Baumgart v. Ptacek (In re Ptacek)

In re: MELLISE N. PTACEK, Debtor.

RICHARD A. BAUMGART, TRUSTEE, Plaintiff. v. JAMES PTACEK, 8641 EAST SAN ARDO DRIVE LLC, & MELLISE N. PTACEK, Defendants.

Case No. 16-10279

Adversary Proceeding No. 17-1105

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO

August 27, 2019

The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically on August 27, 2019, which may be different from its entry on the record.

Chapter 7

Judge Arthur I. Harris

MEMORANDUM OF OPINION¹

In this adversary proceeding, the Chapter 7 trustee seeks to recover property for the benefit of the debtor's estate that the trustee asserts the debtor fraudulentlytransferred to her ex-husband. The trustee also seeks to recover money that the debtor's ex-husband allegedly still owes the debtor from their separation agreement and divorce. Following a trial, the Court finds that the trustee has failed to establish any claims by a preponderance of the evidence other than a claim for money due the debtor under a $36,000 promissory note. Accordingly, the Court enters judgment in favor of the trustee and against the debtor's ex-husband in the amount of $49,048.77 and denies all other claims in the trustee's amended complaint.

JURISDICTION

The Court has jurisdiction over this action under 28 U.S.C. §§ 157(b)(2)(E) and (H) and 1334 and Local General Order No. 2012-7, entered by the United States District Court for the Northern District of Ohio. In addition, all of the parties except the debtor, Mellise N. Ptacek, have expressly consented to the bankruptcy court entering a final judgment. See Amended Complaint at ¶ 1 (Docket No. 4); Pretrial Minutes (Oct. 19, 2017) (Docket No. 9); see also Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1948-49 (2015) (Article III permits bankruptcy judges to decide Stern claims with the parties' knowing and voluntary consent).

PROCEDURAL HISTORY

On January 22, 2016, Mellise N. Ptacek ("debtor") filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code (Case No. 16-10279). The debtor appeared for examination at her initial meeting of creditors on February 29, 2016, and at an adjourned meeting of creditors on March 14, 2016. The Chapter 7 trustee, Richard Baumgart ("trustee"), continued the examination of the debtor on several more occasions, but the debtor failed to appear and failed to provide information requested by the trustee (Adv. No. 16-1080, Docket No. 1).

On June 8, 2016, the trustee filed an adversary proceeding seeking a denial of the debtor's Chapter 7 discharge due to the debtor's repeated failure to appear at adjourned debtor's examinations and to provide requested information (Adv. No. 16-1080). On June 24, 2016, the debtor's attorney filed a motion to withdraw from the debtor's bankruptcy case, which the Court granted on July 27, 2016. After the debtor failed to appear or otherwise respond to the trustee's complaint in Adv. No. 16-1080, the Court granted the trustee's motion for default judgment on August 24, 2016, thereby denying the debtor a Chapter 7 discharge.

On August 17, 2017, the Chapter 7 trustee filed this adversary proceeding against James Ptacek ("Mr. Ptacek"), 8641 East San Ardo Drive LLC ("the LLC"), and the debtor. On September 7, 2017, the trustee filed an amended complaint.

The Amended Complaint

The amended complaint includes four claims for relief.

In Count I, the trustee alleges that on or about September 15, 2015, the debtor fraudulently transferred to her ex-husband, Mr. Ptacek, her one-half interest in certain real property known as 8641 San Ardo Drive, Scottsdale, Arizona ("the Arizona property"). The trustee seeks to set aside the alleged fraudulent transfer under both Section 548 of the Bankruptcy Code and Sections 1336.01 et seq. of the Ohio Revised Code, made applicable under Section 544(b) of the Bankruptcy Code.

In Count II, the trustee alleges that Mr. Ptacek further transferred the Arizona property from himself to the LLC after the debtor's bankruptcy case was filed in order to hinder, delay, or defraud the trustee from reaching this property. The trustee seeks to set aside the alleged fraudulent transfer under both Section 548 of the Bankruptcy Code and Sections 1336.01 et seq. of the Ohio Revised Code, made applicable under Section 544(b) of the Bankruptcy Code. The trustee also seeks to recover the Arizona property from Mr. Ptacek and the LLC for the benefit of the estate under Section 550 of the Bankruptcy Code.

In Count III, the trustee seeks to recover the value of the Arizona property from Mr. Ptacek and the LLC for the benefit of the estate under Section 550 of the Bankruptcy Code.

