Jets R US, LLC v. Colvin (In re Colvin), Case No. 10-32367-JPS

• Decision Date: 28 August 2012
• Docket Number: Case No. 10-32367-JPS,No. 11-3035-JPS,11-3035-JPS
• Parties: In the Matter of: JOHN BARRY COLVIN, Debtor JETS R US, LLC and RAYMOND O. BOYD, Plaintiffs v. JOHN BARRY COLVIN, Defendant
• Court: U.S. Bankruptcy Court — Middle District of Georgia

In the Matter of: JOHN BARRY COLVIN, DebtorJETS R US, LLC and RAYMOND O. BOYD, Plaintiffs

v.JOHN BARRY COLVIN, Defendant

Case No. 10-32367-JPS

No. 11-3035-JPS

UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF GEORGIA ATHENS DIVISION

Date: August 28, 2012

______________________

James P. Smith

United States Bankruptcy Judge

Chapter 7

Adversary Proceeding

BEFORE

James P. Smith

United States Bankruptcy Judge

APPEARANCE:

For Plaintiffs:

Jimmy C. Luke, II

Foltz Martin, LLC

Yasha Heidari

Heidari Power Law Group, LLC

For Defendant/Debtor:

William Russell Patterson, Jr.

Ragsdale Beals Seigler Patterson & Gray, LLP

MEMORANDUM OPINION

Before the Court is Plaintiffs' motion for partial summary judgment in which Plaintiffs seek a determination that certain claims against Defendant/Debtor ("Debtor") are nondischargeable under 11 U.S.C. § 523(a)(6), and that Debtor should be denied a discharge under 11 U.S.C. §727(a). The Court, having considered the record and the applicable law, now publishes this memorandum opinion.

"A motion for summary judgment should be granted when 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.' Fed.R.Civ.P. 56(c). . . Celotex Corp. v. Catrett, 477 U.S. 371, 322, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986); see also Morisky v. Broward County, 80 F.3d 445, 447 (11th Cir. 1996). On a summary judgment motion, the record and all reasonable inferences that can be drawn from it must be viewed in the light most favorable to the non-moving party. See Cast Steel, 347 F.3d at 1301." Midrash Sephardi, Inc., v. Town of Surfside, 366 F.3d 1214, 1223 (11th Cir. 2004), cert. denied 543 U.S. 1146, 125 S.Ct. 1295, 161 L.Ed.2d 106 (2005).

Although Rule 56 was completely rewritten in 2010, no change was made to the summary judgment standard itself or to the burdens imposed on movants and opponents. Wright, Miller & Kane, 10A Federal Practice and Procedure, Text of Rule 56, n.6 (Supp. 2011).

Plaintiffs have the burden of proof on their objections to discharge and dischargeability. United States v. Mitchell (In re Mitchell), 633 F.3d 1319, 1327 (11th Cir. 2011); Jennings v. Maxfield (In re Jennings), 533 F.3d 1333, 1339 (11th Cir. 2008). Exceptions to discharge are strictly construed in favor of the debtor. Transouth Financial Corp. of Florida v. Johnson, 931 F.2d 1505, 1509 (11th Cir. 1991).

FACTS

At all relevant times, Debtor John Barry Colvin has been the sole owner and CEO of U.S. Jets, Inc. ("U.S. Jets"). Raymond O. Boyd ("Boyd") has been the sole member and owner of Jets R US, LLC. ("Jets R US").

In June 2006, Jets R US purchased a Lear jet, model number 35A, from U.S. Jets. Contemporaneous therewith, U.S. Jets leased the jet back from Jets R US for a term beginning June 1, 2006 and ending May 31, 2013. In addition, shortly thereafter, AFB&T, a Georgia bank, formerly known as Athens First Bank & Trust Co., assigned to Boyd a promissory note and security agreement (as well as other collateral documents) from U.S. Jets.

Paragraph 12 of the jet lease agreement between Jets R US and U.S. Jets provided, in pertinent part:

Maintenance. Lessee shall repair and maintain the aircraft during the term of this Lease so as to keep it in good and safe operation condition as when delivered to Lessee, ordinary deterioration excepted...

All inspections, repair modifications, maintenance and overhaul work shall be performed in accordance with thestandard set forth by the Federal Aviation Regulations. Lessee shall maintain all logbooks and records pertaining to the aircraft during the term of this Lease in accordance with the Federal Aviation Regulations. Such records shall be made available for examination by Lessor at all times.

In the spring of 2007, disputes arose between the parties regarding alleged defaults resulting in Jets R US repossessing the jet.¹ Thereafter, Boyd and U.S. Jets became embroiled in litigation in the State Court of Clarke County, Georgia (Civil Action No. ST-07-CV-0677).

