Thomas v. Rice (In re Rice), CASE NO. 13–12722–NPO
| Decision Date | 20 February 2015 |
| Docket Number | ADV. PROC. NO. 14–01004–NPO,CASE NO. 13–12722–NPO |
| Citation | 526 B.R. 631 |
| Parties | In re: Willie R. Rice, Sr. and Kansera J. Rice, Debtors. Calvin Jerome Thomas, Plaintiff v. Kansera J. Rice, Defendant |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
OPINION TEXT STARTS HERE
Chaka Smith, Law Office of Chaka Smith, Cleveland, MS, for Plaintiff.
W. Heath Franklin, Greenville, MS, Samuel David Norquist, David Norquist Law, PLLC, Cleveland, MS, for Defendant.
This matter came before the Court for trial on December 18, 2014 (the “Trial”) on the Complaint (Adversary Proceeding) (the “Complaint”) (Adv. Dkt. 1) 1 filed by Calvin Jerome Thomas (“Thomas”) and the Answer (Adversary Proceeding) (the “Answer”) (Adv. Dkt. 4) filed by Kansera J. Rice (“K. Rice”) in the Adversary. K. Rice also filed the Defendant's Motion in Limine (the “Motion in Limine to Exclude Parol Evidence”) (Adv. Dkt. 15) and the Defendant's Motion in Limine (the “Motion in Limine to Exclude Settlement Evidence” or, together with the Motion in Limine to Exclude Parol Evidence, the “Motions in Limine”) (Adv. Dkt. 16). At Trial, the Court reserved its ruling on the Motion in Limine to Exclude Parol Evidence and denied the Motion in Limine to Exclude Settlement Evidence but in this Opinion addresses both Motions in Limine for the sake of completeness and clarity.
The Pretrial Order (the “Pretrial Order”) (Adv. Dkt. 20) was entered on December 11, 2014. At Trial, Chaka Smith represented Thomas, and S. David Norquist represented K. Rice. During Trial, Thomas introduced into evidence five (5) exhibits, and K. Rice introduced into evidence two (2) exhibits. 2 Exhibit P–1 was admitted over the objection of K. Rice. The parties each offered their own testimony; there were no other witnesses. Thomas asks the Court to declare non-dischargeable a debt arising out of K. Rice's failure to disclose a lien on a mobile home he agreed to purchase from her. Thomas contends the debt is non-dischargeable under either or both 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6).3 The Court, having considered the pleadings, evidence, and arguments of counsel, finds as follows: 4
Jurisdiction
This Court has jurisdiction over the parties to and the subject matter of this Adversary pursuant to 28 U.S.C. § 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).5 Notice of the Trial was proper under the circumstances.
1. In November 1995, K. Rice purchased a 1996 16' x 76'> mobile home (the “Mobile Home”) for $33,907.96 (POC 5–1) and obtained a loan of $27,130.37 from Green Tree Financial Servicing Corporation (“Green Tree”) in connection with the purchase. The loan was payable in 240 monthly installments of $270.86 beginning on December 10, 1995. K. Rice signed a Manufactured Home Retail Installment Contract and Security Agreement (the “Retail Contract”) (POC 5–1) granting Green Tree a lien on the Mobile Home.
2. In January 2007, K. Rice verbally agreed to lease the Mobile Home to Thomas for $480.00 per month beginning on April 1, 2007 with the right to purchase the Mobile Home after 60 payments for a total purchase price of $28,800.00. Although the precise date is unknown from the record, Thomas and his family moved into the Mobile Home at some point after April 1, 2007 under the oral lease purchase agreement.
3. K. Rice testified at Trial that she agreed only to rent the Mobile Home to Thomas in January 2007, not to sell it to him. According to K. Rice, she did not agree to sell the Mobile Home to Thomas until much later in November 2007. The Court finds, however, that the evidence at Trial established that K. Rice agreed in January 2007 to sell Thomas the Mobile Home for a purchase price of $28,800.00. It is undisputed that K. Rice wrote on the receipts for all of the initial four payments, “Lease to Buy Mobile Home.” (Ex. P–1) (emphasis added). The first regular monthly payment of $480.00 was made by Thomas in April 2007, and the next three regular monthly payments were made in May, June, and July 2007.6 (Ex. P–1). Moreover, as part of their agreement, Thomas was required to make a $1,500.00 “down payment,” a term generally defined as “[t]he portion of a purchase price paid in cash ... at the time the sale agreement is executed.” Black's Law Dictionary 1310 (10th ed. 2014) (emphasis added). K. Rice could not explain why she required Thomas to make a down payment if she had not agreed to sell the Mobile Home to him at that time. Thomas paid the down payment in three installments, the last one on March 8, 2007 (Ex. P–1, at 1). The three receipts signed by K. Rice acknowledging the down payment contained language consistent with her intent to sell the Mobile Home to Thomas at the end of the lease term: “Toward Lease to Buy Mobile Home,” “partial down payment toward Mobile Home Lease to Buy,” and “Balance on Down payment toward Mobile Home Lease to Buy.” ( Id.) (emphasis added). K. Rice testified that she did not know the difference between “rent” and “lease to buy,” but the Court does not find her testimony in this regard to be credible.
