In re Hamby, No. 03-13331 (Bankr. E.D. Tenn. 3/29/2007)
| Decision Date | 29 March 2007 |
| Docket Number | No. 03-13331.,Adversary Proceeding No. 03-1138.,03-13331. |
| Parties | In re: LOUIS WILLIAM HAMBY, Chapter 7, Debtor(s) PEGGY HAMBY, Plaintiff(s) v. LOUIS WILLIAM HAMBY, Defendant(s). |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
Rex A. Wagner, Cleveland, Tennessee, for the Plaintiff, Peggy Hamby
Rodney Craig Miller, Cleveland, Tennessee, for the Defendant, Louis William Hamby
This matter has been under advisement for some time. The delay can be partly explained by the court's expectation of a post-trial settlement. The parties informed the court that they were working out a settlement, but none was ever presented to the court. Therefore, the court will render an opinion based on the facts proved at the trial.
The plaintiff, Peggy Ruth Hamby, and the defendant, Louis William Hamby, were divorced in 1996. The divorce decree ordered the sale of a house and lot in Georgia and provided that the Hambys would share the sale proceeds equally after paying certain debts. Mr. Hamby sold the house in 1999 and used the sale proceeds to pay debts as required by the divorce decree. He had about $60,000 left over but did not pay any of it to Ms. Hamby. When Ms. Hamby found out, she filed a petition in the state court to have Mr. Hamby held in contempt of court for disobeying the divorce decree. The state court judge made an oral ruling in Ms. Hamby's favor, but the written judgment was not entered until after Mr. Hamby filed bankruptcy. The bankruptcy filing caused Ms. Hamby to sue Mr. Hamby in this court. The complaint alleges that Mr. Hamby owes her a debt for her share of the sale proceeds, and the debt cannot be discharged in Mr. Hamby's bankruptcy.
Bankruptcy law provides that some debts are excepted from the discharge of debts. Ms. Hamby's complaint relies on three exceptions. Two of the exceptions deal with debts arising from a divorce. 11 U.S.C. § 523(a)(5), (15). At the trial, however, Ms. Hamby's lawyer stated that she was relying on the third exception, § 523(a)(6). It applies to debts for willful and malicious injury to another person or another person's property. Injury includes conversion of another person's property. 11 U.S.C. § 523(a)(6); Financeamerica Corp. v. Ricker (In re Ricker), 26 B.R. 862 (Bankr. E. D. Tenn. 1983). The complaint alleges that Mr. Hamby's failure to pay Ms. Hamby her share of the sale proceeds was a willful and malicious conversion of her property or at least a willful and malicious injury of some kind.
Mr. Hamby does not deny that the divorce decree required him to pay Ms. Hamby half of the net sale proceeds, meaning the proceeds after paying debts as required by the divorce decree. He contends that he was entitled to collect other claims from the net sale proceeds before paying Ms. Hamby, and collection of the other claims used up all the net sale proceeds.
The other claims Mr. Hamby collected from the net sale proceeds can be described as the reimbursement claim and the property expense claim. The reimbursement claim is based on Mr. Hamby's payment of debts that the divorce decree required Ms. Hamby to pay. The property expense claim is made up of expenses Mr. Hamby incurred for maintaining and improving the house and lot in Georgia after the divorce and before the sale. Mr. Hamby argues in effect that Ms. Hamby was liable to him for half of the property expenses, and he could collect from her share of the sale proceeds.
Even if Mr. Hamby was not legally entitled to collect these claims from the net sale proceeds, the argument is still relevant because Mr. Hamby's intent is relevant. Mr. Hamby may be able to prove that his failure to pay Ms. Hamby was not willful and malicious because he honestly believed he was entitled to collect these claims from the net sale proceeds.
In addition to the facts already stated, the court finds the following facts.
The Hambys were divorced in September 1996 by a decree entered in the Chancery Court of Bradley County, Tennessee. They had one minor child, but the decree did not require either of them to pay child support because custody was joint or shared. The decree expressly provided, however, that they would be equally and jointly liable for the child's medical expenses that were not covered by insurance.
