In re Wantz
| Decision Date | 13 January 2023 |
| Docket Number | Case No. GG 18-02851-jtg |
| Citation | 647 B.R. 541 |
| Parties | IN RE: Rose Marie WANTZ, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Michigan |
Roger G. Cotner, Esq., Cotner Law Offices, Grand Haven, Michigan for Rose Marie Wantz;
Lisa Gocha, Esq., Chapter 7 Trustee, Hudsonville, Michigan.
Deadlines may lead to unwelcome results, but they prompt parties to act and they produce finality .1
After reopening her chapter 7 case, Rose Marie Wantz (the "Debtor") filed an amendment to her schedules in which she asserts that the proceeds of a personal injury tort claim not previously disclosed are exempt from property of her bankruptcy estate. Relying on Fed. R. Bankr. P. 1009(a), Lisa Gocha, the chapter 7 trustee (the "Trustee"), objects to the amendment because the Debtor failed to file it before the closing of her case. Moreover, the Trustee contends that the Debtor's neglect should not be deemed excusable under Fed. R. Bankr. P. 9006(b)(1).2 For the following reasons, the court shall overrule the objection.3
The court has jurisdiction pursuant to 28 U.S.C. § 1334(a) and (b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B).
The facts are not in dispute. In 2007, the Debtor had a medical device implanted within her body, after which she began to experience significant health issues. Unbeknownst to the Debtor, the corrosive coils wrapped around the ends of the device were causing her both physical pain and mental anguish.4
Sometime in 2017, the Debtor, through her spouse, contacted attorneys who were representing numerous personal injury plaintiffs in civil litigation against the device manufacturer. In an email dated September 18, 2017, the personal injury attorneys informed the Debtor that they were "evaluating [her] case." (Email, Ex. B at p. 1.) They further explained that:
We have not filed your ... case to date. The reason we have not filed your case yet is it is our understanding that you have not had a surgery to remove your Essure coils. From a legal standpoint, it will be very difficult to explain to a jury that your Essure coils are the cause of your injuries if you have not had them removed . Jurors may not understand how you can be injured by a product that you have not had removed.
(Id . (emphasis added).)
On June 27, 2018, the Debtor filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. The Debtor did not disclose any claim related to the device in her schedules. Four months after her bankruptcy case was filed, the Debtor received her discharge [Dkt. No. 28]. The Clerk entered a decree [Dkt. No. 30] closing the Debtor's no-asset case on November 30, 2018.
Shortly before receiving her discharge, the Debtor executed a form "Attorney Employment Contract" with her personal injury attorneys. The Attorney Employment Contract provided that the personal injury attorneys would represent the Debtor in connection with "all causes of action and matters arising out of and resulting from use of the [device]" in exchange for a contingency fee of approximately 40% plus reimbursement of various costs and expenses. (Ret. Agr., Ex. C at p. 1 (emphasis added).) Somewhat inconsistently, the Attorney Employment Contract also stated that:
Attorneys will investigate [the Debtor's] potential claim and in their sole discretion determine whether to bring a claim on [the Debtor's] behalf. [The Debtor] understands that Attorneys will not be able to fully evaluate the potential claim until [the Debtor] has provided enough evidence to prove the alleged harm, injuries, and/or damages. [The Debtor] also understands that it will take Attorneys a minimum of forty-five (45) days after receipt of such information to evaluate [the Debtor's] potential claim . [The Debtor] understands that [the Debtor's] claim is subject to a statutory time limit that may expire during Attorneys’ investigation .
(Id . at p. 2 (emphasis added).)
In early 2020, the Debtor's personal injury attorneys sent the Debtor at least two emails. In the first email, they informed the Debtor that in addition to a previously submitted "Plaintiff Profile Form," she needed to meet with a to complete a questionnaire/fact sheet of some sort. (Email, Ex. D.) The email also warned the Debtor that the "[f]ailure to fully complete this fact sheet, which includes returning the signed Verification and four (4) authorizations, will result in the Court dismissing your case." (Id . (emphasis in original).)5 The second email provided a similar if not identical reminder. (Email, Ex. E.)
