Opinions

As personal representative of his mother’s estate, the Debtor sold the mother’s residence and satisfied the mortgage lien on the residence with the proceeds of the sale prior to the payment of a life insurance death benefit that was payable to the holder of the mortgage and that would have reduced the mortgage debt on the residence. The Debtor as the second beneficiary of the policy later received the death benefit as the second beneficiary because the mortgage debt had been sagtsified at the time of payment of the death benefit. One of the beneficiaries of the estate filed a complaint contending that the Debtor was liable for his share of the loss to the estate that resulted from the timing of the sale and that the debt was excepted from discharge under § 523(a)(2), (4), and (6). Held: Although the Debtor is liable for breach of fiduciary duty, he did not act fraudulently for purposes of § 523(a)(2), did not commit fraud or defalcation for purposes of § 523(a)(4), and did not act willfully or maliciously for purposes of § 523(a)(6). Accordingly, the debt is dischargeable. NOT INTENDED FOR PUBLICATION.

Order granting motion of United States Trustee to dismiss Chapter 7 case pursuant to 11 U.S.C. § 707(b)(3). U.S. Trustee argued that totality of circumstances demonstrated abuse because evidence shows Debtors could make substantial payments to creditors either in a case under Chapter 11 or 13, or outside of bankruptcy. In analyzing issue, Court determined that Section 707(b)(3) requires more than a finding of ability to pay. Relevant factors include: whether case filing caused by unforeseen event; eligibility of debtor for repayment-based relief; out-of-court remedies and negotiations; reliable income; potential for meaningful distribution to creditors under Chapter 13; and, reasonableness of debtor’s budget. Upon evaluation of foregoing factors in connection with financial condition of Debtors, Court concluded filing of petition under Chapter 7 was an abuse of Section 707(b)(3)."

Order granting summary judgment in favor of Plaintiff and against Defendant-Debtor on issue held in abeyance in prior ruling with regard to nondischargeability of award of attorney’s fees on account under O.C.G.A. § 19-9-3(g) in state court litigation related to dissolution of parties’ marriage. State superior court entered award based on Debtor’s stated intention to seek a jury trial on issue of modification of child support and custody, and court’s assessment of Plaintiff’s ability to retain counsel and offer a defense. Plaintiff contended award is fully enforceable and excepted from discharge since it functions as support under 11 U.S.C. § 523(a)(5). Debtor countered that because award is contingent in nature and no jury trial was ever sought, it is not a legally enforceable obligation. Court determined that even though award is contingent in nature and unfixed in amount, Plaintiff established existence of enforceable obligation. Further, Plaintiff established that same was in the nature of support intended to benefit former spouse in pending litigation, and so was excepted from discharge."

Order Granting in Part and Denying In Part the Plaintiffs' Motion to (1) Strike Affirmative Defenses, or Alternatively, Require More Definite Statement, (2) Dismiss Counterclaims or, alternatively, Require More Definite Statement, and (3) Dismiss Objections to Claim in case involving an objection to discharge. Motion to Strike Affirmative Defenses The Defendant had plead 37 affirmative defenses in his answer. The Plainitffs requested that most of them be stricken pursuant to Rule 12(f). The Court declined to apply the heightened pleading standard outlined by the Supreme Court in Twombly and Iqbal to affirmative defenses, instead relying on the plain meaning of Rule 8(c)'s requirement that a defendant must merely \state\" the affirmative defenses he has. Nevertheless, the Court struck two of the defenses as completely inapplicable to the proceeding. The Court also declined to order the Defendant to provide a more definite statement of his defenses, as there is the Court had not ordered the Plaintiff to respond to the Defendant's answer. Dismiss Counterclaims The Defendant had plead counterclaims for violation of the automatic stay, injunctive relief, slander, intentional infliction of emotional distress, breach of contract, punitive damages, and attorney's fees. Before the Court could address this aspect of the Plaintiffs' motion, the party's entered a consent order withdrawing the motion as to five of the Defendant's counterclaims (violation of the automatic stay, injunctive relief, slander, intentional infliction of emotional distress, and punitive damages). Consequently, the Court only addressed the breach of contract and attorney's fees claims. On the breach of contract, the Defendant alleged that one of the Plaintiffs had been slandering the Defendant to business associates and his bank. The Defendant alleged that this activity breached a non-disparagement clause in a separation agreement entered into by the Defendant and the Plaintiff when they had ceased their prior business relationship. The Court concluded that because the claim was based on a pre-petition contract, the claim belonged to the estate. As the claim belonged to the estate, the Chapter 7 Trustee, rather than the Defendant, was the real party in interest within the meaning of Rule 17. Therefore, the claim was dismissed. Concerning attorney's fees, the Court concluded that the Defendant could proceed with its claim for attorney's fees against one of the Plainitffs, but not the other, as he had alleged no underlying claim that could support attorney's fees against the other. Objection to Claims The Defendant had also listed as \"counterclaims\" objections to the claims of the two Plaintiffs. However, as neither Plaintiff had filed a proof of claim, and objections to claim are to be filed in the main bankruptcy case, not the adversary proceeding, the Court dismissed these counts."

