Lee v. Peeples (In re Peeples)

579 B.R. 254

IN RE: Adam L. PEEPLES and Jennifer K. Peeples, Debtors.

Adrian J. Lee and Angela L. N. Lee, Plaintiffs,

v.Adam L. Peeples and Jennifer K. Peeples, Defendants.

Bankruptcy Number: 14–23970

Adversary Proceeding No. 14–2236

United States Bankruptcy Court, D. Utah.

Signed December 19, 2017

Adrian James Lee, Workman Nydegger, Salt Lake City, UT, for Plaintiffs.

Adam L. Peeples, pro se.

Jennifer K. Peeples, pro se.

MEMORANDUM DECISION

R. KIMBALL MOSIER, U.S. Bankruptcy Judge

Adrian J. and Angela L. N. Lee don't believe that Adam L. and Jennifer K. Peeples should be able to discharge the debt they owe to the Lees. The Lees have been tenacious in their efforts to prevent the Peepleses from discharging that debt and have accused the Peepleses of many wrongs. But after hearing all of the evidence presented over three days of trial, the Court has concluded that the Lees' claims amount to nothing more than a tempest in a teapot, and the Peepleses will be granted their discharge.

I. JURISDICTION

The jurisdiction of this Court is properly invoked under 28 U.S.C. § 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I) & (J), and this Court may enter a final order. Venue is proper under the provisions of 28 U.S.C. § 1408 and § 1409.

II. PROCEDURAL BACKGROUND

The Lees commenced this action against the Peepleses seeking to have the debt owed to them excepted from discharge under 11 U.S.C. § 523(a)(2)(A) and (a)(4)¹ and seeking to deny the Peepleses' discharge under § 727(a)(2), (a)(3), (a)(4), (a)(5), and (a)(6). During the pendency of these proceedings the Lees have consistently maintained that the Peepleses have engaged in a pattern of fraud and deception continuing into this bankruptcy case and the Peepleses should be denied the relief afforded by the Bankruptcy Code.

The Lees and the Peepleses are representing themselves. Although Mr. Lee is an attorney and he is representing Mrs. Lee, he has acknowledged to the Court that he is not a litigator. Because the parties are not represented by skilled litigation counsel, the Court has been forced to wade through procedural deficiencies and overreaching. For example, some facts were established by admission as a result of the Peepleses' failure to respond to improper requests for admission propounded by Mr. Lee. Rather than obviating the need to prove facts that the Peepleses did not substantially dispute,² Mr. Lee principally used his requests for admission in an attempt to establish the elements of his case by getting the Peepleses to admit to disputed and potentially damaging facts. Instead of using more laborious means, Mr. Lee took an improper shortcut in using the requests to establish contested facts. What's more, many of the requests were simply speculations and others sought admission of legal conclusions, but the Court allowed most of them to stand because they did not hinder the presentation of the merits of the action.

There were two requests, however, that the Court permitted the Peepleses to withdraw their answers to because there was no factual basis for the requests and the admissions could be prejudicial to the Peepleses. Specifically, the Lees asked the Peepleses to "[a]dmit that the collective value of silver bullion and/or revenue obtained by the sale thereof remaining in your possession at the time you filed for bankruptcy exceeds $10,000," and to "[a]dmit that the collective value of the coin collection and doll collection remaining in your possession at the time you filed for bankruptcy exceeds $1000."³ In hearings on Mr. Lee's requests for admission he admitted that his evidence of the $10,000 figure was sketchy. His basis for the $1,000 figure was his viewing an approximate number of Barbie dolls at the Peepleses' residence before they filed bankruptcy and looking up values for Barbie dolls on eBay. Mr. Lee admitted that he did not know how many of those dolls the Peepleses had when they filed bankruptcy. Because these requests for admissions lacked foundation and the dollar values were simply fabricated, the Court permitted the Peepleses to withdraw their answers to these admissions.

III. FINDINGS OF FACT

Although some factual findings relate to both the Lees' § 523 and § 727 claims, the Court will organize the facts by dividing them between those that primarily relate to the § 523 claims and those that primarily relate to the § 727 claims. Notwithstanding the organization of the factual findings, all factual findings are equally binding as to all claims.⁴

A. Facts Relating to the § 523(a) Claims

The Lees owned a house located at 2096 Country Pine Cove, Holladay, Utah (House). In February 2009, the Lees decided to purchase, and move to, another home. Although it may have been an opportune time for the Lees to purchase a home, it was an inopportune time to sell the House.

