Case No. 95-11924-AM Adversary Proceeding No. 95-1504United States Bankruptcy Court, E.D. Virginia
September 18, 1996
MEMORANDUM OPINION AND ORDER
STEPHEN MITCHELL, Bankruptcy Judge
At a pretrial conference held on June 18, 1996, the court noted that the debtor had, in addition to filing an answer to the adversary complaint, filed a motion to dismiss under F.R.Bankr.P. 7012 that had not yet been ruled upon. The court advised the parties at that time that the court would review the motion in chambers and rule on the motion without hearing oral argument. Upon further review and reflection, however, the court has determined that the determination of the motion should be deferred until the trial of this action.
This is an adversary proceeding to determine the dischargeability of the debtors’ liability for a deficiency after foreclosure. The debtors, Robert and Marilyn DeLuca, are real estate
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developers with an extensive portfolio of projects in Virginia and the District of Columbia. They filed a joint voluntary chapter 11 petition in this court on May 5, 1995, and remain in possession of their estate as debtors in possession. At various dates immediately prior to and subsequent to their own filing, they caused voluntary chapter 11 petitions to be filed on behalf of thirteen of the partnerships, limited partnerships, and limited liability companies they owned or managed (“the DeLuca entities”). One of those was Colonial Associates Limited Partnership (“Colonial”), on whose behalf a petition was filed in this court on May 5, 1995, the same date as their own. Although Colonial initially operated as a debtor in possession, a chapter 11 trustee was ultimately appointed and now serves.
Colonial’s sole asset was a 100-unit rental apartment complex in Williamsburg, Virginia, known as the Country Club Apartments. The property was encumbered by a first-lien deed of trust held by The Federal National Mortgage Association (“Fannie Mae”) in the approximate amount of $2,600,000. Prior to the appointment of the chapter 11 trustee, the property was managed by American Property Services, Inc., which is wholly owned by the DeLucas. Although the debtor proposed several plans of reorganization, no plan was ever confirmed, and Fannie Mae was ultimately granted relief from the automatic stay in order to foreclose under its deed of trust.
The complaint presently before the court was filed on December 11, 1995, and seeks a determination that the DeLucas are personally liable to Fannie Mae for certain rents alleged to have been improperly diverted from Colonial for the personal benefit of the DeLucas and DeLuca related parties, and that such liability is excepted from discharge under §§ 523(a)(4) and (a)(6), Bankruptcy Code. The debtors have filed a timely motion under F.R.Bankr.P. 7012 to dismiss Counts I, IV, and V of the complaint for failure to state a claim upon which relief may be
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granted.[1] The counts at issue sound in breach of fiduciary duty (Count I), statutory conspiracy to injure another in his trade or business (Count IV), and common-law conspiracy (Count V). Not affected by the motion are counts grounded in embezzlement (Count II) and conversion (Count III). All five counts rely on the same factual allegations; only the theory of nondischargeability or recovery differ.[2]
As the plaintiff correctly observes, the motion to dismiss is little more than a bare assertion that insufficient facts are pleaded. The motion utterly fails to comply with Local Rule 109(G), which requires that all motions, with certain exceptions not relevant here, “shall be accompanied by a written memorandum setting forth a concise statement of the facts and supporting reasons, along with a citation of the authorities upon which the movant relies. . . .” Additionally, the court notes that under the scheduling order entered by the court in this adversary proceeding on January 4, 1996, if a motion to dismiss under F.R.Bankr.P. 7012 is filed, “it shall be noticed for a hearing by the proponent of the motion who shall be responsible for giving notice to all other parties. If no notice is given, no hearing will be held, and the motion will be dismissed.” ¶ 1 (emphasis added). In this case, the defendants have never set the motion to dismiss for a hearing. In fairness, however, one reason they may not have done so is because the parties are apparently
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continuing to discuss settlement.
Although the court is not required to hold a hearing or hear oral argument on the motion to dismiss and could simply rule based on the pleadings and on the court’s own research of the issues, to rule on the motion at this time would appear to be an inappropriate use of judicial resources. First, the matter has not been thoroughly briefed. The motion to dismiss cited no cases or other legal authority. The plaintiffs response, accordingly, is very general and likewise does not cite to any authority. While obviously the court always has the ability to do its own research and analysis, complete briefing and a thorough analysis of the controlling case law serves to focus the issues and promote informed decision making. Second, ruling on the motion at this time would not significantly promote judicial economy in the sense of narrowing issues for trial. As noted above, all five counts in the plaintiffs complaint rely on precisely the same facts: only the theory of recovery differs. Since the motion to dismiss is directed at only three of the five counts, whether or not they are dismissed will have no material effect on the trial, except to possibly shorten and simplify the final arguments. Under Fed.R.Civ.P. 12(d), incorporated by F.R.Bankr.P. 7012, the court has the option of deferring until trial a ruling on whether a pleading sets forth a claim for relief.[3] Such action is appropriate in this case.
ORDER
For the foregoing reasons, it is
ORDERED:
1. Pursuant to Fed.R.Civ.P. 12(d), the hearing and determination of the defendants’ motion to dismiss filed February 5, 1996, is deferred until the trial of this action. Not later than 15 days prior to the scheduled trial date, the defendants shall file, and serve upon the plaintiff, a memorandum of points and authorities in support of the defense that Counts I, IV, and V fail to state claims upon which relief can be granted. The plaintiffs may file a memorandum in response no later than two business days prior to trial.
2. The clerk shall mail a copy of this order to counsel for the plaintiff and counsel for the defendants.