In re Cummings
| Decision Date | 25 February 1998 |
| Docket Number | Bankruptcy No. 97-07161-TOM-7. |
| Citation | 221 BR 814 |
| Parties | In re Beryl D. CUMMINGS and Linda Cummings, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Alabama |
Dewayne Morris, Birmingham, AL, for Debtors.
Jerome Tucker, III, Birmingham, AL, for Movant.
(Filed by Maureen Green)
Ms. Maureen Green is a co-defendant with the Debtor Linda Cummings in an action pending in the state Circuit Court of Jefferson County, Alabama, styled Starlin v. Everette, et al., Case No. CV-96-3396.1 On June 26, 1996, Ms. Green filed a cross-claim against Ms. Cummings in that action. On November 18, 1997, Ms. Green filed a Motion for Relief from Stay against Ms. Cummings in this Court seeking permission to continue with that state court action. And on December 29, 1997 Ms. Green filed a Complaint Objecting to Discharge and Requesting an Order for Investigation by the Trustee against Ms. Cummings, also in this Court, contending that whatever debt owed to her by Ms. Cummings was a non-dischargeable debt.
The only matter subject to this opinion and order is the Motion for Relief from Stay. A hearing on that motion was held December 11, 1997. Mr. Jerome Tucker appeared for Ms. Green and Mr. Dewayne Morris appeared for the debtors. No testimony was offered but counsel stipulated to certain facts and made various representations. From those stipulations and representations (and judicial notice of the Court's file in this case pursuant to Federal Rules of Evidence 201) the Court finds that the automatic stay should not be lifted and that the state court case should not be allowed to proceed. And for the reasons expressed below, the Court finds that the debtors' liability to Ms. Green, if any, and the amount of that liability, must be considered and determined in conjunction with the non-dischargeability complaint filed by Ms. Green in this bankruptcy case.
On May 31, 1996, Dr. Calvin Starlin filed a lawsuit against Ms. Cummings and Ms. Green in the Circuit Court for Jefferson County, Alabama. That lawsuit alleges breach of a lease agreement. A jury trial was not demanded. On June 26, 1996, Ms. Green filed a cross-claim against Ms. Cummings containing counts for detinue, conversion, and outrage. Ms. Green demanded a trial by jury. On October 22, 1996, Ms. Green amended her cross-claim and added Ronald and Deborah Gilley as defendants.2 The Gilleys filed a cross-claim against Ms. Cummings for indemnity.3
Ms. Cummings and her husband filed a petition for relief under Chapter 7 of the Bankruptcy Code on September 24, 1997. The Chapter 7 trustee filed his "Final Report of Trustee in No Asset Case" on November 7, 1997, indicating that there were no assets owned by the debtors from which a distribution to creditors could be made. Ms. Green filed her motion for relief on November 18, 1997.
At the hearing on the motion, counsel for Ms. Green argued that his client should be allowed to proceed in state court in order to liquidate her claim of damages against Ms. Cummings and then return to the bankruptcy court to establish the nondischargeability of that debt. Counsel for Ms. Cummings argued that both matters should be resolved in the bankruptcy court. No evidence or representations about the status of discovery, the readiness of the state court case for trial, or the nature and complexity of the action were presented. This Court can however, from this Court's file and copies of some of the state court pleadings attached to Ms. Green's motion, extract some pertinent information.
The deadline in this case for filing complaints objecting to discharge under 11 U.S.C. § 727 or objecting to the dischargeability of a debt under 11 U.S.C. § 523, was December 29, 1997. On December 29, 1997, Ms. Green filed an adversary proceeding in this Court, in which she named Mr. and Ms. Cummings, Mr. and Ms. Gilley, and Dr. Starlin as defendants. See note 2. The complaint alleges the following facts: Ms. Green purchased a tanning salon business from Ms. Cummings in November of 1995. The business was located in a building owned by Dr. Starlin. On May 31, 1996, Ms. Cummings, in a conspiracy with Dr. Starlin, locked Ms. Green out of the building and obtained a temporary restraining order from the state court forbidding Ms. Green from entering the building. Shortly thereafter, on June 14, 1996, Ms. Cummings, along with her husband, sold the assets of the business to Mr. and Ms. Gilley. Ms. Green concludes in her complaint that Dr. Starlin and Mr. and Ms. Cummings, by preventing her access to the building where the business and its assets were located, and selling those assets to Mr. and Ms. Gilley, "willfully and maliciously engaged in acts of oppression, fraud, conversion, and trespass against her" and "consciously and deliberately engaged in oppression, fraud, wantonness, willfulness and malice, with regard to Plaintiff Green" and that their conduct in accomplishing those acts "was so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, so as to be regarded as atrocious and utterly intolerable." The complaint neither alleges wrongdoing on the part of the Gilleys nor alleges facts that might support any such wrong.
