Steven L. Speth, Trustee vs. Cortina Leather (In re Goldsmith’s Inc. of Texas); Case No. 03-13106; Adv. No. 05-5276 (Nugent) (March 28, 2006).
MEMorandum opinion
Facts:
On January 2, 2003, the defendant Cortina Leather shipped goods to the debtor Goldsmith’s Inc. of Texas. Payment of $3,186.85 was not received by the defendant for said goods until a time period within ninety days of the bankruptcy filing. The trustee filed a complaint seeking return of money in the amount of $3,186.85 paid to the defendant to the estate on the theory that the payments to the defendant were preferential transfers under 11 U.S.C. §547. The Defendant filed an answer by and through its corporate president, who is not an attorney, stating that defendant had no knowledge of the debtor’s impending bankruptcy.
Holdings:
1. The answer filed by defendant was stricken for failing to comply with the Local Rules of the Court in that it was filed pro se and the defendant, a corporation, is not permitted to appear pro se in this matter.
2. The trustee is granted judgment on the merits despite the fact that the answer was stricken because lack of knowledge of an impending bankruptcy is not a valid defense to a preferential transfer claim. Furthermore, lack of knowledge is insufficient to rebut the presumption of insolvency for the ninety days immediately preceding the date of filing of the bankruptcy petition.
In re Fe Esparanza Joslin; Case No. 04-16168 (Nugent) (March 28, 2006).
MEMORANDUM OPINION
Facts:
The Debtor listed two debts on two different accounts to MBNA America on her Schedule F. In addition to scheduling MBNA, the debtor listed several other assignees of MBNA. B-Line was not listed. B-Line filed a timely proof of claim listing an account number that did not match either of the MBNA account numbers scheduled by the debtor. Apparently MBNA assigned its claim to Collect America which in turn transferred the claim to B-Line. B-Line used the Official Form 10 that identified the debtor, the balance due, the last payment, the amount of that payment and the original creditor, MBNA. No account statements, transaction history or credit card agreement were attached to the proof of claim. The trustee filed an objection to B-Line’s claim on the ground that it lacked sufficient documentation. B-Line argued that insufficient documentation was not one of the substantive legal grounds under 502(b) for dismissal. After the Trustee filed its brief, B-Line submitted the notice of transfer of claim and assignment documents. None of the documentation showed the prior transfer or assignment of claim from MBNA to Collect America.
Holding:
The Court had little hesitancy in concluding that the account summary is sufficient to allow B-Line’s claim. The documentation provided by B-Line contained enough information for the trustee to at least establish whom and how much to pay and whether the claim asserted was indeed against the debtor. This was enough to fulfill the creditor’s initial burden of proving the existence and amount of its claim. Because the trustee took no position or offered any evidence that would “meet, overcome, or at least equalize” B-Line’s claim, the Court concluded that the trustee’s objection to B-Line’s claim on the basis of inadequate documentation was overruled. The Court similarly held that B-Line’s proof of claim made on Official Form 10 which showed the original creditor (MBNA) was sufficient prima facie evidence of the validity and amount of the claim. The Court also did not give weight to the fact that the account number used by B-Line did not match MBNA’s account number because of the fact that different companies use different numbering systems.
Melissa York vs. Phillip Eugene Redd; (In re Redd); Case No. 04-15917; Adv. No. 04-5328 (Nugent) (April 3, 2006).
memorandum opinion
Facts:
The Plaintiff Melissa York filed a complaint seeking to except her personal injury claim from the Debtor’s discharge pursuant to 11 U.S.C. §523(a)(9). On September 26, 2003, the plaintiff and the debtor were involved in an auto accident in Cherokee County, Kansas. Both parties sustained injuries as a result of the accident and were taken to St. John’s Regional Medical Center in Joplin, Missouri for care. At the hospital, the debtor’s blood sample was processed one hour and fifty-nine minutes after the accident had occurred, within the two hours required by statute. The lab results indicated that debtor’s blood alcohol content was .21 percent.
