In re Stedham

• Decision Date: 08 August 2005
• Docket Number: Bankruptcy No. 03-10023.,Adversary No. 05-5088.
• Citation: 327 B.R. 889
• Parties: In re William Boyce STEDHAM, Debtor. Samuel R. Humphreys, Plaintiff, v. William Boyce Stedham, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Tennessee

327 B.R. 889

In re William Boyce STEDHAM, Debtor Samuel R. Humphreys, Plaintiff, v. William Boyce Stedham, Defendant.

Bankruptcy No. 03-10023.

Adversary No. 05-5088.

United States Bankruptcy Court, W.D. Tennessee, Eastern Division.

August 8, 2005.

COPYRIGHT MATERIAL OMITTED

John Van den Bosch, Charlotte, NC, for Debtor.

Charles Exum, Jackson, TN, for Plaintiff.

Gregory Jordan, Jackson, TN, for Plaintiff.

Marianna Williams, Dyersburg, TN, Chapter 7 Trustee.

MEMORANDUM OPINION AND ORDER RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

G. HARVEY BOSWELL, Bankruptcy Judge.

The Court conducted a hearing on the Defendant's Motion for Summary Judgment on June 1, 2005. FED. R. BANKR. P. 9014. Resolution of this matters is a core proceeding. 28 U.S.C. § 157(b)(2). The Court has reviewed the testimony from the hearing and the record as a whole. This Memorandum Opinion and Order shall serve as the Court's findings of facts and conclusions of law. FED. R. BANKR. P. 7052.

I. FINDINGS OF FACT

At issue in this case is the debtor's failure to list a collection of antiques known as the "Bray Collection," ("collection"), as an asset on his bankruptcy schedules. According to the Plaintiff in this matter, Samuel Humphreys, ("Humphreys"), the collection has an estimated value of around $150,000.00. Prior to the debtor's chapter 7 filing, Humphreys filed a state court lawsuit against William Boyce Stedham, ("Stedham" or "debtor") and Douglas Hudson, ("Hudson"). Humphreys alleged in that lawsuit that Stedham and Hudson had breached a contract and committed negligence in the purchase and sale of the antiques collection at issue.

Stedham filed his chapter 7 petition on January 3, 2003. He listed Humphreys on his schedule F as an unsecured, non-priority creditor with a claim of $20,000.00. He also listed the state court lawsuit on his statement of financial affairs. Humphreys was the only creditor listed on the petition and matrix.

Stedham listed four assets on his petition: a checking account worth $100.00; "miscellaneous household items" worth $1,000.00; "wearing apparel" worth $300.00; and a 1998 Ford F150 worth $2,050.00. Stedham claimed an exemption in the checking account, wearing apparel and the Ford.

The Bankruptcy Court Clerk's Office issued the "Notice of Commencement of Case Under Chapter 7 of the Bankruptcy Code, Meeting of Creditors and Fixing of Dates" in the case on January 9, 2003. The notice plainly states that the deadline to file a complaint objecting to the discharge of the debtor or to determine the dischargeability of certain debts was April 14, 2003. Pursuant to the certificate of service in the file, Humphreys was served with a copy of this notice on January 13, 2003. Humphreys did not dispute that he received the notice. The meeting of creditors in the case was conducted on February 25, 2003. At the hearing in this matter, the debtor's attorney stated that Humphreys' attorneys were present at the 341 meeting and had every opportunity to ask Stedham questions. Humphreys did not dispute this assertion.

The chapter 7 trustee filed her no asset report on February 28, 2003, and the case was discharged on April 17, 2003. The certificate of service for the discharge order shows that Humphreys was served with a copy of the discharge order on April 21, 2003. The final decree was issued and the case was closed on May 1, 2003.

Approximately five and a half months after the debtor's discharge, Humphreys filed a motion to reopen the debtor's case for purposes of finding the debt "nondischarged."¹ Humphreys did not specify what particular debt he was seeking to except from the debtor's discharge, nor did he state under which particular section of the Bankruptcy Code he was seeking a "nondischarged" determination.² What he did allege, however, was that the debtor failed to schedule the antiques collection on his chapter 7 petition. At the time the motion was filed, the collection allegedly had a value of approximately $150,000.00. Humphreys asserted that the debtor should turn the collection over to the chapter 7 trustee so that she could administer the collection for the benefit of the creditors of the estate. In paragraph four of the motion, Humphreys states that "recently acquired information" from the state court lawsuit "has shown that the Debtor knowingly and fraudulently misrepresented his assets at the meeting of his creditors and on his bankruptcy schedules."