In March 2021, the Debtor visited her personal physician who confirmed what the Debtor had begun to suspect — the device was the cause of her extreme lower back and pelvic discomfort, fatigue, depression, and anxiety. With her pain becoming more and more acute, the Debtor had the device removed later that year. The medical procedure cost the Debtor over $7,000, plus four weeks away from work while she recovered. (Invoices, Ex. 1.)
Around the same time that her physician confirmed that the device was the cause of her pain, the Debtor received from her personal injury attorneys an email regarding a "settlement packet" resolving the Debtor's claims against the device manufacturer. (Email, Ex. F.) The email attached a form document entitled "Confidential Release of All Claims," which the Debtor eventually executed. (Release, Ex. G.)
On December 3, 2021, the Debtor's personal injury attorneys sent an email to the Debtor's counsel in this case that stated the following:
(Email, Ex. I.)6
Approximately three weeks after the email, the Debtor filed an ex parte motion to reopen her case [Dkt. No. 31] so that she could "file amended schedules to add the omitted and anticipated personal injury recovery." (Mot. to Reopen at ¶ 6.) Upon review of the motion to reopen, the court scheduled it for hearing [Dkt. No. 36] to provide an opportunity for parties in interest to object to the relief requested. When no objections to the motion to reopen were timely filed, the court dispensed with the need for a hearing and entered an order [Dkt. No. 41] reopening the Debtor's case.
On the same day her case was reopened, the Debtor filed amended schedule A/B and amended schedule C [Dkt. No. 42] (collectively, the "Amendment"). The Amendment disclosed that the Debtor held the personal injury tort claim against the device manufacturer, which the Debtor sought to exempt under section 522(d)(11)(D).7 Promptly upon reappointment [Dkt. Nos. 44, 45], the Trustee withdrew her report of no distribution [Dkt. No. 47] and timely filed an objection to the Amendment [Dkt. No. 48] (the "Objection").
After holding a preliminary hearing, the court entered an order scheduling the Objection for an evidentiary hearing [Dkt. No. 52]. Leading up to the evidentiary hearing, the parties filed briefs in support of their respective arguments [Dkt. Nos. 60, 63], a stipulation to admit documents into evidence [Dkt. No. 54], and a stipulation of facts [Dkt. No. 64]. The Debtor was the only witness called to testify during the evidentiary hearing. At the conclusion of the hearing, the court took the matter under advisement.
The parties have raised the following issues:
Upon the filing of any bankruptcy case, an estate is created by operation of law. 11 U.S.C. § 541(a). Subject to certain exceptions, section 541 provides that the estate is comprised of all legal or equitable interests of the debtor in property as of the commencement of the case. 11 U.S.C. § 541(a)(1).9 However, an individual debtor may assert that property is exempt, meaning that the value of such property (or, in some instances, the property itself) is excluded from property of the estate. 11 U.S.C. § 522(b)(1) ; Fed. R. Bankr. P. 4003(a) ; see Schwab v. Reilly , 560 U.S. 770, 775-76, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010) (citations omitted).
In this case, the Debtor filed her voluntary petition, thereby creating an estate comprised of, among other things, her personal injury tort claim against the device manufacturer. See, e.g. , Tyler v. DH Capital Mgmt., Inc. , 736 F.3d 455, 462 (6th Cir. 2013) (citations omitted). Because the claim was not included on the Debtor's schedules or otherwise disclosed, it was unknown to the Trustee and other parties in interest. With a report of no distribution filed and a discharge entered, the Debtor's case was finalized upon its closing. See 11 U.S.C. § 350(a). Or so it was thought.
Upon receiving news of the settlement from her attorneys, the Debtor sought to reopen her case. Section 350 provides that a previously closed case "may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." 11 U.S.C. § 350(b). "It is well settled that decisions as to whether to reopen bankruptcy cases and allow amendment of schedules are...
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