Wolfe v. Pugh (In re Pugh)
| Decision Date | 29 November 2022 |
| Docket Number | 2:21-bk-50768-SDR,Adv. 2:22-ap-05002-SDR |
| Parties | In re: Derrek Wade Pugh, Debtor. v. Derrek Wade Pugh, Defendant. Marie Vernon Wolfe, Plaintiff, |
| Court | U.S. Bankruptcy Court — Eastern District of Tennessee |
In re: Derrek Wade Pugh, Debtor.
Marie Vernon Wolfe, Plaintiff,
v.
Derrek Wade Pugh, Defendant.
No. 2:21-bk-50768-SDR
Adv. No. 2:22-ap-05002-SDR
United States Bankruptcy Court, E.D. Tennessee, Northeastern Division
November 29, 2022
MEMORANDUM OPINION
SHELLEY D. RUCKER, CHIEF UNITED STATES BANKRUPTCY JUDGE
I. INTRODUCTION
Over 12 years ago, adversary plaintiff Marie Wolfe was severely injured by a pit bull owned by Derrek Pugh, the debtor and adversary defendant. Plaintiff sued defendant in South Carolina, where the attack occurred, and obtained a judgment in the amount of $700,000.00. Defendant has not paid anything toward the judgment and has filed for bankruptcy twice. The first
case was dismissed without resolution of this debt. Whether this case should be dismissed without a discharge, or whether his discharge denied because of his actions in this proceeding, are the issues before the Court.
The Court held a trial on October 28, 2022 on a motion by plaintiff in the main bankruptcy case to dismiss that case under 11 U.S.C. § 707(a) and an objection to discharge under four different subsections of 11 U.S.C. § 727(a). The Court has jurisdiction under 28 U.S.C. §§ 157(b), 1331, and 1334, and the parties previously agreed that the pending matters are core proceedings that may proceed to final judgment. For the reasons discussed below, the Court will grant the motion to dismiss and will dismiss the adversary proceeding without prejudice.
II. BACKGROUND AND FINDINGS OF FACT
Pursuant to Federal Civil Rule 52(a)(1), made applicable by Federal Bankruptcy Rule 7052, this Background section will serve as the Court's findings of fact following trial.
A. Origin of the Plaintiff's Claim
This case traces its origins back to an injury that occurred over 12 years ago. Defendant was a college student in Charleston, South Carolina who was preparing to move back to Tennessee. On June 1, 2010, plaintiff came to defendant's apartment with one of defendant's friends. Unbeknownst to plaintiff, defendant kept a pit bull in his apartment that had a prior history of aggression and of attacking people. Defendant's dog attacked plaintiff and bit her on her face, causing severe injuries.
On April 17, 2012, plaintiff sued defendant in state court in South Carolina for actual and punitive damages in connection with the injuries that she suffered from the attack. When defendant failed to answer the complaint, the South Carolina court found defendant in default, following a hearing and over defendant's objection. Plaintiff proceeded to seek a judgment for damages. After defendant dismissed his first bankruptcy case (see Section B below), the South Carolina court held
a damages hearing. Defendant appeared at the hearing through counsel, and his counsel cross-examined both of plaintiff's witnesses. On October 8, 2015, after the hearing ended, the South Carolina court issued an order and award of damages. (Doc. No. 31-13 at 3-10.) The South Carolina court awarded $450,000.00 in actual damages and $250,000.00 in punitive damages. The South Carolina court's order included the following findings of fact and conclusions of law:
1) Plaintiff was lawfully on the Defendant's premises at the time of the injury. (Doc. No. 31-13 at 7)
2) Plaintiff was seriously injured by the pit bull belonging to Defendant. (Id.)
3) The attack by Plaintiff's pit bull was unprovoked by Plaintiff in any fashion. (Id.)
4) Defendant kept the animal under cruel confinement and isolation, conditions contributing to the animal's aggressive nature and dangerous disposition. (Id.)
5) Defendant knew or should have known, by reason of previous incidents involving the animal, that the pit bull was dangerous. (Id.)
6) Defendant knew or should have known of the serious potential for attacks. (Id.)
7) Defendant took no measures at the time of Plaintiff's visit to reasonably protect her from the dangerous animal (Id.)
8) Defendant's conduct in the previously mentioned respects was negligent, grossly negligent, willful, wanton and reckless. (Id.)
9) "I find the defendant's conduct under the negligence cause of action rises to the level of culpability warranting a punitive damage award. Based on the admissions of facts in the Complaint, I find Plaintiff has met [her] burden of proving by clear and convincing evidence that Defendant's conduct was so reckless, willful, wanton or malicious that the Defendant should be punished." (Id. at 9.)
