EDWARD J. COLEMAN, III, Bankruptcy Judge.
The day after the Debtor filed her Chapter 13 bankruptcy petition, Defendant Wells Fargo Bank, N.A. ("Wells Fargo") conducted a non-judicial foreclosure of certain real property located at 4 Blue Gill Lane, Pooler, Georgia 31322 (the "Residence"). This property (which serves as the Debtor's marital residence) was owned solely by the Debtor's husband, and he alone executed the note and Security Deed for this property. PIP-West, LLC purchased the Residence at the foreclosure sale, and Defendant PIP-East, LLC (successor by merger to PIP-West, LLC) subsequently filed a dispossessory action. Despite the fact that the Debtor had no title to the property, she claims an equitable interest such that the filing of her bankruptcy petition should have prevented Wells Fargo's post-petition foreclosure.
On September 14, 2016, the Debtor filed this adversary proceeding (adv. dckt. 1) seeking a judgment setting aside the foreclosure sale and an award for damages pursuant to 11 U.S.C. § 362(k) for the Defendants' willful violations of the automatic stay. On October 25, 2016, the Debtor amended her complaint
This Court has subject-matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by then Chief Judge Anthony A. Alaimo on July 13, 1984. This is a "core proceeding" within the meaning of 28 U.S.C. § 157(b)(1).
On or about August 6, 2011, the Debtor married her current husband, Ronnie Nicholson, Jr. (Adv. Dckt. 17, ¶ 10). Shortly after their marriage, on August 30, 2011, the Debtor's husband purchased the Residence and placed title to the property solely in his name
It is undisputed that the Debtor did not contribute any funds towards a down payment on the Residence. However, the Debtor has regularly contributed funds for the monthly mortgage payments and for the repairs and maintenance of the property. (Adv. Dckt. 17, ¶ 11, 12). In fact, since Mr. Nicholson's arrest in January 2016, the Debtor has borne the costs of any monthly mortgage payments, repairs, and improvements concerning the Residence
On May 3, 2016, Wells Fargo
On May 2, 2016, one-day prior to Wells Fargo's foreclosure sale of the Residence, the Debtor filed her Chapter 13 bankruptcy petition. (Dckt. 1). In her schedules, the Debtor indicated that she held a one-half
On September 14, 2016, the Debtor initiated this adversary proceeding seeking damages for the Defendants' alleged violations of the automatic stay pursuant to 11 U.S.C. § 362(k). (Adv. Dckt. 1). In her complaint, the Debtor alleges that she held an equitable interest in the Residence under Georgia law, and thus the Defendants' actions taken with respect to the Residence violated the automatic stay of 11 U.S.C. § 362(a). (Adv. Dckt. 17, ¶ 13). The Debtor further alleges that Defendants took such actions despite having notice and actual knowledge of the Debtor's bankruptcy filing and her asserted interest in the Residence. (Adv. Dckt. 17, ¶ 18-20, 27). In their Motions to Dismiss, the Defendants argue that the Debtor has failed to plead facts which establish that the Residence was "property of the estate" protected by the automatic stay. (Adv. Dckt. 22, 23). As a result, the Defendants contend that neither the foreclosure sale of the Residence nor the dispossessory action violated the automatic stay, and thus the Debtor's claim for damages under § 362(k) must be dismissed. Id.
A complaint should be dismissed under Federal Rule 12(b)(6) only where it appears that the facts alleged fail to state a "plausible claim for relief." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Fed. R. Civ. P. 12(b)(6). Under Federal Rule 8(a)(2)
"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The rule "does not impose a probability requirement at the pleading stage," but instead "asks for more than a sheer possibility that a defendant has acted unlawfully." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," a complaint is insufficient under Federal Rule 8(a) because it has merely "alleged" but not "show[n] . . . that the pleader is entitled to relief. Iqbal, 556 U.S. at 679.
The Debtor contends that Wells Fargo's foreclosure sale of the Residence and PIP East's subsequent dispossessory action violated the automatic stay of 11 U.S.C. § 362(a). The Debtor further contends that such actions were willful, and therefore she is entitled to damages under § 362(k), which provides:
11 U.S.C. § 362(k)(1). Accordingly, to state a claim under § 362(k) as to each Defendant, the Debtor must allege facts sufficient to establish the following three elements: (1) the actions taken by Defendant were in violation of the automatic stay; (2) the violation was willful; and (3) the violation caused actual damages. Here, the Debtor's Amended Complaint fails to state a claim under § 362(k) because the Debtor has no protectable interest in the Residence, and thus the Defendants' actions taken with respect to the Property did not violate the automatic stay of § 362(a).
Under 11 U.S.C. § 362(a), the filing of a bankruptcy petition triggers an automatic stay of, among other things, "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362(a)(3) (emphasis added). In this case, it is clear that the foreclosure sale and the subsequent dispossessory action constitute acts to obtain possession of or to exercise control over the Residence. However, the Defendants argue that the Debtor has failed to plead any facts which establish that the Residence was "property of the estate" protected by the automatic stay
The Bankruptcy Code defines "property of the estate" to include "all legal and equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a). Although the question of what is "property of the estate" under § 541(a) is a federal question, property rights are created and defined by state law. Butner v. United States, 440 U.S. 48, 55 (1979). It is state law that determines whether the debtor's interest in property is sufficient to create a property right in the bankruptcy estate under § 541(a). Id.