The division of personal property appears to be irrelevant to this dispute. Nevertheless, the court notes the original disposition of two boats because it was subsequently changed as the result of Ms. Hamby's petition for contempt. The decree awarded a pontoon boat to the debtor and ordered the sale of a cabin cruiser with the profit to be divided equally between Mr. and Ms. Hamby.
As to the sale of the house, the divorce decree provided:
[T]he real property located at 2195 Lake Capri Road, Conyers, Georgia, shall be sold with the proceeds going first to pay off any debt existing on the property and second to pay off any other marital debts of the parties. After all debts are paid, any and all profit is to be divided equally between the parties.
Next, the divorce decree dealt with the payment of debts owed by either or both parties. The decree provided that "any and all obligations individually incurred by either of the parties herein shall be his or her own responsibility and obligation and the other spouse shall be forever held harmless as to the payment of the same."
Specifically, Husband shall be solely responsible for one-half (½) of the marital debts. The amount Husband is to pay is as follows: Suntrust Bank for the mortgage on the property in Conyers, Georgia ($11,500.00); GMAC for the repossessed 1994 Jeep Cherokee ($1600.32); Snapping Shoals for utility bill for Georgia home ($92.50); Fingerhut ($155.06); Bell South ($397.16); Jane Howell, M.D. for medical bill on the minor child ($532.50); Capital Consumer for Macy's bill ($543.52); Beneficial National Bank for the Rhode's furniture bill ($598.77); Charter Winds Hospital for medical bill on minor child ($550.00); and Rockdale Hospital for the Husband's medical bill ($250.00).
The next paragraph of the decree made Ms. Hamby solely responsible for the other half of the same debts. It replaced "Specifically" with "The" to begin the sentence, substituted "Wife" for "Husband" every time it appeared, and inserted "the remaining" before "one-half". The list of creditors and amounts was the same.
The divided marital debts are listed below with the totals, instead of the one-half that each party was solely responsible for paying.
Mr. Hamby testified that he paid all of the divided marital debts, and Ms. Hamby paid nothing. Ms. Hamby admitted that she did not pay anything on these debts despite the divorce decree. She explained her failure to pay by saying that the debts were supposed to be paid from the proceeds of selling the house.
Mr. Hamby sold the property in Georgia for $82,000 according to the closing statement dated April 1, 1999. The closing statement shows the following deductions from the sale price:
Settlement charges to seller $ 3,910.00
Payoff of first mortgage loan $16,617.15
to Suntrust Bank
Express Payoff — Federal Express $ 18.00
County taxes 1/01 to 4/01 $ 97.32
TOTAL $20,639.67
The balance of $61,360.33 was paid to Mr. Hamby, but he did not pay any of the money to Ms. Hamby. He testified that he used the money to reimburse himself and his mother and sister and to pay burial expenses for his mother.
Mr. Hamby argues that he was justified in reimbursing himself from the sale proceeds for maintaining, repairing, and improving the house after the divorce and before the sale, or at the least, he was justified in believing that he could reimburse himself without Ms. Hamby's agreement or the chancery court's approval. The evidence includes Mr. Hamby's testimony and two handwritten lists. The following expenses are on the first list.
Mortgage $18,001.36
Snapping Shoals (utilities) $ 2,286.99
Insurance $ 2,000.00
Taxes $ 2,439.21
Enclose stairwell $ 1,250.00
Wallpaper $ 265.00
Haul & spread gravel $ 465.00
Gravel $ 112.83
Paint $ 207.04
Labor, roof $ 2,300.00
Shingles $ 242.29
Materials $ 245.75
Ad in paper $ 36.60
Rogers Lake land fill $ 150.00
Paint inside $ 1,050.00
Basement $ 1,089.90
Gas & food $ 1,415.48
Carpet $ 663.77
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