Chapter 13 case and plan were not filed in good faith where (1) Debtor wife sold real property in Florida and received proceeds in excess of $64,000, (2) Debtor husband induced a judgment creditor to release a lien on their residence in Georgia, (3) Debtors sold their Georgia residence in a short sale without informing the mortgage holders that they had cash on hand from the Florida sale, and (4) Debtor husband used the Florida sale proceeds to purchase a new Georgia residence in his name alone free of liens. It appears Debtors actions were calculated to provide themselves with a residence free of debt without fully satisfying the judgment creditor and mortgage creditors. NOT INTENDED FOR PUBLICATION

Order granting in part and denying in part the motion to dismiss of Debtor and Joint Debtor (“Defendants”). Plaintiff initiated an adversary proceeding seeking a finding of Debtor’s personal liability directly or under an alter ego theory, a finding of nondischargeability under § 727(a)(2)(A) and § 727(a)(4)(A) of the Bankruptcy Code, and a denial of Defendants’ discharges under § 523(a)(2)(A) and § 523(a)(6) of the Bankruptcy Code. In response, Defendants filed a motion to dismiss for failure to state a claim. First, the Court granted Defendants’ motion in part, concluding that Plaintiff failed to allege facts in the complaint sufficient for relief under § 727(a)(2)(A) as to Debtor and for any relief as to Joint Debtor. Second, the Court denied Debtors’ motion in part, concluding that, on the remaining counts against Debtor, Plaintiff alleged facts sufficient to state a claim upon which relief could be granted and facts sufficient to show Debtor’s personal liability. Finally, the Court granted Plaintiff leave to amend the complaint under Federal Rule of Civil Procedure 15(c)(1)(B).

Order on Parties’ Cross-Motions for Summary Judgment. The parties disputed the preclusive effect of a state court judgment for rental commissions, attorney’s fees, costs, and punitive damages entered in favor of the Plaintiff. As a preliminary matter, the Court ruled that the state court’s denial of the Defendant’s motion for reconsideration of the state court judgment while Defendant’s bankruptcy case was pending was void as a violation of the automatic stay. On the issue of preclusion, the Court found that Georgia law provides that a judgment is not final as long as there is a right to appellate review. The Court further ruled that the state court judgment was not preclusive because the Defendant’s motion for reconsideration challenged the factual findings of the state court, making it a motion for new trial, which tolled the time to appeal.

Order denying Defendant's motion to dismiss for failure to state a claim. Complaint states facts that satisfy pleading requirements for claims under Sections 523(a)(2)(B), 727(a)(2)(A), and 727(a)(3). NOT INTENDED FOR PUBLICATION."

Plaintiff filed an Amended Emergency Motion For Injunctive Relief, Motion For Contempt, Motion For Violation Of Automatic Stay, Motion For Creditors Misconduct. Plaintiff alleged that certain claims arose when the Water Department terminated his access to municipal water and mailed Debtor a letter regarding his account post-petition. The Court held that claims for violation of the stay are matters that can only arise in bankruptcy and such claims are within the Court’s core jurisdiction. 11 U.S.C. § 362(a); 28 U.S.C. 157(b)(2). Likewise, to the extent Plaintiff was asserting claims against the chapter 7 trustee, these claims arise under the Bankruptcy Code and are within the Court’s core jurisdiction. In contrast, Plaintiff’s claims seeking injunctive relief in the form of an order directing that the Water Department restore water service, seeking to hold Defendants in contempt, and alleging creditor misconduct are not matters that could only arise in bankruptcy and therefore are not within the Court’s core jurisdiction. Moreover, the Court did not have “related to” jurisdiction over these claims because any award of damages would solely benefit Plaintiff and not the bankruptcy estate. The Court also denied Plaintiff’s request for injunctive relief on an expedited basis because Plaintiff failed to demonstrate an ability to satisfy any of the elements necessary for injunctive relief. NOT FOR PUBLICATION

Order granting in part and denying in part Trustee’s motion for summary judgment on actual and constructive fraudulent transfer actions under 548(a)(1) and Georgia law. The court concluded that the defendant did not rebut the \"Ponzi scheme presumption\" with respect to the transfer it received, but that factual disputes regarding value and good faith precluded entry of summary judgment in favor of the trustee. Not intended for publication."

