In re Williams

• Decision Date: 17 March 2008
• Docket Number: No. 06-2028-JS.,No. 05-28334-JS.,05-28334-JS.,06-2028-JS.
• Citation: 400 B.R. 479
• Parties: In re Charles Edward WILLIAMS, Debtor. Sean C. Logan, Trustee, Plaintiff v. Charles Edward Williams, et al., Defendants.
• Court: U.S. Bankruptcy Court — District of Maryland

400 B.R. 479

In re Charles Edward WILLIAMS, Debtor.

Sean C. Logan, Trustee, Plaintiff v. Charles Edward Williams, et al., Defendants.

Bankruptcy No. 05-28334-JS.

Adversary No. 06-2028-JS.

United States Bankruptcy Court, D. Maryland.

March 17, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Douglas B. Riley, Esquire, Camilla B. Russack, Esquire, Sean C. Logan, Esquire, Logan Russack, LLC, Annapolis, MD, Lenka Janotka Koss, Esquire, Playa Del Rey, CA, for Plaintiff.

Charles Edward Williams, Colora, MD, pro se.

Angel L. Williams, Pylesville, MD, pro se.

George Breschi, Esquire, Towson, MD, Michael N. Russo, Jr., Esquire, Amanda Lesher Olear, Esquire, Council, Baradel, Kosmerl & Nolan, P.A., Annapolis, MD, William M. Savage, Esquire, Shapiro & Burson, LLP, Fairfax, VA, Michelle E. Stawinski, Esquire, Law Office of Michelle E. Stawinski, Riverdale, MD, Lawrence P. Pinno, Jr., Esquire, Bel Air, MD, Office of the United States Trustee, Baltimore, MD, for Defendants.

MEMORANDUM OPINION GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT [PP. 38, 39, 48], DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [P. 40], OVERRULING TRUSTEE'S OBJECTION TO DEBTOR'S EXEMPTIONS [P. 30] AND DISMISSING TRUSTEE'S COMPLAINT FOR AVOIDANCE OF LIEN, TURNOVER OF PROPERTY AND MONEY DAMAGES

JAMES E. SCHNEIDER, Bankruptcy Judge.

The matters before the Court are the Chapter 7 trustee's objection to exemptions claimed by the debtor and cross motions for summary judgment filed by the parties to the Chapter 7 trustee's complaint for avoidance of lien, turnover of property and damages. For the reasons stated, the defendants' motions for summary judgment will be granted, the plaintiff/trustee's motion will be denied, the trustee's objection to the debtor's exemptions will be overruled and the instant complaint will be dismissed.¹

FINDINGS OF FACT

1. On August 17, 2005, Charles Edward Williams (the "debtor"), by his attorney, Joseph M. Guida, filed the instant voluntary Chapter 7 bankruptcy petition, together with schedules and all related documents.² On the petition date, Mr. Williams was married to Angel L. Williams, his non-filing spouse. Together as tenants by the entireties they owned a residence located at 45 Russell Road, Colora, Cecil County, Maryland 21917 (the "Property"). Deed dated August 27, 1997, Exhibit A to the Complaint.

2. On Schedule A, the debtor valued the Property at $230,000, subject to a lien in the amount of $102,417.86, in favor of Countrywide Home Servicing LP ("Countrywide"), his sole secured creditor.

3. On Schedule C, the debtor claimed an exemption in the Property only in the amount of $127,582.14, citing "Md. Cts. & Jud. Proc.Code § 11-504(c)(3)(f)." While no such statutory section exists, it is understood and stipulated that the section intended to be cited was Maryland Courts and Judicial Proceedings Code § 11-504(f), the so-called "wild card exemption," which allows the debtor an exemption of up to $5,000 in real or personal property of his choice.

4. However, at the top of Schedule C, debtor's counsel checked off the box which indicates that "Debtor elects the exemption to which debtor is entitled under 11 U.S.C. § 522(b)(2)³ (Exemptions available under applicable nonbankruptcy federal laws, state or local law where the debtor's domicile has been located for the 180 days immediately preceding the filing of the petition, or for a longer portion of the 180-day period than in any other place, and the debtor's interest as a tenant by the entirety or joint tenant to the extent the interest is exempt from process under applicable nonbankruptcy law)." Schedule C to the Petition. Under the laws of Maryland, it is uncontested that, conditioned upon the non-existence of joint creditors, property held by the entireties by the debtor and his non-filing spouse is completely exempt from the bankruptcy estate to the full extent of its fair market value.

5. The debtor did not indicate specifically that the Property was owned as tenants by the entireties with Angel Williams. In Schedule A, he indicated his interest in the Property as "fee simple." However, in Schedule H, he listed Angel Williams as co-debtor on the mortgage to Countrywide.

