CHAIN v. DELL et al

Filing 29

OPINION resolving 23 the motion to dismiss by defendant Charles O. Zebley, Jr. Signed by Judge David S. Cercone on 3/18/20. (mwm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

IN RE:
JOHN MICHAEL CHAIN,
Debtor,
____________________________________
RONALD V. DELL and LISA DELL,
Plaintiffs,
v.
JOHN CHAIN,
Defendant.

)
)
)
)
)

)
)
)
)
)
)
)
)
)

2:17cv1592
(Bankruptcy Case No. 14-23630-GLT)
(Adversary Proceeding No. 17-02219-GLT)
Electronic Filing

OPINION
Plaintiffs commenced this personal injury action in Court of Common Pleas of
Westmoreland County seeking redress for injuries sustained by Ronald Dell when he assertedly
fell as a result of a decaying step on stairs leading to an apartment that plaintiffs occupied as
tenants. The originally named defendant, John Chain, removed this action to the United States
Bankruptcy Court for the Western District of Pennsylvania based on the contention that the
action was "related to" his prior petition in bankruptcy court. Presently before the court is a
motion to dismiss by recently joined defendant, Charles O. Zebley, Jr., who served as the
bankruptcy trustee. For the reasons set forth below, the motion will be denied.
On November 30, 2017, a status conference was held before the Bankruptcy Court
wherein defendant Chain inquired about adding the trustee to this action as a co-defendant. The

Bankruptcy Court did not further address this inquiry and entered a Memorandum Order on
December 7, 2017, referring the action to this court as an adversary proceeding.
Plaintiff then sought clarification from the Bankruptcy Court regarding the automatic stay
imposed by 11 U.S.C. § 362. The Bankruptcy Court held a hearing on March 22, 2018, and
thereafter entered a memorandum order lifting the stay to permit plaintiffs to pursue their action
to recover “from any available proceeds of the Debtor's liability insurance policies and not from
his personal assets involved in the . . . bankruptcy action.”
Following the Bankruptcy Court’s lifting of the stay, plaintiffs filed with this court a
motion to remand to state court on the premise that any stay had been lifted and without the
trustee being named as a defendant, they were entitled to have the matter remanded. Defendant
Chain filed a motion to join trustee Zebley as a defendant and sought to invoke the protections
afforded by the "Barton doctrine." Plaintiffs’ motion was denied "without prejudice to plaintiffs
renewing [their] motion in the event the potential for joining the trustee as a defendant
definitively has been eliminated from the case." Defendant Chain's motion was denied "without
prejudice to plaintiffs seeking leave to amend their complaint to add the trustee as a defendant
and/or debtor/defendant John Chain pursuing an action over against the trustee as permitted by
Federal Rule of Civil Procedure 14."
On February 22, 2019, plaintiffs filed an amended complaint naming Zebley as a
defendant. The instant motion to dismiss followed.
It is well-settled that in reviewing a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6) "[t]he applicable standard of review requires the court to accept as true all
allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view
them in the light most favorable to the non-moving party." Rocks v. City of Philadelphia, 868
2

