In re: WARREN BOYD DOZIER SSN/ITIN xxx-xx-2564 Debtor.
FORREST C. ALLRED, IN HIS CAPACITY AS CHAPTER 7 TRUSTEE Plaintiff
v.
ALOYSIUS ARENDT aka Al Arendt Defendant.
Bankr. No. 15-30018
United States Bankruptcy Court, D. South Dakota
December 15, 2021
DECISION RE: TRUSTEE-PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Charles L. Nail, Jr. Bankruptcy Judge
The matter before the Court is Trustee-Plaintiff Forrest C. Allred's Motion for Summary Judgment. For the reasons discussed below, the Court will deny the motion.
I.
Warren Boyd Dozier ("Debtor") sought bankruptcy relief because he had medical bills in excess of $1, 000, 000.00. In late March 2015, Debtor hired Aloysius Arendt ("Attorney Arendt") to be his bankruptcy attorney. Bonita "Bonnie" London and Jeff Ice, two of Debtor's friends, paid Attorney Arendt $1, 800.00 to represent Debtor.[1]
On April 5, 2015, Debtor's mother, Joyce Dozier, died. Her will named Debtor as her sole heir.
On April 6, 2015, Bonnie London spoke to Attorney Arendt by telephone to ask whether Joyce Dozier's death would impact Debtor's bankruptcy. Attorney Arendt advised her it would not; his time records do not indicate the basis for his opinion, and he could not recall why he gave that opinion when she called.
On May 21, 2015, Debtor filed his chapter 7 petition, schedules, and statements. In signing the petition, Debtor declared, under penalty of perjury, that the information provided in the petition was true and correct. Because Debtor's debts were primarily consumer debts and 11 U.S.C. § 707(b)(4)(D) applied, in signing the petition Attorney Arendt certified he had no knowledge after an inquiry that the information in the schedules was incorrect.
At question 20 on his schedule of assets, Debtor did not disclose his mother had died earlier and he was her sole heir. On his schedule of monthly expenses, at question 24, which asked Debtor if he expected any increase or decrease in expenses within the following year, Debtor implied his mother was still living when he stated he
resides in his mother's house in Pierre, SD, is fully disabled and pay's [sic] her rent and helps with the utilities as set forth on the Schedule J; in addition, he drives her 2001 Dodge Ram 1500 PU, pays for the insurance gas and upkeep on the same
Attorney Arendt has acknowledged Debtor's answer was not responsive to the
question; Attorney Arendt stated he just put on the form the answer Debtor gave him.
Debtor and Attorney Arendt attended Debtor's meeting of creditors conducted by the case trustee, Forrest C. Allred, on July 1, 2015. During the meeting, Debtor affirmed under oath the truthfulness, accuracy, and completeness of his schedules and indicated no changes to them were needed. Debtor also testified he was not a beneficiary under any probate proceeding.
Trustee Allred did not find any nonexempt assets to liquidate, and he filed a report to that effect on July 7, 2015. Debtor received a general discharge of debts on September 1, 2015. Debtor's bankruptcy case was closed on October 5, 2015.
In the spring of 2017, Debtor hired Attorney Arendt to help him administer the Joyce Dozier estate.[2] Debtor died in October 2017, before the Joyce Dozier estate was fully administered. Attorney Arendt represented Bonnie London for a time when she was the personal representative of Debtor's decedent's estate and when she succeeded Debtor as the administrator of the Joyce Dozier estate.
According to an inventory filed on December 4, 2018, the Joyce Dozier estate, consisting of her house in Pierre, two vehicles, an ATV, and some household goods, had a value at the time of her death of $209, 117.00. The estate's value was described on the inventory as "minus encumbrances." A Proposal for Distribution in
Debtor's decedent's estate, which was also filed on December 4, 2018, indicated Debtor had, in addition to his mother's home in Pierre, an interest in some real property in Gann Valley, South Dakota valued at $1, 500.00. The Proposal for Distribution stated this real property had been transferred from Debtor's decedent's estate to Jeffrey Ice on April 19, 2018. The record is not clear whether Debtor held an interest in the Gann Valley property when he filed bankruptcy or why the property was transferred to Jeffrey Ice.[3] The Proposal for Distribution also indicated debts of Debtor's decedent's estate totaling $1, 611.85 were previously paid.
The Joyce Dozier estate was distributed, and then Debtor's probate estate was distributed. Debtor's daughter, Lacey Boxley, received the house, then valued at $213, 000.00, and two vehicles, then valued at a total of $6, 000.00, plus some household goods. Debtor's son, Lonnie Dozier, received an ATV and some household goods.