The Lees attempted to sell the House for six months, but received little interest and no offers. Although the Lees would have preferred to sell the House, due to concerns about owing money on two large homes in the middle of the housing crisis, they decided to lease the House. The Lees leased the House from November 2009 through June 2010. Feeling less economic strain, the Lees did not rent the House for the remainder of 2010 or 2011, but attempted to sell it again. In early 2012, after their failed efforts to sell the House, and "in order to try to stir up interest," the Lees advertised the House for lease with an option to buy on KSL.com, "hoping to attract someone that couldn't initially afford to purchase but maybe could start getting used to the neighborhood and save up and then possibly purchase after a few months."⁵

Shortly thereafter, on Saturday, February 25, 2012, Mr. Peeples meet with the Lees. He arranged to see the House with Mrs. Peeples on Sunday, February 26, 2012 and they signed the lease that day. The lease term began on February 28, 2012 and was to expire on February 28, 2013, with a monthly rent of $3,000 due on the 28th of each month. Prior to moving into the House, the Peepleses paid the Lees the first month's rent and an additional $3,000.00 security deposit in cash. The Lees did not ask the Peepleses for any references, and there was no evidence that the Lees requested a credit report or investigated the Peepleses' leasing history. The Lees did ask Mr. Peeples what line of work he was in, and he informed them that he was in the coin business, specifically the sale of Silver Eagle coins.

The Peepleses moved into the House with their five children⁶ and timely paid rent on or about March 28, April 28, and May 28, 2012. Each month the rent was paid by cashier's check. The controversy between these parties began when the Peepleses failed to pay the June 28, 2012 rent payment when it was due. Although the Peepleses told the Lees that they had mailed a cashier's check for the June rent payment on June 26th, the admitted fact is that the Peepleses neither obtained nor sent any cashier's check to the Lees to pay rent due on June 28th.⁷ Between June 28th to July 8th there were at least 20 text messages exchanged between the parties regarding the missing payment. On June 30th, Mr. Lee suggested that the check might have been lost in the mail. The following day, Mr. Peeples agreed that the check should have arrived and indicated he would check with the post office in the morning. On July 2nd, Mr. Peeples stated that the Postal Service was looking into the matter. For the first time he suggested that the check may have been stolen from their outgoing mail. Later on July 2nd, Mr. Lee informed Mr. Peeples that the check had not arrived that day, and Mr. Peeples responded that they had a "case" with the post office and this was a "large loss" for them. Mr. Lee responded quickly, stating that the Peepleses should be able to cancel the cashier's check.

After the cashier's check didn't arrive on July 3rd, Mr. Lee texted Mr. Peeples and again suggested that the Peepleses cancel the cashier's check or inquire with their bank to see if someone else had cashed it and also requested that they keep the Lees informed on the status of the lease payment. Mr. Peeples's response was vague: "Exactly, thankyou, [sic] will do," but there is no evidence that he or Mrs. Peeples canceled a cashier's check or inquired at the bank regarding whether one had been cashed. On July 6th, Mr. Lee asked for an update from Mr. Peeples. Five hours passed without a response, and Mr. Lee sent him the following text message:

Your long silence on this sensitive matter is becoming a serious concern. We need assurances that you are dealing with us in good faith. Timely reports are what is required for us to have such assurances given that you are in default on the lease, and we have been willing to work with you.

Mr. Peeples did not respond to this text message either, and Mr. Lee's growing concerns about the Peepleses' good faith led him to visit the House on July 7th. He spoke with Mrs. Peeples, who repeated the story that the check had been left in the outgoing mail and was feared stolen. According to Mr. Lee, Mrs. Peeples appeared under stress, and her demeanor caused him to believe the story and put to rest his concerns about the Peepleses' good faith. Mr. Lee testified that he "no longer had a concern after that [visit]."⁸ By July 8th, the parties had reached a new arrangement for rent: the parties agreed that the Peepleses could make up the June 28th payment by paying $4,000.00 in July, August, and September.

Unfortunately, the Peepleses failed to make the July 28th lease payment. This time there was no representation that the payment had been sent; the Peepleses simply informed the Lees that they would be late on that month's payment. They scrambled to scrape together some money and did make a handful of minor, fractional payments toward the July 28th lease payment. The Peepleses paid $380.00 on July 30th, $500.00 on July 31st, and $150.00 on August 1st. After these payments were made Mr....