United States District Court, E.D. Pennsylvania
case involves allegations that Defendants the City of
Philadelphia and the School District of Philadelphia
(collectively the "City" or "City
Defendants") attempted to collect debts that had been
discharged in Plaintiff Milton Thomas Sr.'s bankruptcy,
in violation of the discharge injunction entered under 11
U.S.C. § 524. The United States Court of Appeals for the
Third Circuit remanded this action to this Court with
instruction to determine if the City had notice of the
bankruptcy and what effect, if any, such notice has on the
City has now filed a Motion for Judgment on the Pleadings in
an attempt to strip the Court of jurisdiction to resolve this
case. For reasons that follow, the Court will deny
Defendants' Motion for Judgment on the Pleadings (Doc.
No. 39), and will impose a sanction in the amount of $10, 100
on Defendants for violating the discharge injunction, which
will be awarded to Plaintiff.
2004, Thomas filed for bankruptcy under Chapter 13 of the
Federal Bankruptcy Code. In the bankruptcy proceeding, Thomas
filed proof of claims-or debts-owed to the City for three
properties he owned: 1618 S. 58th Street, 1620 S. 58th
Street, and 1251 S. Ruby Street,  all in Philadelphia,
Pennsylvania. These debts related to real estate taxes on the
properties, which Thomas failed to pay.
Chapter 13 bankruptcy enables an individual debtor to propose
a repayment plan and make installments to his creditors over
three to five years. Harris v. Viegelahn, 135 S.Ct.
1829, 1835 (2015) (citing 11 U.S.C. §§ 1306(b),
1322, 1327(b)). Secured creditors who have notice of a
bankruptcy may file a proof of claim to establish the
debtor's obligation. 11 U.S.C. § 501(a). Secured
creditors who fail to do so may face a "cramdown"
of their secured claims. Generally speaking, the debtor is
entitled to a discharge once he completes the Chapter 13
plan, thereby obtaining his "fresh
start." Harris, 135 S.Ct. at 1835. The
discharge releases the debtor from all debts provided for by
the plan ("pre-petition debts"), with limited
exceptions. 11 U.S.C. § 524. Creditors may no longer
continue any collection action against the debtor to recoup
August, 26, 2004, noting that there was "no answer or
appearances by respondent, " the Bankruptcy Court
entered a cramdown order with respect to the debts on the
properties at 1618 S. 58th Street and 1620 S. 58th Street.
See In re Thomas, Bankr. E.D. Pa. 04-10175-elf, dkt.
#54. After completing the Chapter 13 plan more than five
years later, Thomas received a discharge. Id. at
13, 2015, Thomas initiated this action against the City
alleging that it was attempting to collect debts that had
been discharged in the earlier bankruptcy. (Doc. No. 3.)
Specifically, Thomas claimed that the City was attempting to
collect outstanding real estate taxes incurred from 1984 to
2004 on the 1618 S. 58th Street and 1620 S. 58th Street
properties, which had been previously discharged in the
bankruptcy. (Id. at 1-2.) Thomas sought an
injunction prohibiting the sale of the two properties, as
well as compensatory and punitive damages for Defendants'
violation of the bankruptcy discharge. (Id. at 2.)
February 3, 2016, Defendants moved to dismiss the Complaint
on the grounds of res judicata, or claim preclusion. (Doc.
No. 22.) They argued that although this "dispute
concerns the real property located at 1618 S. 58th Street and
1620 S. 58th Street, " an earlier action Thomas filed in
United States Bankruptcy Court for the Eastern District of
Pennsylvania involving the 1251 S. Ruby Street property
should bar this instant case. (Doc. No. 13.) On July 7, 2016,
in an Opinion and Order, this Court granted Defendants'
Motion to Dismiss. (Doc. Nos. 28, 29.)
