In re Wilson, Case No.: 12-32715-WIL
| Decision Date | 29 March 2016 |
| Docket Number | Case No.: 12-32715-WIL |
| Parties | In re: Robert Horace Wilson, Debtor. |
| Court | U.S. Bankruptcy Court — District of Maryland |
Before the Court are The James Adkins Living Trust's Motion to Dismiss or Convert (the "Motion") and the Debtor's Answer thereto. The Motion seeks dismissal of the Debtor's bankruptcy case under 11 U.S.C. § 707(a) or, in the alternative, conversion of this case to a case under Chapter 11 of the Bankruptcy Code. The Court conducted a two-day trial on the Motion on October 29, 2014, and May 4, 2015. At the conclusion of the trial, the Court took the matter under advisement and gave the parties thirty (30) days to file post-trial briefs. Only The James Adkins Living Trust (the "Trust" or "Movant") submitted a post-trial brief. The Court has considered the Motion, the Debtor's Answer thereto, the evidence and testimony presented at trial and the post-trial brief. For the following reasons, the Motion is granted.
This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334, 28 U.S.C. §157(a) and Rule 402 of the Local Rules of the United States District Court for the District of Maryland. This is a "core proceeding" within the meaning of 28 U.S.C. § 157(b).
The following facts are relevant to the Court's decision and are either undisputed or supported by the evidence presented at trial.1 The Trust is a creditor of the Debtor based on a loan made to the Debtor by James Adkins in 2008. The Debtor defaulted on his obligations under the loan documents causing James Adkins to file a lawsuit against the Debtor in the Superior Court for the District of Columbia. Thereafter, on February 27, 2012, the Trust, which was substituted as a party in the lawsuit for James Adkins, was awarded a judgment against the Debtor in the amount of $1,342,087.97, plus a judgment for possession of the property securing the loan. The Debtor failed to turn over the assets as ordered by the Superior Court. Consequently, the Trust sought post-judgment collection and contempt remedies against the Debtor. Thereafter, on December 21, 2012 (the "Petition Date"), the Debtor commenced the instant bankruptcy case by filing a voluntary petition under Chapter 7 of the United States Bankruptcy Code (hereafter, the "Bankruptcy Code").
The Debtor and his non-filing spouse are both practicing physicians, the Debtor being an orthopedic surgeon and his spouse being a dermatologist. They have six children. As of the Petition Date, all six children lived at home along with the Debtor's mother, a former au pair, and a niece and a nephew, both of whom were at least 18 years of age as of the Petition Date. The Debtor filed his bankruptcy schedules and statement of financial affairs on January 24, 2013. The Debtor's original schedules were admitted into evidence as Debtor's Exhibit No. 2. Schedule A identifies one parcel of real property located at 2412 Norbeck Farm Place, Olney, Maryland 20822 owned by the Debtor and his spouse, Dr. Paula Bourelly ("Dr. Bourelly"). Schedule B lists, among other assets, the Debtor's 50% ownership interest in Spike Club, LLC with an assigned value of $1.00. Schedule B also lists Debtor's 2% ownership interest in Capitol Endoscopy with an assigned value of $19,000.00. Schedule D lists Peter Mann, Esquire (the Trust's attorney) as having a contingent, unliquidated and disputed secured claim in the amount of $1,348,542.37 based on the Trust's judgment against the Debtor. Schedule D also lists two claims held by Merrill Lynch secured by the Norbeck Farm property, and a judgment in favor of Premier Bank, Inc. in the amount of $369,123.76.2 Debtor's original Schedule E reflects that there are no creditors holding unsecured priority claims. Debtor's original Schedule F incudes various credit card debt totaling $30,785.00 and a claim in favor of Dr. Bourelly in the amount of $100,000.00 based on a "Promissory Note." Debtor's original Schedule F also includes numerous claims totaling $1,285.00 held by Professional Account Management, LLC, a collection agency for the District of Columbia. Debtor testified that he believed these claims were for parking tickets. Debtor testified that the $30,785.00 credit card balance was incurred in the ordinary course of business and was a balance that he typically carried. Debtor further testified that he obtained the $100,000.00 from Dr. Bourelly in connection with the purchase of his business and that he has never made a payment to Dr. Bourelly on the Promissory Note despite it having a maturity date of December 31, 2013.
The Chapter 7 Trustee informed the Court at trial that the Debtor's bankruptcy case is an "asset case" and that upon withdrawal of Premier Bank's Proof of Claim, the Trust represents 99% of the filed claims in Debtor's case.
