In re Hettick

• Decision Date: 25 February 2009
• Docket Number: Adversary No. 08-00063.,Bankruptcy No. 04-60081-7.
• Citation: 413 B.R. 733
• Court: U.S. Bankruptcy Court — District of Montana
• Parties: In re Gary John HETTICK, Debtor. Darcy M. Crum, Plaintiff. v. Kaye Tomlinson, Employers Mutual Casualty Company, Petit, Hock & Strauch, PLLP, and Petit & Strauch, PLLP (Dismissed), Defendants.

413 B.R. 733

In re Gary John HETTICK, Debtor.

Darcy M. Crum, Plaintiff. v. Kaye Tomlinson, Employers Mutual Casualty Company, Petit, Hock & Strauch, PLLP, and Petit & Strauch, PLLP (Dismissed), Defendants.

Bankruptcy No. 04-60081-7.

Adversary No. 08-00063.

United States Bankruptcy Court, D. Montana.

February 25, 2009.

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Quentin M. Rhoades, Sullivan, Tabaracci & Rhoades, Missoula, MT, for Plaintiff.

Michael G. Black, Rock Creek Legal Services PLLC, Martin S. King, Harold V. Dye, Missoula, MT, Michael F. McMahon, McMahon Law Firm, PLLC, Helena, MT, for Defendants.

Petit & Strauch, PLLP(Dismissed), pro se.

MEMORANDUM OF DECISION; PROPOSED FINDINGS OF FACT & CONCLUSIONS OF LAW

RALPH B. KIRSCHER, Bankruptcy Judge.

Trustee/Plaintiff Darcy M. Crum ("Crum") initiated this adversary proceeding to recover property of the estate. Several matters are pending, including: Defendant Employers Mutual Casualty Company's ("EMC") motion to determine that claims against EMC are non-core proceedings and to refer them to the federal district court (Docket No. 9) and demand for jury trial (Docket No. 10); EMC's motion to dismiss counts Four and Five of Plaintiff's complaint under FED. R. BANKR.P. 7012(b), incorporating FED. R.CIV.P. 12(b)(6), for failure to state a claim upon which relief can be granted (Docket No. 11); EMC's motion for summary judgment (Docket No. 12); Defendant Petit, Hock & Strauch, P.L.L.P.'s ("PHS") motion for summary judgment (Docket No. 40) and its demand for jury trial (Docket No. 23); and Defendant Kaye Tomlinson's ("Tomlinson") motion for summary judgment (Docket No. 48). The Plaintiff Crum filed objections to the motions to dismiss and motions for summary judgment, and also filed a motion to strike (Docket No. 58) certain paragraphs submitted in support of PHS' motion for summary judgment.

A hearing on the jury demands and EMC's motion to determine non-core matters and to refer to district court was held at Missoula on November 13, 2008, and hearings on the other pending motions were held at Missoula on December 11, 2008. The parties were represented at the hearings by counsel¹, and have had the opportunity to submit briefs, responses and replies in support of their positions, as well as oral argument, which have been reviewed by the Court together with the record and applicable law. These matters are ready for decision.

The pending matters involve both core proceedings and non-core proceedings. Pursuant to 28 U.S.C. § 157(c)(1) this Court submits the following proposed findings of fact and conclusions of law to the district court with respect to the non-core proceedings, while the core proceedings shall be subject to this Court's findings and conclusions. In the interests of judicial economy, this adversary proceeding will be referred in its entirety to the United States District Court, Missoula Division, for trial by jury in accordance with EMC's and PHS' jury demands, which the Plaintiff does not oppose², and which encompass all or in part every one of the five claims for relief asserted in the complaint. The Court denies Plaintiff's request to retain pretrial jurisdiction in the interests of judicial economy, and to avoid inconsistent results from separate trials.

[NOTE to Clerk of Court and to the Parties and their attorneys prior to transmission of proposed findings and conclusions to District Court:

Under FED. R. BANKR.P. 9033 and after the bankruptcy court files these proposed findings and conclusions, the clerk of court shall serve copies of these proposed findings and conclusions on all parties by mail and note the date of mailing on the docket. Within 10 days after being served with a copy of the proposed findings and conclusions, a party may serve and file with the clerk of bankruptcy court written objections which identify the specific proposed findings or conclusions objected to and state the grounds for such objection. A party may respond to another party's objection within 10 days after being served with a copy thereof. An objecting party shall arrange promptly for the transcription of the record, or such portions of it as all parties may agree upon or the bankruptcy judge deems sufficient, unless the district judge otherwise directs. The time for filing objections may be extended by the bankruptcy judge for a period not exceeding 20 days from the expiration of the time otherwise prescribed. Any request for extension should be filed prior to the expiration of the objection period. After the objection period has expired pursuant to Rule 9033, the clerk of the bankruptcy court shall transmit this decision and the proposed findings of fact and conclusions of law to district court. Any decision within the jurisdiction of this Court and decided herein shall be subject to the time period imposed for appeal.

