In re Pittard, Bankruptcy No. 05-93308-JB.

• Decision Date: 14 November 2006
• Docket Number: Adversary No. 05-06394.,Bankruptcy No. 05-93308-JB.
• Parties: In re Jack Warren PITTARD, Jr., Debtor. Cadlerock Joint Venture, L.P. Plaintiff, v. Jack Warren Pittard, Jr. Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

358 B.R. 457

In re Jack Warren PITTARD, Jr., Debtor.

Cadlerock Joint Venture, L.P. Plaintiff, v. Jack Warren Pittard, Jr. Defendant.

Bankruptcy No. 05-93308-JB.

Adversary No. 05-06394.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

November 14, 2006.

Thomas E. Austin, Jr., Esq., Atlanta, GA, for Plaintiff/Petitioner/Movant.

C. David Butler, Esq., Atlanta, GA, for Defendant/Respondent.

ORDER

JOYCE BIHARY, Bankruptcy Judge.

This adversary proceeding is before the Court on defendant's motions for summary judgment (Docket Nos. 13 and 19). Defendant argues that he is entitled to a judgment as a matter of law on plaintiffs complaint objecting to the debtor's discharge under 11 U.S.C. § 727(a) and to the dischargeability of a claim for fraud under 11 U.S.C. § 523(a)(2). This is a core proceeding under 28 U.S.C. § 157(b)(2)(I)-(J) (2006). After carefully considering the briefs and affidavits submitted and arguments of counsel, the Court concludes that defendant is entitled to summary judgment on all of plaintiffs claims.

The following material facts are undisputed. In August of 1999, defendant Jack Warren Pittard, Jr. as President of Pittard Machinery Company obtained a $300,000 increase on a line of credit with Merrill Lynch Business Financial Services, Inc. ("Merrill Lynch"). The line of credit was guaranteed by Mr. Pittard. In extending the additional credit, Merrill Lynch requested and Mr. Pittard produced certain financial information regarding Pittard Machinery Company. Pittard Machinery Company defaulted on the loan.

On April 26, 2000, Merrill Lynch filed a lawsuit against Mr. Pittard, Pittard Machinery Company, and others in the Superior Court of Fulton County, Georgia ("Superior Court Action"). On February 6, 2001, the Superior Court entered a "Consent Order and Final Judgment" ("Superior Court Consent Order") consented to by Mr. Pittard, Merrill Lynch, and the other defendants. The Superior Court Consent Order specifically granted Merrill Lynch a judgment against each defendant, including Mr. Pittard, jointly and severally, in the amount of $2,193,576.55 on all counts of Merrill Lynch's amended complaint except Count Eight. Count Eight is labeled as "Count Eight: Fraud," and contains allegations that Mr. Pittard made fraudulent statements and omissions to Merrill Lynch in connection with Pittard Machinery Company's request for the 5300,000.00 increase on the line of credit. The relief sought by Merrill Lynch under Count Eight was for actual damages of $351,927.06 and punitive damages. The Superior Court Consent Order did not award Merrill Lynch any judgment on Count Eight, and contained the following language:

Merrill Lynch shall forbear from prosecuting its claim set forth in Count Eight of Plaintiffs Amended Complaint, alleging that Defendants fraudulently induced Plaintiff to extend credit to Defendants, until such time as Defendant Pittard files personal bankruptcy, in which case Plaintiff may reassert these claims without any defense by Pittard on the basis of limitations, lathes, release, res judicata, or other similar defenses. All such defenses are hereby deemed to be and shall be waived by Pittard.

On August 22, 2003, Merrill assigned the judgment it obtained in the Superior Court Action to Cadle Company. On October 22, 2003, Cadle Company assigned the judgment to Cadlerock Joint Venture, L.P. ("Cadlerock"), the named plaintiff in this adversary proceeding.

On May 16, 2005, Mr. Pittard filed a petition under Chapter 7 of the Bankruptcy Code. The deadline for filing a complaint objecting to the debtor's discharge under 11 U.S.C. § 727(a) or the dischargeability of a debt under 11 U.S.C. § 523(a)(2) was August 15, 2005. See 11 U.S.C. § 523(c); Fed. R. Bankr.P. 4004(a), 4007(c); see also Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines sent to all creditors. The parties requested and obtained from the Court an extension of this deadline until September 15, 2005. On Thursday, September 15, 2005, Cadlerock's counsel electronically filed a copy of the Superior Court Consent Order which he labeled Exhibit "A". Counsel docketed the September 15, 2005 transmission as an adversary proceeding and labeled it "Complaint to Determine Dischargeability of Debt and Object to Discharge." On Friday, September 16, 2005, counsel for plaintiff Cadlerock was informed by Deputy Clerk Irene Wiggins that only the Superior Court Consent Order had successfully been filed with the Court's electronic filing system. On Friday, September 16, 2005, counsel for Cadlerock spoke on the telephone with Mr. Douglas Hassinger, counsel for Mr. Pittard in his related bankruptcy case, regarding the pleading filed on September 15, 2006. On Monday, September 19, 2005, plaintiff filed the Complaint it had intended to file on September 15, 2006, which it labeled as "First Amendment to Complaint to Determine Dischargeability of Debt and Object to Discharge," stating that only Exhibit "A" was filed on September 15, 2005 and attaching a five count complaint objecting to discharge and dischargeability.

