In re Stemple

• Decision Date: 14 February 2007
• Docket Number: Bankruptcy No. 04-77388-SCS.,Adversary No. 06-7088-SCS.
• Citation: 361 B.R. 778
• Parties: In re Steven V. STEMPLE, Debtor. Warren Johnson, Jr., Plaintiff, v. Steven V. Stemple, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Virginia

361 B.R. 778

In re Steven V. STEMPLE, Debtor Warren Johnson, Jr., Plaintiff, v. Steven V. Stemple, Defendant.

Bankruptcy No. 04-77388-SCS.

Adversary No. 06-7088-SCS.

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

February 14, 2007.

COPYRIGHT MATERIAL OMITTED

John M. Barrett, Virginia Beach, VA, for Plaintiff.

John Edwin Bedi, Chesapeake, VA, for Defendant.

MEMORANDUM OPINION

STEPHEN C. ST. JOHN, Bankruptcy Judge.

This matter comes before the Court upon the Motions to Dismiss the Plaintiff's Complaint, which were filed separately by the Defendant, Steven V. Stemple ("Stemple"), and by the Chapter 13 Trustee in the underlying bankruptcy case, George W. Neal ("Trustee"). This Court has jurisdiction over these proceedings pursuant to 28 U.S.C. §§ 157(b) and 1334(b). Venue is proper pursuant to 28 U.S.C. § 1409(a). Upon consideration of the pleadings and memoranda submitted by each party, the Court makes the following findings of fact and conclusions of law.

I. PROCEDURAL HISTORY

The bankruptcy case underlying this adversary proceeding has a lengthy and contested history. Stemple filed, by counsel, a voluntary petition under Chapter 13 of the Bankruptcy Code on December 28, 2004. George W. Neal was appointed Chapter 13 Trustee. Stemple filed his original Chapter 13 Plan, as well as his Schedules and Statement of Financial Affairs, on January 11, 2005. The Section 341 Meeting of Creditors in this case was held on February 14, 2005. Amended Schedules F, G, and H, were filed by Stemple on February 24, 2005. Objections to Confirmation of the original Chapter 13 Plan were filed by the Trustee; the Internal Revenue Service; the Virginia Department of Taxation; and by creditor Warren Johnson, Jr., by counsel, the Plaintiff in the instant matter ("Johnson"). The hearing on the objections to confirmation was held on April 7, 2005, and all objections were sustained by the Court, thereby denying confirmation of the original Chapter 13 Plan. Stemple filed his First Amended Chapter 13 Plan, Amended Schedules G, H, and I, and Amended Statement of Financial Affairs on April 26, 2005.

While the Objections to Confirmation of the original Chapter 13 Plan were pending, Johnson filed Motions to Conduct Examinations of Stemple; his wife, Susan J. Stemple; and Stemple's father, William J. Stemple, pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, which motions were granted by separate orders entered by the Court on March 16, 2005. On March 30, 2005, Johnson filed a Motion for Sanctions against Stemple; Mrs. Stemple; and Stemple's father for their alleged failure to comply with subpoenas served upon each of them in conjunction with the Rule 2004 examinations. On May 25, 2005, Johnson filed an Amended Motion for Sanctions, asking only for sanctions against Stemple and his wife. At a hearing held on May 26, 2005, the Motion for Sanctions against William J. Stemple was dismissed upon his motion.

The hearing on the Amended Motion for Sanctions was held on June 23, 2005. At that hearing, the Court ordered Stemple to provide Johnson with evidence of his homeowner's insurance within five days. The Court also established the date of July 27, 2005, as the date for the Rule 2004 Examinations of Mr. and Mrs. Stemple by Johnson. The Court also held a hearing on the Objections to Confirmation of the First Amended Chapter 13 Plan on June 23, 2005, which were filed by the Internal Revenue Service (which was settled prior to the hearing), and Johnson.¹ The Court continued the hearing on Johnson's Objection, along with his Amended Motion for Sanctions, to the date established for the confirmation hearing of the anticipated amended plan.

Stemple filed his Second Amended Chapter 13 Plan on July 28, 2005, along with Amended Schedules E, F, and J. The Trustee; Internal Revenue Service; and Johnson filed Objections to Confirmation of the Second Amended Chapter 13 Plan, which were scheduled for hearing for September 22, 2005. On that date, the Court also conducted the continued hearing on Johnson's Amended Motion for Sanctions and his Objection to Confirmation of the First Amended Chapter 13 Plan. The Objections to Confirmation by the Trustee and the Internal Revenue Service to the Second Amended Chapter 13 Plan were settled by the parties, with Stemple agreeing to file a subsequent amended plan. The Court continued the hearing on Johnson's Objections to Confirmation of the First and Second Amended Chapter 13 Plans and his Amended Motion for Sanctions to November 30, 2005. The Court also ordered Johnson to file any objection to the Third Amended Chapter 13 Plan within ten days after the filing of such plan and set the confirmation hearing for the Third Amended Chapter 13 Plan for November 30, 2005, as well.

