Discover Bank v. Warren (In re Warren), C/A No. 11–06879–dd

• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Citation: 507 B.R. 862
• Decision Date: 26 November 2013
• Docket Number: Adv. Pro. No. 12–80002–dd,C/A No. 11–06879–dd
• Parties: In re Sybil Smith Warren, Debtor. Discover Bank, Issuer of the Discover Card, Plaintiff, v. Sybil Smith Warren, Defendant.

507 B.R. 862

In re Sybil Smith Warren, Debtor.

Discover Bank, Issuer of the Discover Card, Plaintiff,

v.Sybil Smith Warren, Defendant.

C/A No. 11–06879–dd

Adv. Pro. No. 12–80002–dd

United States Bankruptcy Court, D. South Carolina.

Filed November 26, 2013

Wes B. Allison, Kahn Law Firm LLP, Charleston, SC, Kenneth S. Jannette, Weinstein & Riley PS, New York, NY, for Plaintiff.

H. Flynn Griffin, III, H. Flynn Griffin, III, LLC, Irmo, SC, for Defendant.

Chapter 7

ORDER

David R. Duncan, Chief US Bankruptcy Judge

This adversary proceeding is before the Court on the amended complaint of the plaintiff, Discover Bank, Issuer of the Discover Card (“Plaintiff”), seeking a determination that a debt owed to it by defendant and debtor, Sybil Smith Warren (“Defendant”), is nondischargeable under 11 U.S.C. § 523(a)(2)(A). Jurisdiction for this proceeding is premised upon 28 U.S.C. §§ 1334 and 157(a). Venue is proper under 28 U.S.C. § 1409. This adversary proceeding is a core proceeding. 28 U.S.C. § 157(b)(2)(I).

Defendant answered the amended complaint and counterclaimed for attorney fees and costs under 11 U.S.C. § 523(d). A trial was held on August 29, 2013. After careful consideration of the applicable law, arguments of counsel, and evidence submitted, the Court issues the following findings of fact and conclusions of law under Federal Rule of Civil Procedure 52(a), made applicable by Federal Rule of Bankruptcy Procedure 7052.¹

FINDINGS OF FACT

1. Defendant is the debtor in the chapter 7 case underlying this adversary proceeding.

2. Defendant filed her voluntary petition for relief under chapter 7 of the Bankruptcy Code on November 4, 2011. Defendant's bankruptcy case is captioned In re Sybil Smith Warren, Case No. 11–06879–dd, and is pending before this Court.

3. In 2004, Defendant submitted an application to Plaintiff for a credit card. Pl.'s ex. 2.

4. Plaintiff issued a Discover card to Defendant for her personal use pursuant to an account ending with the numbers 6016.

5. Over the next seven years until her bankruptcy filing, Defendant used the card to purchase goods and services and for other authorized purposes.

6. Defendant has two sons. The older son is named Payton, and the younger son is named Paxton. Payton and Paxton were both in their thirties in 2011. Defendant testified she had a lot of problems with Paxton. Trial Tr. p. 13. Defendant also testified both of her sons worked at a grinding and sharpening business her husband purchased and her husband had told her “he was buying them a job.” Trial Tr. p. 19. Additionally, Defendant indicated Paxton almost brought the business down during his first year. Id. at 20. When asked whether either son was disabled, Defendant responded “well, not physically, but—.” Id. at 19. Defendant claimed neither son as a dependent on her bankruptcy schedules. Id.

7. Paxton was married in late September 2011.

8. The specific charges Plaintiff asserts should be excepted from discharge consist of the following transactions Defendant conducted with her Discover card during the ninety days preceding her bankruptcy filing (collectively, referred to herein as the “Contested Charges”):

a. On August 24, 2011, Defendant used her Discover card to make a $96.12 purchase at Talbots, a women's clothing retailer.²

b. On August 30, 2011, Defendant made an $847.00 purchase at Physicians Plan Weight Loss using her Discover card. Defendant saw a medical doctor there, received some vitamin B–12 injections, and purchased some other medications. She does not know whether the medications were prescription medications. She has health insurance, but her health insurance would not pay for the medicines and services she purchased. Her family physician did not send her to Physicians Plan Weight Loss. Trial Tr. pp. 42–43.

c. Defendant made two purchases at Jos. A. Bank, which is a men's clothing retailer, on September 16, 2011, using her Discover card. The purchases were in the amounts of $553.94 and $230.69. One purchase consisted of a suit that was on sale, a shirt, a pair of dress shoes, and some socks for Payton to wear to Paxton's wedding. The other purchase consisted of some socks and shoes for Paxton to wear to his wedding. Trial Tr. pp. 39–40; Pl.'s Ex. 11.

d. Defendant also purchased a blouse she wanted to wear to Paxton's wedding from Talbots on September 16, 2011, using her Discover Card. The total for this purchase was $64.26. Defendant remembered the blouse being on sale. Trial Tr. pp. 41, 67; Pl.'s Ex. 12.

