In re Wright

• Decision Date: 11 February 2016
• Docket Number: CASE NO: 13–10472, CASE NO: 11–10483
• Citation: 545 B.R. 541
• Parties: In re: Vicky Gribble Wright; aka Vicky L Wright; aka Vicky Wright; fdba Vicky Wright/Borders Contractors Inc., Debtor
• Court: U.S. Bankruptcy Court — Southern District of Texas

545 B.R. 541

In re: Vicky Gribble Wright; aka Vicky L Wright; aka Vicky Wright; fdba Vicky Wright/Borders Contractors Inc., Debtor

CASE NO: 13–10472

CASE NO: 11–10483

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

Signed February 11, 2016

James Patrick Grissom, Attorney at Law, McAllen, TX, Abelardo Limon, Jr., Limon Law Office PC, Brownsville, TX, for Debtor.

MEMORANDUM OPINION

APPROVING THE CHAPTER 7 TRUSTEE'S MOTION TO COMPROMISE

AND

DENYING THE DEBTOR'S MOTION TO COMPROMISE

[Resolving Case No. 11–10483, ECF Nos. 69, 80, and 83

&

Case No. 13–10472, ECF No. 75, 84, and 87]

Eduardo V. Rodriguez

, United States Bankruptcy Judge

I. Introduction

This case involves a duel between pre-petition and post-petition interests. Before this Court is a pair of mutually exclusive motions emanating from separate and sequential, yet simultaneously open, bankruptcy estates involving the same debtor. The debtor first filed a chapter 7 case, wherein the chapter 7 trustee now asks this Court to approve a settlement agreement associated with pre-petition property of the chapter 7 estate and a related post-petition lawsuit in state court. While the chapter 7 case was still open post-discharge, the debtor filed a chapter 13 case. The debtor in her chapter 13 case requests that this Court approve her version of the settlement, but conditioned on the rejection of the chapter 7 trustee's claim to his portion of the settlement proceeds. This Court will now decide which motion for the approval of the settlement is to emerge victorious.

II. Findings Of Fact

This Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rules of Bankruptcy Procedure 7052

, which incorporates Fed.R.Civ.P. 52. To the extent that any Finding of Fact constitutes a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is adopted as such. This Court reserves the right to make any Findings and Conclusions on its own analysis or as requested by any party.

1. On August 15, 2011, Vicky Gribble Wright (hereinafter "Debtor ") petitioned for chapter 7 bankruptcy under title 11 of the United States Code (hereinafter the "Bankruptcy Code " or "Code ").¹ [Case No. 11–10483; ECF No. 1].

2. On Schedule B, regarding her personal property interests, Debtor listed an unspecified quantity of stock in API Pipe & Supply, LLC (hereinafter "API "), and the alleged value of Debtor's stock interest was "unknown." Id. at 9. Moreover, the alleged value of her claimed exemption over the API stock was listed as "unknown." Id. The chapter 7 trustee, William Romo (hereinafter "Romo,"), has not objected to this exemption.

3. On January 18, 2012, after multiple continuances, a final Meeting of Creditors was held and concluded. The same day, Romo filed a Notice Of Assets, Notice To Creditors And Other Parties In Interest Of The Need To File Claims (hereinafter "Notice of Assets "), which stated that the case first appeared to be a no asset case, but that it subsequently appeared that there is an estate from which a dividend to creditors may be paid. [ECF No. 15]. Romo notified creditors to file a proof of claim by April 17, 2012. Id.

4. According to the claims register, the total amount of allowed filed claims in the chapter 7 case is $60,948.11, of which $46,067.28 constitutes unsecured claims. No objections to claims have been filed in the chapter 7 case. This is notwithstanding one claim for $12,444.53, which was filed beyond the bar date, and therefore is not an allowed claim. [Claim No. 5].

5. On January 23, 2012, Debtor received a discharge of debts pursuant to § 727. [ECF No. 17]. Importantly, Debtor's chapter 7 case still remains open.

6. On June 7, 2013, Romo filed a Status Report stating that he was pursuing the sale of Debtor's interest in API. [ECF No. 29].

7. On September 6, 2013, Romo filed a Trustee's Application to Employ Waldron & Schneider, L.L.P. as Counsel Nunc Pro Tunc, Kimberly A. Bartley (hereinafter "Bartley "), a lawyer who has purportedly been assisting Romo since July 1, 2013. [ECF No. 31]. Specifically, Romo wished to employ Bartley to help him to investigate the API interest and its value to the estate for the purpose of a sale. Id. at ¶ 5. Bartley began her employment on September 30, 2013 by this Court's Order Authorizing Employment of Counsel Nunc Pro Tunc, which additionally granted retroactive employment to July 1, 2013. [ECF No. 34].

