Connector 2000 Ass'n, Inc. v. Herrin (In re Re)

In re, Wanda Painter Herrin, Debtor(s).

Connector 2000 Association, Inc. aka Greenville Toll Road, Plaintiff(s), v. Wanda Painter Herrin, Defendant(s).

Case Number: 17-06247-hb

Adversary Proceeding Number: 18-80017-hb

U.S. BANKRUPTCY COURT District of South Carolina

October 10, 2018

ORDER

The relief set forth on the following pages, for a total of 13 pages including this page, is hereby ORDERED.

/s/_________

US Bankruptcy Judge

District of South Carolina

Chapter 13

ORDER

THIS MATTER came before the Court for trial on the Complaint filed by Connector 2000 Association, Inc. aka Greenville Toll Road ("Connector"). The Joint Pretrial Order setting forth stipulated facts and issues for consideration is hereby incorporated.¹ Connector asserts its claims resulting from toll road violations under S.C. Code Ann. § 57-5-1495 are nondischargeable debts pursuant to 11 U.S.C. § 523(a)(2)(A). In response, Debtor Wanda Painter Herrin requests that if the debts are discharged, she be granted a judgment against the Connector for her attorney's fees and costs in defending this action pursuant to 11 U.S.C. § 523(d).

Stanley H. McGuffin represented the Connector and F. Lee O'Steen appeared on behalf of Herrin. Peter Femia, President of the Connector, and Herrin testified. After considering the evidence and observing the credibility of the witnesses, the Court makes thefollowing findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52,² and finds that the debts owed to the Connector are dischargeable but Herrin is not entitled to relief under § 523(d).

FINDINGS OF FACT

1. The Connector operates a controlled access facility road in South Carolina known commonly as the connector and/or Greenville Southern Connector Toll Road (the "Toll Road"). The Toll Road is subject to the provisions of S.C. Code Ann. § 57-5-1010, et seq.

2. The Connector is entitled to collect tolls and penalties for toll violations in accordance with S.C. Code Ann. §§ 57-5-1490 through 1495.

3. In 2013, Herrin purchased a Ford Focus hatchback.

4. Herrin allowed Tyler Hammond to use her vehicle. Herrin and Hammond became business partners in early 2014 when they decided to start a furniture refurbishing business. The vehicle was often used in furtherance of their business venture to pick up furniture, equipment, and supplies, and to seek out customers. Hammond would use the vehicle for days at a time.

5. Beginning in late 2013, Herrin's vehicle was involved in numerous toll violations on the Toll Road. The violations occurred by driving the vehicle in "Palmetto Pass" lanes, which do not have operators or gates to stop vehicles from passing through, while not having a corresponding transponder and account to draw from to pay the tolls.

6. For each toll violation, a use charge ranging from $1.00 - $1.75 was incurred plus a $25.00 administrative fee or civil penalty.³ Herrin was the owner of the vehicle at the time each of the toll violations occurred. As the owner of the vehicle, Herrin is jointly and severally liable with any driver of the vehicle pursuant to S.C. Code Ann. § 57-5-1495(B).⁴

7. The Connector notified Herrin of the toll violations by sending her notices in the mail to her residence. A First Notice to Pay Toll ("First Notice") includes the following instructions:

AFFIDAVIT OF NON-LIABILITY:

INSTRUCTIONS: You are charged with the violation described in this document. Under Section 57-5-1495 of the South Carolina Code of Laws, as amended, the owner and operator of the vehicle are jointly and severally liable. It is presumed that the registered owner of the vehicle was the person driving it. You were listed as the registered owner by DMV on the date of the violations. If you did not own the vehicle on that date, and/or were not the operator of the vehicle, complete the declaration below, in its entirety, and return it in the enclosed envelope.

The undersigned declares that the vehicle bearing the license plate on the Notice/Citation was not owned and/or operated by me on the violation date.

The vehicle was: (Check one only)

[ ] Reported Stolen

[ ] Leased or Rented Under a Written Agreement

[ ] Sold/Released to Another Party

[ ] Not Operated by Registered Owner

[ ] Other (please provide explanation) __________

(emphasis in original).⁵

8. The Connector mailed Herrin six First Notices dated February 21, 2014 for unpaid toll violations that occurred from October 26 through December 6, 2013.

9. The Connector sent Herrin another First Notice dated November 29, 2016, for unpaid toll violations that occurred from October 5 through November 24, 2016.

