Estate of Smith v. Smith (In re Smith)

• Decision Date: 09 July 2013
• Docket Number: Adversary No. 08–01181–JDW.,Bankruptcy No. 08–10080–JDW.
• Citation: 495 B.R. 291
• Parties: In re Michael R. SMITH, Sr., Debtor. Estate of Maggie Mae Smith, Plaintiff v. Michael R. Smith, Sr., Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Mississippi

495 B.R. 291

In re Michael R. SMITH, Sr., Debtor.
Estate of Maggie Mae Smith, Plaintiff
v.
Michael R. Smith, Sr., Defendant.

Bankruptcy No. 08–10080–JDW.
Adversary No. 08–01181–JDW.

United States Bankruptcy Court,
N.D. Mississippi.

July 9, 2013.

[495 B.R. 294]

R. David Ringer, Ringer Law Firm, Florence, MS, for Plaintiff.

Craig M. Geno, Law Offices of Craig M. Geno, PLLC, Ridgeland, MS, James R. Mozingo, Mozingo Simpson & Quarles, PLLC, Jackson, MS, for Defendant.

MEMORANDUM OPINION AND ORDER
JASON D. WOODARD, Bankruptcy Judge.

This adversary proceeding is before the Court on the Motion for Partial Summary Judgment (the “Motion”) (A.P. Doc. 60) filed by Michael R. Smith, Sr. (the “Defendant”) on January 17, 2013 and the response thereto (the “Response”) (A.P. Doc. 66). A hearing on the Motion was held on June 11, 2013. Appearing at the hearing were R. David Ringer, attorney for plaintiff Estate of Maggie Mae Smith (the “Plaintiff”), and Craig Geno and James Mozingo, attorneys for the Defendant. Plaintiff commenced this adversary proceeding with the filing of the Complaint (A.P. Doc. 1) on September 9, 2008, wherein the Plaintiff seeks a determination that debts arising from Defendant's alleged self-dealing related to a trust be declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2), § 523(a)(4) and § 523(a)(6). 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 District of Mississippi's Order of Reference dated August 6, 1984. This is a core proceeding arising under Title 11 of the United States Code as defined in 28 U.S.C. § 157(b)(2)(A), (B), and (I). The Court has considered the arguments of counsel, the pleadings, the evidence, the briefs and the law, and finds and concludes that summary judgment is due to be granted in favor of Defendant as to the transfer of the William Wilson Property.

I. FINDINGS OF FACT¹

The following facts are undisputed, if complicated. Plaintiff is the estate of the now deceased Maggie Mae Smith, acting through David Smith in his capacity as executor of her estate.² Maggie Smith was the mother of both David Smith and,

[495 B.R. 295]

David's brother, defendant/debtor Michael R. Smith, Sr. Defendant is the acting trustee for both the Maggie Legett Smith Irrevocable Trust (the “Maggie Trust”) and the Miss Eva Elise Legett Revocable Trust (the “Eva Trust”), of which Maggie Smith was a contingent beneficiary. (A.P. Doc. 1, ¶¶ 3 and 4). The allegations of self-dealing and breach of fiduciary duty leveled by the Plaintiff against the Defendant stem from the Defendant's position as trustee of the Eva Trust and his actions while serving in that capacity. Although the Complaint alleges several instances of self-dealing, the Motion pertains exclusively to the real property known as the “William Wilson Property.” (A.P. Doc. 60, ¶ 2).

Katie Legett Wilson (“Aunt Katie”)—sister to Ms. Maggie Smith and aunt of Plaintiff and Defendant—was the original owner of the William Wilson Property. In 1984, Aunt Katie deeded the William Wilson Property to the Defendant in his personal capacity (the “1984 Deed”). (A.P. Doc. 60, Ex. F). The 1984 Deed was never recorded in the public records. (A.P. Doc. 60, Ex. A, ¶ 6).

Aunt Katie and her sister, Eva Elise Legett (“Aunt Eva”), subsequently established the Mrs. Katie Louise Legett Wilson and Miss Eva Elise Legett Revocable Trust (the “Katie and Eva Trust”). (A.P. Doc. 60, Ex. H). With Defendant's knowledge and despite the prior 1984 Deed to Defendant, Aunt Katie deeded the William Wilson Property to the Katie and Eva Trust. (A.P. 60, Ex. A, ¶ 7). The Defendant stated in his affidavit that he had no use for the land at the time, and did not object to the land being placed in the Katie and Eva Trust. Id. Upon Aunt Katie's death, Aunt Eva conveyed four pieces of property—including the William Wilson Property—from the Katie and Eva Trust into the Eva Trust, effectively ending the Katie and Eva Trust. (A.P. Doc. 60, Ex. I). Aunt Eva was the settlor, creator, and sole beneficiary of the Eva Trust at the time of its establishment. (A.P. Doc. 60, Ex. E). At Aunt Eva's direction, Defendant served as the trustee of the Eva Trust. (A.P. Doc. 62, Pg. 2).

