Chavis v. Mangrum (In re Mangrum)

599 B.R. 868

IN RE: Leroy MANGRUM, Jr., Doris R. Mangrum, Debtors.

Brenda L. Chavis, in her capacity as co-beneficiary of the Estate of Bobbie F. Wynder, Plaintiff,

v.Leroy Mangrum, Jr., Defendant.

Case No. 16-51687-FJS

APN 17-05007-FJS

United States Bankruptcy Court, E.D. Virginia, Newport News Division.

Signed May 14, 2019

Peter G. Zemanian, Zemanian Law Group, Norfolk, VA, for Plaintiff.

Sherman C. Smith, Upright Law, LLC, Newport News, VA, for Defendant.

MEMORANDUM OPINION

FRANK J. SANTORO, United States Bankruptcy Judge

On November 16, 2018, this matter came before the Court for trial on the Complaint to Determine Nondischargeability of Debt (the "Complaint") filed on February 13, 2017, by Brenda L. Chavis ("Chavis"), in her capacity as co-beneficiary of the probate estate of Bobbie F. Wynder (the "Estate"). The Complaint seeks a determination that an indebtedness owed by Leroy Mangrum, Jr. ("Mangrum") to the Estate is nondischargeable under 11 U.S.C. § 523(a)(4) because of Mangrum's alleged defalcation while serving as attorney-in-fact for Bobbie F. Wynder ("wynder") pursuant to a general power of attorney. The debt at issue originates from a judgment initially entered by the Circuit Court for the City of Hampton, Virginia (the "Circuit Court"), holding in relevant part that Mangrum violated § 1612 of the Virginia Uniform Power of Attorney Act ( Va. Code. Ann. § 64.2-1600 et seq. ) when he cashed in an annuity belonging to Wynder valued at $ 116,330.64 (the "Annuity") while serving as her attorney-in-fact, and that he must restore those funds to the Estate. See Pl.'s Ex. 1 at 262-63; see also id. at 284-85.

This adversary proceeding constitutes a core proceeding over which this Court has jurisdiction under 28 U.S.C. §§ 157(b)(2)(I) and 1334(b). Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409(a).

Upon consideration of the evidence presented at trial and for the reasons set forth below, the Court finds and concludes that Mangrum's debt to the Estate did not arise from defalcation within the meaning of § 523(a)(4). The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, as incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7052.

Procedural History

Leroy and Doris Mangrum filed a joint voluntary petition for relief under chapter 7 of the Bankruptcy Code on December 17, 2016. Chavis timely initiated this adversary proceeding by filing the Complaint on February 13, 2017. Mangrum answered the Complaint on March 16, 2017 (the "Answer"), and generally denied all of its material allegations.¹ See Answer at 1, ECF No. 7.

At a pre-trial conference held on April 28, 2017, counsel for Chavis represented that the Circuit Court's judgment was on appeal to the Supreme Court of Virginia.² The Court thus continued the pre-trial conference generally pending the outcome of the appeal. See Order Cont. Generally at 2, ECF No. 9.

After receiving notice of the opinion and order entered on March 1, 2018, by the Supreme Court of Virginia, which affirmed the Circuit Court in part, the Court reconvened the pre-trial conference on April 20, 2018. Counsel for both parties advised the Court that the only issue remaining in this case was whether Mangrum possessed the requisite culpable state of mind to prove defalcation under § 523(a)(4). The Court thus limited the scope of the proceedings to the narrow issue of Mangrum's mental state and invited the parties to file simultaneous briefs on that issue. Instead, on May 31, 2018, Chavis filed a motion for summary judgment, and Mangrum filed a motion to dismiss.³ At a hearing held on July 20, 2018, the Court denied both motions because there remained a genuine issue of material fact with respect to Mangrum's state of mind for purposes of § 523(a)(4).⁴ See Order Denying Summ. J. Mot., ECF No. 31 ; Order Denying Mot. to Dismiss, Adv. Pro. No 30.

At trial, Mangrum was the only witness examined by either party. No objections were lodged to Mangrum's testimony. The Court also admitted without objection all exhibits offered by the parties into evidence.

Following the trial, the parties filed supplemental briefs at the Court's invitation.

Findings of Fact

Mangrum testified at trial as to his decades-long relationship with Wynder and the events specifically related to the matter before the Court. During his testimony, Mangrum proved himself to be an excellent oral historian who was confident in his recollections of the past. Even though Mangrum's advanced years appeared to contribute to some difficulty in organizing his thoughts and speech, his testimony was detailed, consistent, and indicative of a strong long-term memory. Having listened to Mangrum's testimony and assessed his candor and demeanor, the Court finds him to be genuine and credible. This finding is further supported by the underlying state court record, which speaks to Mangrum's integrity and good character. See, e.g. , Pl.'s Ex. 1 at 104, 263. In these findings of fact, the Court weaves together the excerpts of testimony from the state court record admitted into evidence and Mangrum's testimony at trial to establish a chronology spanning approximately six decades.

