Humphries v. Rogers (In re Humphries)
| Decision Date | 29 August 2014 |
| Docket Number | Bankruptcy No. 10–11006–JDW.,Adversary No. 13–01008–JDW. |
| Parties | In re Kenneth Don HUMPHRIES, Debtor. Kenneth Don Humphries, Plaintiff, v. Robyn Rogers, Defendant. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Mississippi |
OPINION TEXT STARTS HERE
Miranda Linton Williford, Southaven, MS, for Plaintiff.
Dalton Middleton, Middleton Law Office, PLLC, Tupelo, MS, for Defendant.
This adversary proceeding is before the Court on the Complaint to Determine Dischargeability (the “Complaint”) (Dkt. # 1) filed by debtor-plaintiff Kenneth Don Humphries (the “Plaintiff”) against defendant-counterclaimantt Robyn Rogers (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 District of Mississippi's Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc Dated August 6, 1984. This is a core proceeding as set forth in 28 U.S.C. § 157(b)(2)(I) and (J).
The Plaintiff and Defendant are divorced. On February 28, 2010, the Plaintiff filed for chapter 13 protection in this Court. On July 19, 2010, the Defendant filed a Proof of Claim in the Plaintiff's bankruptcy case for $212,906.91 (Claim 5–1).
The Plaintiff filed the Complaint on February 4, 2013, seeking a declaration that the debts owed to the Defendant are dischargeable in the Plaintiff's bankruptcy case. The Defendant's claim arose, initially, from the parties' Judgment of Divorce (the “Divorce Decree”), entered in October, 2003, by the Chancery Court of Alcorn County, Mississippi (the “Chancery Court”). The Plaintiff alleges in the Complaint that the debts are in the nature of property division—not domestic support—and are therefore dischargeable in a chapter 13 case. In her Amended Answer to the Complaint (the “Answer”) (Dkt. # 19), the Defendant denies that the debts were in the nature of property division, but instead were intended as support, and are therefore nondischargeable pursuant to 11 U.S.C. § 523.1 Further, the Defendant counterclaimed that certain other judgments related to the divorce, entered against the Plaintiff by the Chancery Court, are nondischargeable as domestic support obligations. The Defendant also asserted in her Answer that even if the debts are not domestic support obligations, those debts should be held to be nondischargeable as the debts are the result of Plaintiff's fraud and/or deceit.
A trial on the adversary proceeding was held on May 20, 2014, at which time the Plaintiff, counsel for the Plaintiff, Miranda Linton Williford, the Defendant, and counsel for the Defendant, Dalton Middleton, all appeared.
During opening statements, Defendant's counsel made specifically clear that (with regard to her counterclaims) Defendant would be traveling under §§ 523(a)(4)2 and (a)(15) exclusively. The Court expressly inquired whether the Defendant was asserting a claim under § 523(a)(5). Defendant's counsel unequivocally stated that no claim was being asserted under § 523(a)(5). As such, the Court must only decide whether the Defendant's claim is nondischargeable pursuant to §§ 523(a)(4) and/or (a)(15).
The Court has considered the pleadings, the testimony offered and evidence admitted, the arguments of counsel and applicable law, and finds and concludes that the Defendant's claim is dischargeable in part, and nondischargeable in part, as set forth below.
The Plaintiff and the Defendant were married on October 22, 1999, but separatedon May 13, 2002. The Divorce Decree was entered on October 6, 2003 by the Chancery Court. The parties had no children together. At the time the parties were married, Defendant was employed, owned her own home, and owned rental property. She also has a college degree and owned stocks worth approximately $150,000.00.
In the Divorce Decree, the Chancery Court ordered that the parties divide and/or return to one another numerous items of real and personal property. The only property division or portion of the Divorce Decree at issue here concerns the businesses co-owned by the parties.
The Chancery Court found that (i) H & H Wholesale, Inc., (“H & H”) (ii) LeBlanc, Nichols and Page, Inc., (“LNP”) (iii) Budget Phone, (iv) Guntown Cash Advance (“Guntown”), and (v) Chadco, were all marital assets. The Chancery Court specifically found that the Plaintiff had drawn money out of the businesses since the parties' separation. In order to compensate the Defendant for the Plaintiff's withdrawals of money, the Chancery Court awarded her the exclusive use, possession and ownership of Guntown. Toward that end, the Plaintiff was ordered to turn over to the Defendant all information, documents, assets and account information related to Guntown. As to the other four businesses, the parties were each awarded a 50% ownership share in each business. By the time the Divorce Decree was entered, H & H was the only business still operating.
