IN RE: Mildred B. Cole
Filing
5
ORDER adopting the Bankruptcy Judge's Report and Recommendation. Plaintiff's claims are DISMISSED without prejudice. Signed by Judge Samuel H. Mays, Jr on 06/11/2019.
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
IN RE MILDRED B. COLE
Debtor,
MILDRED B. COLE
Plaintiff,
v.
INSOUTH BANK,
Defendant.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 2:15-mc-00017-SHM-dkv
ORDER
Before the Court is the Report and Recommendation on Motion
to Dismiss Complaint filed by United States Bankruptcy Judge
Jennie D. Latta on January 7, 2015.
(ECF No. 1.)
The Bankrupt-
cy Judge recommends that Plaintiff Mildred B. Cole’s Complaint
“be dismissed without prejudice to amendment.”
(Id. at 17.)
Plaintiff’s objection was filed on January 26, 2015.
3.)
Defendant responded on February 19, 2015.
(ECF No.
(ECF No. 4.)
For the reasons below, the Court ADOPTS the proposed findings of fact and conclusions of law set out by the Bankruptcy
Judge in the Report and Recommendation.
DISMISSED without prejudice.
Plaintiff’s claims are
I.
Background
Before
2004,
Plaintiff
Mildred
Cole
and
her
husband,
Charles Cole, African-American residents of Brownsville, Tennessee, invested in real estate.
(Compl. ¶ 1, In re Mildred B.
Cole, No. 13-24387, (Bankr. W.D. Tenn.), ECF No. 35.)
In 2004,
Defendant InSouth Bank refinanced loans and made new loans to
Plaintiff and her husband for the purchase of rental properties.
(Id. ¶ 10.)
The properties were allegedly personal investments intended
for long-term rentals.
(Id. ¶ 14.)
Despite knowing their in-
tended purpose, Defendant allegedly financed the properties with
short-term loans, which were “flipped” repeatedly.
(Id. ¶ 16.)
Because of the serial short-term financing, the Coles were unable to acquire equity in their properties.
loan
balances
grew
from
approximately
(Id. ¶ 19.)
$90,000
to
Their
more
than
$300,000, and their monthly payments increased from $1,592 a
month in 2005 to approximately $3,117 in 2011.
(Id. ¶¶ 20-21.)
The loans were evidenced by balloon notes with maturity dates
within two to five years.
(Id. ¶ 22.)
Defendant allegedly knew
the Coles would be unable to pay the loans on maturity.
(Id. ¶
23.)
In 2011, the Coles’ daughter met with a Memphis branch InSouth Bank loan officer, who said the Coles “should be able to”
convert their notes to a long-term, fully amortized loan.
2
(Id.
¶¶ 30-32.)
Later, a Brownsville branch InSouth Bank loan of-
ficer informed the Coles that the bank could not convert the
loans “because the bank did not maintain long-tern debts in its
portfolio or service them.”
(Id. ¶ 33.)
Defendant also in-
formed the Coles that “the loans could not be refinanced because
of loan to collateral ratios and an insufficient income stream.”
(Id. ¶ 34.)
The Coles allege that, contrary to the loan of-
ficer’s statement, InSouth Bank “does sometimes make long-term
loans for investor-owned houses and duplexes.”
(Id. ¶ 35.)
Defendant offered to refinance the Coles’ loans in exchange
for a security interest in the Coles’ home and a laundromat they
owned.
(Id. ¶ 37-38.)
As the result of pressure by Defendant, Mildred Cole agreed
to surrender an apartment building for sale to reduce the outstanding debt.
(Id. ¶¶ 41-42.)
Mildred Cole asserts that she
“believes” the building was sold for much less than its fair
market value.
(Id. ¶ 43.)
Defendant continued to deduct loan payments from a bank account that the Coles maintained at InSouth bank, which contained
rents and other revenues from properties.
In November 2011,
however, Defendant stopped deducting payments and began foreclosure proceedings because the Coles refused to provide additional
collateral.
(Id. ¶¶ 46-50.) The Complaint alleges that Defend-
ant has refused to negotiate in good faith with the Coles be3
cause
they
are
African-American
and
their
identifiably African-American neighborhoods.
properties
are
in
(Id. ¶ 52.)