March 16, 2017, the United States Court of Appeals for the
Third Circuit decided that Thomas's claims were not
barred by claim preclusion or issue preclusion,
remanded the case. This Court was instructed to "decide
anew, in the context of Thomas's current complaint, and
after providing the parties with notice and an opportunity to
be heard, whether the City had sufficient notice of
Thomas's bankruptcy." Thomas v. City of
Philadelphia, 624 F.App'x 174, 177-78 (3d Cir. 2017)
(internal citations omitted). If this Court "determines
that the City had notice of the 2004 bankruptcy, then it will
decide what effect, if any, the discharge had on the matters
in Thomas's current complaint." Id. at 178.
accordance with the Third Circuit's decision, this Court
scheduled a status conference with the parties. (Doc. No.
36.) On May 9, 2017, at the conference, the parties informed
the Court of the current status of the two properties at
issue in this case: 1618 S. 58th Street and 1620 S. 58th
respect to the property located at 1620 S. 58th Street, the
City explained that the property was sold at sheriff's
sale on July 15, 2015 for approximately $10, 000. (Doc. No.
41 at 16:21-18:13.) The City admitted that the 1620 S. 58th
Street property was sold on the basis that Thomas had not
paid real estate taxes for the residence, including those
pre-petition taxes incurred between 1983 and 2004.
(Id. at 16:18-18:13.) Thomas stated that he suffered
a significant loss from the sale of 1620 S. 58th Street.
(Id. at 18:14-19:3.) For example, he noted that he
was receiving $650 per month in rental income from this
property before it was sold. (Id. at 18:18-20.) For
the City's sale of the 1620 S. 58th Street property,
Thomas requested damages including the appraisal value of the
property at the time it was sold, the unearned rental income
that he would have received on the property, and punitive
damages to penalize the City for its conduct. (See Id.
to the property located at 1618 S. 58th Street, the City had
stayed the collection action for unpaid real estate taxes and
the pending sheriff's sale of the property. (Doc. No. 41
at 7:23-8:9.) The Court noted that the basis for
Defendants' collection measures concerning the 1618 S.
58th Street property included unpaid real estate taxes Thomas
incurred from 1983 through 2004, which had previously been
discharged in the bankruptcy. (Id. at 7:23-8:23,
12:22-13:2.) Significantly, with respect to both properties,
the City "admit[ted] that it had notice of the
bankruptcy." (Id. at 9:12-13.) Defendants then
pointed out that Thomas had not paid any real estate taxes on
the property from 2005 through 2017 ("post-petition
debts"), and argued that these outstanding liabilities
could be the basis of a future sheriff sale on the property.
(Id. at 8:20-23.) Thomas conceded that he had not
paid real estate taxes on the property post-bankruptcy.
(Id. at 13:3-15:4.) In terms of relief, Thomas
requested that the Court order the City to vacate the pending
sheriff's sale and to declare that he no longer owed real
estate taxes from 1983 to 2004 on 1618 S. 58th Street.
(Id. at 14:16-15:1.)
addition, at the May 9, 2017 status conference, the City
raised for the first time the argument that this Court lacked
jurisdiction over this case. (Id. at 11:8-12:8.) The
City subsequently briefed this issue and filed the Motion for
Judgment on the Pleadings. (Doc. No. 39.)
conclusion of the status conference, the Court advised the
parties that it may be in their best interest to reach a
settlement since the City conceded that it had notice of the
bankruptcy. (Doc. No. 41 at 25:1-19.) However, if they were
unable to do so, the Court would schedule a second hearing at
which the parties could present evidence "on what
effect, if any, the discharge had on matters in Thomas's
current complaint." (Id. at 31:7-12.)
parties were unable to reach a settlement. On July 31, 2017,
the Court held an evidentiary hearing to determine what
effect the discharge had on matters in the Complaint.