10. A Second Notice to Pay Toll ("Second Notice") is issued if the First Notice remains unpaid or if the vehicle incurs additional violations. The Second Notice instructs an owner who contests his/her liability to complete the form as follows:

The undersigned declares: If the vehicle(s) listed above was/were stolen, leased or rented at the time of the violation(s), provide the following information on the operator(s) of the vehicle(s) at the time of the violation(s).

The vehicle was: (Check one only)

[ ] Reported Stolen

[ ] Leased or Rented Under a Written Agreement

(emphasis in original).⁶

11. The Connector sent Herrin a Second Notice dated April 27, 2017 for unpaid toll violations that occurred from October 5, 2016 through January 8, 2017.

12. Additionally, two correspondences from the Connector to Herrin dated October 19, 2017, informed her of the debts owed for unpaid toll violations and of the Connector's intention to submit the debts to the South Carolina Department of Revenue for collection through the Setoff Debt Collection Act and/or Governmental Enterprise Accounts Receivable Collections Program until the debts were paid in full, unless Herrin submitted a written dispute that she owed the debts.

13. The Connector sent Herrin another Second Notice dated February 8, 2018 for unpaid toll violations that occurred from January 20, 2017 through July 10, 2017.

14. Although Herrin allowed Hammond to use her vehicle, she testified that sometimes he would not return it despite her requests. She attempted to recover the vehicle from Hammond in 2016 and 2017. Herrin testified that she reported Hammond's refusal to return her vehicle to the Lancaster County Sheriff's Department. The Sheriff's Department advised Herrin that she would need to report the incident as a breach of trust (as opposed to a stolen vehicle) because she initially granted Hammond permission to use the vehicle.

15. Herrin testified that because the vehicle was neither stolen nor leased, she did not contest her liability for the toll violations committed by Hammond.

16. Femia testified that when the Connector is informed by an owner that his or her vehicle was used on the Toll Road as a result of a breach of trust, it will investigate the matter and try to pursue collection from the individual who operated the vehicle at the time of the violation.

17. Herrin filed a voluntary petition for Chapter 13 relief on December 15, 2017. She listed the toll violations on her Schedule E/F in the amount of $2,049.75 and did not list the debts as disputed.

18. The Connector filed Claim No. 10 in the amount of $2,242.10, and Claim No. 11in the amount of $3,717.05, arising from the toll violations.

19. After Herrin filed for bankruptcy relief, her counsel informed the Connector's counsel that Herrin:

does not know who would have driven that vehicle through a toll road without paying . . . The first she heard about it was as we were filing this case, she received a notice that she owed for toll charges. She totally disputes that sheever drove her vehicle on a toll road without paying. She has no idea what or who would have drive[n] through a toll road.⁷

Further correspondence from Herrin's counsel to the Connector's counsel represented that:

Debtor is saying she was not the driver of any vehicle that has ever run a toll nor been in any vehicle that ran a toll when while [sic] she was present, nor provided a vehicle to a person she knew was going or intended to run a toll or break any laws . . . The car was supposed to be used by a business partner who absconded with the vehicle . . .⁸

20. Despite these representations, Herrin's testimony at trial indicated that upon becoming aware of the toll violations, she knew Hammond was the individual who drove her vehicle.

21. Even though numerous toll violations occurred at various times over the span of several years, the evidence presented did not establish that Herrin was driving or in the vehicle when the violations occurred, that she knew where Hammond was driving when he had possession of the vehicle, or that she was aware of the toll violations as they occurred.

DISCUSSION AND CONCLUSIONS OF LAW

A. JURISDICTION

This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334(a) and (b). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(I) and the parties have consented to this Court entering a final order.

B. 11 U.S.C. § 523(A)(2)(A)

Section 523(a) of the Bankruptcy Code sets forth certain obligations that Congress deems excepted from a debtor's discharge. Counsel for the Connector acknowledges that the debts at issue fall within the discharge exception under § 523(a)(7), which applies to debts fora fine or penalty to and for the benefit of a governmental unit. However, because those debts may be discharged under Chapter 13, see 11 U.S.C. § 1328(a), the Connector seeks relief pursuant to § 523(a)(2)(A).

Under § 523(a)(2)(A), debts "for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition" are not dischargeable. "In addressing exceptions to discharge, courts 'traditionally interpret the exceptions narrowly to protect the purpose of providing debtors a fresh start' but 'are equally concerned with ensuring...