Appeal from the United States Bankruptcy Court for the Eastern District of California Honorable W. Richard Lee, Bankruptcy Judge, Presiding Bk. No. 11-17709-WRL Adv. No. 11-1252-WRL
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Submitted Without Oral Argument on October 19, 2012,*fn2
Before: KIRSCHER, DUNN, and JURY, Bankruptcy Judges.
Appellants, chapter 13*fn3 debtors Dana Paul Foster ("Dana") and Cheryl Deann Foster ("Cheryl")(collectively "Fosters"), appeal an order denying their motion to dismiss Wilma Clarise Sligar's ("Sligar") complaint for nondischargeability of debt and denial of discharge based on various tort claims, including fraud and elder abuse. The bankruptcy court further ordered that it was abstaining from hearing Sligar's tort claims against Fosters, that it was granting Sligar relief from the automatic stay to pursue her tort claims in state court, and that it was administratively closing the adversary proceeding. Because the bankruptcy court should have dismissed the complaint without prejudice, we VACATE in part and REMAND.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. Events leading to the adversary complaint.
The following facts are as alleged in Sligar's state court complaint and in her adversary complaint against Fosters. Cheryl is the third of three daughters of Sligar; Dana is Cheryl's husband and Sligar's son-in-law. Sligar currently lives with her second daughter, Betty Briscoe ("Briscoe"). Since September 2010, Briscoe has had power of attorney for Sligar under CAL. PROB. CODE § 4401 and is authorized to engage in many transactions on Sligar's behalf, including prosecuting and/or defending claims and litigation. Briscoe is not an attorney at law.
Shortly after Sligar's husband passed away and before Briscoe became Sligar's caretaker, Fosters cared for Sligar and assisted 1 her with her daily needs. Cheryl was named on at least one of 2 Sligar's bank accounts to assist Sligar with payment of her 3 monthly financial obligations. Sligar alleged that between 2007 4 and January 2010, Cheryl and/or Fosters made unauthorized 5 withdrawals from Sligar's bank account, made unauthorized cash 6 advances on Sligar's credit card, forged Sligar's signature on 7 certain checks made payable to Sligar, and failed to pay some of 8 Sligar's bills. Sligar further alleged that Fosters conspired to 9 deceive her into signing a blank quitclaim deed conveying title to 10 real property she owned in Florida to Cheryl, which Cheryl 11 subsequently conveyed to Dana. Sligar asserted in her state court 12 complaint that at no time during this nearly three year period was 13 she physically or mentally unable to sign her own signature due to 14 illness or any other reason. She further asserted that Cheryl did 15 not have power of attorney, or conservatorship, or any legal 16 authorization to sign Sligar's signature. Sligar alleged that 17 Fosters fraudulently acquired from her approximately $660,000 in 18 real and personal property.
19 In January 2010, Sligar contacted Kern County Adult 20 Protection Services and the Kern County Sheriff's Office to 21 investigate the allegations against Fosters. They investigated 22 the matter, but the county ultimately decided not to prosecute any 23 criminal charges against Fosters.
24 Based on the above conduct, in July 2010, Sligar, represented 25 by counsel, sued Fosters civilly in state court alleging claims of 26 financial elder abuse, fraud and conspiracy to defraud, 27 constructive trust, unjust enrichment, and for an accounting. The 28 matter was set for trial on August 8, 2011. However, the trial -3- 1 was stayed once Fosters filed their chapter 13 bankruptcy case on 2 July 7, 2011.
3 B. The adversary complaint and motion to dismiss.
4 Sligar filed a proof of claim in Fosters' bankruptcy case for 5 the alleged debt on August 9, 2011. The proof of claim was signed 6 by Briscoe as attorney-in-fact for Sligar. No objections were 7 filed.
8 Based on the above allegations, on October 4, 2011, Briscoe, 9 as attorney-in-fact for Sligar, filed a complaint seeking to 10 except Sligar's debt from discharge under §§ 523(a)(2)(A), 11 (a)(2)(B), (a)(4) and (a)(6) and to deny Fosters' discharge under 12 727(a)(2), (a)(3)(A), (a)(4)(A), and (a)(4)(B). Although the 13 complaint was signed by Briscoe as attorney-in-fact for Sligar, 14 Sligar did sign the adversary complaint cover sheet. The caption 15 on the adversary complaint shows Sligar as the pro se plaintiff 16 and ...