Ruby v. Ryan (In re Ryan)

472 B.R. 714

In re Mykal S. RYAN, Debtor.David R. Ruby, Chapter 7 Trustee, Plaintiff,

v.Helen E. Ryan, John J. Ryan, Jr., Defendants.

Bankruptcy No. 08–50805–FJS.

Adversary No. 10–05026–FJS.

United States Bankruptcy Court,

E.D. Virginia,

Newport News Division.

April 4, 2012.

David R. Ruby, Thompson McMullan, P.C., Richmond, VA, Kelly Megan Barnhart, Roussos, Lassiter, Glanzer & Barnhart, Norfolk, VA, for Plaintiff.

Helen E. Ryan, San Diego, CA, pro se.

John J. Ryan, Jr., San Diego, CA, pro se.

MEMORANDUM OPINION

FRANK J. SANTORO, Bankruptcy Judge.

This matter comes before the Court upon Plaintiff's Motion for Default Judgment, The Court has subject-matter jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and the General Order of Reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. This matter arises under Title 11 of the United States Code and is a core proceeding pursuant to 28 U.S.C. § 27459012 157(b)(2)(A), (E), (F), (H), (K) and (O). The following constitutes the Court's findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. Fed. R. Bankr.P. 7052. For the reasons set forth below, the Court finds that Defendants are in default and, therefore, the Court will enter a Default Judgment against Defendants, entitling Plaintiff to recovery under 11 U.S.C. § 550(a).

I. PROCEDURAL BACKGROUND

On July 16, 2008 Mykal S. Ryan (the “Debtor”) filed a voluntary petition under Chapter 7 of Title 11 of the United States Code (the “Petition”). ¹ (Case No. 08–50805–FJS, Doc. No. 1.) Relief was ordered. David R. Ruby (the “Plaintiff”) was appointed as Chapter 7 Trustee and continues to serve in that capacity.

Thereafter, on July 15, 2010, the Plaintiff initiated the above-captioned adversary proceeding by filing a complaint (the “Complaint”) against the Debtor's parents, Helen E. Ryan (“Mrs. Ryan”) and John J. Ryan, Jr. (“Mr. Ryan”) (collectively the “Defendants”). (Doc. No. 1.) The Complaint seeks: (i) to avoid and recover fraudulent transfers, fraudulent conveyances and voluntary conveyances; (ii) to avoid and recover preferential transfers; (iii) to avoid and recover post-petition transfers; (iv) turnover of assets; and (v) a judgment of sums determined to be due the bankruptcy estate by the Defendants. (Compl. ¶¶ 42–74.)

On July 21, 2010, the Court issued a Summons and Notice in Adversary Proceeding (the “Summons”). (Doc. No. 3.) The Summons established an initial pre-trial conference date of September 28, 2010, and required the Defendants to file an answer or other responsive pleading no later than August 20, 2010. (Doc. No. 3.) The Plaintiff effectuated service of the Summons and Complaint upon the Defendants at their San Diego, California dwelling, via first-class mail, postage prepaid, on July 28, 2010. SeeFed. R. Bankr.P. 7004(b)(1). (Doc. No. 4.) Thereafter, on August 18, 2010, Mrs. Ryan filed, pro se, a responsive pleading styled as “Motion to Request Dismissal of the Complaint” (the “First Motion to Dismiss”). (Doc. No. 5.) On August 25, 2010, the Clerk of Court issued to Mrs. Ryan a Confirmation of Request for Hearing, which established a September 28, 2010 hearing date on the First Motion to Dismiss and instructed Mrs. Ryan to provide notice of the same. (Doc. No. 6.)

Thereafter, on September 27, 2010, Mrs. Ryan filed a document with the Court entitled “Motion to Stay Adversary Proceeding” (the “Motion to Stay”). (Doc. No. 11.) The Motion to Stay requested that the Court “stay the [above-captioned matter] for [n]inety (90) days and re-evaluate at that time,” due to an illness affecting Mr. Ryan. (Doc. No. 11.)

On September 28, 2010, the Court convened a pre-trial conference (the “Pre-trial Conference”) and a hearing on the First Motion to Dismiss. (Doc. No. 12.) The Defendants failed to appear, although they were notified of the date, time, and location of the Pre-trial Conference and of the hearing on the First Motion to Dismiss, and were afforded an opportunity to attend the same via telephone. (Doc. No. 12.) At the Pre-trial Conference, the Court established a trial date of May 11, 2011, a common discovery deadline of March 31, 2011, and a bar date of April 20, 2011 for all dispositive motions, including motions for summary judgment; the Court entered a pre-trial order memorializing the same on October 4, 2010. (Doc. No. 13.) Additionally, the Court noted that although the Motion to Stay was filed one day prior, it was not accompanied by a request for an expedited hearing. Therefore, the Court stated that the Motion to Stay was not properly before the Court at that time, and that it would be set for a hearing in the ordinary course.² Subsequently, on November 22, 2010, the Court administratively dismissed the First Motion to Dismiss for failure to prosecute. (Doc. No. 27.) Neither Defendant filed, thereafter, any other responsive pleading or motion pursuant to Federal Rule of Bankruptcy Procedure 7012.

