The Movant, Mr. Roger Munn, filed this motion to object to discharge and objection to confirmation of the Debtor’s plan. The Court found the motion to object procedurally deficient and otherwise lacking in merit. The Court overruled the Movant’s objection under § 1325(a)(3) because it found the Debtor filed her case in good faith in accordance with the factors in In re Kitchens, 702 F.2d 885. The Court also overruled the Movant’s objection under § 1325(b)(3) and § 1325(a)(4) because it found the Debtor’s income and estate do not include child support arrearages.
Opinions
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Judge John T. Laney, III
The Chapter 7 Trustee, Walter Kelley, filed a motion for the Court to reconsider its previous memorandum opinion and order in this case. The Court considered the Trustee’s arguments and denied the motion. The parties stipulated that at least one institution should have been served in accordance with 7004(h), but the Court found that the Trustee did not prove the error justified the use of Rule 59. The Court reconsidered its previous finding that the Trustee was bound by res judicata and did not find it had made a manifest error of law. The Court also found the Trustee’s arguments about the Debtors’ motivation for converting their case untimely. Finally, the Court was unpersuaded by the Trustee’s oral motion under Rule 60(b)(6).
The Debtors in this case had previously motioned to the Court and received permission to sell two loaders and a lawn mower in satisfaction of a claim by the Creditor, Southern Pine Credit Union. In exchange for the proceeds from the sale, the Creditor would release the liens on the three pieces of equipment and a Nissan Armada owned by the Debtors. The Chapter 13 Trustee consented to the Debtors’ motion to sell. After the order of sale was entered but before the proceeds were received by the Creditor, the Debtors converted their case to Chapter 7. Shortly after the conversion, the Creditor filed a motion to relief from the stay. The proceeds have since been received.
The Chapter 7 Trustee investigated and contests the validity of the liens on the two loaders and the lawn mower, but not the Nissan Armada, and has demanded turnover of the sale proceeds as part of the Chapter 7 estate. The Trustee responded to the Creditor’s motion for relief from the stay on those grounds. The Debtors filed a motion for turnover against the Creditor requesting clear title be transferred on the Armada because the proceeds had been paid in accordance with the Court’s previous order to sell. The Creditor filed a motion for relief from order claiming the Chapter 7 Trustee is barred by res judicata and, in the alternative, requesting relief from the Court’s order requiring the liens be released.
The Court found the proceeds from the sale are part of the Chapter 7 estate under § 348(f)(1)(A), but the Trustee is barred by res judicata from contesting the liens because the Chapter 13 Trustee consented to validity of the liens in the Debtors’ motion to sell.
Vacating and withdrawing the opinion and order entered July 13, 2022, as well as its order sustaining Debtor’s objection to Movant’s claim, the Court reexamined the Movant’s due process and priority arguments. First, the Court vacated its order sustaining Debtor’s objection to Claim no. 2. The Court found that Movant’s active litigation of his claim’s priority status, through his motion to reconsider, oral argument, and brief, adequately preserved his position. The Court then reexamined Movant’s argument that he was denied due process. The Court found that because Movant received no notice beyond mere existence of the case, he was deprived notice and opportunity to be heard as to the chapter 13 plan and confirmation hearing. Accordingly, Movant was not bound by the terms of the confirmed chapter 13 plan. Finally, the Court evaluated the merits of Movant’s contention that his claim, arising from attorney’s fees which accrued during his representation of Debtor, qualify as a domestic support obligation. Although Movant represented Debtor in a domestic proceeding, Debtor is the beneficiary of a domestic support obligation owed to her by her ex-spouse. Thus, the Court held that the debt owed by Debtor to Movant is not a domestic support obligation. Because Movant’s claim is not a domestic support obligation, the Court found it is not entitled to first priority status.
