Manchester v. Easly (In re Easly)

In re: JAMIE MICHELLE EASLY, Debtor.

SUSAN MANCHESTER, TRUSTEE, Plaintiff, v. JAMIE MICHELLE EASLY, Defendant.

Case No. 20-10360-SAH

Adv. Pro. 20-01071-SAH

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF OKLAHOMA

February 1, 2021

The following is ORDERED:

Chapter 7

ORDER DENYING IN PART AND GRANTING IN PART TRUSTEE'S MOTION FOR SUMMARY JUDGMENT ON TRUSTEE'S ADVERSARIAL CAUSE OF ACTION AGAINST JAMIE MICHELLE EASLY FOR TURNOVER OF TAX REFUNDS, FOR AN ORDER DENYING THE DEBTOR'S DISCHARGE HEREIN FOR CONVERSION OF ESTATE PROPERTY AND FOR FAILURE TO OBEY A COURT ORDER AND FOR JUDGMENT AGAINST JAMIE MICHELLE EASLY WITH NOTICE FOR OPPORTUNITY FOR HEARING WITH BRIEF IN SUPPORT [DOC. 11]

The following are before the Court for consideration:

1. Complaint to Deny the Discharge of the Debtor and for Turnover of Property of the Estate [Doc. 1] (the "Complaint"), filed by plaintiff Susan Manchester, Trustee ("Trustee") on October 15, 2020;

2. Answer [Doc. 5] (the "Answer"), filed by the debtor and defendant Jamie Michelle Easly ("Debtor") on November 9, 2020;

3. Amendment to Answer [Doc. 9] (the "Amendment"), filed by Debtor on November 23, 2020; and

4. Trustee's Motion for Summary Judgment on Trustee's Adversarial Cause of Action Against Jamie Michelle Easly for Turnover of Tax Refunds, for an Order Denying the Debtor's Discharge Herein for Conversion of Estate Property and for Failure to Obey a Court Order and for Judgment Against Jamie Michelle Easly with Notice for Opportunity for Hearing with Brief in Support [Doc. 11] (the "Motion"), filed by Trustee on November 25, 2020.

BACKGROUND

Debtor filed her chapter 7 voluntary petition on February 3, 2020. In June 2020, Trustee filed a motion for turnover of estate property, specifically Debtors 2019 tax refund. The Court granted Trustee's motion and ordered Debtor to turn over the tax refund to Trustee. Debtor, however, did not turn over the refund. Consequently, on October 15, 2020, Trustee filed this adversary proceeding pursuant to 11 U.S.C. §§ 542 and 727(a)(2) and (6)(a),¹ seeking to deny Debtor's discharge, require turnover of the tax refund,² and obtain a judgment against Debtor for said funds. Trustee now seeks summary judgment, arguing there are no disputed material facts, and she is entitled to judgment on her complaint as a matter of law.

JURISDICTION

The Court has jurisdiction to hear this Motion pursuant to 28 U.S.C. § 1334(b), and venue is proper pursuant to 28 U.S.C. § 1409. Reference to the Court of this matter is proper pursuant to 28 U.S.C. § 157(a), and this is a core proceeding as contemplated by 28 U.S.C. § 157(b)(2)(J). Additionally, the parties consented to this Court's entry of final orders pursuant to Federal Rules of Bankruptcy Procedure 7008 and 7012. [Doc. 1, ¶ 4 and Doc. 9].

UNDISPUTED MATERIAL FACTS

Debtor failed to respond to the Motion; therefore, the Court deems admitted all properly supported³ material facts in the Motion for purposes of ruling on the Motion. Local Rule 7056-1.C.⁴; Hagelin for President Comm. of Kansas v. Graves, 25 F.3d 956, 959 (10^th Cir. 1994) ("Because the state failed to submit any materials contradicting plaintiffs' statement of facts in support of their motion for summary judgment, these facts are deemed admitted").

1. Debtor filed her chapter 7 voluntary petition on February 3, 2020 (the "Petition Date"). Case No. 20-10360-SAH (the "Bankruptcy Case"), Doc. 1.⁵

2. Trustee was appointed as the duly qualified and acting chapter 7 trustee in the Bankruptcy Case. Bankruptcy Case, Doc. 6.

3. On Debtor's Schedule A/B, Debtor scheduled $750.00 as the amount owed to her for her federal tax refund. Bankruptcy Case, Doc. 1.

4. Debtor acquired her 2019 tax refund (the "Tax Refund") after the Petition Date. Complaint ¶ 5, Admitted in Debtor's Answer.

5. Debtor spent the non-exempt portion of the Tax Refund. Admitted in Debtor's Answer; Motion, Uncontroverted Facts ¶ 8.

6. Debtor was informed at the 341 meeting of creditors that she was required to turn over her Tax Refund. Complaint ¶ 14, Admitted in Debtor's Answer; Motion, Uncontroverted Facts ¶ 8.