The Court considered a motion to remand and for abstention of a post-petition declaratory judgment action filed in the state court concerning certain rights to mine rock that had been transferred pre-petition from debtor to an entity created by debtor’s managing member. The Court determined that it had subject matter jurisdiction over this matter because the complaint merely re-characterized a fraudulent transfer dispute resolved through an order denying the appointment of a chapter 11 trustee as a contract dispute and because resolving the dispute over rights to mine rock required construing and potentially enforcing this Court’s order denying the motion for appointment of a trustee. Abstention was not required because the proceeding involved core proceedings (i.e., fraudulent transfer litigation and interpretation of the Court’s own order). As to removal directly to bankruptcy court, the Court agreed with the majority rule that removal under 28 U.S.C. § 1452 can be made directly to the bankruptcy court. As to venue, 28 U.S.C. § 1409(e) was inapplicable, and even if it did apply, venue in the Northern District of Georgia was proper. Finally, the right to a jury trial over certain claims does not require that the entire proceeding be remanded because such claims can be tried in district court. NOT INTENDED FOR PUBLICTION

Order Denying Defendant’s Motion to Dismiss and Granting Judgment for Plaintiff. The parties disputed whether a security deed contained the requisite signatures and formalities to comply with Georgia law. The Court ruled that the placement of the notary public’s signature within a certificate of acknowledgment indicated that his signature was an acknowledgment rather than an attestation. Further, the Court ruled that the notary public’s failure to record the date on which the notarial act of acknowledgment took place rendered the acknowledgment invalid, making the deed patently defective under Georgia law and therefore avoidable pursuant to 11 U.S.C. § 544.

Order denying Defendant’s motion to dismiss, denying motion of the Nonparties to quash subpoena, granting Plaintiff’s motion to compel, and setting a status conference. Plaintiff initiated an adversary proceeding objecting to discharge. This order resolved three primary issues: First, Defendant, who is also the Debtor in the lead bankruptcy case, moved to dismiss the adversary proceeding for Plaintiff’s failure to properly effect service on Defendant’s attorney. It was undisputed that Plaintiff failed to properly effect service on Defendant’s attorney. However, the Court found that Plaintiff properly served Defendant, and that Defendant’s attorney waived insufficient service by, among other things, failing to timely raise his defense. Therefore, the Court denied Defendant’s motion to dismiss. Second, the Nonparties moved to quash a subpoena issued by Plaintiff’s counsel for the purpose of deposing the Nonparties. Plaintiff had previously deposed the Nonparties in Defendant’s lead bankruptcy case. The Nonparties asserted that FRCP 30(a)(2)(A)(ii) required Plaintiff to obtain leave of court to depose Nonparties in the adversary proceeding because the “deponent had already been deposed in the case.” The Court disagreed, concluding that “case,” in the context of FRCP 30(a)(2)(A)(ii), refers to the adversary proceeding, not the title 11 umbrella as a whole. Therefore, because the Nonparties had not already been deposed in the case, the Court concluded that Plaintiff could depose Nonparties without leave of court. Third, Plaintiff filed two motions to compel, which were deemed unopposed because no response to either motion was filed.

Order sustaining Trustee’s objection to Claimant’s claim. Trustee objected to Claimant’s claim for lack of documentation. Claimant alleged that is entitled to a constructive trust on funds allegedly misappropriated by Debtor’s former owner. Claimant failed to trace the allegedly misappropriated funds to Debtor and, as such, failed to provide support for applying a constructive trust to such funds. The Court sustained Trustee’s objection to Claimant’s claim and ordered the claim disallowed in its entirety.

