Morris v. Zimmer (In re Zimmer)

• Decision Date: 14 December 2020
• Docket Number: Case No. 17-20543-JAD
• Citation: 623 B.R. 151
• Parties: IN RE: David H. ZIMMER, Debtor. Daniel Peter Morris and Lucille Aiosa Morris, Movants, v. David H. Zimmer, Department of Treasury Internal Revenue Service, and Rosemary C. Crawford, Chapter 7 Trustee, Respondents.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

623 B.R. 151

IN RE: David H. ZIMMER, Debtor.Daniel Peter Morris and Lucille Aiosa Morris, Movants,

v.David H. Zimmer, Department of Treasury Internal Revenue Service, and Rosemary C. Crawford, Chapter 7 Trustee, Respondents.

Case No. 17-20543-JAD

United States Bankruptcy Court, W.D. Pennsylvania.

Signed December 14, 2020

Donald R. Calaiaro, James A. Prostko, David Z. Valencik, Calaiaro Valencik, Pittsburgh, PA, for Debtor.

Rosemary C. Crawford, Crawford McDonald, LLC, Allison Park, PA, for Trustee.

MEMORANDUM OPINION

The Honorable Jeffery A. Deller United States Bankruptcy Judge

The matter before the Court is a motion captioned as "Creditors Daniel Peter Morris and Lucille Aiosa Morris Motion to Dismiss This Bankruptcy for the Debtor's Abuse and Lack of Good Faith Subject to the Agreement at AP-17-02230-JAD Doc 124-2 Approved at AP-17-02230-JAD Doc 124" (the "Motion to Dismiss").

The Motion to Dismiss is a core proceeding, pursuant to which the Court has the requisite subject-matter jurisdiction to enter a final judgment. See 28 U.S.C. §§ 157(b)(2)(A), 157(b)(2)(0) and 1334(b). This Memorandum Opinion shall constitute the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.¹ As set forth more fully in this Memorandum Opinion, an order shall be entered that denies the Motion to Dismiss.

I.

Daniel Peter Morris and Lucille Aiosa Morris (collectively, the "Morris Creditors") were defrauded by their former lawyer, David H. Zimmer, giving rise to certain non-dischargeable claims by the Morris Creditors against Mr. Zimmer.

Since the mid to late 2000's, the Morris Creditors have been engaged in litigation and judgment enforcement proceedings against Mr. Zimmer. That litigation included cases brought in the state and federal courts of New York, a brief foray into the United States Bankruptcy Court for the Southern District of Florida, and judgment enforcement in the Court of Common Pleas of Allegheny County, Pennsylvania. Ultimately the parties' dispute found its way to this Court's docket when Mr. Zimmer filed a chapter 13 case in the Western District of Pennsylvania on February 14, 2017.

While this bankruptcy case is not necessarily complex, it is hardly routine. For example, while he proclaimed to be residing in the Western District of Pennsylvania as of the petition date, Mr. Zimmer's actual residence could generously be described as nomadic. That is, he resided in Canada, Mexico and the United States from time to time in year 2016, and later was living in Canada when the instant bankruptcy case was commenced on February 14, 2017. See Transcript of September 9, 2020, ECF No. 418, at pp. 31-69; see also Debtor's Response to Motion to Dismiss the Bankruptcy Case for Abuse, Alternatively for Change of Venue, and Other Miscellaneous Relief, ECF 59, at paras. 40-45 and 111

Despite living in Canada as of the petition date, Mr. Zimmer falsely claimed in his bankruptcy schedules that he was a resident of Wall, Pennsylvania. This misrepresentation led to a flurry of motions or requests by the Morris Creditors seeking dismissal of this bankruptcy case as a bad faith filing. In fact, as of the writing of this Memorandum Opinion, the Morris Creditors have made at least 22 requests that the instant bankruptcy case be dismissed. See Creditors Daniel Peter Morris and Lucille Aiosa Morris Post-Evidentiary Hearing Brief, ECF 427, at para. 87.

However, because Mr. Zimmer's principal assets were located within the Western District of Pennsylvania, Mr. Zimmer's presence in Canada did not preclude his commencement of a bankruptcy case in this district. See 11 U.S.C. § 109(a) ("a person ... that ... has ... property in the United States ... may be a debtor under this title"); 28 U.S.C. § 1408(1) ("a case under title 11 may be commenced in the district court for the district ... in which the ... principal assets in the United States, of the person ... that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement").

Accordingly, the Court declined the Morris Creditors' invitation to dismiss this case based upon lack of bankruptcy eligibility and/or for improper venue.

As this case meandered through the bankruptcy system, both the Morris Creditors and the standing Chapter 13 Trustee had a number of concerns regarding whether Mr. Zimmer filed this bankruptcy in good faith. For example, by way of a motion to dismiss filed on October 13, 2017, the Morris Creditors complained that Mr. Zimmer's shell game regarding his multiple addresses was a scheme designed to frustrate the judgement enforcement efforts of the Morris Creditors. A review of the findings and conclusions of the various state and/or federal courts regarding Mr. Zimmer's conduct largely supports the Morris Creditors' narrative. See generally Motion of Creditors & Adversary Plaintiffs Daniel Peter Morris & Lucille Aiosa Morris to Dismiss Bankruptcy Case for Abuse, Alternatively to Change Venue & Other Miscellaneous Relief and exhibits attached thereto, ECF 55.