F.2d 644, 645 (3d Cir. 1989). Under the Supreme Court's decision in Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 561 (2007), dismissal of a complaint pursuant to Rule 12(b)(6) is
proper only where the averments of the complaint plausibly fail to raise directly or inferentially
the material elements necessary to obtain relief under a viable legal theory of recovery. Id. at
544. In other words, the allegations of the complaint must be grounded in enough of a factual
basis to move the claim from the realm of mere possibility to one that shows entitlement by
presenting "a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570).
"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. In contrast, pleading facts that only offer "'labels or conclusions' or 'a formulaic recitation of
the elements of a cause of action will not do,'" nor will advancing only factual allegations that
are "'merely consistent with' a defendant's liability." Id. Similarly, tendering only "naked
assertions" that are devoid of "further factual enhancement" falls short of presenting sufficient
factual content to permit an inference that what has been presented is more than a mere
possibility of misconduct. Id. at 1949-50; see also Twombly, 550 U.S. at 563 n. 8 (A complaint
states a claim where its factual averments sufficiently raise a "'reasonably founded hope that the
[discovery] process will reveal relevant evidence' to support the claim.") (quoting Dura
Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005) & Blue Chip Stamps v. Manor Drug
Stores, 421 U.S. 723, 741 (1975)); accord Morse v. Lower Merion School Dist., 132 F.3d 902,
906 (3d Cir. 1997) (a court need not credit "bald assertions" or "legal conclusions" in assessing a
motion to dismiss) (citing with approval Charles Alan Wright & Arthur R. Miller, FEDERAL
PRACTICE AND PROCEDURE § 1357 (2d ed. 1997) ("courts, when examining 12(b)(6) motions,
3

have rejected 'legal conclusions,' 'unsupported conclusions,' 'unwarranted inferences,'
'unwarranted deductions,' 'footless conclusions of law,' or 'sweeping legal conclusions cast in the
form of factual allegations.'").
This is not to be understood as imposing a probability standard at the pleading stage.
Iqbal, 556 U.S. at 678 ("'The plausibility standard is not akin to a 'probability requirement,' but it
asks for more than a sheer possibility that a defendant has acted unlawfully.'"); Phillips v. County
of Allegheny, 515 F.3d 224, 235 (3d Cir. 2008) (same). Instead, "[t]he Supreme Court's
Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim
requires a complaint with enough factual matter (taken as true) to suggest the required element ...
[and provides] enough facts to raise a reasonable expectation that discovery will reveal evidence
of the necessary element.'" Phillips, 515 F.3d at 235; see also Wilkerson v. New Media
Technology Charter School Inc., 522 F.3d 315, 321 (3d Cir. 2008) ("'The complaint must state
'enough facts to raise a reasonable expectation that discovery will reveal evidence of the
necessary element.'") (quoting Phillips, 515 F.3d at 235) (citations omitted). "Once a claim has
been stated adequately, it may be supported by showing any set of facts consistent with the
allegations in the complaint." Twombly, 550 U.S. at 563.
The facts read in the light most favorable to plaintiffs are as follows. Plaintiffs leased an
apartment as tenants at 218 Pittsburgh Street, Scottdale, Pennsylvania. Amended Complaint at
¶¶ 6, 10. On March 25, 2016, plaintiff Ronald Dell was traversing the stairway to his apartment

when his cane broke through a wooden step that had been decaying for some time. Amended
Complaint at ¶¶ 11, 12. As a result, he slipped and/or otherwise lost his balance and fell down
the stairway. Amended Complaint at ¶ 12. He suffered an array of injuries, including but not

4

limited to a closed head injury, headaches, back spasms, and bruising and pain in his right
abdomen and extremities. Amended Complaint at ¶ 13.
Plaintiffs initially rented the apartment from defendant Chain. Thereafter, Chain filed a
petition in bankruptcy pursuant to Chapter 11. The proceeding was converted to Chapter 7 on
September 18, 2015. At that juncture, all of Chain’s property was converted into a bankruptcy
estate. Zebley was appointed as the Chapter 7 trustee to administer the estate.
At a meeting of creditors on October 16, 2015, the secured creditor of the building in
which plaintiffs’ apartment is located, Scottdale Bank, and Zebley as the Chapter 7 trustee,
agreed that Zebley would manage the ongoing operations of the building until it and other
property could be sold and distributed. The trustee did not abandon the interest of the debtor in
this and other real estate coming into the estate and continued to manage the property in an effort
to liquidate it for the benefit of the creditors. The trustee sold the property on November 10,
2016. See In re: John Michael Chain (Bkrtcy Case No. 14-23630) at Doc. No.s 194 (Meeting of
Creditors to be held on 10/16/2015), 285 (October 4, 2016, Amended Motion to Sell Property
Free and Clear of Liens) & 296 Order of November 10, 2016, granting 285 and Confirming Sale
of Real Property Free and Clear of Liens and Encumbrances).
Against this backdrop, Defendant Zebley makes two arguments in support of dismissal.
First, this court assertedly lacks subject matter jurisdiction over this action because the Barton
doctrine prohibits a trustee from being sued for administrative acts without leave from the
bankruptcy court, which plaintiffs did not obtain; and the exception under 28 U.S.C. § 959(a)
does not apply. Second, Zebley contends that this action is barred by the statute of limitations
under Pa. C.S. § 5524(2), as he was named in this action nearly a year after the limitations period
had run.
5