6. On September 27, 2005, the first occasion upon which a meeting of creditors was held, the debtor appeared but did not bring any documents with him, specifically the deed to the Property and a credit report. On that occasion, the debtor was represented by Lawrence P. Pinno, Jr.,⁴ who advised the trustee that the Property was owned by the debtor and his then-wife as tenants by the entireties, and that the debtor and his wife were separated, but had not been divorced. At the conclusion of the meeting, the trustee commented, "You've got lots of equity in the house. As counsel told you, creditors can't touch it unless you have joint debt. I need a credit report to verify that, so that when the creditors come back to me and say, `Why didn't you sell the house, trustee?', I can say, `You didn't have any joint debt.'" Sound recording of the meeting of creditors dated September 27, 2005.

7. The meeting was continued pending the debtor's production of the requested documents. No docket entry was made that indicated that the meeting of creditors had been conducted.

8. On November 30, 2005, the debtor was granted a discharge, entered by order [P. 9].

9. On February 7, 2006, Mr. Guida, the debtor's counsel of record was disbarred by the Court of Appeals of Maryland based upon his conduct in an unrelated case. See Attorney Grievance Comm'n v. Guida, 391 Md. 33, 891 A.2d 1085 (2006).

10. On February 9, 2006, a docket entry was filed that stated, "Meeting of Creditors Rescheduled to 3/29/2006 at 09:00 AM at x 300 W. Pratt, # 375, Baltimore, MD (Logan, Sean)", followed on February 15, 2006, by a notice of same.

11. On February 16, 2006, the debtor and Ms. Williams attended a hearing and testified in a proceeding before the Circuit Court for Harford County, Judge William O. Carr presiding (the "Circuit Court"), in which she was seeking an absolute divorce.

12. On March 2, 2006, the Circuit Court granted Ms. Williams a judgment of absolute divorce. Exhibit B to the Complaint. At the time of the judgment, and as a part thereof, the debtor was given a first option to purchase from Ms. Williams her interest in the Property, to be exercised by him within 90 days from February 16, 2006. Id.

13. On March 29, 2006, the debtor failed to appear at the rescheduled meeting of creditors and therefore did not produce the requested documents. The meeting was continued again, pending the debtor's production of a credit report. At some point, the trustee also requested a copy of the divorce decree from the debtor. As before, no docket entry was made that indicated that a meeting of creditors was conducted.

14. On April 7, 2006, a "Notice to Debtor Whose Attorney has Been Suspended or Disbarred From the Practice of Law in This Court" [P. 11] was entered on the docket, in which the debtor was advised to engage substitute counsel. Id.

15. On May 16, 2006, the trustee filed a "line" that indicated that he had discovered possible assets in the case, and requested the Court send a notice of assets to creditors, instructing them to file proofs of claim.

16. Between June 1 and August 1, 2006, ten creditors filed proofs of claim. All of the proofs of claim represented individual debts of the debtor only and not joint debts of the debtor and his non-filing wife.

17. On July 24, 2006, by supplemental order, the Circuit Court granted the debtor 30 days from July 11, 2006 to obtain refinancing on the Property to permit his former spouse to be released from the mortgage. Exhibit C to the Complaint. On that date, the Property was valued at $215,000, and the Circuit Court awarded Angel Williams one-half of that amount minus the one-half of the amount owed on the existing mortgage to Countrywide.

18. On August 25, 2006, the debtor refinanced the Property with Saxon Mortgage, Inc. ("Saxon") for $188,900. Settlement, Escrow, and Abstract Solutions, Inc. ("Settlement Solutions") conducted the settlement, at which time Angel Williams received a distribution of $52,552.66, partly in consideration of her half of the equity in the Property, and partly for past-due child support in the approximate amount of $15,000. Deed of trust, recorded September 27, 2006, Exhibit to Saxon's Motion for Relief from Automatic Stay [P. 26] in the bankruptcy case.

19. The refinance of the Property and disbursements were made without the prior permission of this Court or the Chapter 7 trustee.

20. On September 22, 2006, the trustee learned from Robert Judd, Mr. Williams' divorce attorney, that Mr. Williams had refinanced the Property 29 days earlier and acquired Angel Williams' interest in the Property. Complaint, ¶ 14.

21. A docket entry dated September 26, 2006 indicated that a third meeting of creditors was scheduled for October 10, 2006.

22. Before the meeting of creditors scheduled to occur on October 10, 2006, the debtor sent a credit report to the trustee, which the trustee deemed insufficient because it did not differentiate between joint and individual debts.

23. On October 9, 2006, one day before the next meeting of creditors was scheduled, the trustee filed "Application to Employ Patrick J. Hurley and Coldwell Banker Residential as Real Estate Agent to the Trustee" [P. 21], in order to market the Property. The application made no mention of the trustee's knowledge that the Property had been refinanced.

24. At the October 10, 2006 meeting of creditors, the trustee did not advise the debtor that he had filed the application to employ a realtor to sell the debtor's house. The debtor appeared without Mr. Pinno, whom the trustee contacted by telephone. Mr. Pinno explained that he had noted the hearing for the wrong date. The debtor presented the trustee with the divorce decree as well as a credit report that the...