Debtor's original Schedule I states that the Debtor is employed as a physician with Providence Hospital in Washington, D.C. Debtor's average monthly income is listed as $17,961.78, including a "Satuday Combination of Soirry Staefe" in the amount of $3,000.00. Debtor's original Schedule I lists Dr. Bourelly's average monthly income from her dermatology practice, Olney Dermatology Associates, as $10,993.67.3 The combined average monthly income on Debtor's original Schedule I totals $28,955.45. Debtor's original Schedule J lists average monthly expenses of $29,098.33, and reflects a monthly household deficit of $142.88. Examples of specific monthly expenses include: $7,900 for mortgage payments; $2,340.00 for household utilities; $2,000.00 for home maintenance; $7,400.00 for food; $1,200 for transportation (not including car payments); $1,050 for recreation, $200.00 for pet expenses and $500.00 for vehicle maintenance. Debtor testified at trial that his initial Schedules I and J were not accurate and that he did not know what the "Satuday Combination of Soirry Staefe" was. He further testified that he knew his schedules would have to be "improved and tweaked."
There was significant focus at trial on the Debtor and Dr. Bourelly's household operations. Debtor testified that he does not have a bank account titled in his name. The bank account that he owned prior to the Petition Date was closed after a writ of attachment was issued. He testified that he gives his paycheck from Providence Hospital to Dr. Bourelly for deposit into her checking account at SunTrust Bank.4 This is the same account into which Dr. Bourelly deposits her salary checks and from which all household bills are paid, including mortgage payments, utilities, cable and any other regular monthly household expenses. Although Dr. Bourelly testified that she and Dr. Wilson never sat down and decided who would pay what bills, it was agreed that Dr. Bourelly paid the family's expenses from her checking account. Dr. Bourelly testified that she opened her SunTrust checking account to have more control of her finances after the Debtor was using funds from their former joint account to pay for his business expenses. As of the Petition Date, Debtor could obtain cash from Dr. Bourelly or by accessing her SunTrust account.
On February 7, 2013, the Trust filed the Motion alleging that the Debtor filed his bankruptcy case in bad faith. Debtor filed his Answer to the Motion on February 17, 2013, and a status hearing was held on April 8, 2013, at which various deadlines were set and the matter was scheduled for trial. On May 28, 2013, the Debtor filed amended Schedules B, C, F, I and J, all of which were admitted into evidence at trial.5 The amended schedules were prepared with the assistance of Richard Block, a certified public accountant retained by the Debtor to help revise the Debtor's Schedules I and J and to determine whether the Debtor and Dr. Bourelly operate as a single economic unit or separate units. The only difference the Court can discern between the Debtor's original Schedule F and the amended Schedule F is that the amended version lists "Paula Bourelly, M.D." as the creditor as opposed to "Paula Bourelly" with respect to the $100,000.00 Promissory Note. Other than that, the claims listed on the amended Schedule F are identical to the original version. The changes to the Debtors' Schedules I and J are far from minor, however. The Debtor's amended Schedule I differs significantly from his original Schedule I in that it increases the Debtor's "payroll taxes and Social Security" from $5,116.61 to $8,391.00, increases the Debtor's "insurance" from $18.31 to $925.00, increases his "Flex Spending" from $416.67 to $625.00, and adds a voluntary "TSA" (Tax Sheltered Annuity) expense of $1,369.00. Debtor's amended Schedule I also omits several expenses included in his prior version, including the $3,000.00 monthly income attributed to "Satuday Combination of Soirry Staefe," and $1,704.00 in supplemental life insurance. The amended Schedule I reflects a total increase in Payroll Deductions of $1,628.85 for the Debtor. The amended Schedule I also includes additional monthly income for the Debtor in the amount of $750.00 from "Capital Endoscopy" and additional monthly income for Dr. Bourelly in the amount of $24,116.00 from Olney Dermatology. In total, the Amended Schedule I reflects a combined average monthly income of $48,760.00. Debtor testified at trial that he has also started working at Howard University. Although salary terms were not finalized as of trial, Debtor testified that his employment with Howard University should provide an additional $100,000.00 in income.6
The changes to Debtor's Schedule J are even more significant. First and foremost, the amended Schedule J divides expenses between the Debtor and Dr. Bourelly so that they each submitted an individual Schedule J (together, the "amended Schedule J"). Mr. Block testified that the amended Schedule J was based, in part, on a QuickBooks general ledger of Dr. Bourelly's checking account for the period January 1,...
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