B&B Unlimited, Inc. v. Beecroft (In re Beecroft)
| Decision Date | 13 June 2014 |
| Docket Number | Case No.: 12-14217-JDW,A.P. No.: 13-01007-JDW |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
| Parties | In re: JAMES RICHARD BEECROFT, Debtor. B & B UNLIMITED, INC. and CECIL BURNS, Plaintiffs, v. JAMES RICHARD BEECROFT, Defendant. |
SO ORDERED,
The Order of the Court is set forth below. The case docket reflects the date entered.
This adversary proceeding is before the Court on a Complaint to Determine Dischargeability and for Other Relief (the "Complaint")(Dkt. # 1) filed on February 1, 2013, by B & B Unlimited, Inc. ("B & B") and Cecil Burns (together with B & B, the "Plaintiffs") against debtor James Richard Beecroft (the "Defendant"). This Court has jurisdiction pursuant to 28 U.S.C. §§ 151, 157(a) and 1334(b) and the United States District Court for the Northern Districtof Mississippi's Order Of Reference Dated August 6, 1984. This is a core proceeding as set forth in 28 U.S.C. § 157(b)(2)(B), (I) and (J).
The Plaintiffs allege that the Defendant fraudulently sold the same mobile home twice, first to B & B and then later to a third party. The two sales led to inevitable litigation, and Plaintiffs alleged in the Complaint that damages arising from the transactions are nondischargeable pursuant to 11 U.S.C. § 727. At the parties' request and pursuant to the Scheduling Order entered on May 6, 2013 (Dkt. # 9), no pre-trial conference was held. A trial on the adversary proceeding was held on April 24, 2014, at which time Plaintiff Cecil Burns, counsel for the Plaintiffs, J. Keith Pearson, the Defendant, and counsel for the Defendant, James W. Amos, all appeared. At the outset of the trial, Mr. Pearson announced the Plaintiffs' decision - without objection from the Defendant1 - to travel exclusively under 11 U.S.C. § 523(a)(6) and abandon all arguments under § 727.
The trial was held and testimony was given by both Mr. Burns and the Defendant, documents were received into evidence and argument made by counsel. At the close of the trial, the parties were ordered to brief the issue of whether or not the selling of the property multiple times by the Defendant was per se willful and malicious action as contemplated under § 523(a)(6). Upon submission of the parties' briefs, the Court took the matter under advisement. The Court must decide (1) whether or not the Plaintiffs hold a valid claim against the Debtor, and (2) whether the Plaintiffs' claims are nondischargeable pursuant to 11 U.S.C. § 523(a)(6). TheCourt has considered the pleadings, testimony, admitted evidence and applicable law, and finds and concludes as follows.2
B & B is a Mississippi corporation wholly owned by Mr. Burns. B & B owns Techville Mobile Home Park in Oxford, Mississippi. Although B & B owns the mobile home park, neither it nor Mr. Burns own the mobile homes located therein. Instead, tenants rent lots in the park on which to put their own mobile homes, and pay B & B monthly rent for the use of each individual lot. The Defendant rented two lots (Lots # 27 and # 45), at a monthly rate of $165.00 each.3
After entering into the lease agreements, Defendant missed several payments on both Lot 27 and 45. In October 2008, the parties reached an agreement to satisfy the arrearage on Lot 27. As testified to at trial by both Mr. Burns and the Defendant, the parties agreed that Defendant would deliver a bill of sale to B & B for the mobile home on Lot 27 and the Lot 27 rent arrearage would be forgiven, but Defendant would continue to pay rent for Lot 27 until B & B could find a new tenant. No other consideration was paid. Although an unusual sale arrangement, it was credibly explained at trial that the Defendant agreed to the deal so that he would not be evicted from both lots and sued for the back rent on each lot. In other words, the Defendant made the business decision that it was cheaper for him to transfer the Lot 27 mobile home (which had minimal value) to B & B and continue to pay rent on Lot 27 until a new tenant could be found, than it would have been to spend the money to move both mobile homes and face a lawsuit forback rent. Defendant agreed to help locate a tenant for Lot 27 in an attempt to stop his liability for the rent as soon as possible.