On March 15, 1999 Defendant, acting in his capacity as trustee of the Eva Trust, deeded the William Wilson Property from the Eva Trust to himself (the “1999 Deed”). (A.P. Doc. 60, Ex. C). The transfer of the William Wilson Property out of the Eva Trust to the Defendant was made at the direction of Aunt Eva, as evidenced by her written instructions. (A.P. Doc. 60, Ex. J). Although the consent of contingent beneficiary Maggie Smith was not required, she also consented to the transfer, as evidenced by her written acknowledgement. (A.P. Doc. 60, Ex. K). Defendant subsequently sold the William Wilson Property and retained the proceeds from the sale. (A.P. Doc. 60, Ex. D).

In 2002, David Smith filed a petition to become, and was subsequently appointed as, conservator for Ms. Maggie Smith. On August 9, 2002, the Conservatorship of Maggie Mae Smith filed a petition to remove Defendant as trustee of the Eva Trust.³ (A.P. Doc. 60, Ex. G). The petition was pending in Chancery Court in Rankin County, Mississippi, at the time the Defendant filed for bankruptcy on September 9, 2009. (A.P. Doc. 1, ¶ 7). No hearing on the petition has been held, and Defendant remains the trustee for both the Maggie Trust and the Eva Trust.

[495 B.R. 296]

II. CONCLUSIONS OF LAW A. Standard

Rule 56 of the Federal Rules of Civil Procedure governs the process by which a court will grant or deny a motion for summary judgment.⁴ It is well established that summary judgment is appropriate when, viewing the evidence in the light most favorable to the non-moving party, the record, pleadings, and evidence demonstrate that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). See also Bridgmon v. Array Sys. Corp., 325 F.3d 572, 576 (5th Cir.2003). “A material fact is one that ‘might affect the outcome of the suit under the governing law’ and a ‘dispute about a material fact is “genuine”... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ ” Sulzer Carbomedics, Inc. v. Oregon Cardio–Devices, Inc., 257 F.3d 449, 456 (5th Cir.2001) ( citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

The Fifth Circuit Court of Appeals and Supreme Court have both clearly held that the moving party is responsible for submitting sufficient evidence that would show an absence of genuine issue of a material fact.

[T]he party moving for summary judgment must “demonstrate the absence of a genuine issue of material fact,” ... If the moving party fails to meet this initial burden, the motion must be denied, regardless of the nonmovant's response.

Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) ( citing Celotex, 477 U.S. at 323, 106 S.Ct. at 2553). However, that obligation does not negate the responsibilities of the non-moving party as to issues on which that party bears the ultimate burden of proof. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.

In response to Defendant's Motion, Plaintiff provided the Court with only a general response, admitting or denying the numbered assertions by the Defendant. (A.P. Doc. 66). The Plaintiff provided no evidence, affidavits, or even explanation for the general denial. While this may be an appropriate format for an answer to a complaint, it is usually insufficient as a response to a motion for summary judgment. Subsection (e) of Federal Rule of Procedure provides in relevant part:

If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may:

.....

(2) consider the fact undisputed for purposes of the motion;

(3) grant summary judgment if the motion and supporting materials—including the facts considered undisputed—show that the movant is entitled to it ...

Id. A party may not successfully defeat a motion for summary judgment with a blanket denial that the moving party's claims and assertions are correct, without also providing some degree of supporting evidence to show that there is a genuine issue as to a material fact. “If the moving party meets its burden, the non-movant must designate specific facts showing there is a genuine issue for trial.” Little, 37 F.3d at 1075. As the Supreme Court has stated, “[o]ne of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses.”

[495 B.R. 297]

Celotex, 477 U.S. at 323–24, 106 S.Ct. 2548. In its Response, Plaintiff has only provided such “factually unsupported claims or defenses.” Id.

B. Statute of Limitations

Though the Complaint is unclear, it appears as though Plaintiff is attempting to bring an action for money damages equal to the sale price for which Defendant sold the William Wilson Property in 1999.⁵ Though the Plaintiff travels under the provisions of the Bankruptcy Code ⁶ pertaining to nondischargeability of a debt, the Plaintiff must first establish that there is a debt actually owed.

A determination of nondischargeability is a two step process. First, the claim must be established under relevant state or non-bankruptcy federal law. See Grogan v. Garner, 498 U.S. 279, 111 S.Ct. 654, 657–58 and n. 9, 112 L.Ed.2d 755 (1991). Only then does the federal issue of nondischargeability come into play. A creditor cannot get beyond the first step if its underlying claim fails.
In re Taylor, 137 B.R. 925, 929 (Bankr.S.D.Ind.1991). Beginning with the question of the underlying debt, the Court must consider all relevant factors to the cause of action, including any applicable statute of limitations. “[T]he establishment of the debt itself, is governed by the state statute of limitations—if suit is not...