Plaintiffs’ response likewise is two-fold. First, they contend this court has jurisdiction
because Zebley was carrying on business on the premises where and when the accident occurred,
so the exception under § 959(a) applies and the Barton doctrine does not. Second, the statute of
limitations purportedly does not prevent them from adding defendant Zebley to their lawsuit, as
their Amended Complaint relates back to the original complaint under Rule 15(c).
Plaintiffs’ Amended Complaint adequately pleads facts that plausibly establish this
court’s jurisdiction based on the exception to the Barton doctrine, and therefore, leave of court
was not required. Under the Barton doctrine, a court lacks “jurisdiction, without leave of the
court by which the receiver was appointed, to entertain a suit against him for a cause of action . .
. based on his negligence or that of his servants in the performance of their duty in respect of [the
property administered by the receiver.]” Barton v. Barbour, 104 U.S. 126 (1881). Section
959(a) establishes an exception to the Barton doctrine. It provides:
Trustees, receivers or managers of any property, including debtors in
possession, may be sued, without leave of the court appointing them, with
respect to any of their acts or transactions in carrying on business
connected with such property. Such actions shall be subject to the general
equity power of such court so far as the same may be necessary to the ends of
justice, but this shall not deprive a litigant of his right to trial by jury.
28 U.S.C. § 959(a) (emphasis added).
Carrying on business “only cover[s] acts or transactions in conducting the debtor's
business in the ordinary sense of the words or in pursuing that business as an operating
enterprise.” Seaman Paper Co. of Massachusetts, Inc. v. Polsky, 537 F. Supp. 2d. 233, 238 (D.
Mass. 2007). It does not include an operation where the business by the debtor is no longer
conducted. In re Globe Bldg. Materials, Inc., 345 B.R. 619 (N.D. Ind. 2006). Thus, the business
must make ongoing use of the property of the bankruptcy estate. In re Kashani, 190 B.R. 875
(9th Cir BAP 1995).
6

Courts have distinguished between the activities of the trustee in “carrying on business
connected with such property” and the administration of assets, for which a trustee may not be
sued. More specifically, “[a]ctions taken in the mere continuous administration of property
under order of the court do not constitute an ‘act’ or ‘transaction’ in carrying on business
connected with the estate under [§ 959(a)].” Muratore v. Darr, 375 F.3d 140, 144 (1st Cir.
2004). In this regard suit is not permitted against a trustee for performing tasks incident to the
“consolidation, preservation, and liquidation of estate assets.” Phoenician Mediterranean Villa,
LLC v. Swope, 554 B.R. 747, 756 (W.D. Pa. 2016), aff'd sub nom Phoenician Mediterranean
Villa, LLC v. Swope (In re J & S Props., LLC), 2017 U.S. App. LEXIS 18726 (3d Cir. Pa., Sept.
28, 2017). If tasks are necessarily incident to the administration of assets, then § 959 does not
apply and leave from the appointing court is required before filing against the trustee. In re
VistaCare Group, LLC, 678 F.3d 218, 227 (3d Cir. 2012).
Moreover, it has become clear that the exception to the Barton doctrine is meant to apply
in precisely the type of case alleged here. Specifically, courts have recognized the exception to §
959(a) “is intended to permit actions redressing torts committed in furtherance of the debtor’s
business, such as the common situation of a negligence claim in a slip and fall case where a
bankruptcy trustee, for example, conducted a retail store.” Hutchins v. Shatz, Schwartz and
Fentin, P.C., 494 B.R. 108 (D. Mass. 2013) (citations omitted); c.f. In re Allied Sign Co, Inc.,
280 B.R. 688 (Bkrtcy S.D. Ala. 2001) (holding that cataloging the progress of the debtor’s
financial status was a court (as opposed to a business) activity, even though the extracted
information permitted the debtor to carry on its business).
Here, plaintiffs assert that defendant Zebley was negligent in maintaining the premises
for the operation of the rental business, as required for the exception to the Barton doctrine to
7