10) "I have also considered the Gamble factors [for punitive damages under state law]: (1) the defendant's degree of culpability; (2) the duration of the conduct; (3) the defendant's awareness or concealment; (4) the existence of similar past conduct; (5) the likelihood the award will deter the defendant or others from like conduct; (6) whether the award is reasonably related to the harm likely to result from such conduct; (7) the defendant's ability to pay; and (8) any other factors deemed appropriate. See Gamble v.
Stevenson, 305 S.C. 104, 406 S.E.2d 350 (1991). Having carefully considered the above factors, I find the Plaintiff's testimony and the history of the case suggest a lack of remorse by Defendant. Further, while Defendant may have not intended for his dog to bite Ms. Wolfe, he displayed willful, wanton, and reckless disregard of her safety and the safety of others because of his knowledge of the dog through his ownership. In light of the Plaintiff's severe injuries and the facts deemed admitted in the Complaint, I find punishment is needed. I find Defendant had foreknowledge of the dangerous pit bull's nature, contributed to the animals' dangerous nature, and put forth no effort to protect Plaintiff." (Id. at 10.)
On August 14, 2017, plaintiff obtained an order from Washington County Circuit Court in Tennessee confirming the South Carolina court judgment. (Id. at 1-2.) That same day, plaintiff recorded the Tennessee court order with the Washington County Register of Deeds.[1] (Id. at 1.)
B. Prior Proceedings in Tennessee
1) First Bankruptcy Case in 2013
After the South Carolina suit had been filed, but before the judgment for damages was entered, defendant filed a voluntary Chapter 7 petition on May 10, 2013. (Case No. 2:13-bk-50870-MPP (the "First Bankruptcy Case" or "FBC"), Doc. No. 1.) In Schedule A, defendant disclosed that he owned real property that had a current value of $43,100.00. That property secured a claim of $54,216.14. (FBC, Doc. No. 13 at 12.) In Schedule D, debtor disclosed that he cosigned mortgage loans with his grandfather, James F. "Fred" Brooks, and that the balances totaled over $370,000. (Id. at 17.) Defendant noted in an original and amended statement of financial affairs that he deeded his one-half interest in seven houses and one empty lot to his grandfather and that
the market value of the properties was less than the combined mortgage balance. (FBC, Doc. No. 13 at 4; Doc. No. 23 at 4.) Defendant also disclosed that he operated rental property with his grandfather for several years before transferring his interest in the rental properties back to his grandfather in May 2012. (FBC, Doc. No. 13 at 6; Doc. No. 23 at 7; see also SAP, Doc. No. 31-15 (Trial Ex. 15, quitclaim deed from defendant to James Brooks dated May 23, 2012).) An amendment to Schedule F added an unsecured loan that defendant owed his grandfather in the amount of $200,000.00 (FBC, Doc. No. 23 at 10), although his grandfather never filed a proof of claim. The Trustee filed an adversary proceeding to recover one of the properties as a fraudulent transfer. See generally Payne v. Pugh, No. 2:14-ap-05001-MPP (Bankr.E.D.Tenn.). In Schedule F, defendant disclosed plaintiff's South Carolina case and estimated that damages could exceed $100,000. (FBC, Doc. No. 13 at 19.) In Schedule I, defendant disclosed $636.00 in average monthly income. (Id. at 22.)
On August 23, 2013, plaintiff filed a motion to dismiss the First Bankruptcy Case under 11 U.S.C. § 707(a). (FBC, Doc. No. 26.) Plaintiff sought dismissal on the grounds that defendant filed for bankruptcy to avoid compensating her for her injuries and to avoid modifying his lifestyle in ways that would allow him to make payments to her. (Id. at 2-3.) Plaintiff also asserted that defendant failed to maintain records that would show his financial condition and that, out of the banking records that he was required to bring to his Rule 2004 examination, he brought little more than an account history from his Eastman Credit Union account that was altered to redact important information. (Id. at 3-4.) The Court (Parsons, C.J.) granted the motion, but only in a limited sense. Defendant had filed his own motion to dismiss the case (FBC, Doc. No. 54), and both motions were resolved through an agreed order setting forth that the case would be dismissed once defendant paid the Trustee $4,310.00 in costs and expenses for an adversary proceeding in which
the Trustee had sought to set aside one of the property transfers made to James Brooks. (FBC, Doc. Nos. 61, 66.)
2) First Adversary Proceeding: Objections to Discharge and to Dischargeability
On the same day plaintiff filed the motion to dismiss, she commenced Adversary Proceeding No. 2:13-ap-05030-MPP (the "First Adversary Proceeding" or "FAP") objecting to the dischargeability of her debt on the basis that it arose from willful and malicious injury caused by defendant. Plaintiff also objected to his discharge on account of defendant's transferring his property interests to his grandfather solely to put those assets outside the reach of creditors. In support of this accusation, plaintiff noted that one property transfer occurred on June 14, 2010, just four days after the dog attack, while the other transfers occurred in May 2012, one week after plaintiff served defendant with the...
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