Trustee objected to Debtor’s claimed exemption in real property that Debtor quitclaimed to his former spouse pre-petition as part of a Settlement Agreement executed one day prior to the spouse’s filing a Divorce Proceeding. The deed was recorded three days later. During the pendency of the Divorce Proceeding the Debtor filed for bankruptcy and a Final Judgment of Divorce was entered thereafter. The Court determined that the Property was not property of the bankruptcy estate and Debtor had no interest to exempt because it was transferred pre-petition when the Debtor executed the Deed contemporaneously with the Settlement Agreement. The transfer was not an equitable division of property which arose after the divorce proceeding was filed. Further, the exception contained within O.C.G.A. § 19-5-7 did not apply to the transfer. Consequently, Debtor had no interest in the Property on the Petition Date. In addition the transfer of the Property was a voluntary transfer for purposes of § 522(g)(1)(A). And, to the extent the Trustee recovers the Property, Debtor would not be entitled to claim an exemption in the Property. NOT INTENDED FOR PUBLICTION

Order Denying Motion for Partial Summary Judgment. The Court ruled disputed issues of fact remained with respect to sections 523(a)(2)(A) and (a)(6). The Court also held that the Plaintiff’s attempt to use collateral estoppel failed because the Plaintiff failed to establish that there was an identity of issues between the state court judgment and the dischargeability action.

The Court entered default judgment against the defendant, a petition preparer, in an adversary proceeding brought by the U.S. Trustee. The Court had previously entered an order requiring the defendant to reduce her fee to $25 and remit the remaining $125 to the debtor. The defendant failed to remit the $125. As a result, the Court enjoined the debtor from acting as a bankruptcy petition preparer pursuant to section 110(j)(2)(B).

The Court entered default judgment against the defendant, a petition preparer, in an adversary proceeding brought by the U.S. Trustee. The Court had previously entered an order requiring the defendant to disgorge the fee she had charged the debtor and to pay a $500 fine. The defendant failed to do either. As a result, the Court enjoined the debtor from acting as a bankruptcy petition preparer pursuant to section 110(j)(2)(B).

Order granting in part and holding in abeyance in part motion of Plaintiff for summary judgment, and denying in part and holding in abeyance in part motion of Defendant-Debtor for summary judgment, regarding Plaintiff’s complaint objecting to the dischargeability of certain obligations of Debtor former spouse, awarded in state court marital dissolution litigation, as domestic support obligations under 11 U.S.C. § 523(a)(5) & (a)(15) and § 1328(a)(2). Obligations at issue consisted of the following: (1) payments under Divorce Decree; (2) award of attorney’s fees in Contempt Order; and, (3) award of attorney’s fees “on account” in Modification Order pending anticipated jury trial regarding same. First, Debtor argued that part of subject obligation set forth in Divorce Decree constituted dischargeable property settlement. After concluding Section 523(a)(15) did not apply in Chapter 13 case, Court determined that obligation at issue constituted domestic support obligation excepted from discharge under Section 523(a)(5). Applying longstanding factors used prior to 2005 amendments to Bankruptcy Code to discern nature of an obligation (i.e. property settlement or support), Court concluded that order for Debtor to pay Plaintiff for her share of business interest acquired during marriage was in the nature of support given its function in view of the totality of circumstances presented. Therefore, arrearage could not be discharged. Despite label of obligation in Divorce Decree, payments appeared designed to balance parties’ disparate levels of income and the obligation was enforceable by contempt. Court next concluded that attorney’s fee award in Contempt Order, awarded as expense of litigation to enforce child support obligation, also constituted nondischargeable support. Finally, Court held in abeyance ruling on award of attorney’s fees “on account” in Modification Order under O.C.G.A. § 19-9-3(g) to allow further argument on issue of status of this award based on state court litigation and possible jury trial."

The debtor brought this suit against the Chapter 7 trustee and the trustee's bondholder in the name of the United States pursuant to Bankruptcy Rule 2010(b). The debtor alleged that the trustee had negligently carried out his duties in regard to the sale of a 1974 Corvette in which the debtor had claimed an exemption. On debtor's motion for judgment on the pleadings, the Court held: (1) the fact that a debtor has claimed an exemption does not automatically entitle the debtor to receive that amount; and (2) a trustee cannot be held liable for conducting a 363 sale in conformity with a court order approving that sale. The Court ultimately concluded that the debtor could not make out any case against the trustee based on his allegations and dismissed the complaint. Because the action against the bondholder was derivative of the action against the trustee, the Court dismissed the debtor's motion for default judgment against the bondholder and denied the bondholder's motion to set aside default as moot.