Morsey v. Semer

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AUTHENTICATED / h
U.S. GOVERNMENT
INFORMATION
GPO
14-08

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Shirley Semer )
) Case No. 11-3266
Debtor(s) )
) (Related Case: 11-35467)
Carla Morsey )
)
Plaintiff(s) »)
)
v. )
)
Shirley Semer )
)
Defendant(s) )
DECISION AND ORDER

The matter now before the Court is based upon a prior order entered in this proceeding. In
the prior Order, the Court, based upon a determination that the Plaintiff's claim was a
nondischargeable debt, required the Plaintiff to submit an itemized list of her actual damages,
including attorney fees, as a prerequisite to the entry of a monetary judgment in her favor. The
Plaintiff has since submitted this list, with the Defendant filing a response thereto. Based upon a
review of the materials submitted by the Parties, the Court finds that a monetary judgment in the

amount of $47,697.80 should be entered in the Plaintiffs favor.

PROCEDURAL HISTORY

After a Trial held on the Plaintiff's Complaint to Determine Dischargeability, the Court
found in favor of the Plaintiff, holding “that the claim held by the Plaintiff, Carla Morsey, against
the Defendant, Shirley Ann Semer, be, and is hereby, determined to be a NONDISCHARGEABLE
DEBT pursuant to 11 U.S.C. § 523(a)(2)(A).” (Doc. No. 26, at pg. 13). As a part of her action

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Carla Morsey v. Shirley Semer
Case No. 11-3266

against the Defendant, the Plaintiff sought the entry of a monetary judgment on her claim. (Doc. No.
1, at pg. 3). For this request, the Court, although disposed to enter a monetary judgment in the
Plaintiff’s favor,' determined that the evidence presented to the Court at the Trial was inadequate to

enable the Court to liquidate the Plaintiff's damages.

Based then upon this conclusion, the Court set forth in its “Decision and Order” that:

to liquidate the Plaintiffs damages, the Plaintiff shall be required to file with
the Court an itemized list setting forth her actual damages, including attorney
fees, with due allowance made for the prior settlement reached with the entity
performing the inspection report. The Defendant shall then be afforded the
opportunity to respond to the report.
(Doc. No. 26, at pg. 12). Consistent with this determination, the Plaintiff filed a “Report of Actual

Damages.” (Doc. No. 27). Thereafter, the Defendant filed a timely response thereto. (Doc. No. 29).

CLAIMS FOR DAMAGES

In her “Report of Actual Damages,” the Plaintiff sought the entry of a monetary judgment
totaling $56,057.80. This request was based upon the following list of itemized damages:

$34,200.00 Difference between purchase price and present value of St.
Marys property

$ 8,750.00 Monthly rent to Plaintiffs parents of $350.00 per month for
25 months.

$ 2,250.00 Monthly rent of a storage unit at $90.00 per month for 25
months

i

In Longo v. McLaren (In re McLaren), the Sixth Circuit Court of Appeals held that, as a part
of proceeding to determine the dischargeability ofa particular debt, a court may, upon a finding
of nondischargeability, enter a monetary judgment in favor of the claimant. 3 F.3d 958, 966 (6"
Cir.1993).

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$13,357.90 Attorney fees through history of litigation

($2,500.00) Deduction for settlement with residential inspector in
underlying state court action

With respect to this itemized list, the Defendant raised two objections.

First, it is the Defendant’s position that the damages claimed by the Plaintiff for 25 months
of rental charges — representing the $350.00 per month the Plaintiff pays for rent to live with her
parents and the $90.00 per month rent the Plaintiff pays to rent storage space — should be limited to
a duration of six months. Second, it is the position of the Defendant that, based upon a procedural
deficiency, the Plaintiff should not be entitled to recover any of the $13,357.90 sought as attorney’s
fees. For the reasons now explained, the first point, but not the second point, raised by the Defendant

has merit.

DISCUSSION

The basis of this Court’s prior “Decision and Order,” wherein it was determined that the
Plaintiff suffered an injury as the result of the Defendant failing to disclose material defects in a real
estate transaction, was predicated on fraud, 11 U.S.C. § 523(a)(2)(A). In so holding, the Court
determined that the “Plaintiffs actual damages shall include the sum of $34,200.00, representing the
difference between the purchase price of the St. Marys property ($63,500.00) and the present value
of the property ($29,300.00).” (Doc. No. 26, at pg. 12). The Defendant did not contest this

determination.

