In re Clements

• Decision Date: 22 August 1995
• Docket Number: Bankruptcy No. 94-3779-BKC-3F3.
• Citation: In re Clements, 185 B.R. 895 (Bankr. M.D. Fla. 1995)
• Parties: In re Jimmy Delwyn CLEMENTS and Nell Brock Clements, Debtors.
• Court: U.S. Bankruptcy Court — Middle District of Florida

185 B.R. 895 (1995)

In re Jimmy Delwyn CLEMENTS and Nell Brock Clements, Debtors.

Bankruptcy No. 94-3779-BKC-3F3.

United States Bankruptcy Court, M.D. Florida, Jacksonville Division.

August 22, 1995.

Earl M. Barker, Jr., Jacksonville, FL, for debtors.

David B. Ferebee, Jacksonville, FL, Evans Crowe, Mobile, AL, for Locomotion Prop., Ltd.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JERRY A. FUNK, Bankruptcy Judge.

This case is before the Court upon an Objection to Claim # 6 of Locomotion Properties, Ltd., filed by the Debtors (Doc. No. 19).A hearing was held on the Objection on April 20, 1995 at which the Court heard testimony of witnesses, received evidence and heard argument of counsel.Based upon the evidence presented at the hearing, the Court makes the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

Debtors filed their petition in bankruptcy under Chapter 13 on September 2, 1994.On December 8, 1994, Locomotion Properties, Ltd.(hereinafter "Locomotion") filed a Motion for Relief from Stay, which this Court subsequently denied on February 7, 1995 after issuing Findings of Fact and Conclusions of Law (Doc. Nos. 30 and 31).On January 3, 1995, Locomotion filed a claim in the amount of $250,138.98, which Debtors objected to on January 17, 1995.

The genesis of this litigation concerns a lease of real property in Alabama.On November 2, 1979, Locomotion executed a lease of property with a building located in Mobile, Alabama to Twickenham Station, Inc., (hereinafter "TSI") who was to use the property to operate a restaurant.At the time of the formation of the lease, Debtor Jimmy Clements, was one of the principals of TSI, along with two other men.The lease was for a term of 25 years, due to expire on November 1, 2004.Under the terms of the lease, Twickenham was to pay Locomotion rent in the amount of $1,000,625.00, payable in monthly installments of $5,416.67, as well as ad valorem taxes and costs of insurance.

Concurrently with the execution of the lease, the principals of TSI and their wives executed a Guaranty Agreement, guaranteeing the performance of the lease terms.The guaranty is in two parts: one page contains the signatures of the three principals of TSI and their wives, including the Debtors.The second page contains the signatures of the three principals and the wives of the two non-debtor principals.(LocomotionEx. 4)Both parties agree that Mrs. Clements was not present at the time of the execution of the guaranty.(Tr.at 35, 71).Locomotion contends that Mrs. Clements signed the guaranty at some later date, but when that date was and where that took place were never testified to and no evidence was presented on that point.Mrs. Clements disputes the fact that the signature on the guaranty is hers, claiming that she never signed the guaranty, even though the signature resembles hers.(Tr.at 21-22)Mr. Clements testified that he did not sign Mrs. Clements' name to the guaranty, nor did she authorize anyone else to sign her name.(Tr.at 35).Mr. Clements admits that he did sign his name to the guaranty and that the signature on the guaranty admitted into evidence is his.(Tr.at 34).

Whether or not the signature on the guaranty agreement is that of Mrs. Clements is a matter of factual dispute between the parties.Locomotion offered the testimony of a handwriting expert, Lamar Miller, at the hearing.Mr. Miller testified that upon examination of the guaranty agreement, his expert opinion was that the handwriting on the guaranty was the same signature as that on several handwriting specimens said to be Mrs. Clements' handwriting.These specimens include a signature on Answers to Request for Production of Documents and an Affidavit in Opposition to a Motion for Summary Judgment filed in a state court proceeding, bearing the typed name of Mrs. Clements with a signature above it.(Tr.at 126).Mr. Miller testified that, in his opinion, the handwriting on the guaranty agreement was the same as that on the "known" handwriting samples of Mrs. Clements.(Tr.at 128).However, not once was Mrs. Clements ever asked if the "known" handwriting samples were indeed signed by her.The signature on the handwriting samples was labeled "Nell Clements," and the documents were court documents signed under penalty of perjury; however, there is a gap in the chain of proof, because Locomotion's attorney never established by testimony or otherwise, that the handwriting on the "known" samples was indeed that of Mrs. Clements.All the Court learned from the handwriting expert is that, in his opinion, the signature on the guaranty matched a signature on other documents, filed in some other court proceeding.