apply. Plaintiffs specifically aver that while defendant Zebley was acting as the trustee, he
leased, operated, owned, possessed, controlled, managed and maintained the premises where the
accident occurred. The record further reflects that this carrying on of business on the premises
occurred for approximately six months, including on the date of the accident. These alleged
activities extend beyond the mere administration of property, or tasks incident to consolidating,
preserving or liquidating the assets. They raise a sufficient inference that defendant Zebley
carried on an ongoing rental business connected with the premises for nearly half a year after his
appointment as trustee.
In short, plaintiffs’ negligence and loss of consortium claims fit squarely within the
exception to the Barton doctrine that Congress enacted. Because the exception to applies, this
court has jurisdiction over this action. Consequently, defendant Zebley’s motion to dismiss on
this ground will be denied.
Second, plaintiffs’ cause of action is not barred by the statute of limitations because their
Amended Complaint relates back to their original complaint. Under 42 Pa. C.S.A. § 5524(2), the
statute of limitations for a negligence claim in Pennsylvania is two years.
“The statute of limitations begins to run when the cause of action accrues.” Douglas v.
Joseph, 656 F. App’x 602, 605 (3d Cir. 2016) (citing Fine v. Checcio, 870 A.2d 850, 857 (Pa.
2005)). This occurs when “the plaintiff could have first maintained the action to a successful
conclusion.” Kapil v. Ass'n of Pa. State Coll. & Univ. Faculties, 470 A.2d 482, 485 (Pa. 1983).
With respect to the propriety of motions to dismiss based upon a limitation period having
expired, the law of this jurisdiction permits a limitations defense to be raised by a Rule 12(b)(6)
motion “only if ‘the time alleged in the statement of a claim shows that the cause of action has
not been brought within the statute of limitations.’” Robinson v. Johnson, 313 F.3d 128, 135 (3d
8

Cir. 2002) (quoting Hanna v. U.S. Veterans' Admin. Hosp., 514 F.2d 1092, 1094 (3d Cir. 1975)
(footnote omitted)); accord Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014). “If the bar is
not apparent on the face of the complaint, then it may not afford the basis for a dismissal of the
complaint under Rule 12(b)(6).” Robinson, 313 F.3d at 135 (quoting Bethel v. Jendoco Constr.
Corp., 570 F.2d 1168, 1174 (3d Cir.1978)); Schmidt, 770 F.3d at 249 (Because the applicability
of the statute of limitations usually involves questions of fact for the jury, if the statutory bar is
not apparent on the face of the complaint, then it may not afford the basis for a dismissal under
Rule 12(b)(6)). Additionally, it is not incumbent upon the plaintiff to anticipate the limitations
defense and plead all facts necessary to defeat it. Buttolph v. PrimeCare Med. Inc., 2018 U.S.
App. LEXIS 26636, *3 (3d Cir. Sept. 19, 2018) (citing Stephens v. Clash, 796 F.3d 281, 288 (3d
Cir. 2015)).
Here, the alleged incident forming the basis for plaintiffs’ negligence claim—the
accident, occurred on March 25, 2016. Plaintiffs filed their original complaint on September 8,
2017, which is within the two-year statute of limitations.
Zebley argues that he was not formally named in this action until February 22, 2019,
approximately a year after the statute of limitations had run. However, the statutory bar is not
apparent from the face of plaintiffs’ Amended Complaint, as augmented by the record before the
court, because it alleges/contains facts that, if assumed true, are sufficient to support a finding
that the Amended Complaint relates back to the original complaint under Federal Rule of Civil
Procedure 15(c)(1).
Rule 15(c)(1) provides that amendments relate back to the date of the original pleading
when:
(A) the law that provides the applicable statute of limitations allows relation back;
9