11 U.S.C. §523(a)(9) provides that discharge under section 727 of this title does not discharge an individual debtor from any debt “for death or personal injury caused by the debtor’s operation of a motor vehicle if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug or another substance.” In order to sustain an action under this section the burden is placed on the plaintiff to establish three elements: (1) that there is debt for death or personal injury; (2) that this death or personal injury was caused by debtor’s unlawful operation of motor vehicle; and (3) that operation of motor vehicle was unlawful because debtor was intoxicated pursuant to state law. The Debtor stipulated to elements one and two but argued that element three could not be proven without expert testimony as to how the blood alcohol level is calculated. The matter was submitted to the Court to resolve on a “case stated” basis, without trial.
Holdings:
The Court disagreed with the debtor’s argument. The Court held that expert testimony was not required to determine blood alcohol content because the calculation was a simple mathematical calculation the Court could conduct. The Court also refereed to the deposition testimony of the person who drew the debtor’s blood and oversaw the testing testified in her deposition that the debtor’s blood alcohol content exceeded the legal limit. Because the plaintiff met her burden of proving all three elements necessary to except the debt from discharge, the plaintiff’s personal injury claim was excepted from discharge.
The Consociate Group, LLC vs. Zachary Bryan Campbell; (In re Campbell); Case No. 05-18338; Adv. No. 06-5112 (Nugent) (April 3, 2006).
memorandum opinion and order
Facts:
The Debtor Zachary Bryan Campbell was an employee of the plaintiff Consociate Group, LLC, but terminated his employment on February 4, 2005 prior to the filing of debtor’s Chapter 13 bankruptcy on October 13, 2005. The Plaintiff alleges in its complaint to except debts from discharge under 11 U.S.C. §523(a)(2)(A) that the debtor took certain computer databases containing confidential, proprietary and trade secret information belonging to the plaintiff thereby causing damages in excess of $700,000 to the plaintiff. The Debtor filed his 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted on the basis that §523(a)(2)(A) debts are not expected from a §1328(a) “super discharge”. The plaintiff’s complaint was filed before plan confirmation.
Holding:
The Court dismissed plaintiff’s complaint because the complaint to determine the dischargeability of the debtor’s obligations and debts was premature.
Estate of Michael John Maher vs. John Howard Fittell and Valerie Poidevin Fittell; (In re Fittell); Case No. 05-40854; Adv. Case no. 05-7063 (Karlin) (April 6, 2006).
Memorandum order and opinion denying plaintiff’s motion for summary judgment and setting deadline for filing jurisdictional motion to dismiss
Facts:
The Defendants were executors of an estate and while performing their duties, paid themselves fees totaling $9,203.25. The Defendants were advised by their attorney that because the estate was brought under the Kansas Simplified Estates Act, court approval was not required for such payments. Still, Defendants notified all beneficiaries of the payments and received either written or oral approval from each of the heirs. Furthermore, Defendants kept meticulous records concerning the time that they spent working on the estate. Plaintiff’s filed a motion for summary judgment based solely on the theory that Defendant’s payment without court approval constituted conversion as a matter of law which required a double damage award under Kansas Statute. The Plaintiff contended that damages sought were a breach of fiduciary duty, embezzlement and/or conversion and thus nondischargeable under 11 U.S.C. 523(a)(4) and (6).
Holding:
The court held that it could not find that as a matter of law that there was embezzlement or a conversion. It relied on the fact that the heirs ratified the Defendant’s conduct and that the Defendants had been advised by an attorney that they could pay themselves without court approval. Relying on In Matter of Estate of Harrison the Court commented that the Plaintiffs must show at trial that the heirs were substantially prejudiced by Defendant’s failure to first seek authority to pay their expenses and that the expenses were reasonably necessary. Thus, the motion for summary judgment was denied and the matter was set for trial.
In re Clarence Edward Ellis and Erin Ellis; Case No. 05-41505; (Karlin) (April 6, 2006).
Memorandum order and opinion sustaining debtors’ objection to claim of wells fargo bank and overruling, in part, wells fargo bank’s objection to confirmation of debtors’ chapter 13 plan
Facts:
The Debtors signed a note and mortgage with Kansas Home Mortgages. These instruments were eventually assigned to Wells Fargo. On July 30, 2003, Wells Fargo filed a state foreclosure action against the Debtors because of their failure to make timely payments. The Debtors counterclaimed that Wells Fargo had mismanaged the escrow account associated with the mortgage. Eventually, the parties entered into a Settlement Agreement which intended to resolve all issues associated with the foreclosure action. More particularly, the agreement provided that the Debtors pay Wells Fargo $21,720.85 in two installments. The first installment was due on February 25, 2005 and the second installment was by April 15, 2005. The agreement provided that if the Debtors failed to pay the installments that judgment for foreclosure in rem would be granted to Wells Fargo. At the same time the agreement was executed, an Agreed Journal Entry of Settlement and Dismissal was filed with the state court.