The initial motion to dismiss filed by the Morris Creditors, and the many requests that followed, also repeated a litany of other bad acts of Mr. Zimmer. These bad acts can generally be described as Mr. Zimmer's failure to produce documents or information in collateral litigation, Mr. Zimmer's failure to list assets in his prior bankruptcy (which was filed in the Southern District of Florida in 2005), and Mr. Zimmer's failure to list the Morris Creditors as a creditor in Mr. Zimmer's 2005 Florida bankruptcy (thereby precluding or preventing the Morris Creditors from receiving a distribution at the conclusion of that case).

The Morris Creditors also complained that, in the bankruptcy case before this Court, Mr. Zimmer failed to adequately disclose interests that Mr. Zimmer had in various business ventures or explain whether he had any meaningful earnings from the same. With respect to lack of disclosure, the Morris Creditors also complained to the Chapter 13 Trustee that Mr. Zimmer had not adequately disclosed information regarding Mr. Zimmer's pre-bankruptcy disposition of certain retirement assets and the whereabouts of the proceeds of a sale of a Florida residence which occurred in 2007. See e.g., Supplemental Reply of Creditors Daniel Peter Morris and Lucille Aiosa Morris to the Order Directing the Debtor to Show Cause Why He Should Not Be Denied a Discharge at Doc 198, ECF 204, at para. 3 and the exhibits attached thereto.

With respect to Mr. Zimmer's current assets which were disclosed, the most valuable of them consists of Mr. Zimmer's interest in his late parents' decedent's estate. By way of background, prior to the filing of the chapter 13 bankruptcy and in an effort to initiate judgment execution on Mr. Zimmer's inheritance consisting of property located in Allegheny County, Pennsylvania, the Morris Creditors domesticated their New York judgments to Allegheny County, Pennsylvania.

When Mr. Zimmer attempted to evade the Morris Creditors' judgment collection efforts by disclaiming his interests in the decedent's estate, the Court of Common Pleas of Allegheny County prevented or otherwise enjoined the disclaimer by Mr. Zimmer. It was at that juncture that Mr. Zimmer commenced his chapter 13 bankruptcy before this Court, and in connection with this bankruptcy case Mr. Zimmer sought to avoid the putative judgment lien (or execution lien) of the Morris Creditors as an avoidable preference pursuant to 11 U.S.C. § 547. See Complaint to Avoid Preferential Liens Pursuant to 11 U.S.C. § 547, ECF 64.

In their motion(s) to dismiss, the Morris Creditors complain that the timing of the bankruptcy, which occurred on the heals of the Morris Creditors' judgment collection efforts and Mr. Zimmer's failed disclaimer of his inheritance, is indicia that the bankruptcy case was commenced in bad faith. See generally Motion of Creditors & Adversary Plaintiffs Daniel Peter Morris & Lucille Aiosa Morris to Dismiss Bankruptcy Case for Abuse, Alternatively to Change Venue & Other Miscellaneous Relief and exhibits attached thereto, ECF 55.

The Morris Creditors' concern regarding Mr. Zimmer's lack of good faith was shared by the Chapter 13 Trustee and another creditor, the Client Protection Fund of the Bar of Maryland. The Client Protection Fund of the Bar of Maryland is an entity that reimbursed the Morris Creditors on account of some of their claims against Mr. Zimmer. As a result the Client Protection Fund of the Bar of Maryland asserted certain subrogated claims in this bankruptcy case. It is worth noting that the Client Protection Fund of the Bar of Maryland and Morris Creditors are not the only creditors identified by Mr. Zimmer in his bankruptcy schedules. Rather, the schedules identified eight additional creditors,² including an unsecured priority claim of the Internal Revenue Service that was timely filed by the IRS at Claims Register No. 13-1.

In response to the initial motion to dismiss filed by the Morris Creditors, the Client Protection Fund of the Bar of Maryland opposed dismissal and averred:

... To the best of its information, Debtor has assets in this district that can be devoted to payment of Debtor's creditors provided the Debtor exercises Debtor's right to set aside transfers.

... The Client Protection Fund of the Bar of Maryland believes that the case should not be dismissed because there is a better prospect of all creditors being fairly treated in this case than if the case were to be dismissed.

See Response of the Client Protection Fund of the Bar of Maryland to Motion to Dismiss the Bankruptcy Case for Abuse, Alternatively to Change Venue and Other Miscellaneous Relief, ECF 58, at paras. 5 and 6.

With respect to the Chapter 13 Trustee, she shared much of the Morris Creditors' concerns regarding Mr. Zimmer's lack of good faith. For example, the Chapter 13 Trustee had concerns regarding chapter 13 plan funding and that despite...