7. On June 24, 2020, Trustee filed a motion for turnover of the Tax Refund as property of Debtor's bankruptcy estate (the "Turnover Motion"). Bankruptcy Case, Doc. 27. Debtor did not file any response to, or otherwise contest, the Turnover Motion. See Bankruptcy Case Docket generally.

8. The Court granted the Turnover Motion and entered the Order on Trustee's Motion for Turnover on July 9, 2020, which ordered Debtor to turn over the Tax Refund to Trustee (the "Turnover Order"). Bankruptcy Case, Doc. 28.

9. Debtor did not turn over the Tax Refund to the Trustee. Complaint ¶ 14, Admitted in Debtor's Answer; Motion, Uncontroverted Facts ¶ 8.

10. Accordingly, on October 15, 2020, Trustee filed the Complaint, commencing this adversary proceeding seeking to deny Debtor's discharge pursuant to Sections 542 and 727(a)(2) and (6)(A) and to obtain a judgment against Debtor for the Tax Refund. [Doc. 1].

11. Debtor filed her Answer on November 9, 2020, and filed the Amendment on November 23, 2020, to add her consent pursuant to Federal Rule of Bankruptcy Procedure 7012. [Docs. 5, 9].

APPLICABLE STATUTORY PROVISIONS

Section 542 provides in pertinent part:

(a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.

Section 727 provides in pertinent part:

(a) The court shall grant the debtor a discharge, unless-

(2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, hastransferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed-

(B) property of the estate, after the date of the filing of the petition;

(6) the debtor has refused, in the case-

(A) to obey any lawful order of the court, other than an order to respond to a material question or to testify;

. . .

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate if all of the pleadings, depositions, discovery responses, together with any affidavits, show that there is "no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (made applicable to this proceeding by Fed. R. Bankr. P. 7056); Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10^th Cir. 2003); Bank of Cushing v. Vaughan (In re Vaughan), 342 B.R. 385, 2006 WL 751388, at *2 (10^th Cir. BAP March 22, 2006) (first citing prior Fed. R. Civ. P. 56(c); then citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); and then citing Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10^th Cir. 1993)). The moving party "bears the ultimate burden of establishing its right to summary judgment as a matter of law even when it does not have the ultimate burden of persuasion at trial." Trainor v. Apollo Metal Specialties, Inc., 318 F.3d 976, 982 (10^th Cir. 2002). "If the movant has the burden of proof on the claim at issue, 'the movant must establish every element of its claim or defense by sufficient, competent evidence to set forth a prima facie case.'" Reynolds v. Haskins (In re Git-N-Go, Inc.), 2007 WL 2816215, at *2 (Bankr. N.D. Okla. Sept. 25, 2007) (quoting In re Ribozyme Pharm., Inc., Sec.Litig., 209 F. Supp. 2d 1106, 1111 (D. Colo. 2002)). Competent summary judgment evidence does not include "'[c]onclusory statements and testimony based merely on conjecture or subjective belief.'" Git-N-Go, 2007 WL 2816215, at *2 (quoting Rexrode v. Allstate Indem. Co., No. 06-CV-00887, 2007 WL 2288190, at *1 (D. Colo. Aug. 9, 2007) (citing Rice v. United States, 166 F.3d 1088, 1092 (10^th Cir.1999))).

"Summary judgment is not proper merely because [the non-moving party] failed to file a response. Before the burden shifts to the nonmoving party to demonstrate a genuine issue, the moving party must meet its 'initial responsibility' of demonstrating that no genuine issue of material fact exists and that it is entitled to summary judgment as a matter of law." Reed v. Bennett, 312 F.3d 1190, 1194 (10^th Cir. 2002) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). However, "[b]ecause a failure to respond means the facts are considered undisputed, '[t]he court should accept as true all material facts asserted and properly supported in the summary judgment motion. But only if those facts entitle the moving party to judgment as a matter of law should the court grant summary judgment.'" Wilson v. Village of Los Lunas, 572 F. App'x 635, 640 (10^th Cir. 2014) (quoting Reed, 312 F.3d. at 1195).

"A fact is 'material' if under the substantive law it could have an effect on the outcome of the lawsuit." Adams v. Am. Guarantee and Liab. Ins. Co., 233 F.3d 1242, 1246 (10^th Cir. 2000) (citing Equal Employment Opportunity Comm'n v. Horizon/CMS Healthcare Corp., 220 F.3d 1184, 1190 (10^th Cir. 2000)). "A dispute over a material fact is 'genuine' if a rational [fact finder] could find in favor of the nonmoving party on the evidence presented." Horizon/CMS Healthcare Corp., 220 F.3d at 1190 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence presented must, in turn, be considered inthe light most favorable to the party opposing summary judgment. Vaughan, 2006 WL 751388, at *2 (citing Bee v. Greaves, 744 F.2d 1387, 1396 (10^th Cir. 1984)).

LEGAL CONCLUSIONS

Denying a debtor's discharge is an extreme remedy "reserved for a truly pernicious debtor" and should not be taken lightly. Los Alamos Nat'l Bank v. Lamey (In re Lamey), 574...