4. Thomas testified that before entering into the oral agreement, K. Rice told him—in direct response to his question—that the Mobile Home was not encumbered by any lien.7 Thomas further testified that he would not have entered into the lease purchase agreement had he known that the Mobile Home was in fact encumbered by a lien held by Green Tree.8
5. K. Rice had promised Thomas a lease purchase document but she did not provide him one for several months. Thomas testified that he finally told K. Rice either to return the money to him and take back the Mobile Home or reduce their agreement to a written document. Thomas did not make his regular monthly payments in August, September, and October 2007 upon the advice of an attorney who he retained to contact K. Rice about entering into a written lease purchase agreement. After being contacted by Thomas's then-attorney, K. Rice hired her own lawyer to draft an agreement.9
6. The parties signed the Installment Sales Contract (the “Sales Contract”) (Ex. P–2) on October 29, 2007. The Sales Contract required Thomas to make “lease-purchase” payments of $480.00 per month by the 5th day of each month for 60 months beginning on November 1, 2007 and ending October 1, 2012. The sum total of these payments is $28,800.00 10 but there is no express mention of any purchase price in the Sales Contract. For any payment not made by the 5th day of the month, Thomas incurred a late charge of $30.00. (Ex. P–2, at ¶ 4). The Sales Contract indicated that Thomas had already paid a down payment of $1,500.00 “to be applied to the purchase price.” (Ex. P–2, at ¶ 5). As K. Rice pointed out at Trial, however, the Sales Contract did not expressly provide that the down payment would be subtracted from the purchase price. Also, the Sales Contract did not mention the four monthly payments totaling $1,940.00 11 made by Thomas from April 2007 through July 2007 although the receipts for these payments were marked by K. Rice as payments “to buy Mobile Home.”
7. The Sales Contract obligated K. Rice to “execute a Bill of Sale to [Thomas] upon receipt of the final payment due on or about October 1, 2012.” (Ex. P–2, at ¶ 14). If Thomas vacated the Mobile Home prior to making the final October 1, 2012 payment, he forfeited all payments made toward the purchase of the Mobile Home to K. Rice. ( Id., at ¶ 12).
8. The Sales Contract did not disclose the Retail Contract between K. Rice and Green Tree or mention Green Tree's lien on the Mobile Home, although K. Rice agreed “not to use the [M]obile [H]ome ... as collateral for any additional indebtedness which [K. Rice] may hereafter incur prior to [K Rice's] conveyance of a free and clear Certificate of Title to said [M]obile [H]ome to [Thomas] on or about October 1, 2012.” (Ex. P–2, at ¶ 17) (emphasis added). K. Rice argued at Trial that the word “additional” was an implied reference to the Retail Contract.
9. The Sales Contract contained an “anti-reliance” clause under the heading “Binding Effect,” as follows: “Neither party has relied upon any statement or representation not embodied in this contract allegedly made by the other party or any representative of either party.” (Ex. P–2, at ¶ 18).
10. Thomas paid K. Rice $480.00 in November and December 2007 and $510.00 for the next 47 months from January 2008 through November 2011. The higher payments of $510.00 each included a $30.00 late fee. Although Thomas's payments from January 2008 forward were late, they were always made before the end of the same month they were due and always included the $30.00 late fee.
11. According to Thomas, K. Rice was unhappy with the Sales Contract because it did not include any “interest” 12 and for that reason asked him to “tear it up.” Thomas refused. K. Rice then brought two (2) eviction proceedings against Thomas in justice court because of his failure to pay her in a timely manner. Both times, the justice court ruled in favor of Thomas on the ground he paid the monthly amounts along with the additional late fees provided for in the Sales Contract before the end of each month. Thomas viewed these justice court proceedings as K. Rice's attempt to avoid her obligation under the Sales Contract to sell him the Mobile Home.
12. K. Rice defaulted on her obligations to Green Tree under the Retail Contract, and Green Tree obtained a Final Judgment in Replevin (the “2008 Replevin Judgment”) (Ex. P–3) against her on May 23, 2008 from the County Court for the Second Judicial District of Bolivar County, Mississippi in Cause No. C2008–105. The 2008 Replevin Judgment required K. Rice to vacate the Mobile Home but suspended that provision upon her payment of the delinquency. K. Rice paid the delinquency. K. Rice's default and Green Tree's collection actions against her were unknown to Thomas who...
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