BancorpSouth Bank v. Avery (In re Avery)

• Decision Date: 30 November 2018
• Docket Number: CASE NO. 17-04214-NPO,ADV. PROC. NO. 18-00030-NPO
• Citation: 594 B.R. 655
• Parties: IN RE: Matthew S. AVERY, Debtor. BancorpSouth Bank, Plaintiff v. Matthew Avery, Defendant
• Court: U.S. Bankruptcy Court — Southern District of Mississippi

594 B.R. 655

IN RE: Matthew S. AVERY, Debtor.BancorpSouth Bank, Plaintiff

v.Matthew Avery, Defendant

CASE NO. 17-04214-NPO

ADV. PROC. NO. 18-00030-NPO

United States Bankruptcy Court, S.D. Mississippi.

Signed November 30, 2018

Andrew Roberts Norwood, Jim F. Spencer, Jr., Watkins & Eager PLLC, Jackson, MS, for Plaintiff.

John D. Moore, Ridgeland, MS, for Defendant.

MEMORANDUM OPINION AND ORDER ON MOTION FOR SUMMARY JUDGMENT

Judge Neil P. Olack, United States Bankruptcy Judge

There came on for consideration the Motion for Summary Judgment (the "Summary Judgment Motion") (Adv. Dkt. 11)¹ filed by BancorpSouth Bank, successor by merger to Ouachita Independent Bank ("BancorpSouth"); and the Memorandum Brief in Support of Motion for Summary Judgment (the "BancorpSouth Brief") (Adv. Dkt. 12) filed by BancorpSouth in the Adversary. In support of its Summary Judgment Motion, BancorpSouth presented seven (7) exhibits marked as Exhibits "A" through "G." (Adv. Dkt. 11-1 to 11-7).²

Jurisdiction

The Court finds that it has jurisdiction over the parties to and has subject matter jurisdiction pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I). Notice of the Summary Judgment Motion was proper under the circumstances.

Facts³

1. On November 13, 2017, the debtor, Matthew S. Avery (the "Debtor"), filed a petition for relief under chapter 7 of the U.S. Bankruptcy Code (the "Code") (Bankr. Dkt. 1).

2. On November 17, 2017, the Court entered the Notice of Chapter 7 Bankruptcy Case—No Proof of Claim Deadline

(Bankr. Dkt. 11), providing that the 11 U.S.C. § 341⁴ meeting of creditors (the "Meeting of Creditors") would be held at 9:00 a.m. on January 10, 2018.

3. On January 10, 2018, the chapter 7 trustee, Derek A. Henderson, filed the Proceeding Memo and Minutes of the Chapter 7 § 341 Meeting, informing the Court that the Meeting of Creditors had concluded and that there is a "possible asset" in the Bankruptcy Case. (Bankr. Dkt. 18). The Debtor, counsel for the Debtor, and counsel for BancorpSouth attended the Meeting of Creditors.

4. On May 15, 2018, BancorpSouth filed the Complaint to Determine Dischargeability of Debt Pursuant to 11 U.S.C. § 523 (the "Complaint"), seeking a judgment declaring the Debtor's debt in the amount of $154,697.68, plus applicable interest at the per diem rate, to be nondischargeable under § 523(a)(2)(A). (Adv. Dkt. 1).

5. On June 13, 2018, the Debtor filed Matthew Avery's Answer and Defenses To: Complaint to Determine the Dischargeability of Debt Pursuant to 11 U.S.C. § 523 [Dkt # 1], asserting (1) that "[t]he Complaint fails to state a claim upon which relief can be granted as to the Debtor[;]" and (2) that the Debtor "reserves and raises all [a]ffirmative [d]efenses available to it." (Adv. Dkt. 9). Additionally, the Debtor "denies all allegations contained in the Complaint and the exhibits to the Complaint" and requests that the Court dismiss the Complaint, "with all costs and attorney's fees assessed against BancorpSouth," and that the Court enter "a judgment in favor of the Debtor for all of the Debtor's damages." (Id. )

6. On October 23, 2018, BancorpSouth filed the Summary Judgment Motion, asserting that the Debtor "admitted to the material facts" at the Meeting of Creditors; that "[t]here is no genuine issue of material fact as to whether [the Debtor's] debt to BancorpSouth is nondischargeable under § 523(a)(2)(A) [;]" and that it "is entitled to judgment as a matter of law." (Adv. Dkt. 11). In support of the Summary Judgment Motion, BancorpSouth submitted to the Court the transcript from the Meeting of Creditors taken on January 10, 2018 (the "Meeting of Creditors Transcript") (B. Ex. A); the Commercial Guaranty (the "Commercial Guaranty") (B. Ex. B); the Commercial Pledge Agreement (the "Commercial Pledge Agreement") (B. Ex. C); the Affidavit of Dawn Day (B. Ex. D); the Control Agreement and Acknowledgement of Pledge and Security Interest (B. Ex. E); text messages between Matthew Avery and Andrew Marascalco (B. Ex. F); the Mutual Funds, Variable Products and Alternative Investments (B. Ex. G); and the BancorpSouth Brief.