Ms. Green's non-dischargeability complaint more or less tracks the language of her state court cross-claim against Ms. Cummings and alleges that the debt created by the complained of conduct is non-dischargeable under 11 U.S.C. §§ 523(a)(4) and (6). In pertinent part, the premise of Ms. Green's complaint appears to be that the alleged acts of Ms. Cummings and Dr. Starlin, in preventing Ms. Green's access to the building where the business and its assets were located, and the alleged acts of Mr. and Ms. Cummings in selling those assets to Mr. and Ms. Gilley, constitute conversion under state law and thus result in a willful and malicious injury to her property, so that the debt owed to her by the Cummings, if any, is non-dischargeable by virtue of 11 U.S.C. § 523(a)(6).4
Based on the same statement of facts contained in Count One of her complaint, Ms. Green also contends that the debtors should be denied their discharges under 11 U.S.C. §§ 727(a)(3), (5), and (7). And finally, Ms. Green's complaint contains a prayer that this Court, pursuant to 11 U.S.C. § 727(c)(2), should order the trustee to examine the acts and conduct of the Cummings to determine whether a ground exists for denial of a discharge.
The filing of the debtors' bankruptcy petition under Chapter 7 of the Bankruptcy Code on September 24, 1997 stayed the continued prosecution of Ms. Green's cross-claim against the debtors. Ms. Green has requested relief from that stay for the purpose of continuing the prosecution of her cross-claim against Ms. Cummings in state court. Section 362(d) of the Bankruptcy Code provides that the bankruptcy court may grant relief from the automatic stay for "cause." 11 U.S.C. § 362(d). "Cause" for granting relief from the stay may exist if the equities in a particular case dictate that a lawsuit, or some other similar pending action, should proceed in a forum other than the bankruptcy court for the purpose of liquidating the claim on which the lawsuit is premised.5 The issue in this proceeding then is whether "cause" to lift the stay exists under Section 362(d).
The practical questions before this Court are, should the state court lawsuit continue in the forum in which it originated or should Ms. Green be required to proceed solely in the bankruptcy court. To answer these questions, this Court must balance the hardship to Ms. Green, if she is not allowed to continue the lawsuit, against the potential prejudice to the debtors, the bankruptcy estate, and to other creditors, if she is. To aid in balancing these equities, this Court has considered certain factors. Those include: (1) trial readiness of the proceeding in the non-bankruptcy forum; (2) judicial economy; (3) the resolution of preliminary bankruptcy issues; (4) costs of defense or other potential burden to the debtor or the bankruptcy estate; (5) the creditor's chances of success on the merits; (6) specialized expertise of the non-bankruptcy forum; (7) whether the damages or claim that may result from the non-bankruptcy proceeding may be subject to equitable subordination under Section 510(c); (8) the extent to which trial of the case in the non-bankruptcy forum will interfere with the progress of the bankruptcy case; (9) the anticipated impact on the movant, or other non-debtors, if the stay is not lifted; and, (10) the presence of third parties over which the bankruptcy court lacks jurisdiction.6 The party requesting relief from the automatic stay must first, of course, present at least a prima facie showing of "cause."7 The burden is then on the party opposing the motion for relief to show that if a movant is allowed to proceed against a debtor in state court, that there would be prejudice to the debtor, to the bankruptcy estate, or to other creditors.8
In reviewing the above ten factors, if the liquidation of a debt that a creditor contends is non-dischargeable is at issue, special attention, and additional emphasis, should be accorded factors numbered (4) and (8).9 "The whole point of bankruptcy is to provide a debtor with a fresh start." Folendore v. United States Small Business Administration (in re Folendore), 862 F.2d 1537, 1540 (11th Cir.1989). In order to protect the debtor's opportunity to obtain his or her "fresh start," Congress has placed the exclusive jurisdiction to determine the dischargeability of the debts described in subsections (a)(2), (a)(4), (a)(6) and (a)(15) of 11 U.S.C. § 523 in the bankruptcy court. 11 U.S.C. § 523(c)(1). One reason for this exclusive jurisdiction was to...
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