In re Rountree

• Decision Date: 02 March 2011
• Docket Number: Bankruptcy No. 01–21480–SCS.,Adversary No. 09–07057–SCS.
• Citation: 448 B.R. 389
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re June Laurie ROUNTREE, Debtor.June Laurie Rountree, Plaintiff,v.Pamela Nunnery, Paul Klein, Defendants.

448 B.R. 389

In re June Laurie ROUNTREE, Debtor.June Laurie Rountree, Plaintiff,

v.Pamela Nunnery, Paul Klein, Defendants.

Bankruptcy No. 01–21480–SCS.

Adversary No. 09–07057–SCS.

United States Bankruptcy Court, E.D. Virginia,Norfolk Division.

March 2, 2011.

Gregory K. Pugh, Gregory K. Pugh, P.C., Steven L. Brown, Wolcott Rivers Gates, Virginia Beach, VA, for Debtor.

MEMORANDUM OPINION

STEPHEN C. ST. JOHN, Bankruptcy Judge.

On October 25, 2010, this Court conducted a hearing on the Motion for Summary Judgment of the Plaintiff, June Laurie Rountree (“Rountree” or the “Plaintiff”), against the Defendants, Pamela Nunnery (“Nunnery”) and Paul Klein (“Klein,” and together with Nunnery, “Nunnery and Klein” or the “Defendants”). At issue is whether Nunnery and Klein have violated § 524 of the Bankruptcy Code ¹ by their continuation of a state court proceeding pending in the State of North Carolina against Rountree and others. At the conclusion of the hearing, the Court took the matter under advisement. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409(a). This Memorandum Opinion constitutes the Court's conclusions of law.

I. PROCEDURAL HISTORY

A. The Complaint and the Answer

On May 22, 2009, Rountree filed her complaint, asking this Court to find that Nunnery and Klein have violated § 524 of the Bankruptcy Code by their continuation of a state court proceeding pending in North Carolina against Rountree and others (the “Complaint”). The Complaint, among other things, alleges Rountree was discharged of any debts owed to Nunnery by reason of her discharge received in the underlying bankruptcy case on April 25, 2002 (the “Discharge Order”). The parties fully litigated the issue of dischargeability prior to the filing of the instant Complaint: Nunnery initiated a complaint against Rountree seeking a determination that Rountree's indebtedness to Nunnery was nondischargeable under § 523(a) of the Bankruptcy Code (the “§ 523 Proceeding”). The § 523 Proceeding ended when the United States Court of Appeals for the Fourth Circuit ruled that the indebtedness of Rountree to Nunnery was discharged. Nunnery v. Rountree (In re Rountree), 478 F.3d 215, 222–23 (4th Cir.2007) (concluding that § 523(a)(2)(A) of the Bankruptcy Code “is not ... the appropriate exception to discharge in bankruptcy for Nunnery's judgment claim against Rountree” and affirming the final order of the United States District Court for the Eastern District of Virginia, which found the debt to be dischargeable).²

The Complaint further alleges (i) that on September 24, 2003, the Chapter 7 Trustee (the “Trustee”) filed a complaint in this Court against Rountree, alleging a fraudulent conveyance of certain real property located in North Carolina, and (ii) that on October 23, 2003, Nunnery filed suit in Superior Court in Randolph County, North Carolina, alleging the same cause of action as the Trustee in his complaint (the “N.C. Fraudulent Transfer Proceeding”). Complaint ¶¶ 9–10. This Court enjoined the prosecution of the N.C. Fraudulent Transfer Proceeding pending the final resolution of the § 523 Proceeding. Id. ¶¶ 11–12. On July 26, 2005, shortly after this Court enjoined the prosecution of the N.C. Fraudulent Transfer Proceeding, the state court declared the N.C. Fraudulent Transfer Proceeding inactive and closed the proceeding without prejudice to be reopened on proper motion. Id. ¶ 13. On February 27, 2007, the United States Court of Appeals for the Fourth Circuit issued its decision and Nunnery's claim was declared dischargeable. Id. ¶ 14.

The Complaint additionally alleges that in January 2009, Nunnery moved for the N.C. Fraudulent Transfer Proceeding to be “put back” on the state court trial calendar, and trial was set for June 15, 2009. Id. ¶ 16. Rountree alleges that on March 12, 2009, counsel for Rountree wrote to counsel for Nunnery requesting that Nunnery dismiss the N.C. Fraudulent Transfer Proceeding, which Nunnery declined to so do. Id. ¶¶ 21–22. Finally, Rountree contends that Nunnery, by continuing the N.C. Fraudulent Transfer Proceeding, is willfully and blatantly violating the provisions of § 524 of the Bankruptcy Code. Id. ¶¶ 24–28.³ Rountree prays that this Court (i) enjoin the further prosecution of the N.C. Fraudulent Transfer Proceeding by Nunnery against Rountree and the other defendants named therein, Laurin DeWolf and April DeWolf (collectively, “the DeWolfs”), (ii) find Nunnery and Klein in contempt of this Court, and (iii) award sanctions against each of them, including damages and attorneys' fees.⁴