Cadlerock's amended complaint filed on Monday, September 19, 2005, is pled in five counts. In Count I, Cadlerock objects to dischargeability under 11 U.S.C. § 523(a)(2), and the claim is predicated on allegations of fraud and material misrepresentations by Mr. Pittard to Merrill Lynch in connection with the $300,000.00 extension of credit. The remaining three counts are objections to Mr. Pittard's entire discharge under 11 U.S.C. § 727(a). Count II objects to defendant's discharge on the basis of an alleged transfer or concealment of real property located in the Bahamas under 11 U.S.C. § 727(a)(2). Count III objects to defendant's discharge alleging that defendant concealed or failed to keep records for Island Exploration, Inc. a business owned by defendant and his wife, with the intent to hinder, delay or defraud creditors under 11 U.S.C. § 727(a)(3). Count IV objects to defendant's discharge alleging that defendant made a false oath to the court by failing to reveal ownership of the real property in the Bahamas on Schedule A under 11 U.S.C. § 727(a)(4). Count V requests attorney's fees associated with bringing the complaint objecting to discharge and dischargeability.

Defendant seeks summary judgment on plaintiffs claims under 11 U.S.C. § 523(a)(2) on three grounds: that plaintiffs claim under 11 U.S.C. § 523(a)(2) was not timely filed pursuant to Federal Rule of Bankruptcy Procedure 4007(c), that Merrill Lynch's claim for fraud against Mr. Pittard was not assignable to Cadlerock under Georgia law, and that the undisputed facts as a matter of law show Mr. Pittard did not make material misrepresentations of fact to Merrill Lynch. Defendant seeks summary judgment on plaintiff Cadlerock's claims under 11 U.S.C. § 727(a) both on the grounds that Cadlerock's complaint was not timely filed under Federal Rule of Bankruptcy Procedure 4004(a) and that Cadlerock's complaint fails to state a claim upon which relief could be granted.

A court will enter summary judgment only upon a showing that there is no genuine issue as to any material fact and that the moving part is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). Courts must review all evidence "in the light most favorable to the nonmoving party." Samples on Behalf of Samples v. Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988). In the instant case, defendant Pittard bears the initial burden of establishing that there is no issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After the defendant meets this initial burden, the burden shifts to the plaintiff who must go beyond the pleadings and show that an issue of material fact indeed does exist. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, then the court should not grant the summary judgment motion. Samples, 846 F.2d at 1330.

I. The § 523(a)(2) Claim

Defendant is entitled to summary judgment on Count I of Cadlerock's amended complaint, because Merrill Lynch's right of action against Mr. Pittard for injuries arising from fraud could not be assigned. Under the common law, assignments of actions were disfavored as contrary to the public policy discouraging litigation. Charles Adams, Georgia Law of Torts § 1-9 (2006) (citing Marshall v. Means, 12 Ga. 61, 67, 1852 WL 1387 (1852)). While the Georgia Legislature amended the Georgia Code over time to allow the assignment of certain actions, assignments of rights of actions for injuries arising from fraud to the assignor are not assignable. O.C.G.A. § 44-12-24 (2002); Couch v. Crane, 142 Ga. 22, 29, 82 S.E. 459, 463 (1914); Morehead v. Ayers, 136 Ga. 488, 71 S.E. 798 (1911); In re Estate of Sims, 259 Ga.App. 786, 791, 578 S.E.2d 498, 502 (2003); Generali — U.S. Branch v. Southeastern Security Insurance Co., 229 Ga.App. 277, 282, 493 S.E.2d 731, 735 (1997); Feeney v. Decatur Developing Co., 47 Ga.App. 353, 354-55, 170 S.E. 518, 519 (1933).

O.C.G.A. § 44-12-24 provides as follows: Except for those situations governed by Code Sections 11-2-210 and 11-9-406, a right of action is assignable if it involves, directly or indirectly, a right of property. A right of action for personal torts or for injuries arising from fraud to the assignor may not be assigned.

(Emphasis added)

Plaintiff Cadlerock received its claim for fraud against Mr. Pittard by an assignment from the Cadle Company which received the claim in turn by an assignment from Merrill Lynch. Count I of plaintiffs amended complaint in this adversary proceeding alleges that Mr. Pittard made fraudulent statements to induce Merrill...