(B) the amendment asserts a claim or defense that arose out of the conduct,
transaction, or occurrence set out—or attempted to be set out—in the original
pleading; or
(C) the amendment changes the party or the naming of the party against whom a
claim is asserted, if Rule 15(c)(1)(B) is satisfied and if, within the period provided
by Rule 4(m) for serving the summons and complaint, the party to be brought in
by amendment:
(i) received such notice of the action that it will not be prejudiced in
defending on the merits; and
(ii) knew or should have known that the action would have been brought
against it, but for a mistake concerning the proper party's identity.
Fed. R. Civ. Pro. 15(c)(1); see also Feldman v. Am. Asset Fin., LLC, 534 B.R. 627, 637 (E.D.
Pa. 2015) (Rule 15(c) is to be read in the disjunctive).
The inquiry at hand is whether the requirements for relation back under Rule 15(c)(1)(C)
are met. In order for a claim to relate back under subsection (c), the requirement for Rule
15(c)(1)(B) must be present and “all three conditions specified in Rule 15(c)[(1)(C)] must be
satisfied.” Nelson v. County of Allegheny, 60 F.3d 1010, 1014 (3d Cir. 1995); accord Singletary
v. Pa. Depart. of Corrections, 266 F.3d 186, 193 (3d Cir. 2001). Plaintiffs have satisfied these
requirements.
First, plaintiffs sufficiently plead facts to establish that the Amended Complaint and
original complaint arise out of the same incident. Rule 15(c)(1)(B)’s “arising out of”
requirement focuses on “whether the ‘amendment asserts a claim or defense that arose out of the
conduct, transaction or occurrence set out . . . in the original complaint,’ not whether the ‘legal
inquiry’ of both claims are identical.” Feldman v. Am. Asset Fin., LLC, 534 B.R. 627, 632 (E.D.
Pa. 2015). Thus, the focus is on “whether there is a ‘common core of operative facts uniting the
original and newly asserted claims.’” Id. (citing Mayle v. Felix, 545 U.S. 644, 659 (2005).
Here, plaintiffs’ Amended Complaint arose out of the same accident that formed the basis
for their original action against Chain. Ronald Dell allegedly fell due to a decaying step on the
10

premises on March 25, 2016, which provides the common core of operative facts. Because it is
reasonable to infer that these core facts unite plaintiffs’ claims against defendant Chain and
Zebley, plaintiffs’ complaints arose out of the same occurrence.
Second, the record sufficiently establishes that defendant Zebley received notice of the
action and is not prejudiced in defending on the merits. It is well-settled that formal notice is not
required. Rule 15 Notes of Advisory Committee on Rules—1966 Amendment; see also
Advanced Power Systems, Inc. v. Hi-Tech Systems, Inc., 801 F. Supp. 1450, 1456 (E.D. Pa.
1992). In this regard, “notice may be actual, constructive or imputed.” Hargrove v. City of
Philadelphia, 1994 U.S. Dist. LEXIS 10820, *10, 1994 WL 410567 (E.D. Pa. Aug. 5, 1994)
(citing Heinly v. Queen, 146 F.R.D. 102, 106 (E.D. Pa. 1993); Kinnally v. Bell of Pennsylvania,
748 F. Supp. 1136, 1141 (E.D. Pa. 1990) (holding that Rule 15(c) can be satisfied “where a party
who has some reason to expect his potential involvement as a defendant hears of the
commencement of litigation through some informal means”). Moreover, “[n]otice may be
imputed to parties added after the limitations period expired ‘when the original and added parties
are so closely related in business or other activities that it is fair to presume the added parties
learned of the institution of the action shortly after it was commenced.’” Advanced Power
Systems, 801 F. Supp. at 1456 (citations omitted).
Here, it appears that Zebley had both actual and imputed notice of the action. Zebley was
served with notice of a status conference pertaining to the action immediately after it was
removed to the Bankruptcy Court. The action involved an injury on property under his
management at the time. It is therefore reasonable to infer that he received actual notice of
plaintiffs’ claims.