In Count IV, the trustee asserts that, at the time the debtor filed for bankruptcy, Mr. Ptacek owed the debtor

• $36,000, plus interest and costs, based on a promissory note;

• $150,000 related to a property settlement that the debtor fraudulently transferred to Mr. Ptacek; and

• the sum of $2,040 per month for 36 months for unpaid spousal support.

Pretrial Proceedings and Discovery

On September 12, 2017, Mr. Ptacek and the LLC answered the amended complaint, but the debtor failed to respond. Despite the debtor's failure to appear or respond to the amended complaint, the trustee has never sought entry of default or moved for a default judgment against the debtor.

The Court held status conferences on October 17, 2017, December 5, 2017, and January 9, 2017. By agreement, the next status conference was adjourned several times to July 24, 2018. On July 30, 2018, the Court set a discovery deadline of October 1, 2018, and a trial date of December 14, 2018. On October 12, 2018, the Court granted the trustee's unopposed motion to extend the discovery deadline to November 1, 2018.

On October 31, 2018, the trustee filed a motion for the debtor to show cause why she should not be held in contempt for failing to appear for deposition on two occasions despite receiving proper notice (Docket No. 23). On November 7, 2018, the Court postponed the December 14, 2018, trial and trial-related deadlines in light of the trustee's motion. On December 18, 2018, the Court held a hearing on the trustee's motion, during which the trustee asserted that both the debtor and Mr. Ptacek had deliberately obstructed the trustee's efforts to conduct discovery. Neither the debtor nor Mr. Ptacek appeared at the hearing.

On December 19, 2018, the Court ordered the debtor and Mr. Ptacek to appear and show cause why they should not be sanctioned for their efforts to obstruct discovery (Docket No. 28). On January 8, 2019, the Court held a hearing on its order to show cause. Mr. Ptacek appeared and testified, but the debtor failed to appear. The Court concluded its order to show cause against Mr. Ptacek and indicated it would consider a request by the trustee for service of a subpoena upon the debtor by a deputy United States marshal, if such a request was made by February 28, 2019. The trustee made no such request by February 28, 2019.

The Court set a status conference for March 26, 2019, but that status conference was rescheduled for April 9, 2019, at the request of Mr. Ptacek's attorney and with the consent of the trustee. On April 11, 2019, the Court issued arevised scheduling order, establishing a dispositive motion deadline of April 23, 2019, and a trial date of June 24, 2019.

Summary Judgment

On April 18, 2019, Mr. Ptacek and the LLC moved for summary judgment (Docket No. 40). On May 24, 2019, the Court denied their motion for summary judgment, holding that genuine disputes of material fact existed as to each of the trustee's claims (Docket No. 46).

Defendants' motion for summary judgment is denied. While defendants make a good argument that the trustee will not be able to establish elements of his claims at trial, a genuine dispute of material fact exists as to each of the trustee's claims, especially construing the evidence in a light most favorable to the trustee. See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 245 (1986) (trial court may deny summary judgment in a case "where there is reason to believe that the better course would be to proceed to a full trial"). The June 25, 2019, trial date and related deadlines remain in effect.

Trial, Including Debtor's Failure to Appear

A trial was held on June 24 and 25, 2019. The Court heard testimony from:

• Bohdan Holyk, the process server who had attempted service on the debtor for deposition by the trustee;

• Michael Lewis, a process server who successfully served a trial subpoena on the debtor;

• Shawnee Delaney, who witnessed an altercation involving Mr. Ptacek and the debtor's boyfriend on June 4, 2014;

• Robert Somogyi, the debtor's former domestic relations attorney; and• Mr. Ptacek.

The debtor failed to appear at the trial, despite being properly served. The trustee moved for an order that the debtor be taken into custody by a deputy United States marshal and be required to testify in this proceeding. The trustee also moved to have the trial stayed until the debtor could be apprehended and brought to the courthouse to testify at some future date. The Court permitted the trustee to make a proffer of what he believed the debtor would testify were the debtor apprehended and brought to the courthouse at some future date, but the Court refused to postpone the trial or order that the debtor be apprehended and brought to the courthouse to testify. The Court told the trustee that he was free to submit a criminal referral of Mr. Ptacek and/or the debtor to the United States Attorney under 18 U.S.C. § 3057.

Subject to redaction under Bankruptcy Rule 9037, the Court admitted exhibits 1-12 of the trustee without objection, while sustaining Mr. Ptacek's objections to exhibits 13, 15, 17, 18, and 19. The Court also admitted exhibits A-J, L-N, R, and T of Mr. Ptacek without objection, while sustaining the trustee's objection to exhibit K and overruling ...