In re Nazu, Inc.

• Decision Date: 25 August 2006
• Docket Number: No. 04-41332-H4-11.,04-41332-H4-11.
• Citation: 350 B.R. 304
• Parties: In re NAZU, INC., Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Texas

Page 304

350 B.R. 304

In re NAZU, INC., Debtor.

No. 04-41332-H4-11.

United States Bankruptcy Court, S.D. Texas, Houston Division.

August 25, 2006.

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Pete W. Weston, Houston, TX, for Debtor.

MEMORANDUM OPINION ON THE DEBTOR'S OBJECTION TO TEMEKA FARR'S PROOF OF CLAIM AND TEMEKA FARR'S MOTION TO DEEM PROOF OF CLAIM AS TIMELY FILED

JEFF BOHM, Bankruptcy Judge.

I. INTRODUCTION

Nazu, Inc. (the Debtor) commenced this case when it filed its bankruptcy petition on August 6, 2004. [Docket No. 1.] On August 26, 2005, Temeka Farr (Farr) filed a Proof of Claim in this bankruptcy case in the amount of $30,125.00 based on a Default Judgment Nunc Pro Tunc (the Default Judgment Nunc Pro Tunc) rendered against the Debtor in County Court at Law Number 1 of Harris County, Texas (the State Court). [Claim No. 12.] On December 19, 2005, the Debtor filed Debtor's Objection to Claim Filed by Temeka R. Farr and Request for Hearing (the Debtor's Objection). [Docket No. 80.] In its Objection, the Debtor asserts that it was not the responsible party as alleged in Farr's State Court lawsuit and that the Default Judgment Nunc Pro Tunc is therefore void. On January 13, 2006, Farr filed Creditor Temeka R. Farr's Response to Objection to Claim Filed by Debtor, Motion to Deem Proof of Claim as Timely Filed, and Request for Hearing (Farr's Motion to Deem Proof of Claim as Timely Filed). [Docket No. 88.] For the reasons set forth in this opinion, the Court overrules the Debtor's Objection and grants Farr's Motion to Deem Proof of Claim as Timely Filed.

On May 25, 2006, the Court held a hearing on the Debtor's Objection and Farr's Motion to Deem Proof of Claim as Timely Filed.¹ On July 12, 2006, this Court made its oral Findings of Fact and Conclusions of Law in open court. This Court has reduced its Findings of Fact and Conclusions of Law into writing in this Memorandum Opinion, which will be entered on the docket. To the extent that any of this Court's oral Findings of Fact and Conclusions of Law conflict with this Court's written Findings of Fact and Conclusions of Law, the written Findings of Fact and Conclusions of Law shall govern and shall be considered amendments to the oral Findings of Fact and Conclusions of Law.

The Court makes the following Findings of Fact and Conclusions of Law under Federal Rule of Civil Procedure 52 as incorporated into Federal Rule of Bankruptcy Procedure 7052. To the extent that any Finding of Fact is construed to be a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law is construed to be a Finding of Fact, it is adopted as such. The Court reserves the right to make any additional Findings and Conclusions as may be necessary or as requested by any party.

II. FINDINGS OF FACT

The facts, in chronological order, either as stipulated to or admitted by counsel of record, as admitted in the briefs and filings, or as adduced from the testimony are as follows:

1. Farr filed a civil suit (the State Court Suit)² against the Debtor as "Nazu, Inc. d/b/a 7 Evenings Food Stores" on May 6, 2002 in State Court. [Farr Ex. No. 1.]³ In her State Court Petition (the Petition), Farr alleged that she was brutally beaten by employees Sajjad Kahn and Khurram Kahn (the Individual Defendants) when she was shopping on May 8, 2000 at the 7 Evenings Food Stores located at 8900 South Braeswood, Houston, Harris County, Texas 77074. [Id. at ¶ III, VI.]

2. The Debtor is a Texas corporation solely owned by Aziz Shah (Shah), who also serves as the Debtor's registered agent and sole officer, director, and president. [Docket No. 94, ¶ 1.] The Debtor's business is operating a single convenience store: the "7 Evening Food Store," located at 525 Crosstimbers, Houston, Harris County, Texas 77022.⁴ Id. There are several stores using similar names in Harris County, Texas. Id.

3. On May 13, 2002, the Debtor was served with Farr's State Court Suit through its registered agent, Shah. [Farr Ex. No. 2.]

4. The Debtor failed to answer Farr's Petition. [Farr Ex No. 3; Docket No. 96, ¶ 4.]

5. Prior to rendition of the Default Judgment, the individual Defendants were nonsuited for lack of service. [Docket No. 96, ¶ 5.]

6. After holding a hearing on April 16, 2004, the State Court rendered the Default Judgment against the Debtor on May 26, 2004. [Farr Ex. No. 3; Debtor Ex. No. 9.]

7. Counsel for Farr represented to this Court at the May 26, 2006 hearing that notices of the proceedings in Farr's State Court Suit were sent to the Debtor, and the Debtor does not dispute that it received notice of the April 16, 2004 hearing. [See Farr Ex. Nos. 3, 5; Debtor Ex. No. 9.]