The district judge shall make a de novo review upon the record or, after additional evidence, of any portion of the bankruptcy judge's findings of fact or conclusions of law to which specific written objection has been made. The district judge may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions.]

PROCEDURAL HISTORY

Gary Hettick ("Hettick" or "Debtor") filed a voluntary Chapter 7 petition on January 15, 2004. Schedule B, of Debtor's Schedules, item no. 9 calling for "Interests in insurance policies" is marked "None". Item no. 20 on Schedule B calling for "Other contingent and unliquidated claims of every nature" lists a potential legal malpractice claim, but does not list a claim against EMC. Item no. 33 calling for "Other personal property of any kind" is marked "None."

On Schedule F, of Debtor's Schedules, Hettick listed Tomlinson as an unsecured creditor with a disputed claim in an unknown amount. The Statement of Financial Affairs lists a lawsuit by Tomlinson against Hettick, No. DV-03-082(C), in the Flathead County Montana District Court (hereinafter Tomlinson's "state court action"). Notice of the commencement of the case and deadlines was sent to Tomlinson in care of her attorney David F. Stufft, but Tomlinson did not file a Proof of Claim.

Donald W. Torgenrud ("Torgenrud") was appointed Chapter 7 Trustee initially, and he filed an asset report on March 31, 2004. Torgenrud passed away in 2008, and Crum was appointed to replace him as Trustee on July 30, 2008.

A discharge of the Debtor was entered on May 11, 2004. On the same date, but after entry of the discharge, Tomlinson filed a complaint to determine dischargeability of her claim. The Debtor moved to dismiss Tomlinson's complaint in Adv. Proc. No. 04-00057 based upon her failure to file by the deadline set by the notice of commencement of the case. Tomlinson objected, but the Court overruled the objection and dismissed Tomlinson's complaint on July 15, 2004.

Tomlinson filed a motion to modify the stay on December 21, 2005, to pursue her claim in the state court case against Hettick and his insurer EMC based on a commercial general liability ("CGL") insurance policy issued to Hettick, based upon Hettick's alleged negligence in constructing a home for Tomlinson. Tomlinson's motion specified that she did not seek any recovery against Hettick personally. The Trustee Torgenrud filed a consent. After no objection was filed within the notice period the Court granted Tomlinson's motion and modified the stay by Order entered on January 4, 2006, authorizing Tomlinson to pursue her claims for recovery against EMC based on the CGL policy, but not to seek recovery against Hettick individually. No appeal or motion to reconsider that Order was filed until six months later.

Hettick filed a motion to rescind the order modifying the stay and to declare a default judgment obtained by Tomlinson in the state court action void. Tomlinson filed an objection, and the contested matter was set for hearing on August 3, 2006. In her objection Tomlinson advised that a default judgment was entered in the state court case in the amount of $622,478.19, but that it was not to be enforced against Hettick personally, in accordance with the Order modifying the stay. After a hearing the Court entered a memorandum of decision³ and order sustaining Tomlinson's objection and denying Hettick's motion to rescind the order modifying the stay and declare the default judgment void. The Court did not agree with Hettick's contentions that the default judgment violated the Court's order and the discharge injunction, but clarified that the default judgment is not a personal liability of Hettick, that Tomlinson's claim is discharged and Hettick has no personal liability for any portion of the default judgment except for purposes of Tomlinson pursuing her claims for recovery under the CGL policy issued by EMC.

Torgenrud filed a final report and account on October 12, 2006, and a Final Decree was entered closing the case on November 15, 2006. More than a year later on December 24, 2007, Torgenrud moved to reopen the case to administer "a potential asset that was not administered before this case was closed", i.e., "the estate's interest in proceeds payable to the Debtor arising from the Debtor's claim against his insurance company." The Court granted the motion and reopened the case.

Torgenrud applied to employ Rhoades as attorney for the estate. Tomlinson objected and moved to rescind Rhoades' employment. After a hearing the Court entered a memorandum of decision and Order overruling Tomlinson's objection. That memorandum⁴ noted at page 3:

Between the date of the Default Judgment and the Amended Default Judgment and unbeknownst to the Court or Torgenrud, Debtor purportedly assigned his claims against EMC to Tomlinson on or about September 11, 2006. Exhibit A. This case was not closed until November 15, 2006, and thus the...