Plaintiff filed the Complaint in her Chapter 13 bankruptcy
proceeding on June 5, 2013.
(Id.)
Plaintiff contemporaneously
filed a motion for temporary restraining order.
al.
v.
InSouth
Bank,
Tenn.), ECF No. 3.)
Adv.
Pro.
No.
13-00247,
(In re Cole et
(Bankr.
W.D.
The Bankruptcy Court granted the prelimi-
nary injunction contingent on Plaintiff’s meeting with Defendant’s counsel.
(Id., ECF No. 23.)
Plaintiff failed to satisfy
the conditions for a preliminary injunction, and the Bankruptcy
Court
permitted
Defendant
to
pursue
its
state
law
remedies.
(Id., ECF No. 25.)
On October 9, 2014, Defendant filed a Motion to Dismiss the
Complaint for failure to state a claim.
(Id., ECF No. 42.)
Plaintiff responded on November 11, 2014.
(Id., ECF No. 48.)
Defendant filed its reply on November 18, 2014.
52.)
(Id., ECF No.
The Bankruptcy Court held oral argument on the motion to
dismiss on December 18, 2014.
(Id., ECF No. 54.)
On January 7, 2015, the Bankruptcy Court entered a Report
and Recommendation, dismissing all of Plaintiff’s claims.
ECF No. 70.)
(Id.,
Plaintiff filed a timely, but improperly labelled,
objection on January 26, 2015.
(Id., ECF Nos. 71, 74.)
tiff’s proper objection was filed on February 16, 2015.
4
Plain(Id.,
ECF No. 78.)
Defendant filed a response on February 19, 2015.
(Id., ECF No. 81.)
II.
A
Jurisdiction & Standard of Review
bankruptcy
§§ 1334 and 157.
court’s
jurisdiction
stems
from
28
U.S.C.
Under 28 U.S.C. § 1334, district courts have
jurisdiction over “cases under title 11,” and proceedings “arising under,” “arising in a case under,” or “related to a case under” title 11.
28 U.S.C. § 1334(a) and (b).
District courts
routinely refer this jurisdiction over bankruptcy cases and proceedings to the bankruptcy courts.
See 28 U.S.C. § 157(a).
Title 28 U.S.C. § 157 “permits a bankruptcy court to adjudicate a claim to final judgment in two circumstances -- in core
proceedings, see § 157(b), and in non-core proceedings ‘with the
consent of all the parties,’ § 157(c)(2).”
Exec. Benefits Ins.
Agency v. Arkison, 573 U.S. 25, 37 (2014).
To enter a final
judgment in a core proceeding, a bankruptcy court must also have
constitutional
authority
to
do
so
pursuant
to
the
Supreme
Court’s decisions in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50 (1982), Stern v. Marshall, 564
U.S. 462 (2011), and Executive Benefits.
As the Supreme Court
has observed, “Congress may not bypass Article III simply because a proceeding may have some bearing on a bankruptcy case;
the question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims al5
lowance process.”
Stern, 564 U.S. at 499.
For non-core pro-
ceedings and for core proceedings in which the bankruptcy court
does not have constitutional authority to enter a final judgment, the bankruptcy court may “‘hear [the] proceeding,’ and
then ‘submit proposed findings of fact and conclusions of law to
the district court.’”
Exec. Benefits, 573 U.S. at 34 (quoting
28 U.S.C. § 157(c)(1)) (alterations in original).
The district
court reviews these proposed findings of fact and conclusions of
law de novo.
Id. at 2168.
Under Bankruptcy Rule 9033(d), the
district court need only review the portions of the bankruptcy
judge’s report to which there are specific written objections.
Cf. Thomas v. Arn, 474 U.S. 140, 148-53 (1985) (explaining that
neither the text nor the history of the provision of the Federal
Magistrates Act parallel to Bankruptcy Rule 9033(d), requiring
de novo review of the portions of a recommendation to which specific objections have been made, “requires [a] district court
review of a magistrate’s factual or legal conclusions, under a
de novo or any other standard, when neither party objects to
those findings”).
Here, the Court referred its jurisdiction under §§ 1334 and
157 to the bankruptcy court.
