Manchester v. Eaves (In re Eaves)

In re: FERN L. EAVES, Debtor.

SUSAN MANCHESTER, Trustee, Plaintiff, v. FERN L. EAVES, Defendant.

Case No. 18-13008-SAH

Adv. Pro. 19-01059-SAH

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF OKLAHOMA

October 31, 2019

The following is ORDERED:

Chapter 7

ORDER DENYING IN PART AND GRANTING IN PART TRUSTEE'S MOTION AND BRIEF IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT ON TRUSTEE'S ADVERSARIAL CAUSES OF ACTION AGAINST FERN L. EAVES FOR AN ORDER REVOKING THE DEBTOR'S DISCHARGE HEREIN FOR CONVERSION OF ESTATE PROPERTY, FOR FAILURE TO OBEY AN ORDER OF THIS COURT AND FOR JUDGMENT FOR THE VALUE OF PROPERTY OF THE ESTATE WITH NOTICE FOR OPPORTUNITY FOR HEARING [DOC. 16]

The following are before the Court for consideration:

1. Complaint to Revoke the Discharge of Debtor and for Turnover of Property of the Estate [Doc. 1] (the "Complaint"), filed by plaintiff Susan Manchester, Trustee ("Trustee") on June 27, 2019;

2. Answer [Doc. 7] (the "Answer"), filed by the debtor and defendant Fern L. Eaves ("Debtor") on July 29, 2019;

3. Trustee's Motion and Brief in Support of Motion for Summary Judgment on Trustee's Adversarial Causes of Action Against Fern L. Eaves for an Order Revoking the Debtor's Discharge Herein for Conversion of Estate Property, for Failure to Obey an Order of this Court and for Judgment for the Value of Property of the Estate with Notice for Opportunity for Hearing [Doc. 16] (the "Motion"), filed by Trustee on October 3, 2019; and

4. Defendant's Response to Trustee's Motion for Summary Judgment and Brief in Support [Doc. 20] (the "Response") filed by Debtor on October 24, 2019.

JURISDICTION

The Court has jurisdiction to hear this Complaint 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, ¶ 3 and Doc. 7, ¶ 3].

BACKGROUND

Debtor filed her chapter 7 voluntary petition in July 2018 and received a discharge about four months later. In April 2019, Trustee filed a motion for turnover of estate property consisting of funds Debtor had withdrawn from her retirement plan pre-petition that remained in Debtor's credit union account on the petition date. After a hearing, the Court granted Trustee's motion and ordered Debtor to turn over the funds to Trustee. Debtor, however, did not turn over the funds. Consequently, in June 2019, Trustee filed this adversary proceeding pursuant to 11 U.S.C. § 727(a)(6) and (d)(3),¹ seeking to revoke Debtor's discharge 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.

UNDISPUTED MATERIAL FACTS

Since Debtor failed to include in her Response a statement of Trustee's material facts that she disputes, the Court will deem admitted all of the material facts in the Motion for purposes of ruling on the Motion. Local Rule 7056-1.C.;² Hagelin for President Comm. of Kansas v. Graves, 25 F.3d 956, 959 (10^th Cir. 1994) ("[b]ecause 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. On July 9, 2018, the Debtor withdrew $39,471.71 from her retirement account. Admitted in Debtor's Answer, Paragraph #13.

2. Debtor filed her chapter 7 voluntary petition on July 18, 2018 (the "Petition Date"). [Case No. 18-13008 (the "Bankruptcy Case"), Doc. 1].³

3. Trustee was appointed as the duly qualified and acting chapter 7 trustee in the Bankruptcy Case. [Case No. 18-13008, Doc. 5].

4. On the Petition Date, Debtor had $12,191.85 of non-exempt retirement funds remaining in her Oklahoma Federal Credit Union Account (the "Funds"). Admitted in Debtor's Answer, Paragraph #14.

5. The Funds were not scheduled on Debtor's bankruptcy petition. See Debtor's Petition Schedule A/B and Statement of Financial Affairs. [Case No. 18-13008, Doc. 1, pp. 12, ¶¶ 16 and 17, p. 13, ¶¶ 30, 33, 34 and 35, 15 - 16, 38, ¶ 13, 39. ¶ 18].

6. Debtor received a discharge on November 6, 2018. [Case No. 18-13008, Doc. 20].

7. On April 9, 2019, Trustee filed a motion for turnover of the Funds as property of Debtor's bankruptcy estate. [Case No. 18-13008, Doc. 28].

