Ward v. Jenkins (In re Jenkins)
| Decision Date | 12 December 2012 |
| Docket Number | Case No. 12-50413,Adversary Proceeding 12-5033 |
| Court | U.S. Bankruptcy Court — Western District of North Carolina |
| Parties | In re: Matthew Alan Jenkins, d/b/a Shephard Service Company, Debtor. James T. Ward, Trustee, Plaintiff, v. Dianna Lee Jenkins, Defendant. |
This matter came on for hearing on November 28, 2012 on the Trustee's Motion for Partial Summary Judgment (the "Motion") filed on October 29, 2012, through counsel; the Defendant's Opposition to Trustee's Motion for Partial Summary Judgment (the "Objection") filed by Dianna Jenkins ("Defendant"); and the Plaintiff's Reply to Defendant's Opposition to Trustee's Motion for Partial Summary Judgment (the "Reply"). Present at the hearing were James T. Ward, Sr., the trustee for Matthew Alan Jenkins (the "Debtor") and the Plaintiff herein(the "Trustee" or "Plaintiff"), who was represented at the hearing by A. Cotten Wright, and Linda Simpson, the United States Bankruptcy Administrator for the Western District of North Carolina. Defendant did not attend the hearing or otherwise appear.
The Court has reviewed the pleadings, the exhibits thereto, the affidavits and declarations, and other matters of record in this adversary proceeding and in the Debtor's bankruptcy case. Based on consideration of the same, as well as the parties' legal arguments and the argument made at the hearing, the Court has determined that Plaintiff's Motion should be allowed and hereby makes the following findings of fact and conclusions of law.
In the Objection, Defendant argued that the Supreme Court's holding in Stern v. Marshall, 564 U.S._, 131 S.Ct. 2594 (2011), limits this Court's jurisdiction. However, the holding in Stern was that "[t]he Bankruptcy Court . . . lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim." Stern v. Marshall, 131 S. Ct. 2594, 2620, reh'g denied, 132 S. Ct. 56 (2011) (emphasis added). Stern makes clear that 28 U.S.C. § 157(b) provides bankruptcy courts with jurisdiction to enter final orders in "core proceedings." Id. at 2603-04. The list of core proceedings in § 157(b)(2) includes "proceedings to determine, avoid or recover fraudulent conveyances," precisely the types of claims at issue here. § 157(b)(2)(H).
Bankruptcy courts have wrestled with whether the Supreme Court's ruling in Stern should be narrowly applied as indicated in the Stern opinion, or whether Stern applies so as to prevent bankruptcy courts from entering final orders with respect to claims to avoid fraudulent conveyances and other core matters as set forth in § 157. Neither the Fourth Circuit Court of Appeals (the "Fourth Circuit") nor the United States District Court for the Western District ofNorth Carolina (the "District Court") has provided guidance on this point. Other courts are split on this question.
The Court has researched the split of opinion as to whether the Stern decision prohibits this Court's entry of final orders on claims other than the narrow category of claims at issue in Stern. The Court concludes that Stern should be narrowly interpreted as the text of the Stern decision indicates. 131 S. Ct. at 2620. The Court does not believe that it is appropriate for bankruptcy courts to limit their congressionally determined jurisdiction as set forth in § 157 in reaction to a Supreme Court decision that states it "does not change all that much." Id. As explained in In re Safety Harbor Resort and Spa, 456 B.R. 703 (Bankr. M.D. Fla. 2011):
years from now the Supreme Court may hold that section 157(b)(2)(F) dealing with fraudulent conveyances is unconstitutional, just as it did with section 157(b)(2)(C). But the job of bankruptcy courts is to apply the law as it is written and interpreted today. Bankruptcy courts should not invalidate a Congressional statute . . . or otherwise limit [their] authority to finally resolve other core proceedings [] simply because dicta in Stern suggests the Supreme Court may do the same down the road.
456 B.R. at 718. The Court agrees with this analysis and holds that it has jurisdiction pursuant to 28 U.S.C. § 157(b)(2)(H) and (O), as well as the constitutional authority, to enter a final order with respect to the Motion. Nevertheless, to the extent that the District Court determines that, this Court did not have the constitutional authority to enter a final order in this matter, this Order is to be construed as setting forth proposed findings of fact and conclusions of law.