The Bankruptcy Judge concluded
that Plaintiff’s Complaint constituted a non-core proceeding under Stern and submitted proposed findings of fact and conclusions of law.
(See ECF No. 1 at 4.)
6
Plaintiff makes two objec-
tions to the Bankruptcy Judge’s Report and Recommendation: (1)
the Bankruptcy Judge erred in dismissing the Fair Housing Act
(“FHA”) claims, and (2) the Bankruptcy Judge erred in dismissing
the Tennessee Human Rights Act (“THRA”) claims.
30 & 36.)
(ECF No. 3 at
The Court reviews the findings and conclusions to
which Plaintiff has objected de novo.
III. Legal Standard
Federal Rule of Civil Procedure 12(b)(6) allows dismissal
of a complaint that “fail[s] to state a claim upon which relief
can be granted.”
A Rule 12(b)(6) motion permits the “defendant
to test whether, as a matter of law, the plaintiff is entitled
to legal relief even if everything alleged in the complaint is
true.”
ing
Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993) (cit-
Nishiyama
1987)).
v.
Dickson
Cty.,
814
F.2d
277,
279
(6th
Cir.
A motion to dismiss tests only whether the plaintiff
has pled a cognizable claim and allows the court to dismiss meritless cases that would waste judicial resources and result in
unnecessary discovery.
Brown v. City of Memphis, 440 F.Supp.2d
868, 872 (W.D. Tenn. 2006).
When evaluating a motion to dismiss for failure to state a
claim, the Court must determine whether the complaint alleges
“sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’”
Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550
7
U.S. 544, 570 (2007)).
If a court decides in light of its judi-
cial experience and common sense, that the claim is not plausible, the case may be dismissed at the pleading stage.
556 U.S. at 679.
Iqbal,
The “[f]actual allegations must be enough to
raise a right to relief above [a] speculative level.”
Ass’n of
Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548
(6th Cir. 2007) (quoting Twombly, 550 U.S. at 555).
A claim is
plausible on its face if “the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
U.S. at 678 (citing Twombly, 550 U.S. at 556).
not contain detailed factual allegations.
Iqbal, 556
A complaint need
However, a plain-
tiff’s “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Id.
When deciding a 12(b)(6) motion to dismiss, the court may
look to “matters of public record, orders, items appearing in
the record of the case and exhibits attached to the complaint”
for guidance.
Barany-Snyder v. Weiner, 539 F.3d 327, 332 (6th
Cir. 2008) (quoting Amini v. Oberlin Coll., 259 F.3d 493, 502
(6th Cir. 2001)).
8
IV.
Analysis
A. Fair Housing Act (“FHA”) Claims
The FHA forbids “discriminat[ing] against any person in the
terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection
therewith, because of race . . . .”
42 U.S.C. § 3604(b).
The
statute allows any “aggrieved person” to file a civil action
seeking
damages
§§ 3613(a)(1)(A),
for
a
violation
3613(c)(1).
The
of
FHA
the
defines
statute.
an
Id.
“aggrieved
person” to include “any person who . . . claims to have been injured by a discriminatory housing practice.” Id. § 3602(i).
Plaintiff argues that the Bankruptcy Judge mistakenly concluded that Plaintiff lacks standing to bring her claim.
No. 3 at 31.)
(ECF
Plaintiff contends that she has sufficiently al-
leged that she is an “aggrieved person” who is entitled to bring
suit under the FHA.
(Id.)
Defendant responds with two arguments.
First, it argues
that Plaintiff’s objection is insufficient because it restates
her previous claims and offers no new proof that the Bankruptcy
Judge erred.
(ECF No. 4 at 42 (citing VanDiver v. Martin, 304
F. Supp. 2d 934, 937 (E.D. Mich. 2004); Fed. R. Civ. P. 72.)
Second, Defendant argues that Plaintiff’s objection incorrectly
characterizes the Bankruptcy Judge’s conclusion.
(Id. at 43.)
Defendant represents that the Bankruptcy Judge did not conclude
9
that Plaintiff lacks standing.
Rather, Defendant contends that
the Bankruptcy Judge concluded Plaintiff fails to allege discrimination connected with a “dwelling” as defined in the FHA.