The Debtor contends in her complaint that the Residence is "property of the estate" because it is marital property in which she is entitled to an equitable interest under Georgia Law. Recognizing that the property interests included under § 541(a) are exceedingly broad, the Debtor equates her potential claim to an equitable division of property in a divorce action that has never been filed to an equitable interest sufficient to be included in her bankruptcy estate under § 541(a) and protected by the automatic stay under § 362(a). The Court disagrees.
The concept of equitable division of property in divorce (or suits for separate maintenance) has been addressed by numerous Georgia court decisions since the seminal case of Stokes v. Stokes, 246 Ga. 765 (1980). Georgia law recognizes both marital property (subject to equitable division) and non-marital, or separate property, that is not subject to equitable division.
Dan E. McConaughey, Georgia Divorce, Alimony, and Child Custody § 12:3 (2016) (citations omitted).
In the present case, it appears undisputed that the Residence was acquired by the Debtor's husband during the marriage, although it was only a few weeks after the parties were married
The complaint does not allege that the Debtor has divorced her husband or that a divorce claim was pending at the time she filed for bankruptcy. In fact, the complaint asserts that "Debtor was married to Ronnie Nicholson, Jr. on or about August 6, 2011 and has remained married to Mr. Nicholson at all time[s] since. . . ." (Adv. Dckt. 17, ¶ 10). Because the Debtor alleges that she is still married to Mr. Nicholson, the Debtor has yet to acquire any equitable interest in the Residence that might result from the equitable division of property, and thus it is not "property of the estate" protected by the automatic stay
The Debtor argues that pursuant to 11 U.S.C. § 1327(a), the Defendants are bound by the provisions of her confirmed Chapter 13 plan, which treats
Section 1327(a) provides that "the provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan." According to the Bankruptcy Code, a "creditor" is an "entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor." 11 U.S.C. § 101(10). In this case, the Court is unaware of any set of facts that would establish PIP East as a creditor of the Debtor. Not only does PIP East have no claim against the Debtor, but its relationship with the Debtor, to the extent there is one, did not arise until after she filed her bankruptcy petition. Accordingly, the Court finds that PIP East is not a "creditor," and thus is not bound by the provisions of the Debtor's confirmed plan under § 1327(a).
The Court recognizes that Wells Fargo is a "creditor" of the Debtor, but this is based solely on its unsecured claim arising from an overdraft charge on a checking account held by the Debtor. It is an unhappy coincidence that the Debtor maintained a checking account with the same bank to whom her husband's mortgage was transferred. Notwithstanding this fact, the Court finds that Wells Fargo's status as an unsecured creditor should not bind it to the Debtor's plan provisions related to the Residence. It is undisputed that the Debtor is not an obligor on the note held by Wells Fargo, and thus is not liable for such debt. Accordingly, Wells Fargo is not a creditor of the Debtor as it relates to the note, and thus cannot be bound by the Debtor's plan provisions which attempts to address such debt.
Even if Wells Fargo was a "creditor" with respect to the Residence, the Court finds that it is not bound by a plan provision which attempts to establish an interest in property that the Debtor did not have on the petition date. The effect of section 1327(a) is such that "an order confirming a Chapter 13 plan is res judicata as to all justiciable issues which were or could have been decided at the confirmation hearing." In re Clark, 172 B.R. 701, 703 (Bankr. S.D. Ga. Sept. 19, 1994) (J. Walker). However, the preclusive effect of a confirmed plan only goes so far. As the court in Winters Nat'l Bank & Trust Co. v. Simpson held:
26 B.R. 351, 354 (Bankr. S.D. Ohio 1982).
Likewise, the Debtor's argument that her confirmed plan precludes the Defendants from disputing her interest in the Residence is without merit. It is arguably true that the Debtor's confirmed plan treats the Residence as the Debtor's property, but only to the extent she proposes to pay the mortgage directly and to fund an arrearage claim which Wells Fargo understandably never filed. However, this proposed plan treatment is irrelevant because the Residence did not become property of the estate upon the filing of the Debtor's bankruptcy, and thus it is not property within the Court's vested jurisdiction. Estep v. Fifth Third Bank of N.W. Ohio (In re Estep), 173 B.R. 126 (Bankr. N.D. Ohio 1994).; Winters, 26 B.R. at 354. Accordingly, the Court finds that the Defendants cannot be bound by a confirmed plan that improperly attempts to bring property, in which the Debtor had no interest on the petition date, into her bankruptcy estate. See Estep, 173 B.R. at 131 (rejecting debtor's argument that the confirmation of his plan is res judicata as to whether a lease in which the debtor had no interest in was property of the estate).
The Debtor filed this adversary proceeding seeking damages for the Defendants' alleged violations of the automatic stay provisions of 11 U.S.C. § 362. However, the Court finds that the Debtor did not have an interest in the Residence at the time she filed for bankruptcy, and thus the Residence was not protected by the automatic stay. Accordingly, the Court will grant Defendants' Motions to Dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). A separate order will be entered contemporaneously with this Opinion.