On March 16, 2010, Federated Financial Corporation of America ("Federated") was awarded judgment against the Debtor (the "Federated Judgment"). The Debtor subsequently filed two unsuccessful appeals with respect to the Federated Judgment. More than two yearslater, on April 10, 2012, The Honorable Donald W. Stephens of the Wake County, North Carolina, Superior Court, entered an Order ("Judge Stephens' Order") in Case No. 09-CVS-002084 (the "Federated Matter"). Judge Stephens' Order included findings that the Debtor had received close to $400,000.00 in settlement proceeds from lawsuits (the "Lawsuit Proceeds") he had filed in North Carolina since 2008, which the Debtor appeared to deposit to Defendant's bank account. The Debtor was ordered to appear before Judge Stephens on April 12, 2012 and to bring with him all bank records from Defendant's bank account or any other bank account that the Debtor had deposited funds into since January 1, 2008.
The next day, on April 11, 2012 (the "Petition Date"), the Debtor filed a voluntary petition for relief pursuant to chapter 7 of the Bankruptcy Code. Federated was the only creditor listed on the Debtor's bare bones Petition.
On April 24, 2012, the Debtor filed his bankruptcy schedules and statement of financial affairs (the "Bankruptcy Papers") in the Bankruptcy Case. The Debtor amended the Bankruptcy Papers several times, most recently on October 19, 2012.1 According to a September 14, 2012 amendment to the Bankruptcy Papers (the "September Amendment"), the Debtor collected $226,031.332 in Lawsuit Proceeds during the two years before the Petition Date.
Based on this Court's Orders, Defendant provided copies of bank statements (the "Bank Statements") on two bank accounts, a checking account at Branch Banking and Trust Company, account number xxxxxxxxx0440 (the "BB&T Account"), and another checking account at Wells Fargo Bank, formerly Wachovia Bank, account number xxxxxxxxx8590 (the "Wells Fargo Account," and together with the BB&T Account, the "Bank Accounts"). The Trustee alsoobtained documentation from the Debtor's pre-petition litigation attorney, W. Andrew LeLiever ("LeLiever"), including information as to various settlements of the Debtor's lawsuits, records regarding LeLiever's trust account, and copies of checks that LeLiever issued to Defendant with respect to the Debtor's Lawsuit Proceeds. Likewise, the Trustee obtained trust account information from J. Blake Norman ("Norman"), another attorney who had represented the Debtor pre-petition, regarding the disposition of the Debtor's Lawsuit Proceeds. The Debtor emailed a summary of the Lawsuit Proceeds to the Trustee's counsel on July 25, 2012 that indicated that the Debtor had collected $226,031.33 in Lawsuit Proceeds.
On May 14, 2012, the Debtor appeared and was sworn at the meeting of creditors in the Bankruptcy Case. When questioned regarding the disposition of the Lawsuit Proceeds, the Debtor testified that checks for Lawsuit Proceeds were disbursed to Defendant and deposited to her bank account (the "Transfers"). The Debtor further testified that he was an authorized user of that account.
On July 19, 2012, the Debtor appeared for a continued meeting of creditors and testified that he had signed a signature card as an authorized user of the BB&T Account and that he had written checks on that account. The Debtor also testified that he had access to the funds transferred to Defendant through permissive use of Defendant's ATM cards as to both of the Bank Accounts. Further, the Debtor testified that the Lawsuit Proceeds have been his only income since 2008.
Although the Defendant denies having received any transfers from the Debtor, both the Debtor and Defendant have acknowledged that the Lawsuit Proceeds were deposited to Defendant's Bank Accounts. Both the Debtor and Defendant have stated that the Debtor spent the Lawsuit Proceeds after they were deposited to Defendant's Bank Accounts. Both the Debtorand the Defendant consistently have maintained that that the Transfers to Defendant were "merely a conduit" to deposit funds into the "marital account,"3 and that the Debtor did not lose ownership or interest in the Lawsuit Proceeds so transferred. The Debtor has stated that the Transfers to Defendant did not reflect payment for any goods or services or for any extensions of credit or money loaned.
Summary judgment is appropriate when the matters presented to the Court "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. BANKR. P. 7056 (); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In considering a motion for summary judgment, the court must construe the "facts and inferences drawn therefrom in the light most favorable to the nonmoving party." Seabulk Offshore, Ltd. V. American Home Assur. Co., 377 F.3d 408, 418 (4th Cir. 2004) (citing Spriggs v. Diamond Auto Glass, 242 F.3d 179, 183 (4th Cir. 2001)).
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