8. On May 26, 2004, the Harris County Clerk's Office sent notice of the Default Judgment to the Debtor. [Farr Ex. No. 4.]

9. The Debtor filed its Chapter 11 voluntary petition on August 6, 2004. [Docket No. 1.]

10. The Debtor failed to list Farr as a creditor in its schedules. [Docket Nos. 1, 8.]

11. On September 23, 2004, Farr obtained a Default Judgment Nunc Pro Tunc to correct certain clerical errors. [Farr Ex. No. 5; Docket No. 96, ¶ 9.]

12. On September 27, 2004, the Harris County Clerk's Office sent notice of the Default Judgment Nunc Pro Tunc to the Debtor. [Farr Ex. No. 6.]

13. On November 3, 2004, Farr abstracted the Default Judgment Nunc Pro Tunc, and the Abstract of Judgment was filed with the Harris County Clerk's Office on December 21, 2004. [Farr Ex. No. 7.]

14. Farr did not learn of the Debtor's bankruptcy until a constable attempted to execute on the Default Judgment Nunc Pro Tunc between the months of January and April of 2005. [Docket No. 96, ¶ 12; Debtor Ex. No. 12.]

15. Farr filed her Proof of Claim on August 26, 2005. [Claim No. 12; Farr Ex. No. 8.]

16. The Debtor filed its Objection on December 19, 2005. [Docket No. 80.]

17. On January 13, 2006, Farr filed her Response to the Debtor's Objection, Motion to Deem Proof of Claim as Timely Filed, and Request for Hearing. [Docket No. 88.]

18. This Court held a hearing on the Debtor's Objection on May 25, 2006. The Court admitted exhibits submitted by both parties, and Farr and Shah testified. [Docket Entry May 25, 2006.]

19. Additionally, on May 25, 2006, the Debtor filed a brief in support of its Objection. [Docket No. 94.]

20. On June 8, 2006, Farr filed a memorandum of law in support of her Proof of Claim. [Docket No. 96.]⁵

III. CREDIBILITY OF WITNESSES

At the May 25, 2006, the Court heard testimony from Farr and Shah. After listening to the testimony and observing the witnesses as they testified, the Court makes the following determinations regarding the credibility of the witnesses:

Farr testified that she was assaulted by the Individual Defendants at the 7 Evenings Food Store at 8900 South Braeswood. Counsel for the Debtor questioned Farr extensively about the proceedings in the State Court Suit, including service of Farr's Petition and how her attorney determined that the Debtor was the appropriate party to sue in the State Court. As Farr is not an attorney, she was unable to testify as to the legal significance of the proceedings in the State Court Suit, including rendition of the Default Judgment. The Court finds that Farr's testimony was credible but did not significantly help either party.

Shah testified that he received service of Farr's Petition and referred the matter to his attorney, Andrew McStay (McStay), who telephoned "Ms. Sanchez." Shah also testified that he spoke with "Ms. Sanchez," and "she said ... `don't worry about it,'" and that "Ms. Sanchez" separately told McStay and Shah that "it's fine." From these conversations, Shah determined that no further action was required with regard to Farr's Petition. Monica V. Funchess (Funchess) has served as Farr's attorney in the instant dispute and in the State Court Suit, and the Court is uncertain as to the identity of Ms. Sanchez. The Debtor's Exhibit No. 15 is a letter from McStay to "Monica V. Sanchez" at Funchess' business address. Apparently, Shah and McStay confused Funchess' surname as being Sanchez. Funchess denied that she had ever told Shah or McStay that they did not have to take any action in Farr's State Court Suit.⁶ Shah also seemed confused about other matters. By way of only one example, after testifying that Farr's Petition was served upon him as the registered agent for the Debtor, Shah subsequently contradicted himself by testifying that he did not know about the suit until the Constable attempted to serve him with the papers related to the execution of the Default Judgment Nunc Pro Tunc, which occurred sometime between February and April of 2005. [See Debtor Ex. Nos. 10-13.] Immediately thereafter, Shah agreed that he did, in fact, learn of the lawsuit in May of 2002, which was when Farr's Petition was served on him as the registered agent for the Debtor. [See Farr Ex. No. 2.] Even if Shah was being truthful, this Court finds that his testimony was not entirely credible due to his confusion of matters essential to this dispute.

IV. CONCLUSIONS OF LAW

In its Objection, the Debtor makes the following objections: (A) the Default Judgment Nunc Pro Tunc is defective;⁷ (B) Farr's Claim does not provide a proper accounting; (C) the automatic stay bars Farr's Claim because it is based on a judgment rendered after the Debtor filed its bankruptcy petition; and (D) Farr's Claim is not in the best interests of the creditors of the estate. [Docket No. 80.] On the day of the hearing on the Debtor's Objection, the Debtor filed a brief in support of its Objection [Docket No. 94], raising additional objections not raised in its Objection [Docket No. 80]. This Coin considers any objection not specifically stated in the Debtor's Objection [Docket No. 80] waived. See Hollingsworth v. Kaler (In re Hollingsworth), 331 B.R. 399, 400 n. 2 (8th Cir. BAP 2035) (finding that "[t]o the extent the Debtor believes the Creditor's claims...