The premises which housed the restaurant consisted of a building structure, to which was attached an old railroad car, which was used as a dining room for the restaurant.(Tr.at 41).The railroad car contained approximately 40 seats for patrons of the restaurant.The entire restaurant contained approximately 250 seats for patrons, so the railroad car contained approximately 16 percent of the total seating for the restaurant.(Tr.at 43)The rail car was removed from the premises in 1990, at the request of the subtenant.(Tr.at 95).It is currently being leased to someone else, at another site, for $500 per month.(Tr.at 95)TSI had no objection to the removal of the railroad car.(Tr.at 114)No credit is being given TSI as an offset for the removal of the rail car, or for the rent received from the current rail car lessee.(Tr.at 95)The Debtors were not notified of, nor asked to consent to, the removal of the rail car from the premises.(Tr.at 93)

TSI occupied the leased premises for a period of years until the mid-1980's, when it ceased operating as TSI.(Tr.at 100)The property was then vacant for some period of time while Locomotion made efforts to re-let the premises by listing it with realtors.(Tr.at 100).TSI then sub-leased the property to at least one restaurant proprietor by a sublease dated September 6, 1990.(LocomotionEx. 7).Simultaneously, a Tri-Party Option agreement was signed by Locomotion and the sub-tenant, giving the sub-tenant a purchase option, which indicates to the Court that Locomotion knew of, and consented to, the sub-lease.(LocomotionEx. 7).There was some reference made to other sub-tenants at the hearing, but if there were other sub-tenants, who they were, and when their sub-leases were in effect, was never made clear to the Court.What is clear, evidenced by a spreadsheet prepared by Locomotion's accountant, is that the last rent received for the property was on April 28, 1993.(LocomotionEx. 18).A sub-tenant was apparently allowed to pay a reduced rent, because Locomotion's Exhibit 18 shows rent was paid from April 15, 1992 to April 28, 1993 in the amount of $3800 per month.Exhibit 18 shows that the last full payment of rent was received on April 15, 1992.

There were other arrearages on the lease, dating back to when the restaurant still operated as TSI, evidenced by several letters sent to the Debtors as guarantors of the lease.(LocomotionExbs. 5, 6, 9, 12).The last letter sent to the Debtors was dated August 10, 1992, notifying the Debtors as guarantors, that the lease was in default.

According to the testimony of Mr. Robert Clark Sledge, General Partner of Locomotion, Locomotion never accepted TSI's abandonment of the property as a termination of the lease.(Tr.at 115).He further testified that Locomotion never took any action that it considered would terminate the lease, and that the lease is still in effect today.(Tr.at 112).

State court litigation was initiated against the Debtors by Locomotion in September, 1992.Debtors filed their bankruptcy petition on September 2, 1994, before the state court litigation had gone to trial.The bankruptcy has stayed any further litigation in state court.

CONCLUSIONS OF LAW

Objections to claims are governed by 11 U.S.C. § 502(a) which provides that, "A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, . . . objects."Section 502(b) provides, ". . . If such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount. . . ."Federal Rule of Bankruptcy Procedure 3001(f) provides that a proof of claim filed in accordance with the rules "shall constitute prima facie evidence of the validity and amount of the claim."The burden of proof is on the objecting party to produce evidence "equivalent in probative value to that of the creditor to rebut the prima facie effect of the proof of claim.However, the burden of ultimate persuasion rests with the claimant."In re VTN, Inc.,69 B.R. 1005(Bankr.S.D.Fla.1987), citing, In re DeLorean Motor Co. Litigation,59 B.R. 329(E.D.Mich.1986).

In their Proposed Findings of Fact and Conclusions of Law submitted after the hearing, Debtors argue three main points as to why the claim is not valid.The first is that, since Mrs. Clements allegedly did not sign the guaranty agreement, she is not a guarantor of the lease; secondly, that a material modification of the lease terminated the guaranty agreement, and lastly that Locomotion did not exercise due care in attempting to re-let the property after TSI's default.The Court will address each of these arguments in turn.

First, it is a major issue of factual dispute as to whether or not Mrs. Clements signed the guaranty agreement.Mrs. Clements contends that she did not sign the guaranty, and that the signature on the guaranty is not hers, even though it resembles hers.Locomotion argues that she did sign the guaranty, although they concede that she was not present at the time the guaranty was executed.Although much time and evidence was spent on this at the...