Summit Cmty. Bank v. David

• Decision Date: 31 March 2021
• Docket Number: Civil Action No. 1:20-cv-00137 (RDA/JFA)
• Citation: 629 B.R. 804
• Parties: SUMMIT COMMUNITY BANK, Appellant, v. Byron F. DAVID, Appellee.
• Court: U.S. District Court — Eastern District of Virginia

629 B.R. 804

SUMMIT COMMUNITY BANK, Appellant,
v.
Byron F. DAVID, Appellee.

Civil Action No. 1:20-cv-00137 (RDA/JFA)

United States District Court, E.D. Virginia, Alexandria Division.

Signed March 31, 2021

629 B.R. 806

Quinton Bowman Callahan, Clark & Bradshaw PC, Harrisonburg, VA, for Appellant.

James P. Campbell, Campbell Flannery PC, Leesburg, VA, for Appellee.

MEMORANDUM OPINION AND ORDER

Rossie D. Alston, Jr., United States District Judge

This matter comes before the Court on Appellant Summit Community Bank's ("Appellant") appeal of the United States Bankruptcy Court for the Eastern District of Virginia ("Bankruptcy Court") Memorandum Opinion ("Opinion") concerning Appellant's Proof of Claims ("Claims"). Dkt. 1. The Court dispenses with oral argument because it would not aid in the decisional process. Loc. Civ. R. 7(J); Fed. R. Civ. P. 78. Accordingly, this matter is now fully briefed and ripe for decision. Considering Appellant's Brief (Dkt. 48), Appellee Byron F. David's ("Appellee") Brief (Dkt. 55), and Appellant's Reply (Dkt. 56), and for the following reasons, the judgment of the Bankruptcy Court as to Appellee's Objections to Appellant's Claims is REVERSED and REMANDED to the Bankruptcy Court for further consideration in accordance with the guidance set forth below.

I. BACKGROUND

A. Procedural Background

On July 10, 2018, Appellee filed a Chapter Seven bankruptcy petition with the Bankruptcy Court. Dkt. 49-1, 4. Thereafter, Appellant filed the five Claims against Appellee's bankruptcy estate—Claim Numbers 3-3, 4-3, 5-3, 6-3, and 7-3. Id . at 32-70. Appellee objected to each of those Claims. Id . at 81-98. On April 10, 2019, the Bankruptcy Court converted Appellee's Chapter Seven bankruptcy action to one under Chapter 11. Id . at 10.

Subsequently, Appellee filed a Motion of Summary Judgment with the Bankruptcy Court, which Appellant opposed, and the Bankruptcy Court denied. Id . at 15, 17, 22. After denying Appellee's Motion for Summary

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Judgment, on October 9, 2019, the Bankruptcy Court held an Evidentiary Hearing on Appellee's Objections to Appellant's Claims. Id . at 24, 25.

B. Factual Background

At the Evidentiary Hearing, it was established that on July 6, 1991, Appellee married Lisa David ("Ms. David"). Dkt. 54-6, 69. On August 29, 2012, Ms. David took her life following a conversation that she and Appellee had regarding finances. Id . at 71-73.

From 2004 to 2012, Appellee partially owned Blue Ridge Technical Services, Incorporated ("BRTS"), which provided "consulting network services." Id . And from 2005 until her death in 2012, Ms. David also worked for BRTS. Id . at 70. There, she "wrote [BRTS's]...tax returns," handled "expense checks[,]" and "help[ed] [ ] review contracts...[and] benefits." Id . In addition to those responsibilities, Ms. David was involved in three real estate ventures (the "David Entities"), in which Appellee seemed to have had no involvement. Id . at 78.

Over a period of time, Appellant issued five loans to the David Entities, which formed the basis of the dispute before the Bankruptcy Court. Dkt. 49-1, 33-80. The chart below sets forth the loans that Appellant issued to the David Entities and to which Appellant filed Claims during the pendency of the bankruptcy proceedings. Id . 37, 47, 55, 65, 75.

Loan Number	Date of Loan Agreement	Entity to which Loan was Issued	Principle Loan Amount	Related Claim Number
359186	September 15, 2005	David-Cantrall and Associates,	$2,160,000.00	Claim 3-3
358003	June 27, 2005	David-Cantrall and Associates, Inc.	$300,000.00	Claim 4-3
358367	July 15, 2005	DCF I, LLC	$660,000.00	Claim 5-3
360540	January 5, 2006	David-Cantrall and Associates, Inc.	$300,000.00	Claim 6-
362232	April 28, 2006	Luck Homes, LLC	$199,750.00	Claim 7-3

According to Appellee, he did not know about the loans until after Ms. David died. Dkt. 54-6, 78-79. However, Appellant maintained that Appellee was listed as the guarantor for each of the loans, as reflected by a series of notary-acknowledged Guarantees and Allonges.¹ Id . at 196-97. During the Evidentiary Hearing, Appellee called Victoria Melby ("Ms. Melby")² and Kerry Self ("Ms. Self"), who Appellant contended were two of the notaries that acknowledged the documents that supported its Claims. Dkt. 54-6, 195-96. In light of Ms. Self's and Ms. Melby's testimony that they did not recall those specific documents nor remember seeing Appellee sign those documents on the particular day in question, Appellee maintained that he did not sign the Guarantees and Allonges that supported Appellant's Claims and contended

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that Ms. David forged his signature on the Allonges and Guarantees without his knowledge. Id . at 206.

In further support of his theory, Appellee also called Ellen G. LoCascio ("Ms.LoCascio"), a retired Central Intelligence Agency ("CIA") officer and a long-time family friend of Appellant and Ms. David. Dkt. 54-5, 87. Ms. LoCascio testified that she went to Appellant's home on August 29, 2012, after she learned that Ms. David had died. Dkt. 54-5, 88, 89. Ms. LoCascio further explained that after learning that Ms. David had taken her life, she "started going through [ ] [Ms. David's] professional and personal things" in an effort to determine why she had done so. Id . at 89. And upon doing so, she observed "hundreds of documents" that were "shredded" in Ms. David's home office. Id . at 90. Many of the documents, Ms. LoCasico claimed, were "altered and manipulated" and in Ms. LoCasico's opinion, it appeared that someone had "cut and paste" certain documents. Id . Amongst other items, Ms. LoCasico recalled seeing papers that concerned "six or seven property loans," and certain BRTS "technical documents" that had been altered. Id . Appellee argued that LoCasico's testimony supported a finding of fraud. Dkt. 54-6, 208.

At the conclusion of the Evidentiary Hearing, the Bankruptcy Court took the matter under advisement, id . at 212, and on January 27, 2020, issued its Opinion concerning Appellee's Objections to Appellant's Claims. Id . at 218-32. Therein, the Bankruptcy Court overruled Appellee's Objection to Claim Number 4-3 and sustained his Objection to Claim Numbers 3-3, 5-3, 6-3, and 7-3. Id . at 219. Appellant then appealed the Bankruptcy Court's determinations as to Claim Numbers 3-3, 6-3, and 7-3.

II. STANDARD OF REVIEW

"When reviewing a decision of the Bankruptcy Court, a district court functions as an appellate court and applies the standard of review generally applied in federal courts of appeal." Paramount Home Entm't Inc. v. Circuit City Stores, Inc. , 445 B.R. 521, 526-27 (E.D. Va. 2010) (citation omitted). Thus, the district court reviews questions of fact under the "clearly erroneous" standard. Id. "The clear error standard requires ‘a reviewing court [to] ask whether on the entire evidence...