As here, when it is determined that an award of actual damages is proper, an injured party
may also be awarded consequential damages. This species of damages is defined “as losses that do
not flow directly and immediately from an injurious act, but that result indirectly from the act.”
United States v. DeRosier, 501 F.3d 888, 895 (8" Cir. 2007). In this matter, the Court found an

award of consequential damages to be appropriate, setting forth that the Plaintiff “shall be entitled

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to her out-of-pocket expenses, including the monthly rent the Plaintiff pays to her parents ($350.00)
and the monthly rent the Plaintiff pays to lease a storage unit ($90.00).” (Doc. No. 26, at pg. 12).

An award of consequential damages, however, is limited by the equitable doctrine of
mitigation. See, e.g., Bank of N.Y. v. Amoco Oil Co., 35 F.3d 643, 659-60 (2™ Cir.1994) (“Generally,
the duty to mitigate is a limitation on consequential damages . . . .”). This doctrine is grounded in
equity and “imposes on a party injured by either a breach of contract or a tort the duty to exercise
reasonable diligence and ordinary care in attempting to minimize its damages.” Fleet National Bank
v. Anchor Media Television, Inc., 45 F.3d 546, 561 (1* Cir.1995). Thus, as noted in this Court’s
“Decision and Order” regarding the Plaintiff’s claim of damages for rent: “Such out-of-pocket
expenses... shall not be allowed in perpetuity as the Plaintiff is under a duty to mitigate her

damages.” (Doc. No. 26, at pg. 12).

Citing to the doctrine of mitigation, it is the position of the Defendant that the Plaintiff's
claim of damages for rent, representing that for storage and accommodation, should be limited to a
period of six months, and not a period of 25 months as claimed by the Plaintiff. Upon consideration

of the matter, this assessment seems reasonable.

The facts, as set forth in this Court’s prior “Decision and Order,” show that the Parties
finalized their real estate transaction in May of 2010 and, that shortly afterwards, the Plaintiff
discovered the defects to the property which gave rise to her claim against the Defendant. However,
despite the fact that one of the defects to the property included the presence of mold, the evidence
in this case does not fully support that the defects to the property, alone, rendered the property
uninhabitable. Of note, no evidence was presented that the mold discovered in the property presented
an immediate health hazard to the Plaintiff. Instead, it is clear that the property was only rendered
uninhabitable after the Plaintiff, in anticipation of remediation, caused the property to be stripped

to its skeleton.

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A key component in any mitigation assessment is the foreseeability and reasonableness of
the injured party’s actions. Alliant Tax Credit Fund 31-A, Ltd. v. Murphy, Slip Copy, 2012 WL
3519463 *10 (6" Cir. 2012). Under the conditions as they exist in this matter, it is reasonable to
assume that the Plaintiff, having undertaken to remediate the property, would then seek to complete
the needed repairs as quickly as possible. For this reason, a duration of six months, as opposed to
25 months, to complete the needed repairs to the Plaintiff's property seems to the Court to be both
reasonable and foreseeable. Put differently, once the Plaintiff undertook to have her property
repaired, thereby rendering the property uninhabitable, the doctrine of mitigation required her to
cause the repairs to be completed in a reasonable amount of time —a period which the Court believes

should be measured in months, not years.

Accordingly, the Plaintiff’s claim of consequential damages for rent will be limited in these
respects. First, as it concerns the rent paid to her parents for accommodation, the Plaintiffs request
of a damage award in the amount of $8,750.00, will be limited to $2,100.00, a downward adjustment
of $6,650.00, representing six months’ rent at $350.00 per month. Likewise, the Plaintiffs claim of
a damage award of $2,250.00 to rent storage space will be limited to $540.00, a downward
adjustment of $1,710.00, representing six months’ rent at $90.00 per month. Therefore, based upon
these adjustments, the Plaintiffs claim of damages for rent will be lowered by $8,360.00. The Court
now turns to address the second matter raised by the Defendant: Whether the Plaintiff is entitled to

an award of legal fees?

