specific misrepresentations by First Georgia: one regarding Loan 2 consolidating Loan 1 and another asserting that Loan 2 would only be secured by a Chevy Tahoe. However, the plaintiff fails to provide evidence supporting the second claim, as the allegations in the second amended complaint do not constitute evidence. Regarding the first claim, Chris Ladd's testimony confirms that the proceeds of Loan 2 did pay off Loan 1, and he acknowledged that the supposed consolidation occurred prior to his deployment to Iraq, with Loan 2 being signed after his return. Consequently, there is insufficient evidence for a rational trier of fact to conclude that these misrepresentations occurred. Additionally, the plaintiff does not establish that First Georgia had a duty to disclose that the Newnan property would serve as collateral for Loan 2, nor does she cite any legal authority supporting such a claim. Thus, summary judgment is deemed appropriate.
Furthermore, even if the proof of claim and a letter dated July 5, 2011, could potentially reset the statute of limitations, summary judgment remains warranted as the plaintiff has not demonstrated reliance on these documents, an essential element for both fraudulent and negligent misrepresentation claims. The plaintiff's actions, including not distributing funds towards the proof of claim, indicate a lack of reliance. Lastly, the breach of contract claim accompanied by a fraudulent act is only asserted against CertusBank, with Loan 2 being governed by Georgia law unless federal law applies.
Plaintiff has not countered CertusBank's assertion that Georgia law governs her breach of contract claim linked to fraudulent conduct. No supporting case law from Georgia for such a claim has been provided by the Plaintiff, and the court has found none. Under Georgia law, exemplary damages are generally not permitted in contract cases but may be awarded if fraud is established, as fraud constitutes tortious conduct. To succeed in her claim, Plaintiff must demonstrate both a breach of contract and fraud; however, she has failed to present sufficient evidence of misrepresentation, justifying summary judgment.
Regarding the conversion claim, Plaintiff alleges CertusBank converted Loan 2 proceeds, but it is undisputed that these proceeds were used to settle Loan X. Without evidence or argument supporting the viability of this claim, CertusBank is also entitled to summary judgment on this issue.
In the conspiracy claim, Plaintiff does not clearly indicate whether Georgia or South Carolina law applies. The court adheres to South Carolina’s conflict of laws principles since the alleged injuries occurred there. South Carolina law requires proof of: (1) a combination of two or more parties; (2) intent to injure the plaintiff; and (3) resulting special damages. Evidence indicates that the PPDPR individuals involved in the Carroll County action deny any wrongdoing regarding the authenticity of the Ladds' signatures. Although the Ladds contest the authenticity of their signatures on certain documents, they lack knowledge of who may have forged them.
Plaintiff has failed to provide sufficient evidence for a rational trier of fact to determine that the defendants conspired to harm the Ladds, warranting summary judgment. Additionally, Plaintiff did not address PPDPR’s arguments regarding the abuse of process claim, nor did they present evidence to support its viability. The essential elements of abuse of process require demonstrating an ulterior motive and improper use of legal process, which Plaintiff has not established. Thus, PPDPR is entitled to summary judgment on this claim, as well as on statute of limitations grounds. PPDPR's counterclaim for attorney fees under 15 U.S.C. § 1692k(a)(3) will be dismissed if summary judgment is granted for all of Plaintiff's causes of action. Consequently, the defendants’ motions for summary judgment are approved, PPDPR's counterclaim is dismissed, and the entire adversary proceeding is concluded. Plaintiff's factual assertions mainly consist of lengthy quotes from depositions without sufficient context. Although Plaintiff claimed that Loan 1 was secured by a Ford Explorer, this discrepancy does not influence the outcome. The Soldiers' and Sailors' Civil Relief Act precedes the Servicemembers Civil Relief Act, allowing designated authorities to order reservists to active duty with their consent; however, National Guard members require state authority for such orders. Even if Georgia law were applicable, it would not change the conclusion. PPDPR contends that the alleged wrongful acts stem from a principal-agent relationship, negating the possibility of conspiracy among separate entities, but due to other justifications for summary judgment, it is unnecessary to rule on this argument.