A transcript of the Chancery Court's bench opinion (the “Divorce Transcript”) (Ex. D–2), incorporated into the Divorce Decree by reference, comprehensively details the Chancery Court's well-reasoned and thorough allocation of property. Based on a reading of the Divorce Transcript, this Court finds that it was not the intention of the Chancery Court to create any form of support or alimony. Rather, the Divorce Transcript is clear that the Defendant did not seek any form of alimony payments, and as such, the Chancery Court did not consider alimony in its decision regarding division of property. (Ex. D–2, pg. 13). Given the parties' respective ages at the time of the marriage, relative financial positions entering the marriage, the brevity of the marriage, and the fact that the couple shared no children, it is unlikely that the Defendant would have been eligible to receive support payments from the Plaintiff in any regard. Instead, the division of property was in the nature of a property settlement.
On September 15, 2008, the Defendant filed an Amended Complaint for Contempt in the Chancery Court (the “Contempt Complaint”)(Ex. D–1). A copy of the January 22, 2010, Chancery Court Judgment resolving the Contempt Complaint was admitted into evidence at trial (the “Contempt Judgment”)(Ex. D–1). The Defendant filed the Contempt Complaint due to Plaintiff's failure to comply with the Divorce Decree, including the failure to assist in the audits of the companies jointly owned by the parties, failure to pay two (2) outstanding notes as provided for in the Divorce Decree, and failure to provide the Defendant with certain information and documents pertaining to the jointly-owned businesses. The Chancery Court ultimately found that the Defendant was entitled to a judgment of $212,906.91, plus interest at the rate of eight-percent (8%) per annum from the date of entry of the Contempt Judgment (January 22, 2010). The Contempt Judgment award was calculated based on findings further discussed below.
In the Divorce Decree, the Plaintiff was directed to pay two outstanding notes, totaling$77,194.40, secured by a building owned by LNP (the “Notes”). The Plaintiff was unable to pay the Notes. When the building was subsequently scheduled for a foreclosure sale, the Defendant, as co-owner of LNP, initiated a partition sale to save her interest in the property. The property was sold to the Defendant, as the highest bidder, for $101,000.00 on September 23, 2004. The Notes were paid out of the proceeds of that sale. The Chancery Court determined that the Defendant was entitled to a judgment against the Plaintiff for $38,922.73 as a result of the Plaintiff's failure to act and contempt stemming from this property and payment of the Notes. Outside of the Notes, there is no mention in the Contempt Judgment of any liabilities of LNP. Similarly, at trial before this Court, no such evidence was admitted or testimony provided.
As for division of other assets of LNP, although neither party was certain when the company ceased operations, both agree that it was defunct at the time of the 2004 partition sale. The Contempt Judgment provided that no testimony was given or evidence presented regarding other assets of LNP, and therefore the Defendant was only entitled to the Contempt Judgment for $38,922.73. No evidence was presented at the trial before this Court to contradict the Chancery Court's finding that LNP owned no other assets.
Budget Phone ceased operations sometime around June 2003. Based on the testimony of the parties, the Chancery Court found that Budget Phone operated out of the same building as LNP (sold at the partition sale), and had no other assets or liabilities. As such, the Chancery Court stated in the Contempt Judgment that there was no way to accurately calculate the value of the business—to which the Defendant was entitled half—except for commissions collected by the company. The Chancery Court found that based on figures presented at the contempt hearing, a judgment for $3,887.78 (which represented half of commissions collected from the date of separation to the date of divorce) was due to be entered against the Plaintiff. No information, evidence or testimony was presented to this Court at trial to more accurately calculate the value of the business.
The Chancery Court found that there was almost no information provided regarding the Chadco business. As such, the Chancery Court declined to award the Defendant a money judgment for her interest in that company. There was no evidence presented at this trial to contradict the Chancery Court's findings in that regard.
H & H was the only business still operating at the time the Divorce Decree was entered, but it also ceased operations in 2004. The Chancery Court found that due to the Plaintiff's failure to comply with the auditing requirements established through the Divorce Decree, there was no way to conclusively or accurately establish...
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