e. On September 21, 2011, Defendant used her Discover card to satisfy an $828.52 obligation Paxton owed to Anderson Brothers Bank. Defendant was not obligated or liable on the debt Paxton owed. She testified Paxton came to her house with a summons and said he would be put in jail if she could not help him pay the debt. Defendant testified Paxton's father was out of town at the time, and she was afraid her son would go to prison, which is why she paid the obligation. The summons Paxton received was a summons issued by the Florence County Magistrate Court and does not indicate anything about going to jail. However, Defendant may not have read the summons and instead relied upon what Paxton told her. Trial Tr. pp. 11–15; Pl.'s Exs. 9 and 10.

f. Defendant used her Discover card on September 29, 2011, for a $119.00 purchase of a woman's belt at the J. Peterman Co., which is a vintage online clothing retailer. Defendant purchased the belt for Paxton's wedding. Trial Tr. pp. 23–24.

9. Defendant made a $181.36 purchase at Schofield Hardware using her Discover card on August 23, 2011. The goods purchased might have been hunting and fishing supplies for Paxton or an item for Defendant's house. No receipt was introducedinto evidence.³ Trial Tr. pp. 43–44; Pl.'s Ex. 4.

10. Defendant first contacted the attorney that eventually represented her in her bankruptcy and this adversary proceeding at the end of September 2011. Trial Tr. pp. 21–22. Defendant first met with her attorney on September 30, 2011, when they discussed her options under the circumstances.⁴Id. at p. 46–47. Defendant did not decide to file bankruptcy until after she met with her attorney. Id. at p. 46.

11. Defendant testified that after meeting with her attorney, she spoke with a longtime friend named Donald Purvis about lending the funds she needed to avoid filing bankruptcy, but he was unable to lend her the money. Trial Tr. p. 47. Mr. Purvis also testified that Defendant, between the time she first spoke with her bankruptcy attorney and when she filed bankruptcy, asked him for a loan. Id. at pp. 80–81. In addition, Defendant indicated her husband tried to gather the funds she needed, but he was unable to do so. Id. at 47.

12. Defendant started looking at debt consolidation or some other form of debt relief in 2010. Trial Tr. p. 22.

13. At the time Defendant made the Contested Charges, she had cut up and was attempting to pay off her other credit cards. She was only using the Discover card. Trial Tr. pp. 15, 62, 74.

14. Between January 1st and July 6th of 2011, Defendant incurred charges of approximately $445.00 on her Discover card. Between July 7th and September 29th of 2011, Defendant incurred charges of approximately $5,360.00, including the Contested Charges. The last charge Defendant made prior to her bankruptcy filing was a $16.95 charge for obtaining her credit report on October 6, 2011. Trial Tr. pp. 36, 63; Pl.'s Ex. 4.

15. During the year preceding her bankruptcy, Defendant made numerous payments on her Discover card that exceeded the minimum payment required during a given month:

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Pl.'s Ex. 4.

16. Included in the payments and credits on the November 5, 2011 statement was a $100.00 cash bonus Defendant received as part of a rewards program for using her Discover card. Rather than apply the $100.00 toward the account balance, Defendant could have requested a check or gift card. Trial Tr. pp. 49–50; Pl.'s Ex. 4.

17. Defendant was charged a $25.00 late fee on her statement with an April 5, 2011 closing date. The $188.00 minimum payment due on this statement included an $82.00 past due amount. The statement with a November 5, 2011 closing date also reflects a $25.00 fee and that the minimum payment due includes a $59.00 past due amount. It is not clear whether the $25.00 fee on this statement is a late fee. Pl.'s ex. 4.

18. Prior to June 5, 2011, Defendant's credit line was $10,700.00. The statement with a June 5, 2011 closing date reflects an increase in her credit line to $11,800.00. Pl.'s ex. 4.

19. Defendant lists Plaintiff as holding an unsecured claim for $5,401.00 in her schedules filed in her bankruptcy. Pl.'s Ex. 1. Defendant's November 5, 2011 Discover card statement indicates a balance owed of $7,343.18. Pl.'s Ex. 4. This statement also reflects Defendant had a cash advance credit line of $3,800.00 of which the full amount was available to her. Id.

20. Besides the amount owed to Plaintiff, Defendant scheduled $34,288.00 in other credit card debt. Pl.'s Ex. 1.

21. Defendant scheduled her average monthly income at $2,776.37. This income consisted of social security and retirement. Pl.'s Ex. 1.

22. Defendant scheduled $3,185.16 in average monthly expenses. Pl.'s Ex. 1. Defendant testified it cost her at least $1,000.00 per month to service her credit card debt. The average monthly expenses indicated on Defendant's schedule J do not include the $1,000.00 needed to service her credit card debt. Trial Tr. p. 31.

23. Defendant is married, but she and her husband have not been living together for seven or eight years. Trial Tr. pp. 15–16.

24. Prior to 2011, Defendant's husband supported her with between $1,500.00 and $2,000.00 per month. Trial Tr. p. 16. However, in early 2011, her husband lost a big client. Id. Defendant indicated she did not know about her husband losing this client until late September 2011 after she made...