On June 30, 2009, Nunnery and Klein filed a joint Motion to Dismiss and Answer to Amended Complaint (the “Answer”). In their Answer, Nunnery and Klein defend the Complaint principally by asserting they committed no willful violations of the discharge order here and that the N.C. Fraudulent Transfer Proceeding is a “suit arising from tortious conduct independent of that which gave rise to the scheduled claim, and that claim has not been discharged, nor had it ever been scheduled.” Answer at 6.⁵

B. The Motion for Summary Judgment

Rountree filed the Motion for Summary Judgment on October 5, 2010. The Motion for Summary Judgment contains forty-seven (47) assertions of fact and law that Rountree believes entitles her to entry of judgment against Nunnery and Klein. The Motion for Summary Judgment initially asserts the circumstances of Nunnery obtaining judgment against Rountree, the filing of the bankruptcy here, and the determination of the discharge of this judgment. Motion for Summary Judgment ¶ ¶ 1–13.⁶ Rountree then asserts circumstances relating to her bankruptcy proceeding, stating (i) that Nunnery does not have a judgment lien recorded or perfected in Currituck County, North Carolina; (ii) that Nunnery filed her unsecured proof of claim in Rountree's bankruptcy on March 21, 2002; (iii) that the basis for Nunnery's claim was “invasion of privacy; fraud; unfair and deceptive trade practices” (the “Privacy Claims”); and (iv) that the Trustee paid a bankruptcy distribution of $1,475.26 to Nunnery on her claim. Id. ¶¶ 14–16. Rountree then recites the assertion of a claim by the Trustee in this bankruptcy: “On September 24, 2003, the Chapter 7 Trustee filed an adversary proceeding against Rountree, Mr. Laurin DeWolf, and Mrs. April DeWolf entitled ‘Complaint to Avoid Transfer and Recover Value of Property’ with regard to the same alleged fraudulent conveyance that is the subject of the pending [N.C. Fraudulent Transfer Proceeding],” id. ¶ 18; “[t]he Adversary Proceeding filed by the Chapter 7 Trustee was later dismissed by Order entered July 14, 2004,” id. ¶ 19.

Rountree then turns to the circumstances of the N.C. Fraudulent Transfer Proceeding, asserting the following:

20. On October 31, 2003, just over one month after the Trustee filed his Complaint to Avoid Transfer, and without Bankruptcy Court approval, Nunnery filed suit against the Debtor, Mr. Laurin DeWolf, and Mrs. April DeWolf in Randolph County Superior Court, North Carolina, alleging the same fraudulent conveyance (the “Randolph County Claim” or “N.C. Fraudulent Conveyance Claim”). (See Defendant's Response No. 11 dated September 2, 2010, to Plaintiff's Second Request for Admissions, attached as Exhibit A).

21. The N.C. Fraudulent Conveyance Claim is currently pending in Randolph County Superior Court. (See Defendant's Response No. 11 dated September 2, 2010 to Plaintiff's Second Request for Admissions, attached as Exhibit A).

22. The N.C. Fraudulent Conveyance Claim was a new, separate right asserted against the Debtor by Nunnery after both the Debtor's filing of her bankruptcy petition and her discharge. (See Defendants' Response No. 8 in Defendants' Opposition to Motion to Reopen dated April 6, 2009, attached as Exhibit K).

23. Nunnery's N.C. Fraudulent Conveyance Claim is not an action on a debt. (See Defendant's Response No. 23, Sec. IV, p. 11, of Defendants' Memorandum in Support of Motions to Dismiss and Summary Judgment dated January 26, 2010, attached as Exhibit F).

24. Nunnery's N.C. Fraudulent Conveyance Claim seeks to “recover for the statutory wrong of a fraudulent conveyance.” (See Defendants' Responses Nos. 23 and 24, Sec. IV, p. 11, of Defendants' Memorandum in Support of Motions to Dismiss and Summary Judgment dated January 26, 2010, attached as Exhibit F).

25. Nunnery's N.C. Fraudulent Conveyance Claim prays that the sale of the Currituck, N.C. property be set aside “to the extent that the proceeds of such sale are to be deposited by recipient of such proceeds into the treasury of this [N.C.] court to be held for distribution to the creditors of Defendant Rountree, including Plaintiff.” (See N.C. Fraudulent Conveyance Complaint of Nunnery attached, produced in response to Plaintiff's First Request for Productions, attached as Exhibit L, emphasis added).

Id. ¶¶ 20–25.

Exhibit L of the Motion for Summary Judgment is Nunnery's Response to Rountree's First Request for Production of Documents. Nunnery has included in the response a copy of her complaint from the N.C. Fraudulent Transfer Proceeding (the “N.C. Complaint”). As follows, the allegations contained in the N.C. Complaint describe (i) the judgment on her prepetition Privacy Claims and (ii) the transactions between Rountree and the DeWolfs as transactions made for the purpose of defrauding Rountree's creditors:

5. On or about July 11, 1997, ... [Nunnery] commenced what eventually became a series of lawsuits (hereinafter “the Privacy Claim”) against Defendant Rountree, alleging, among other things, invasion of privacy, intentional and negligent infliction of emotional distress, fraud, unfair and deceptive trade practices, and other torts.

....

7. On September 27, 2002, Judgment was entered in favor of [Nunnery] herein, and against Defendant Rountree herein in the Privacy Claim in the sum of...