During that litigation, disputes arose regarding the inspection of records and property belonging to U. S. Jets and in which Boyd held a security interest under the assigned note and security agreement. On February 13, 2009, the state court held a hearing on Boyd's motion requesting sanctions against U.S. Jets for its failure to comply with a prior inspection order by the court. At the hearing, both Boyd and Debtor testified, at length, about the aircraft flight log and maintenance records for the jet ("Aircraft Records"), the importance of the Aircraft Records, their whereabouts, Debtor's failure to produce the Aircraft Records and Debtor's contention that Boyd had stolen the Aircraft Records. On March 6, 2009, the state court entered its Corrected Order ("Contempt Order") in which it found, in part:

John Colvin testified at the February 13, 2009, hearing that he did not have the aircraft's records and could not produce them. Colvin asserts that the last time he saw the records was the day that Plaintiff attempted to break into his facility. Colvin further asserts that he believes Plaintiff stole the aircraft records. Colvin further asserts that he did not throw away,shred, burn, dispose of, or give the records to anyone else. Colvin testified that he told Ernie Harris, his attorney in the bankruptcy proceeding [sic]² , that he had received copies of the records in 2007, and would provide such records. However, Colvin now claims he was mistaken at the time because he no longer has copies of such records. Colvin further contends that since the copies of the records were of no importance, the copies of the records were discarded at some time in 2007. When prompted by the Court as to who discarded the aircraft records, Colvin refused to identify the person who discarded the records. He only asserted that he did not have the records and was in full compliance with the Court's [prior orders regarding inspection of property and records].

The Court finds it unreasonable and incredulous to believe that Plaintiff Boyd would steal his own aircraft records, and then go to the trouble and expense of filing a suit to recover the records which are required to operate, maintain, and sell the aircraft at issue. Colvin's actions and statements to others are consistent with a deliberate attempt to destroy the value of Plaintiff's aircraft and have it in Colvin's own words "sold for parts." After reviewing the file, the evidence and testimony at the hearing on February 13, 2009, the Court finds that Defendant, by and through its agent, John Colvin, willfully failed to comply with the Court's Order of June 25, 2008, to produce secured collateral, including the aircraft flight logs and maintenance records and is in contempt of this Court.

The Court hereby finds that the failure to comply with the Court's Order of June 25, 2008, is willful and illustrates contemptuous conduct on the part of Defendant and its agent, John Colvin, which this Court must address by the remedial sanctions afforded by the civil contempt powers of this court as provided for in O.C.G.A. § 15-7-4.

The state court then ordered that Debtor would be incarcerated unless he produced the Aircraft Records by a date certain.

U.S. Jets appealed this decision to the Court of Appeals for the State of Georgia. In an opinion published July 12, 2011 (Case No. A11A0348), the Georgia Court of Appeals dismissed the appeal because U.S. Jets did not file an appellant's brief as required by that court's rules. In the opinion, the court further held:

We note that John Colvin has filed a brief denominated "BRIEF OF APPELLANT JOHN COLVIN," therein enumerating claims of error challenging the contempt rulings against him....We conclude that, because Colvin failed to file a notice of appeal from the contempt order, he failed to invoke this Court's jurisdiction to review the rulings against him.

Colvin was not initially a party to this litigation in the trial court, but when the trial court subsequently held Colvin in contempt, Colvin was made a party to the litigation. See Travelers Ins. Co. v. Segan, 190 Ga App. 66, 67 (1) (378 S.E. 2d 367) (1989). Colvin was thus entitled to file a notice of appeal from the contempt order, but he failed to do so.

Thereafter, on November 7, 2011, the Supreme Court of Georgia (Case No. S11C1786) denied Debtor's petition for certiorari.

Debtor filed this Chapter 7 bankruptcy case on December 30, 2010. Boyd and Jets R US filed this adversary proceeding against Debtor on April 20, 2011.

CONCLUSIONS OF LAW

In support of their motion for partial summary judgment, Boyd and Jets R US rely almost entirely upon the Contempt Order. They contend that collateral estoppel bars relitigation of any issues decided by the state court and that the Contempt Order establishes the facts necessary to show that their claims against Debtor are nondischargeable and that Debtor is not entitled to a discharge.

"Collateral estoppel prohibits the relitigation of issues that have been adjudicated in a prior action. The principles of collateral estoppel apply in discharge exception proceedings in bankruptcy court." Bush v. Balfour Beatty Bahamas, Ltd. (In re Bush), 62 F.3d 1319, 1322 (11th Cir. 1995). In St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672 (11th Cir. 1993) the Eleventh Circuit Court of Appeals stated:

If the prior judgment was rendered by a state court, then the collateral estoppel law of that state must be applied to determine the judgment's preclusive effect... While collateral estoppel may bar a bankruptcy court from relitigating factual issues previously decided in state court, however, the ultimate issue of dischargeability is a legal question to be addressed by the bankruptcy court in the exercise of its exclusive jurisdiction to determine dischargeability.

991 F.2d at 675-76.

Thus, the Court will look to...