Because a “dwelling” is an essential element under § 3604(b),
Defendant
argues
that
the
Bankruptcy
Judge
correctly
decided
that Plaintiff’s allegations fail to state a claim. 1
1.
Sufficiency of Objection
Bankruptcy Rule 9033(b) is nearly identical to Federal Rule
of Civil Procedure 72(b).
The drafters of Rule 9033(b) speci-
fied that the rule “is derived from Rule 72(b) F. R. Civ. P.
which governs objections to a recommended disposition by a magistrate.”
on
this
Bankr. R. 9033(b) advisory committee notes.
language,
courts
have
decided
that
“‘a
Relying
bankruptcy
court’s proposed resolution should be given the same effect as a
magistrate’s proposed resolution as far as an adversely affected
party’s responsibilities are concerned.’”
Leonard v. Dorsey &
Whitney LLP, 553 F.3d 609, 619 (8th Cir. 2009) (quoting
In re
Nantahala Vill., Inc., 976 F.2d 876, 879–80 (4th Cir. 1992)).
It follows that the standard for making objections to a magistrate judge or a bankruptcy judge’s findings or conclusions is
the same.
Cf. id. (concluding that failure to file a timely ob-
1
Defendant also
4 at 44.) The Court
mine the sufficiency
Mediacom Se. LLC v.
Cir. 2012).
argues that Plaintiff misstates certain facts. (ECF No.
cannot accept Defendant’s version of the facts or deterof the evidence at this stage of the litigation.
See
BellSouth Telecomms., Inc., 672 F.3d 396, 400–01 (6th
10
jection to a bankruptcy judge’s findings or conclusions eliminates need for any review by the district court).
The Sixth Circuit holds that “a general or non-specific objection to a report and recommendation is tantamount to no objection at all.”
Stamtec, Inc. v. Anson, 296 F. App’x 518, 520
(6th Cir. 2008) (citing Spencer v. Bouchard, 449 F.3d 721, 725
(6th Cir. 2006) abrogated on other grounds by Jones v. Bock, 549
U.S. 199 (2007)).
“The objections must be clear enough to ena-
ble the district court to discern those issues that are dispositive and contentious.”
disputing
the
Spencer, 449 F.3d at 725.
correctness
of
the
magistrate’s
Objections
recommendation,
but failing to specify the findings believed to be in error are
too general and therefore insufficient.
Id.
Here, Plaintiff argues that the Bankruptcy Judge confused
the legal requirements for standing and discrimination under the
FHA.
(ECF No. 3 at 31.)
The essence of Plaintiff’s argument is
that she has standing to bring a claim under the FHA, and thus
has sufficiently pled an FHA claim.
(See id. at 31-35.)
Plain-
tiff’s objection is sufficiently specific.
2.
The
Failure to State an FHA Claim Under Rule 12(b)(6)
Complaint
alleges
that
Defendant
violated
42
U.S.C.
§ 3604(b) “by failing to offer financing of properties owned by
the Plaintiff in predominately African-American neighborhoods on
as advantageous terms and conditions as offered to other borrow11
ers and regarding properties in other neighborhoods.”
(Compl.
¶ 74, In re Cole, No. 13-24387, (Bankr. W.D. Tenn.), ECF No.
35.)
The FHA makes it unlawful to “discriminate against any
person in the terms, conditions, or privileges of sale or rental
of a dwelling . . . because of race.”
phasis added).
42 U.S.C. § 3604(b) (em-
An essential element in establishing a claim un-
der § 3604(b) is that the locus of discrimination be a “dwelling.”
The FHA defines a “dwelling” as “any building, structure,
or portion thereof which is occupied as, or designed or intended
for occupancy as, a residence by one or more families, and any
vacant land which is offered for sale or lease for the construction or location thereon of any such building, structure, or
portion thereof.”
42 U.S.C. § 3602(b); see also 24 C.F.R. §
100.20.
“[I]n determining whether a particular building is a dwelling or residence, the focus is on whether the individuals that
are subject to discrimination use or intend to use the building
as a dwelling or residence.”
Germain v. M & T Bank Corp., 111
F. Supp. 3d 506, 523 (S.D.N.Y. 2015) (citing cases).
Determin-
ing whether a building is a “dwelling” under the FHA turns on
“the function of [the] specific building for a particular plaintiff alleging discrimination under the Act.”