Attorney Arendt never advised Trustee Allred that Debtor-and later Debtor's decedent's estate-inherited Joyce Dozier's assets. Attorney Arendt said he did not do so because he did not have a fiduciary obligation to the bankruptcy court.
On Trustee Allred's motion, Debtor's bankruptcy case was reopened on March 10, 2020 so the bankruptcy estate could pursue its interest in the Joyce Dozier estate. Trustee Allred filed suit against Debtor's two children on June 8, 2020 to
recover what they had received.[4]
Trustee Allred next commenced this adversary proceeding against Attorney Arendt. In his amended complaint, Trustee Allred seeks both damages from Attorney Arendt and sanctions against Attorney Arendt regarding Debtor's and Attorney Arendt's failure to disclose in Debtor's chapter 7 bankruptcy case Debtor's interest in the Joyce Dozier estate. Trustee Allred's amended complaint contains nine counts. On Attorney Arendt's earlier motion, the Court dismissed counts I, II, V, VII, and VIII.
Trustee Allred now seeks summary judgment on the remainder of his amended complaint: count III for fraud on Trustee Allred; count IV for fraud on the Court; count VI for a violation of Fed.R.Bankr.P. 9011[5] and 11 U.S.C. § 707(b)(4)(B), (C),
and (D); and count IX for a violation of 28 U.S.C. § 1927. Attorney Arendt resists, arguing material facts are in dispute and Trustee Allred cannot establish necessary elements of each count.
II.
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Bankr.P. 7056 and Fed.R.Civ.P. 56(a). An issue of material fact is genuine if the evidence is such that a trier of fact could find for either party. Rademacher v. HBE Corp., 645 F.3d 1005, 1010 (8th Cir. 2011). A genuine issue of fact is material if its resolution affects the outcome of the case. Gazal v. Boehringer Ingelheim Pharmaceuticals, Inc., 647 F.3d 833, 838 (8th Cir. 2011) (cite therein). In reviewing a motion for summary judgment, the Court considers the pleadings, the discovery and disclosure materials in the record, and any affidavits. Wood v. SatCom Marketing, LLC, 705 F.3d 823, 828 (8th Cir. 2013). The Court's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. Tolan v. Cotton, 572 U.S. 650, 656 (2014). The nonmovant receives the benefit of all reasonable inferences supported by the evidence. B.M. ex rel. Miller v. South Callaway R-II School Dist., 732 F.3d 882, 886 (8th Cir. 2013).
The movant bears the burden of identifying those portions of the record that
demonstrate the absence of a genuine issue of material fact. Gibson v. American Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012). If the movant meets its burden, the nonmovant, to defeat the motion, must establish a genuine factual issue. Residential Funding Co. v. Terrace Mortg. Co., 725 F.3d 910, 915 (8th Cir. 2013). The nonmovant may not rest on mere allegations or pleading denials, Conseco Life Ins. Co. v. Williams, 620 F.3d 902, 910 (8th Cir. 2010), or "merely point to unsupported self-serving allegations." Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th Cir. 2008) (quoted in Residential Funding, 725 F.3d at 915). Instead, the nonmovant must come forward with specific facts showing there is a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In other words, "[a] properly supported motion for summary judgment is not defeated by self-serving affidavits. Rather, the [nonmovant] must substantiate allegations with sufficient probative evidence that would permit a finding in the [nonmovant]'s favor." Frevert v. Ford Motor Co., 614 F.3d 466, 473-74 (8th Cir. 2010) (citations omitted) (quoted in Kansas v. Bailey (In re Bailey), Bankr. No. 18-41858-btf7, Adv. No. 18-04225-btf, 2019 WL 2179732, at *7 (Bankr. W.D. Mo. May 17, 2019)).
III.
Count III, Fraud on Trustee Allred.
Both parties identified the following elements of fraud:
That a representation was made as a statement of fact, which was untrue and known to be untrue by the party making it, or else recklessly made; that it was made with intent to deceive and for the purpose of inducing the other party to act upon it; and that he did in fact rely on it
and was induced thereby to act to his injury or damage.
Stabler v. First State Bank of Roscoe, 865 N.W.2d 466, 477 (S.D. 2015) (citations and quotations therein omitted); see Venture Commc'ns Coop., Inc. v. James Valley Coop. Tel. Co., 492 F.Supp.3d 946, 962 (D.S.D. 2020) (federal court applies state substantive law to state law claims). Though not specifically addressed by either party, there appears to be no dispute that if a duty to disclose exists, silence by the party having the duty to disclose is also actionable. Windedahl v. Harris, 156 N.W. 489, 491 (S.D. 1916) ("Deceit can consist in silence when honesty requires speech, as much as in speech itself."[6]); Conway v. Conway, 487 N.W.2d...