8. After a hearing on the matter, the Court granted Trustee's motion and entered the Order on Trustee's Motion for Turnover on May 31, 2019, which ordered Debtor to turn over the Funds to Trustee (the "Turnover Order"). [Case No. 18-13008, Doc. 41].

9. Debtor did not turn over the Funds to the Trustee. Admitted in Debtor's Answer, ¶ 16.

10. Accordingly, on June 27, 2019, Trustee filed the Complaint, commencing this adversary proceeding pursuant to Section 727(a)(6) and (d)(3) seeking to revoke Debtor's discharge and obtain a judgment against Debtor for the Funds. [Doc. 1].

11. Debtor filed her answer on July 29, 2019 [Doc. 7].

DEBTOR'S STATEMENTS OF ADDITIONAL FACT

Debtor's statement of facts contains "additional" facts addressing her state of mind when failing to comply with the Turnover Order:

12. Debtor originally sought bankruptcy services from J.R. Matthews ("Matthews") in 2015. Response, Affidavit, ¶ 1.

13. Subsequent to 2015, Debtor faced financial hardships including a house fire and a mortgage foreclosure. Response, Affidavit, ¶ 2.

14. Debtor's mother passed away on June 4, 2018. Response, Affidavit, ¶ 3.

15. Subsequent to her mother's death, Debtor began caring for her father. Response, Affidavit, ¶ 4.

16. In June 2018, Debtor was also caring for her 17 year old daughter and her 3 month old grandson. Response, Affidavit, ¶ 5.

17. Given her financial hardships, Debtor moved in with her father in June 2018. Response, Affidavit, ¶ 6.

18. In June 2018, Debtor did not know that Matthews never filed a bankruptcy case for Debtor. Response, Affidavit, ¶ 7.

19. Debtor's wages were unable to meet the expenses related to her mother's death and the care of her father, daughter, and grandson. Response, Affidavit, ¶ 8.

20. As a result, on June 16, 2018, Debtor requested a withdrawal from her retirement account. Response, Affidavit, ¶ 9.

21. Debtor used the funds from the retirement account to pay for medical expenses, care giving expenses, and death expenses. Response, Affidavit, ¶ 10. 22. Debtor did not schedule the withdrawal in her bankruptcy schedules as she believed a bankruptcy had been filed prior to June 16, 2018, and it did not need to be listed.⁴ Response, Affidavit, ¶ 11.

23. Since filing bankruptcy, Debtor suffered additional financial difficulties and illness. Response, Affidavit, ¶ 12.

24. On January 19, 2019, Debtor was diagnosed with a pulmonary nodule on her right lung and incurred medical expenses as a result thereof. Response, Affidavit, ¶ 13.

25. Debtor also suffers from diabetes, diverticulitis, and a hiatal hernia and incurs medical expenses associated therewith. Response, Affidavit, ¶ 14.

26. Debtor currently owes $11,134.00 in federal taxes and $1,463.00 in state taxes for 2018. Response, Affidavit, ¶ 15.

27. Debtor currently pays $159.00 monthly to the IRS on her 2018 tax obligation. Response, Affidavit, ¶ 16.

28. Debtor has not refused to turnover any money to Trustee but did not have extra funds to pay Trustee. Response, Affidavit, ¶ 17.

29. Debtor currently has $300.00 in her bank account. Response, Affidavit, ¶ 18.

30. The medical expenses for Debtor and those in her care depleted any funds that would have been available to turnover to Trustee. Response, Affidavit, ¶ 19.

31. Debtor did not intend to refuse to turnover monies to Trustee but funds were unavailable for the reasons set forth above. Response, Affidavit, ¶¶ 20, 21, and 24. 32. Debtor did not intend to defraud Trustee or her bankruptcy estate. Response, Affidavit, ¶ 23.

33. Debtor proposes to pay Trustee $200.00 monthly in order to comply with the Turnover Order. Response, Affidavit, ¶ 22.

APPLICABLE STATUTORY PROVISIONS

Section 727 provides in pertinent part:

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

(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;

. . .

(d) On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if—

. . .

(3) the debtor committed an act specified in subsection (a)(6) of this section[.]

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 (10^th Cir. BAP 2006) (citing prior Fed. R. Civ. P. 56(c), Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), 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, the movant must establish each 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, *2 (Bankr. N.D. Okla. 2007) (citing In re Ribozyme Pharm., Inc., Sec. Litig., 209 F. Supp. 2d 1106, 1111 (D. Colo. 2002)). Competent summary...