PETER J. MESSITTE, District Judge.
Stephen Todd Stevens has appealed a decision of the United States Bankruptcy Court issued in Showalter v. Stevens, Adversary Proceeding No. 09-00854, Bankr. Case No. 09-10127 (Bankr. Md.). The Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158(a). No hearing is necessary to dispose of this matter. See Local R. 105.6 (D. Md.). For the following reasons, the Court
The facts of the case are these:
In late 2004, Stevens and Appellee Stephen Showalter entered into a contract, whereby Stevens agreed to purchase Showalter's ownership interest in two corporations, Building Specs, Inc. and Building Specs of Annapolis, Inc., for the price of $1,000,000. Pursuant to the agreement, Stevens was to pay $50,000 at the time of contract formation, an additional $250,000 by January 15, 2005, and the remaining balance of $700,000 over an agreed-upon timeframe. The money owed was secured by a promissory note and a deed of trust on real property owned by Stevens in Upper Marlboro, Maryland. The contract also included a stock pledge agreement for the two companies, a life insurance policy on Stevens' life for the benefit of Showalter, and UCC financing statements to secure the amount owed. Stevens eventually defaulted under the terms of the note, after which, on October 29, 2008, Showalter entered a confessed judgment against Stevens in the Circuit Court for Anne Arundel County, Maryland in the amount of $854,514.30.
On January 5, 2009, Stevens filed for Chapter 13 bankruptcy protection in the Bankruptcy Court of this District. Subsequently, on March 13, 2009, he moved to convert the case to Chapter 7. Then, on
In the Complaint he filed against Stevens in the Bankruptcy Court, Showalter alleged, in somewhat conclusory language, that Stevens had been "funneling, transferring, or otherwise appropriating" assets in an effort to "intentionally hide, deplete, and dissipate" funds in which Showalter and others held an interest. Although the Complaint was short on specifics, it expressly invoked 11 U.S.C. § 727, which states, among other things, that a discharge shall not be granted where the debtor:
11 U.S.C. § 727(a)(2).
Despite the somewhat conclusory nature of the allegations in the Complaint, Stevens filed an Answer on January 28, 2010. The Bankruptcy Court then issued a Scheduling Order, and the parties proceeded to discovery.
The matter later proceeded to trial,
Id. at *1 n. 1, 2010 Bankr.LEXIS 4400, at *1 n. 1.
This appeal followed.
On appeal, Stevens argues that the Bankruptcy Court committed reversible error when it denied his Motion to Dismiss and thereby declined to dismiss Showalter's Complaint for failing to meet the pleading requirements of Federal Rule of Civil Procedure 8(a)(2).
A district court reviews conclusions of law made by a bankruptcy court de novo. See Cypher Chiropractic Ctr. v. Runski, 102 F.3d 744, 745 (4th Cir.1996). The bankruptcy court's findings of fact, however, "shall not be set aside unless clearly erroneous." Fed. R. Bankr.P. 8013; see also In re Bryson Props., XVIII, 961 F.2d 496, 499 (4th Cir.1992). A finding of fact is clearly erroneous when, "although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).
Nevertheless, even where a bankruptcy court commits an error of law or makes a clearly erroneous factual finding, its error will not result in reversal so long as the reviewing district court concludes that the error was harmless. See In re Travelstead, 227 B.R. 638, 644 (D.Md.1998) (noting that the harmless error doctrine applies to a district court's review of the decision of a bankruptcy court).
Because the issue raised in this case is a question of law—i.e., whether the Bankruptcy Court erred when it declined to dismiss Showalter's Complaint for failure
Pursuant to the plain language of Federal Rule of Civil Procedure 12(b), it is beyond dispute that a motion to dismiss brought pursuant to Rule 12(b)(6) is untimely when presented after the filing of an answer. See Fed.R.Civ.P. 12(b) (noting that a 12(b)(6) motion "must be made before pleading if a responsive pleading is allowed") (emphasis added).