Following an approved substitution of counsel for the Chapter 7 Trustee, the Court convened a continued pre-trial conference on March 22, 2011 (the “Continued Pre-trial Conference”). (Doc. Nos. 31, 48.) The Defendants were notified of the Continued Pre-trial Conference but failed to attend, despite being afforded the opportunity to appear via telephone. (Doc. No. 48.) Thereafter, the Court entered an amended pre-trial order on March 28, 2011 (the “Amended Pre-trial Order”). (Doc. No. 51.) The Amended Pre-trial Order established a new common discovery deadline date of June 30, 2011, and provided that “all motions, including Motions for Summary Judgment ... are to be filed on or before July 15, 2011.” (Doc. No. 51.) The Amended Pre-trial Order further provided that “[a]ll exhibits proposed by the Plaintiff and the Defendant(s) are to be exchanged with the other parties and filed with the Court at least ten (10) days prior to [the] trial” date of August 31, 2011. (Doc. No. 51.)

On July 5, 2011, Mrs. Ryan filed, pro se, a second motion with the Court, styled as “Motion to Dismiss or Transfer Adversary Proceeding” (the “Second Motion to Dismiss”). (Doc. No. 67.) The Court issued a Confirmation of Request for Hearing on July 7, 2011, which set a hearing date of July 26, 2011 on the Second Motion to Dismiss, instructed Mrs. Ryan to provide notice of the same, and afforded Mrs. Ryan an opportunity to appear via telephone. (Doc. No. 68.) Thereafter, on July 14, 2011, Mrs. Ryan filed with the Court a letter (the “Letter”) objecting to the July 26, 2011 hearing date on the Second Motion to Dismiss. (Doc. No. 72.) The Court treated the Letter as a motion to continue the hearing on the Second Motion to Dismiss (the “Motion to Continue”) (Doc. No. 75.), and scheduled a hearing on the same for August 16, 2011.³ (Doc. No. 79.)

Subsequently, on July 13, 2011, the Plaintiff filed a Motion for Default Judgment pursuant to Federal Rule of Bankruptcy Procedure 7055. (Doc. No. 70.) The Plaintiff served notice of the Motion for Default Judgment on the Defendants via first-class mail, postage prepaid, on July 13, 2011. (Doc. No. 70.)

Thereafter, on July 26, 2011, the Court convened a hearing on the Second Motion to Dismiss. (Doc. No. 73.) Mrs. Ryan failed to attend the July 26, 2011 hearing by telephone or otherwise and failed to provide notice of the same. (Doc. No. 73.) Accordingly, the Court dismissed the Second Motion to Dismiss for failure to prosecute. (Doc. No. 80.)

On August 16, 2011, the Court convened a hearing on the Motion to Continue. (Doc. No. 83.) Mrs. Ryan did not attend the hearing in person and did not avail herself of the opportunity to appear by telephone. (Doc. No. 83.) Accordingly, the Court denied the Motion to Continue for failure to prosecute. (Doc. No. 83.) At the August 16, 2011 hearing, the Court established an October 4, 2011 hearing date for the Motion for Default Judgment (the “Default Motion Hearing”) and directed the Plaintiff to provide the Defendants a minimum of twenty-one (21) days notice of the same. (Doc. No. 83.) Additionally, the Court continued the trial scheduled for August 31, 2011, and instructed that the date set for the Default Motion Hearing would be used as a scheduling conference if necessary.

On August 22, 2011, the Plaintiff served the Defendants with Notice of the Default Motion Hearing, which authorized the Defendants to participate in the Default Motion Hearing by telephone. (Doc. No. 85.) Thereafter, on September 6, 2011, the Plaintiff filed with the Court—and served on Defendants via first-class mail, postage prepaid—an amended list of witnesses, amended list of exhibits, and copies of exhibits intended to be introduced at the Default Motion Hearing. (Doc. Nos. 88, 89.)

Subsequently, the Defendants filed several motions with the Court seeking to avert the Default Motion Hearing.⁴ However,the Court convened the Default Motion Hearing, as scheduled, on October 4, 2011. (Doc. No. 97.) The Defendants failed to attend the Default Motion Hearing in person or by telephone. (Hr'g Tr. 3:13–23, October 4, 2011.) At the Default Motion Hearing the Plaintiff presented evidence in the form of exhibits and testimony, which were admitted without objection.

II. FINDINGS OF FACT

Having reviewed the Complaint, the Court accepts the Plaintiff's well-pleaded factual allegations as true and makes the following findings of fact. See DIRECTV, Inc. v. Rawlins, 523 F.3d 318, 322 n. 1 (4th Cir.2008) (accepting plaintiff's allegations against defaulting defendant as true, noting a defaulting defendant “admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established”) (quoting Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir.2001)).

A. The Family Trust and Judgments Entered Against the Debtor

On March 29, 1999, the John and Christy Ryan Family...