In accordance with the agreement, Defendant prepared a bill of sale to B & B for the mobile home, dated November 1, 2008 (the "First Bill of Sale")(Ev. P-1). The Defendant also delivered a letter to the Mr. Burns, along with the First Bill of Sale, that memorialized some of the terms of the parties' agreement (the "Letter")(Ev. P-2). The Letter reflects a portion of the parties' agreement, but does not include the agreement that Defendant would continue to pay rent until a new tenant could be found. Regardless, Defendant did continue to pay Lot 27 rent until the subsequent sale detailed below.
Sometime after execution of the First Bill of Sale, Mr. Burns indicated by telephone to the Defendant that he believed he had found a new tenant for the mobile home on Lot 27. Sometime thereafter, Mr. Burns again contacted Defendant by telephone, and told him that the potential new occupant had fallen through, and to continue paying rent. Mr. Burns testified that he was only indicating that the potential new tenant would not be leasing Lot 27, and that Defendant was to continue paying rent pursuant to the agreement. Defendant testified that he interpreted this conversation to mean that the entirety of the sale agreement between Defendant and B & B had been canceled. The Defendant stated that, believing that his arrangement with B & B had been canceled, he was once again the owner of the mobile home, despite the fact that a bill of sale conveying the mobile home back to him was not prepared or delivered.
Several months later, the Defendant prepared and executed a second bill of sale for the mobile home to Leslie and Robert Ray (the "Rays"), which was admitted into evidence (the"Second Bill of Sale")(Ev. P-3). Though the Second Bill of Sale is undated, the parties agree that the second sale took place sometime in July 2009.4
Sometime after the second conveyance, the Rays moved into the mobile home and began paying rent to B & B. Sometime in 2010, the Rays stopped making payments. It was then that the Plaintiffs discovered that the Rays were claiming ownership of the mobile home, relying on the Second Bill of Sale. The Rays now claim ownership of the mobile home, have filed suit in the Circuit Court of Lafayette County against the Plaintiffs, and have further refused to pay the rent on Lot 27.5 Plaintiffs have now incurred - and are continuing to incur - costs in defending that lawsuit and B & B's ownership of the mobile home.
On October 4, 2012, Defendant filed his chapter 7 bankruptcy petition.
Plaintiffs allege that by selling the mobile home to B & B, and then later selling the same mobile home to the Rays, Defendant committed slander of title, consequently giving rise to damages that are nondischargeable pursuant to 11 U.S.C. §523(a)(6).
Although the Defendant testified at trial that he did not know that B & B owned the property, and that he believed that the Plaintiffs had nullified the First Bill of Sale, the Court finds that the Defendant's testimony is without credibility or merit. The Defendant admitted at trial that he had participated in numerous transactions involving the sale of real and personal property over a period of several years. He further admitted that he had substantial experience with general business practices and has owned his own business for seventeen years. Defendant has bought and sold two homes and over ten vehicles in his lifetime. Furthermore, he has bought and sold multiple properties for his business. Each time, written documentation was required toevidence the transfers. The Defendant's own testimony confirms that he has a familiarity with business transactions and the process of buying and selling real and personal property.
The Defendant testified that when Mr. Burns contacted him to say that "the deal was off," the Defendant was under the impression that B & B was canceling their arrangement, and as such, the First Bill of Sale and conveyance of the mobile home were void. However, the Defendant was unable to point to any evidence that might support or corroborate his assumption. Most notably, the First Bill of Sale was not returned, the Defendant made no effort to have a new bill of sale executed conveying the mobile home back to him, and there was no further communication between the parties regarding the nullification of the agreement or the sale. The Court finds the lack of supporting evidence particularly compelling given that when the First Bill of Sale was executed, the Defendant sent the Letter, outlining some of the terms of the agreement. No such letter or follow-up communication was had between the parties at the time the Defendant believed the agreement to be canceled and the property transferred back to him. In the aggregate, there is a dearth of evidence that might support the Defendant's testimony that he believed he was once again the owner of the mobile home when he executed the Second Bill of Sale.
In order for the Court to conclude that any debt owed to the Plaintiffs by the Defendant is nondischargeable, the Plaintiffs must first prove that they hold a valid claim against the Defendant for slander of title resulting in damages. Then, the Plaintiffs must demonstrate how and why that claim is nondischargeable pursuant to Title 11 of the United States Code. As explained by the United States Supreme Court, Grogan v. Garner, 498 U.S. 279, 283-84, 111 S. Ct. 654, 657-58, 112 L. Ed. 2d 755 (1991)(internal...
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