Mangrum testified that he first met Wynder in approximately 1955, when he was dating Wynder's sister who later became his wife. Tr. of Nov. 16, 2018 Trial ("Trial Tr.") 10:16-23, ECF No. 45. From the outset of their relationship, Mangrum assisted Wynder with day-to-day activities such as laundry and yard maintenance. Id. 10:20-11:9; see also id. 31:22-25. Those who knew Mangrum and Wynder recognized the trusting familial relationship they had formed. See Pl's Ex. 1 at 104, 231.

After suffering health setbacks in her later years, Wynder sought assistance from Jacqueline Parham ("Parham") with the preparation of a general power of attorney that appointed Mangrum as Wynder's attorney-in-fact. Id. at 219-20. Parham is not a lawyer. Id. at 220. Nevertheless, she agreed to assist Wynder with the preparation of the general power of attorney and later with the preparation of a medical power of attorney and a will. Id. at 221-22.; see also Trial Tr. at 12:6-14. There is no indication that Parham provided advice of any kind to Wynder or Mangrum in connection with her preparation of the power of attorney document. See Trial Tr. at 12:6-14; Pl's Ex. 1 at 220-22. Instead, Parham explained that she simply met with Wynder to confirm her desire to execute a power of attorney and put together the document in accordance with Wynder's directions. Pl's Ex. 1 at 220-22. Parham recalled that Mangrum expressed to her that his only objective in agreeing to serve as Wynder's attorney-in-fact was to execute whatever Wynder asked of him. Id. at 224. Wynder signed the general power of attorney on May 11, 2010 (the "POA"), appointing Mangrum as her attorney-in-fact and bestowing him with broad authority. Id. at 177-78. The POA does not make any reference to or suggest the existence of the provisions of Virginia law that govern the conduct of attorneys-in-fact. See id. at 174-78.

Mangrum understood his role as attorney-in-fact to include handling Wynder's financial affairs. Id. at 47. He recalled that, within weeks of his appointment as attorney-in-fact, he accompanied Wynder to the bank so that she could introduce him, as her attorney-in-fact, to her point of contact there and to visit her safe deposit box. Trial Tr. 12:21-14:17; Pl's Ex. 1 at 48-49. Mangrum testified that he and Wynder met often after he became her attorney-in-fact and that the two worked together to manage Wynder's financial affairs. Trial Tr. 29:20-22; see also Pl's Ex. 1 at 54-55, 201. Mangrum also repeatedly testified that all the actions he took on Wynder's behalf as her attorney-in-fact were based on specific directives from Wynder herself. See, e.g. , Trial Tr. 14:15-15:8, 18:2-9, 20:2-22:13, 29:9-32:12. There is no evidence in the record to dispute this.

In or about March 2012, after experiencing serious health problems that led to a stay in a rehabilitation facility, Wynder moved into Mangrum's home. Pl's Ex. 1 at 147-49; see also id. at 28-29. Because of the decline in her physical health, Wynder required a caregiver to assist her with the activities of daily living, and Mangrum's daughter assumed this role. Id. at 29, 118-22. Visitors to the home reported that Wynder was well taken care of. Id. at 104-05, 224. Although Wynder was no longer in good physical health, those who knew her remarked that she retained her mental capacity and ability to communicate. See id. at 117-18, 122, 224-25. Indeed, the record reflects that, even during her later years, Wynder remained a meticulous person who stayed on top of her affairs and did not hesitate to express her wants and needs. See id. at 105-06, 123-24, 126, 129, 153-54. Both Mangrum and his daughter reported that Wynder continued to personally review her bank statements and other mail after moving into the Mangrum home. Id. at 58-59, 127-28. Given Wynder's personality and her continued involvement in her financial affairs, Mangrum was convinced that Wynder was aware of the status of her financial affairs up until the days just preceding her death. Id. at 54-56, 85-87; see also id. at 125.

At about the same time Wynder moved from the rehabilitation facility to Mangrum's home, Mangrum cashed in the Annuity. See id. at 179-80. Mangrum testified that he cashed in the Annuity pursuant to Wynder's explicit instruction. Trial Tr. 14:18-15:4, 29:9-11, 30:5-10. In connection with this instruction, Mangrum visited the bank. Id. 15:9-17. Mangrum testified that the bank initially refused to honor the POA, though he was unable to describe the exact problem he encountered with particularity. See id. 15:9-16:22. Mangrum explained that bank personnel informed him that he needed a document he referred to variously as a "stipulation in that writing," "new writeup," and "the paper." Id. 16:16-17:20; see also id. 36:14-37:4.

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