However, a failure to submit a 12(b)(6) defense before pleading is not necessarily fatal because a defendant retains the right to raise the defense of failure to state a claim: (1) by filing a motion for judgment on the pleadings, pursuant to Rule 12(c), after the pleadings are closed but early enough not to delay trial, see Fed.R.Civ.P. 12(h)(2)(B); or (2) by raising the defense at trial, see Fed.R.Civ.P. 12(h)(2)(C). Given this, many courts have concluded that a court may construe an untimely Rule 12(b)(6) motion as a Rule 12(c) motion for judgment on the pleadings. See, e.g., Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.1999); Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001); Satkowiak v. Bay County Sheriff's Dep't, 47 Fed.Appx. 376, 377 n. 1 (6th Cir.2002).
It is equally true that, where a plaintiff's complaint fails to state a claim upon which relief can be granted, courts routinely grant leave to amend to provide the plaintiff with an opportunity to cure the errors in his complaint. See Hayden v. Paterson, 594 F.3d 150, 161 n. 9 (2d Cir.2010) (noting that, even when a complaint falls short of the Twombly/Iqbal plausibility standard, "a court should freely give leave to amend before trial when justice so requires") (internal citations and quotation marks omitted). Indeed, "leave to amend should be denied only when . . . amendment would be prejudicial to the opposing party, there has been bad faith on the part of the [party seeking to amend], or amendment would be futile." Matrix Capital Mgmt. Fund, LP v. BearingPoint, Inc., 576 F.3d 172, 193 (4th Cir. 2009); see also Fed.R.Civ.P. 15(a)(2) ("The court should freely give leave [to amend] when justice so requires."); Fed.R.Civ.P. 15(b)(1) (noting that, even at trial, the court "should freely permit an amendment" to conform the pleadings to the proof "when doing so will aid in presenting the merits and the objecting party fails to satisfy the court that the evidence would prejudice that party's action or defense on the merits").
Further still, it is undeniable that, at some point, a defendant no longer retains the right to claim that he has been prejudiced by deficiencies in a plaintiff's complaint. See Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 870-71 (4th Cir.1999) (noting that a defense of failure to state a claim cannot be brought after a trial on the merits, and that deficiencies in a complaint do not violate a defendant's due process rights where the defendant has had ample opportunity to move for dismissal prior to and during trial). After all, the primary purpose of allowing disposal of lawsuits at the motion to dismiss stage is not to foreclose meritorious claims through resort to technicalities, but rather to prevent a defendant from having to endure the time and expense of litigation in defense of a dubious claim. See Francis v. Giacomelli, 588 F.3d 186, 193 & n. 2 (4th Cir.2009) (noting that the Supreme Court's decisions in Twombly and Iqbal were driven, at least in part, by the problems created by "strike suits," whereby plaintiffs bring "largely groundless claims to justify conducting extensive and costly discovery with the hope
Applying these principles, the Court concludes with little difficulty that the Bankruptcy Court did not commit reversible error in declining to dismiss Showalter's Complaint for failure to state a claim.
To begin, it is beyond dispute that Stevens' Motion to Dismiss, which was expressly brought pursuant to Rule 12(b)(6), was presented after the filing of his answer and was, therefore, untimely. See Fed.R.Civ.P. 12(b) (noting that a 12(b)(6) motion "must be made before pleading if a responsive pleading is allowed") (emphasis added). Stevens does not deny this, choosing instead to conveniently ignore it in his brief on appeal. In light of Rule 12(b)'s clear command, the Court declines to find that the Bankruptcy Court committed any reversible error in denying Stevens' Motion.
Additionally, the Court concludes that, even if the Bankruptcy Court erred in denying Stevens' Motion to Dismiss, any such error was harmless since Stevens suffered no prejudice as a result. Stevens at all times retained the right to raise the defense of failure to state a claim by filing a Rule 12(c) motion or by asserting the defense at trial. See Fed.R.Civ.P. 12(h)(2). He also retained the right to challenge the sufficiency of Showalter's claims by filing, at any time, a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56,
For the foregoing reasons, the decision of the Bankruptcy Court is