As a part of her request for damages, the Plaintiff also seeks an award of attorney’s fees in
the amount of $13,357.90. In response, the Defendant argues that the fees should be disallowed
based upon a procedural deficiency. Specifically, the Defendant set forth that “the amount of
damages for attorney fees should be disallowed as Bankruptcy Rule 7008(b) requires that a request

for an award of attorney fees shall be pleaded as a claim in the Complaint.” (Doc. No. 29).

Bankruptcy Rule 7008(b), as cited by the Defendant, provides:

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(b) Attorney’s fees

A request for an award of attorney’s fees shall be pleaded as a claim in a

complaint, cross-claim, third-party complaint, answer, or reply as may be

appropriate.
In accordance with Bankruptcy Rule 7008(b), therefore, a party seeking, as a part of their complaint,
an award of attorney’s fees must seek such an award as a part of their “claim.” This Rule has no
counterpart in the Federal Rules of Civil Procedure, although the Federal Rules of Civil Procedure
do require that a claim for an item of special damage, which includes attorney’s fees, must be

“specifically stated” in the pleadings. FED.R.CIV.P. 9(g).

As used in Bankruptcy Rule 7008(b), a “claim” refers to the requirement of Federal Rule of
Civil Procedure 8(a)(2), made applicable to this proceeding by Bankruptcy Rule 7008(a). Under Rule
8(a)(2), it is provided that a pleading, including a complaint,’ must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief[.]” In turn, Federal Rule of Civil
Procedure 10(b), as made applicable to this proceeding by Bankruptcy Rule 7010, provides that a
“party must state its claims . . . in numbered paragraphs, each limited as far as practicable to a single
set of circumstances.” As used in the Federal Rules of Procedure, a claim is to be contrasted with
the requested relief, often termed a prayer for relief, with Federal Rule of Civil Procedure 8(a)(3)

providing that a complaint must also set forth “a demand for the relief sought... .”

According to the Defendant, the Plaintiff's Complaint to Determine Dischargeability failed
to comply with Bankruptcy Rule 7008(b) because “[a]lthough the Complaint requested attorney fees
there was not a separate claim setting forth said claim and for that reason attorney fees should not
be allowed.” (Doc. No. 29). For this position, the Defendant relies on the fact that the Plaintiff, in
bringing her complaint to determine dischargeability, set forth in her demand for relief that, inter

alia:

2

FED.R.CIV.P. 7(a)(1), made applicable to this proceeding by Bankruptcy Rule 7007.

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Carla Morsey v. Shirley Semer
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WHEREFORE . . . thus Plaintiff prays that this Court award judgment
against Debtor Shirley Ann Semer for the full amount plus attorney fees,
costs, interest, punitive damages in an amount intended to punish and make
an example of Defendant, determine the debt to be nondischargeable, and
grant other such relief as the Court may deem appropriate.

(Doc. No. 1, at pg. 3) (emphasis added).

As posited by the Defendant, the Plaintiffs above request for attorney’s fees, being contained
in her demand for relief, does not comply with Bankruptcy Rule 7008(b). The Plaintiff’ s request for
attorney’s fees in her demand for relief, thus, cannot serve as a basis to make such an award.
Hartford Police F.C.U. v. DeMaio (In re DeMaio), 158 B.R. 890, 892-93 (Bankr. D.Conn.1993).
See also Garcia v. Odom (In re Odom), 113 B.R. 623, 625 (Bankr. C.D.Cal.1990) (plaintiffs’

request for fees in the form of a prayer only is deemed insufficient under Rule 7008(b)).

A review of her complaint, however, shows that the Plaintiff also sought attorney’s fees as
a part of her claim against the Defendant. Specifically, in paragraph 20 of her Complaint, the
Plaintiff set forth:

Debtor acted with actual malice and intent to deceive Plaintiff in making the
false representations, thus entitling Plaintiff to punitive damages in an
amount to be proven at trial, but in excess of One Hundred Thousand Dollars
($100,000.00), plus attorney fees.
(Doc. No. 1, at pg. 3) (emphasis added). The Court concludes this request for attorney fees complies
with Bankruptcy Rule 7008(b), as the request qualifies as a ‘pleaded claim’ with the meaning of the

Rule.