7. The Debtor did not file a response to the Summary Judgment Motion.

Discussion

A. Summary Judgment Standard

Rule 56 of the Federal Rules of Civil Procedure, as made applicable to adversary proceedings by Rule 7056 of the Federal Rules of Bankruptcy Procedure, provides that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). Courts do not disfavor summary judgment, but, rather, look upon it as an important process through which parties can obtain a "just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett , 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citations and quotations omitted). Summary judgment is properly entered when the "depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials" show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law. FED. R. CIV. P. 56(c)(1)(A) ; see also Celotex , 477 U.S. at 322, 106 S.Ct. 2548.

The movant bears the initial burden of proof to specify the basis upon which the Court should grant summary judgment and to identify portions of the record that demonstrate the absence of a genuine issue of material fact. FED. R. CIV. P. 56(c)(1) ; see also Celotex , 477 U.S. at 322, 106 S.Ct. 2548. The movant is entitled to the benefit of any relevant presumption under state law to satisfy the initial burden of proof. Once the initial burden is met, the burden of production shifts to the nonmovant who then must rebut the presumption by coming forward with specific facts, supported by the evidence in the record, upon which a reasonable factfinder could find a genuine fact issue for trial. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Importantly, "conclusory allegations" or "unsubstantiated assertions" do not meet the nonmovant's burden. Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co. , 530 F.3d 395, 399 (5th Cir. 2008). Summary judgment should be granted where the nonmovant "has failed to make a sufficient showing on an essential element of [the] case with respect to which [the party] has the burden of proof." Celotex , 477 U.S. at 323, 106 S.Ct. 2548.

The Court "has the discretion to deny motions for summary judgment and allow parties to proceed to trial so that the record might be more fully developed for the trier of fact." Hall v. Desper (In re Desper) , Adv. Proc. No. 09-05051-NPO, 2010 WL 653864, at *6 (Bankr. S.D. Miss. Feb 19, 2010) ; see also Firman v. Life Ins. Co. of N. Am. , 684 F.3d 533, 538 (5th Cir. 2012) (quoting Anderson , 477 U.S. at 255, 106 S.Ct. 2505 ); River Region Med. Corp. v. Wright , No. 3:13-cv-793-DPJ-FKB, slip op. at 4-6 (S.D. Miss. Aug. 5, 2014) (affirming interlocutory order denying summary judgment); Kunin v. Feofanov , 69 F.3d 59, 62 (5th Cir. 1995) ; Black v. J.I. Case Co. , 22 F.3d 568, 572 (5th Cir. 1994) ; Veillon v. Expl. Servs., Inc. , 876 F.2d 1197, 1200 (5th Cir. 1989). This Court previously has denied summary judgment to allow the parties to develop the facts at trial. Good Hope Constr., Inc. v. RJB Fin., LLC (In re Grand Soleil-Natchez, LLC) , No. 12-00013-NPO (Dkt. 437), at *33 (Bankr. S.D. Miss. Aug. 13, 2013).

B. Summary Judgment Evidence

As a preliminary matter, the Court notes that BancorpSouth relies heavily on the Meeting of Creditors Transcript in support of its Summary Judgment Motion. Courts, however, are reluctant to consider testimony obtained outside the safeguards and protections of the discovery rules when ruling on a motion in an adversary proceeding. See Roberts v. Oliver (In re Oliver) , 414 B.R. 361 (Bankr. E.D. Tenn. 2009) ; In re Enron , 281 B.R. 836, 841 (Bankr. S.D.N.Y. 2002) ; Collins v. Polk , 115 F.R.D. 326 (M.D. La. 1987). For example, in Helena Agri-Enterprises, LLC v. Young (In re Young) , Adv. No. 18-01017-NPO, 2018 WL 6060338 (Bankr. N.D. Miss. Nov. 19, 2018), this Court denied summary judgment where the plaintiff relied primarily on the debtor's Rule 2004 examination testimony to support its motion for summary judgment because the examination did not qualify as a "deposition" taken under Rule 7030 of the Federal Rules of Bankruptcy Procedure ("Rule 7030") that can be used as evidence in an adversary proceeding under Rule 7056(c)(1)(A) of the Federal Rules of Bankruptcy Procedure ("Rule 7056(c)(1)(A)") and because the Court was unable to determine from the record whether there was any prejudice to the debtor.⁵

Like a Rule 2004 examination, the meeting of creditors is broad in scope. Importantly,

[a] meeting of creditors is not an adversary proceeding.... The rules of procedure do not give the debtor the right to discovery from ... any interested party for the purpose of preparing a defense for the meeting of creditors because there is nothing to defend. The statutes and rules do not make the meeting of creditors into a mere discovery deposition subject to all the procedural rules governing discovery. The debtor does not have a constitutional right to representation by an attorney because the meeting of creditors is not a criminal proceeding.

Clippard v. Russell (In re Russell) , 392 B.R. 315, 359 (Bankr. E.D. Tenn. 2008). In other words, the § 341 meeting of creditors "is a fishing expedition allowed, even encouraged, by the statutes and the rules so long as the subject of the questioning relates to the bankruptcy case." Id. at 358-59.

In Stasz v. Gonzalez (In re Stasz) , Adv. Proc. No. LA06-01481-AA, 2007 WL 7370101, at *4 (9th Cir. BAP Aug. 9, 2007), the appellants argued that the bankruptcy court improperly considered the § 341 meeting transcript as...