The debtor filed an objection to the motion to reopen on October 28, 2003. Stedham alleged that it would be improper to reopen the case for purposes of a non-dischargeability determination because Humphreys had received notice of the deadline to object to dischargeability on January 13, 2003, and he did not exercise his rights prior to the deadline on April 14, 2003. Stedham also alleged that Humphreys had not demonstrated any justification for the delay in seeking a non-dischargeability determination.

The "Motion to Reopen" was originally set for a hearing on October 29, 2003, but was continued nine times and was not actually heard until August 16, 2004. In his response to the debtor's motion for summary judgment, Humphreys' attorney asserted that "[o]n numerous occasions, Defendant's attorney delayed this Court from hearing the Motion to Reopen, such as asking for continuances."³ Based on that allegation, the Court went back and reviewed the recordings from each date a continuance was requested. It is clear from these recordings that both parties agreed to each continuance. In fact, one of Humphreys' attorneys, Charles Exum, was the party who stood at the podium and asked the Court to continue the motion on three separate occasions.⁴

At the August 16, 2004, hearing, the Court granted Humphreys' "Motion to Reopen." The "Order Granting Motion to Reopen" was entered on August 20, 2004. The body of the order reads:

"[T]his Court finds that sufficient cause exists to reopen the above-styled Chapter 7 case to reappoint the standing Chapter 7 Trustee, Marianna Williams, to investigate the Debtor's apparent failure to list or otherwise disclose all of the Debtor's assets."

Since the reopening of the case, the trustee has not filed any type of pleading demonstrating what efforts, if any, she has made to investigate the debtor's failure to list all of his assets. The trustee also has not filed any type of report which demonstrates she has discovered hidden or omitted assets.

Although the case was reopened in August 2004, the plaintiff in this matter did not file any type of complaint against the debtor until April 6, 2005. On that date, Humphreys filed a "Complaint to Set Aside Discharge" in which he asked the Court to revoke the debtor's discharge under 11 U.S.C. § 727(d)(1) and/or § 727(d)(2). As grounds for this request, Humphreys alleged that Stedham obtained his discharge through fraud in violation of § 727(d)(1) and that the debtor obtained property which he failed to report or turn over to the trustee in violation of § 727(d)(2).

The first major fact set forth in Humphreys' complaint is that Stedham failed to list the antique collection on his bankruptcy schedules. Stedham does not dispute the fact that he did not list the antiques on his schedules and a cursory review of his petition demonstrates that the collection was indeed omitted. The second major fact set forth in the complaint is that despite the fact that the state court had issued a temporary injunction on December 4, 2002, ordering Stedham and Hudson to stop selling or otherwise disposing of the antique collection at issue, Stedham continued to sell the antique collection on ebay both prior to and after filing for bankruptcy relief. Stedham neither admitted nor denied that an injunction was issued nor did he admit or deny that he continued selling antiques after November 2002.

In part, Humphreys based his allegations of the debtor's fraud on three depositions he took in connection with the state court lawsuit: (1) the deposition of Gail Ann Stedham taken on February 3, 2003; (2) the deposition of William Jackson taken on April 21, 2003; and (3) the deposition of Steve Conner taken on June 20, 2003. Although select pages from each deposition were attached as exhibits to Humphreys' complaint, he did not introduce the depositions into evidence at the hearing on Stedham's motion for summary judgment. Stedham objected to the allegations in the complaint; however, he never disputed the fact that the depositions were taken. Stedham also never alleged that the pages attached to the complaint were inaccurate transcripts of the deposition questions and answers. For this reason, the Court is including some of the information from the first two depositions in this opinion; however, in so doing, the Court is not making any findings regarding the veracity of the statements contained therein. Instead, the Court is including the questions and answers to demonstrate what the plaintiff knew and at what point in the litigation the plaintiff had this knowledge.

The deposition of Gail Ann Stedham was taken on February 3, 2003, two months prior to the debtor's discharge. Gregory Jordan, ("Jordan"), conducted the questioning at Gail Stedham's deposition. Jordan represented Humphreys in the state court lawsuit as well as in all proceedings in this Court. Humphreys was also present at the deposition. During the course of the questioning, Jordan asked Gail Stedham "[h]ave you had in your possession, or do you have now, any documentation that identifies or describes or in any way lists the antique collection [Stedham] bought called the Bray collection?"⁵ In response to that question, Gail Stedham shook her head no. Jordan also asked Gail Stedham if she knew whether or not Stedham had sold antiques on ebay since November 26, 2002.⁶ Gail Stedham replied "he sells, as far as I know, every day."

The deposition of William Jackson was taken on April 21, 2003. Jordan conducted the questioning at the deposition...