For an award of attorney’s fees to be proper under Bankruptcy Rule 7008 it is only required
that the request “be plead as a claim ina complaint... .” Pursuant to the Federal Rules of Procedure
outlined, supra, the requirements of a well-pled claim are minimal, with the complainant only

needing to delineate a claim in a numbered paragraph which contains “a short and plain statement

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of the claim showing that the pleader is entitled to relief[.]” In this matter, both these requirements
have been satisfied. First, the Plaintiff's claim for attorney’s fees was set forth in a separate

paragraph, numbered 20 in her Complaint.

Second, the Plaintiff’ s claim for attorney’s fees provides a sound legal basis for affording the
Plaintiff such relief. In particular, the Plaintiff’s claim for attorney’s fees is coupled with allegations
that the Defendant acted with actual malice and an intent to deceive the Plaintiff. For this purpose,
a defendant who causes injury with actual malice and/or an intent to deceive is subject to an
assessment of legal fees, contrary to the default approach, known as the American Rule, which holds
that each litigant must pay his own attorney’s fees, win or lose. Hardt v. Reliance Standard Life Ins.
Co., -—U.S—, 130 S.Ct. 2149, 2157, 176 L.Ed.2d 998 (2010); Chambers v. NASCO, Inc., 501 U.S.
32, 45-46, 111 S.Ct. 2123, 2134, 115 L.Ed.2d 27 (1991) (an exception to the American Rule occurs

“when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, . . . .”)

The allegations contained in paragraph 20 of the Plaintiff's complaint were, thus, sufficient
to place the Defendant on notice that a judgment against her could be rendered for those attorney’s
fees incurred by the Plaintiff. Notice is the cornerstone of Bankruptcy Rule 7008(b), as well as this
Rule as a whole which, under paragraph (a), incorporates into an adversary proceeding the notice
pleading requirements of the Federal Rules of Procedure. Fotouhi v. Mansdorf, 427 B.R. 798, 805
(N.D.Cal. 2010). See also Bondex Int’l, Inc. v. Hartford Accident & Indem. Co., 667 F.3d 669, 681
(6" Cir. 2011) (federal rules of procedure apply a notice-based standard for pleading). Accordingly,
since the Plaintiff's claim, as set forth in paragraph 20 of her Complaint, was sufficient to place the
Defendant on notice regarding the issue of legal fees, it follows that her claim for legal fees

constitutes a well-pled claim within the meaning of Bankruptcy Rule 7008(b).

As a final matter regarding the entry of an award of attorney’s fees, the Defendant set forth
that in “the event the Court determines that attorney fees be allowed said attorney fees should only
be allowed in an amount that is reasonable and necessary for representation in the Adversary

Complaint.” (Doc. No. 29, at pg. 2). The Defendant, however, did not point the Court to any specific

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fees sought by the Plaintiff which are not reasonable or which are not the result of the Defendant’s
actions in the Parties’ real estate transaction. Without such specifics, the Court is not in a position
to second-guess the billing statements submitted by Plaintiffs legal counsel. Consequently, for these
reasons, the Plaintiff will be allowed legal fees against the Defendant in the sum of $13,357.80, the

full amount sought.

In this matter, the Plaintiff sought the entry of a monetary judgment in her favor in the
amount of $56,057.80. For those reasons explained herein, this request will be lowered by $8,360.00,
to $47,697.80, representing a reduction in the rent sought by Plaintiff. In reaching the conclusions
found herein, the Court has considered all of the evidence, exhibits and arguments of counsel,

regardless of whether or not they are specifically referred to in this Decision.

Accordingly, it is

ORDERED that, pursuant to Bankruptcy Rule 9021, the Clerk, United States Bankruptcy
Court, shall enter against the Defendant, Shirley Semer, and in favor of the Plaintiff, Carla Morsey,
a monetary judgment in the amount of $47,697.80.

Dated: October 25, 2012

~_7% AoA,
CA Richard L. Speer

United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE
Copies were mailed this 25" day of October, 2012 to:

Carla Morsey
150 Parkway Court
St. Marys, OH 45885

Timothy S. Sell
108 E. Poplar St.
Sidney, OH 45365

Shirley Ann Semer
6201 Bergner Rd.
Convoy, OH 45832

Randy Lee Reeves
973 W North St
Lima, OH 45805

/s/Diana Hernandez.
Deputy Clerk, U.S. Bankruptcy Court

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