Id.
If the plain-
tiff uses the property at issue as a commercial venture, but
12
does not live at the property, the plaintiff does not “use or
intend to use” the property as a dwelling.
See Home Quest
Mortg. LLC v. Am. Family Mut. Ins. Co., 340 F. Supp. 2d 1177,
1185 (D. Kan. 2004).
A non-resident owner of a dwelling can as-
sert an FHA claim as to the property “only if the property owner
is asserting that the defendant engaged in unlawful discrimination against a person or class of persons who reside or would
reside in the dwelling absent the unlawful discrimination.”
Id.
Plaintiff’s FHA claim addresses the financing of properties
that she rents to tenants.
(Compl. ¶ 74, In re Cole et al. v.
InSouth Bank, No. 13-24387, (Bankr. W.D. Tenn.), ECF No. 35).
Plaintiff does not live in any of the properties, and she is not
bringing this action on behalf of her tenants.
(Id. ¶ 14.)
Plaintiff uses the properties at issue as commercial ventures
not as a residence.
The Bankruptcy Judge correctly concluded
that the properties are not “dwellings” within the meaning of
the FHA.
See Mitchell v. Citizens Bank, No. 10–CV–569, 2011 WL
101688, at *2 (M.D. Tenn. Jan. 11, 2011) (plaintiff “failed to
state a claim under the FHA because he owned the property as a
commercial venture” and he was not alleging that the defendant
discriminated against any of the tenants).
Plaintiff fails to
state a claim under § 3604(b). 2
2
Plaintiff also fails to state a claim under 42 U.S.C. § 3605.
13
Plaintiff’s contention that the Bankruptcy Judge improperly
concluded that she lacks standing as an “aggrieved person” to
sue under § 3604(b) confuses two inquiries.
The Supreme Court
“has repeatedly written that the FHA’s definition of an [“aggrieved
person”]
reflects
a
congressional
intent
to
confer
standing . . . as broadly as is permitted by Article III of the
Constitution.”
Bank of Am. Corp. v. City of Miami, 137 S. Ct.
1296, 1303 (2017) (internal quotations omitted).
That general
standing inquiry is distinct from the inquiry into what constitutes a “dwelling” under the FHA.
See Spokeo, Inc. v. Robins,
136 S. Ct. 1540, 1547 (2016) (to show Article III standing, a
plaintiff must show an “injury in fact” that is “fairly traceable” to the defendant's conduct and “that is likely to be redressed
by
a
favorable
judicial
decision.”)
The
Bankruptcy
Judge made no conclusion about Plaintiff’s standing.
The Court ADOPTS the Bankruptcy Judge’s proposed findings
of fact and conclusions of law as to Plaintiff’s FHA claim.
Plaintiff’s FHA claim is DISMISSED without prejudice.
B. Tennessee Human Rights Act Claims
The Tennessee Human Rights Act (“THRA”) is similar to the
FHA and prohibits discrimination in the terms, conditions, and
privileges of housing or in the provision of services in connection therewith on the basis of race, color, religion, sex, familial status, or national origin.
14
42 U.S.C. § 3604(b); Tenn.
Code Ann. § 4–21–601(a). Tennessee courts have held that the General Assembly intended the THRA to be coextensive with federal
civil rights laws, and the Tennessee Supreme Court looks to federal interpretation for guidance in interpreting the THRA.
See
Parker v. Warren Cty. Util. Dist., 2 S.W.3d 170, 172 (Tenn.
1999).
The analysis is identical for housing discrimination
claims under the FHA and the THRA.
Plaintiff’s failure to state a claim under the FHA is dispositive of her THRA claim.
The Court ADOPTS the Bankruptcy Judge’s proposed findings
of fact and conclusions of law as to Plaintiff’s THRA claim.
Plaintiff’s THRA claim is DISMISSED without prejudice.
V.
Conclusion
The Court ADOPTS the proposed findings of fact and conclu-
sions of law set out by the Bankruptcy Judge in the Report and
Recommendation. Plaintiff’s FHA and THRA claims are DISMISSED
without prejudice.
So ordered this 11th day of June, 2019.
/s/ Samuel H. Mays, Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE
15
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?