(Id; Doc. No. 40.) At the second hearing, the
parties stipulated that the City had notice of Thomas's
bankruptcy. (Doc. No. 49 at 5:8-17.)
parties then updated the Court of the status of both
properties at issue. The City again admitted that the
property located at 1620 S. 58th Street was sold at
sheriff's sale for $10, 100, partly to recover
outstanding pre-petition taxes that had been discharged.
(Id. at 16:23- 17:2.) Despite the fact that the City
had notice of the bankruptcy and violated the discharge
injunction, the City argued that Thomas should not be awarded
any damages because it only collected $4, 487.48 from the
proceeds of the sale. (Id. at 17:7-10.) Furthermore,
Thomas owed post-petition real estate taxes on the property,
which totaled $11, 024.67. (Id. at 17:6-7.) Thus,
the City argued that it did not profit from the sale. The
City called Karena Baylock, an employee at the Law and
Revenue Department of the City of Philadelphia, to testify
about the City's tax records and the amount of real
estate taxes owed for the properties at issue. Baylock
confirmed the amount of real estate taxes owed on both
terms of the 1618 S. 58th Street property, the City explained
that the collection action and pending sheriff sale had been
stayed. (Id. at 73:23-78:1.) Again, the City
admitted that this collection action included pre-petition
taxes. (Id.) However, the City asserted that Thomas
owed approximately $26, 151.16 in post-petition taxes.
(Id. at 18:8-19.) Given the fact that Thomas owed
post-petition taxes, the City argued that it was entitled to
continue its collection and sale measures on the property.
The Court, however, informed the City that continuing
collection efforts that relied in part on pre-petition debts
to which the City was not entitled was in direct violation of
the discharge injunction. (Id. at 73:23-78:1.)
Therefore, the Court advised the City that it could withdraw
the collection action and pending sheriff sale of the 1618 S.
58th Street property. (Id.) Immediately following
the hearing, the City filed a discontinuance in the
collection case and pending sale of the 1618 S. 58th Street
property. (Doc. No. 43.)
providing the parties with notice and an opportunity to be
heard at the status conference and the evidentiary hearing,
the Court will now determine "what effect, if any, the
discharge had on the matters in Thomas's current
complaint." Thomas, 624 F.App'x at 178. It
will also dispose of Defendants' Motion for Judgment on
STANDARD OF REVIEW
the pleadings are closed-but early enough not to delay
trial-a party may move for judgment on the pleadings."
Fed.R.Civ.P. 12(c). In deciding a motion for judgment on the
pleadings, a court must consider only those documents
contained in the pleadings. See Moco Invs., Inc. v.
United States, 362 F.App'x 305, 307 n.4 (3d Cir.
2010) (explaining that the district court's consideration
of documents outside the pleadings converted the motion for
judgment on the pleadings into a motion for summary
motion for judgment on the pleadings is analyzed under the
same standard as a motion to dismiss under Fed.R.Civ.P.
12(b)(6). See Spruill v. Gillis. 372 F.3d 218, 223
n.2 (3d Cir. 2004) (explaining that "there is no
material difference in the applicable legal standards"
for Rule 12(b)(6) and Rule 12(c) motions). Like a motion to
dismiss, under Rule 12(c), "the trial court must view
the facts in the pleadings in the light most favorable to
plaintiff and must grant the motion only if the moving party
establishes that no material issues of fact remains and that
it is entitled to judgment as a matter of law."
Shelly v. Johns-Manville Corp., 798 F.2d 93, 97 n.4
(3d Cir. 1986); see also Rosenau v. Unifund Corp.,
539 F.3d 218, 221 (3d Cir. 2008) (quoting Jablonski v.
Pan Am. World Airways. Inc.. 863 F.2d 289, 290 (3d Cir.
1988)). A motion for judgment on the pleadings will only be
granted where "the plaintiffs would not be entitled to
relief under any set of facts that could be proved."
Green v. Fund Asset Memt. L.P.. 245 F.3d 214, 220
(3d Cir. 2001).
The Motion for Judgment on the Pleadings Will Be Denied
Because This ...