11

Additionally, Zebley served as trustee for defendant Chain’s bankruptcy estate. This
gave him control over the premises before and at the time the accident occurred. The bankruptcy
court also conducted conferences and proceedings on the proper administration of the claims
arising from the accident. Zebley’s control of the premises and presumptive awareness of the
bankruptcy court’s undertakings support a reasonable inference that Zebley had imputed notice.
Third, the record contains adequate facts to establish the mistake element because Zebley
and defendant Chain had a close debtor-trustee relationship. Mistake “is not limited to cases of
misnamed or misdescribed parties,[but] is widely-understood to allow the addition of new parties
that were never originally named or described.” Heinly, 146 F.R.D. at 107. Mistake “is satisfied
when the original party and the added party have a close identity of interests.” Advanced Power
Systems, 801 F. Supp. at 1457 (citations omitted). Thus, “courts have typically resisted a narrow
reading of the mistake element and allowed the addition of responsible individual defendants
when plaintiff simply made an error in legal judgment or form in suing only [one party].” Id.
(citing Kinnally, 748 F. Supp. at 1136).
Here, the record contains facts to establish sufficiently that Zebley and Chain had a close
relationship. Chain owned and managed the premises from the filing of his original petition
through the conversion of the proceeding to Chapter 7. Zebley then took control of the premises
as trustee and carried on business there, including when the alleged incident occurred. As a
result, Zebley allegedly knew or should have known that the action would have been brought
against him, but for an error in legal judgment in determining the proper party’s identity, even if
there was no misnomer. Thus, the mistake element is met.
Finally, the record includes facts showing the mistake and notice elements were satisfied
within the required time period. Under Rule 15(c)(1)(C), the amending party must fulfill these
12

requirements within the time period specified by Rule 4(m)—90 days. See also Fed. R. Civ. P.
Rule 15 Committee Notes on Rules—2015 Amendment (noting that “[t]he presumptive time for
serving a defendant [has been] reduced from 120 days to 90 days”).
Here, plaintiffs had 90 days after filing their original complaint on September 8, 2017 to
fulfill these requirements, which was December 7, 2017. Zebley received actual and imputed
notice no later than November 30, 2017, which is within the 90-day timeframe. Consequently,
the time requirement was met.
Plaintiffs’ Amended Complaint arises out of the same occurrence as the original
complaint. Because Zebley had timely notice of the action before he was named, he will not be
prejudiced in defending on the merits. It follows that plaintiff’s amended complaint relates back
to the filing of the original complaint and this action is not barred by the statute of limitations.
Thus, Zebley’s motion to dismiss on that ground will be denied as well.
For the reasons set forth above, defendant Zebley’s motion to dismiss will be denied. An
appropriate order will follow.
Date: March , 2020
s/David Stewart Cercone
David Stewart Cercone
Senior United States District Judge
cc:

Emerald N. Williams, Esquire
Michael E. Megrey, Esquire
Richard G. Talarico, Esquire
David A. Colecchia, Esquire
(Via CM/ECF Electronic Mail)
Scottdale Bank and Trust
150 Pittsburgh Street
Scottdale, PA 15683
(Via First Class Mail)

13