8. Also on September 6, 2013, Romo filed a Motion to Compromise Pursuant to Fed. R. Bank. P. 9019

, [ECF No. 33], which asked this Court to approve a settlement wherein Romo alleged: that Debtor purportedly transferred 7.83% of the Interest in API owned by the chapter 7 estate to a Mr. Gary Cain for $45,179.25; that Debtor and the remaining shareholders executed unanimous consent to the transfer; that the maximum value of Debtor's exemption over the API stock interest is $5,928 after deducting the $800 allegedly attributable to a Harlingen Area Teachers Credit Union checking account; that he demanded turnover of the API interest, as Debtor continued to assert control over the property; and that the 2012 K1 issued to Debtor shows that the interest in API is valued in excess of $150,000. Finally, Romo requested that this Court approve the terms of the settlement signed by API, Mr. Cain, and Ms. Tomlinson, provisioning for Romo to release all potential claims against said parties and to transfer the API stock interest to said parties in exchange for $100,000. Id. In opposition, Debtor protested that she had potential claims against API, the pursuit of which would provide a better opportunity to extract more value on account of the API stock interest. [ECF No. 43]. Romo's aforementioned Motion to Compromise was thereafter withdrawn effective March 26, 2014, as Romo claimed to have newly discovered that the settlement was not in the best interest of the chapter 7 estate. [ECF No. 57].

9. On October 31, 2013, Debtor filed a chapter 13 bankruptcy petition. [Case No. 13–10472; ECF No. 1].

10. On her chapter 13 Schedule D, Debtor alleged to have secured debts of $141,243.43. Id. at 14. Debtor further alleges in her Schedule I that she is disabled and receives as income of $1,820 in monthly Social Security benefits. Id. at 20. Debtor further alleges in her Schedule J that she incurs $1,619.66 in monthly expenses, leading to a net monthly disposable income of $200.34. Id. at 21. Debtor further alleges in her Schedule A that she owns three parcels of real property totaling $190,368 in value and which are burdened by secured claims totaling $113,012.61. Id. at 8. On her Schedule B, Debtor further alleges that she owns $51,422.12 in personal property. Id. at 12. Finally, on her Schedule C, Debtor claims a total value in all property of $211,790.12 and exemptions upon all property of $71,852.51. Id. at 13.

11. On her Schedule B, Debtor alleged that she owned a "25% interest in API ... (currently now administered in the Chapter 7 bankruptcy case ... Debtor estimates it to be worth at least $1,300,000 ... Less estimated claims of $ ________ ...)." Id. at 10. However, the scheduled value was "unknown." Id.

12. Special counsel, James P. Grissom (hereinafter "Grissom "), was hired by Debtor on a contingency fee basis for the purpose of pursuing Debtor's claims against API and the Tomlinsons either in or out of state court, as per Debtor's objection against Romo's motion to compromise that she had potential claims against said parties. On January 07, 2014, Debtor filed a Motion to Approve Employment of Counsel in the chapter 7 case. [Case No. 11–10483; ECF No. 40]. This Court entered an Order Approving Employment of Counsel in the chapter 7 case on January 31, 2014. [ECF No. 41]. Importantly, the chapter 7 Order provisioned for Grissom to be employed by Debtor rather than the chapter 7 trustee.

13. On March 19, 2014, Romo filed a proof of claim for $94,179.25 in the chapter 13 case. [Claim No. 6]. To support his claim, Romo attached a May 3, 2013 exhibit in which Debtor purported to transfer 7.8333% of her 24.50% percent interest in API to Gary Cain, a man who desired to ascend to membership in API. [Claim No. 6–1; Ex. A at 3]; [Case No. 11–10483; ECF No. 33 at ¶ 4] (Romo's first chapter 7 Motion to Compromise Pursuant to Bank. R. 9019

, mentioning that). Additionally, Romo also alleges that Debtor's retention of $49,000 in chapter 7 post-petition K–1 distributions on account of the interest in the API stock was part of his calculation in filing his proof of claim. [ECF No. 80 at ¶ 18].

14. On July 31, 2014, Debtor filed an objection to Romo's proof of claim in the chapter 13 case, essentially alleging that her purported transfer of 7.83% of the API stock interest to Gary Cain was ineffective, because it lacked unanimous shareholder consent to the transfer as required by the agreement. [Case No. 13–10472; ECF No. 52, at ¶ 3]. In support, Debtor has offered and admitted a transfer document of an unknown date (evidently sometime around 2010), entitled "Unanimous Consent to the Assignment in [API] to Gary Cain, Vicky Wright, and Peggy Jo Tomlinson, and the Admission of [These Parties], Assignees, As Members of [API]," ("Document ") wherein the Document alleged that while the records of API showed Daniel Wright holding a 49% interest and James Tomlinson holding a 51% interest, Gary Cain and the two stakeholders were actually one third partners. [Debtor Ex. 15]. The Document then alleged that in 2005, James Tomlinson and Daniel Wright agreed to recognize Gary Cain as one third partner. Id. The Document alleges that in 2006, James Tomlinson died, before the two shareholders could convey a portion of their shares in order to accurately reflect the purported reality of ownership. Id. The Document recognizes that Debtor and Daniel Wright, by virtue of divorce, each hold a 24.5% interest, of which they each agreed to transfer 7.8333% to Gary Cain. Id. The Document also...