Stemple filed his Third Amended Chapter 13 Plan on October 5, 2005, along with Amended Schedules A, E, I, and J. Johnson objected to confirmation of this plan as well. The hearing on Johnson's Objections to Confirmation of the First, Second, and Third Amended Plans, as well as the hearing on Johnson's Amended Motion for Sanctions, was held November 30, 2005. Following testimony by Stemple and Marvin Gary King, the former owner of a limousine service now owned by Stemple, and upon consideration of the exhibits tendered and arguments made by counsel for both Stemple and Johnson, the Court found, for the reasons stated from the bench, that Johnson's Objections to the First, Second, and Third Amended Chapter 13 Plans should be sustained and confirmation of those plans be denied pending the filing of amended Schedules I and J, and the addition of any new creditors. The Court denied Johnson's Amended Motion for Sanctions.

On December 15, 2005, Stemple filed his Fourth Amended Chapter 13 Plan, as well as Amended Schedules D, G, I, and J. On January 17, 2006, Johnson filed his Objection to Confirmation of the Fourth Amended Chapter 13 Plan. On January 19, 2006, counsel for Stemple filed a Motion to Dismiss Johnson's' Objection to Confirmation of the Fourth Amended Plan. On January 25, 2006, Johnson filed his Response to Stemple's Motion to Dismiss Objection, as well as a Motion to Dismiss Stemple's bankruptcy case with prejudice, and a Motion to Continue the hearing on his Objection to Confirmation of the Fourth Amended Chapter 13 Plan. The hearing on Johnson's Objection to Confirmation of the Fourth Amended Chapter 13 Plan; Stemple's Motion to Dismiss Johnson's Objection to Confirmation; Johnson's Motion to Dismiss Stemple's bankruptcy case; and Johnson's Motion to Continue was held January 26, 2006. The Court continued the hearing on Johnson's Objection to Confirmation and related motions generally pending the outcome of the February 9, 2006, hearing on Motions to Quash Subpoenas issued by Johnson, which motions were filed on January 19, 2006, by Stemple, by counsel; on January 20, 2006, by Gary King, Pro Se; and on January 23, 2006 by William J. Stemple, by counsel, and by Mrs. Stemple, Pro Se.

On February 9, 2006, the Court held hearings on the Motions to Quash Subpoenas filed by King and by Stemple.² The Motions to Quash were granted. At that hearing the Court established a hearing date of May 2, 2006, for Johnson's Objection to Confirmation of the Fourth Amended Chapter 13 Plan and for Johnson's Motion to Dismiss Stemple's case with prejudice. Following the hearing, the Court entered a Pretrial Order setting forth discovery and motions deadlines.

On April 17, 2006, counsel for Johnson filed a Motion for Summary Judgment on his Motion to Dismiss with Prejudice, which was also heard on May 2, 2006. In his Motion to Dismiss with Prejudice, Johnson relied on his arguments made in his Objection to Confirmation of Stemple's Fourth Amended Chapter 13 Plan. Motion to Dismiss with Prejudice filed by Warren Johnson, Steven V. Stemple, Case No. 04-77388-SCS, Docket Entry 138, filed January 25, 2006. In that objection, Johnson argued, inter alia, that Stemple had exhibited dishonesty throughout his bankruptcy proceedings; that members of Stemple's family had also been dishonest throughout Stemple's bankruptcy case; that Stemple failed to propose his Fourth Amended Chapter 13 Plan in good faith; and that Stemple failed to accurately value his assets. Objection to Confirmation of Fourth Amended Chapter 13 Plan filed by Warren Johnson, Steven V. Stemple, Case No. 04-77388-SCS, Docket Entry 121, filed January 17, 2006. In his Motion for Summary Judgment, Johnson argued, among other things, that Stemple was not eligible to be a debtor under Chapter 13 of the Bankruptcy Code because Stemple's noncontingent, liquidated, unsecured debt as of the petition date exceeded the amount set forth in Section 109(e) of the Bankruptcy Code, and that Stemple's plan was not proposed in good faith. Motion for Summary Judgment filed by Warren Johnson, Steven V. Stemple, Case No. 04-77388-SCS, Docket Entry 161, filed April 17, 2006. On May 1, 2006, counsel for Stemple filed a Response to the Motion for Summary Judgment. On that day, the parties also filed a stipulation of facts regarding the matters set for hearing on May 2, 2006.

At the May 2, 2006, hearing, after hearing argument from both sides, the Court denied Johnson's Motion for Summary Judgment on all grounds, including eligibility and bad faith. The Court, hearing no objection by Stemple, sustained Johnson's Objection to Exemptions, which had been filed earlier in the case and added to the Court's docket for May 2, 2006. On Johnson's Objection, to Confirmation of the Fourth Amended Chapter 13 Plan and his Motion to Dismiss with Prejudice, the Court heard testimony by several witnesses, including Stemple and his wife. Both Johnson and Stemple submitted exhibits into evidence. At the conclusion of the hearing, after hearing argument from both parties, the Court took the matter under advisement.

The Court reconvened the parties on May 24, 2006, to announce its ruling. The Court...