Nothing in the agreement contemplated what would happen if the Debtors made one payment and then attempted to pay the second payment by filing for bankruptcy and stretching that payment over the life of a Chapter 13 plan. This is precisely what happened. Debtors failed to make their second payment and Wells Fargo presented an Order of Sale before the state court. Before the Sheriff’s sale, Debtors filed their Chapter 13 petition. Debtors listed Wells Fargo as a secured creditor indicating their amount of arrearages at “a few pennies in excess” of the second payment. Wells Fargo filed a timely proof of claim which set forth an amount more than double the amount of the second payment required by the Settlement Agreement. Wells Fargo asserted that this amount was attributable to an escrow shortfall on the Debtor’s account that was unaddressed by the Settlement Agreement. Wells Fargo argued that the terms of the Agreement were no longer binding on it due to the Debtor’s breach. The Debtors contended that any shortfall was to be resolved by the Settlement Agreement. Thus, the Debtors objected to Wells Fargo’s claim and Wells Fargo objected to confirmation of the Debtor’s plan.
Holdings:
1. The Court held that the Settlement Agreement barred Wells Fargo from seeking to recover the alleged deficiency in the escrow account. In so holding, the Court articulated that the Agreement was intended to resolve all issues between the parties. Similarly, the debtors’ breach of the Settlement Agreement did not entitle Wells Fargo to double the amount of the deficiency through the use of the escrow account. Wells Fargo was limited to the remedy available in the agreement which was a judgment for foreclosure in rem. No where did the agreement say that breach would make its remedy provisions null and void.
2. The Court thus held that Wells Fargo was entitled to receive the second lump sum over the course of the plan with interest to account for the time value of the money. The Court commented that it would be unfair to allow the Debtors to pay the sum without interest over the course of 36 or more months. The Court directed Wells Fargo to inform it within 10 days whether it intended to prosecute the feasibility portion of its objection.
Christopher J. Redmond vs. Chris E. Wagers and Christina E. Wagers (In re Wagers); Case No. 03-24484; Adv. No. 05-6190 (Somers) (April 17, 2006).
Order denying motion to dismiss party, and granting motion to amend complaint, but requiring new service of process
Facts:
The Trustee’s complaint to avoid pre-petition transfers by the Debtors to their son and daughter-in-law mistakenly named the son’s ex-wife instead of his current wife. The names of the respective current and former daughter-in-law were very similar. (Christina E. Wagers and Kristin H. Wagers). The claim was filed on the last day of the two year period fixed by 11 U.S.C.A. 546(a)(1). Kristin (the current daughter-in- law) asked the Court to dismiss her as a party or to quash the service of process on her. The Trustee responded to Kristin’s motion contending that he had made a mistake and named the wrong woman. At the same time, the Trustee filed a motion for leave to amend his complaint to remove Christine E. Wagers and include Kristin H. Wagers as defendant. The Trustee attached to the motion a proposed amended complaint. The motion was served on Kristin’s attorney electronically.
Holding:
The Court held that the motion to dismiss was denied and the Trustee’s motion to amend the complaint was granted. The Court noted that the Supreme Court had ruled in Schiavone v. Fortune that a complaint could not be amended and relate back if the new party named did not receive notice of the action until the statute of limitations had run. Congress however had changed Civil Rule 15(c)(3) in order to change that harsh result. Since the Trustee’s amended complaint changed nothing about the Trustee’s claims, the claim clearly arose out of the same transaction or occurrence set forth in his original complaint. Furthermore, Bankruptcy Rule 7004(a) gave the plaintiff 120 days after filing a complaint to serve it, together with summons on each defendant. Within this 120 day period, Kristen had knowledge of the original complaint and the mistake made in it and the fact that the Trustee was trying to obtain permission to correct the mistake and assert claims against her. Thus, notice was given within the time period that she was the intended target of the complaint. Therefore she had the opportunity to take any steps that might be necessary to preserve her defense. Consequently, the claims asserted in the complaint will relate back to the original complaint.
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