This Movant, Roger Munn, filed this motion to vacate or set aside plan confirmation. The Movant claimed the lack of notice of the plan’s contents and confirmation date from the BNC, despite actual notice from the attorney representing the Respondent, Esther Collins, violated his due process rights. He also argued his claim for attorneys’ fees from his representation of the Respondent had priority status as a domestic support obligation. The Court found the Movant’s motion to vacate procedurally defective because a motion to set aside plan confirmation must be brought as an adversary proceeding. Despite its procedural deficiencies, the Court found the motion also lacked merit because the Movant had actual notice of the Respondent’s claim and had the duty to inquire to protect his rights. Finally, the Court found the Movant did not present adequate evidence of a claim against the Respondent for attorneys’ fees. Thus, the Court denied the Movant’s motion.
Judge James P. Smith (Retired)
Plaintiff filed an action in Nevada state court in 2018 alleging that Defendant/Debtor had breached her duties as trustee of a Family Trust. There, Plaintiff and Debtor disputed when the state statute of limitations had began to run. Debtor’s bankruptcy in 2022 stayed the state court action. Plaintiff filed a complaint in this Court alleging that Debtor breached her fiduciary duty and that her debt was nondischargeable under 11 U.S.C. §523 (a)(2)(A), (4) and (6). The Court denied Debtor’s motion to dismiss the complaint because, in his complaint, Plaintiff alleged that he first learned of Debtor’s breach of fiduciary duty on a certain date that was within the state statute of limitations. However, the Court did permissively abstain from hearing Plaintiff’s claims that are controlled by Nevada state law. 28 U.S.C. §1334 (c)(1) Once the Nevada case has been resolved and Plaintiff’s claims determined, this Court will make a final determination as to whether the claims, if any, are nondischargeable.
Debtor agreed to help finance a concrete business owned by a long-time friend and former roommate, Hill. Debtor’s loans were to be used to purchase materials with Hill supplying the labor. Debtor’s profit was 30% of the loan amount. Debtor issued a check for each loan and Hill issued a repayment check. Debtor and Hill used different banks and multiple loan and repayment checks were sometimes deposited the same day. For six months, all checks cleared the respective bank. Then Hill deposited checks totaling $550,000 into Debtor’s account and Debtor had his bank issue a cashier’s check for $535,000 to Hill. Hill’s checks were dishonored causing Debtor’s account to be overdrawn. Debtor’s bank obtained judgment against Debtor for the overdraft.
After Debtor filed a Chapter 7 case, his bank alleged that Debtor and Hill participated in a check kiting scheme and that Debtor’s debt arose from actual fraud and was nondischargeable under 11 U.S.C. §523(a)(2)(A).
The court analyzed the swapping of checks between Debtor and Hill and determined that there was no check kiting at least prior to the end of November 2017. The time gap between some deposits and debits exceeded the float time between the banks.
The court determined that the transactions over the next twenty days suggested that kiting was occurring but that Debtor was not a knowing participant, did not attempt to defraud his bank and that his debt to the bank was dischargeable in bankruptcy.
Defendant moved to disqualify Plaintiff’s counsel (Geer) because one of its attorneys (Christy) had allegedly learned confidential information about Defendant while Christy was working as a contract attorney for Defendant’s counsel (McBryan). While working for McBryan, Christy worked on the Chapter 11 bankruptcy cases of four corporations of which Defendant was sole owner and CEO. After Christy stopped receiving work from McBryan, McBryan filed an individual Chapter 11 case for Defendant. Christy never worked on Defendant’s bankruptcy case. Defendant’s brother then filed an adversary proceeding asserting that Defendant’s debt arising from her actions as trustee of her brother’s trust are non-dischargeable under 11 U.S.C. § 523(a)(2)(A), (a)(4) and (a)(6). Geer is counsel for the brother and Christy is a contract attorney at Geer.
Whether Christy learned confidential information about Defendant while working at the McBryan firm on the corporations’ bankruptcy cases was hotly disputed. The Court applied Rules 1.6(a), 1.7(a), 1.9(a) and 1.13(a) of the Georgia Rules of Professional Conduct and determined that Geer and Christy should not be disqualified.
When Christy worked for McBryan, McBryan represented the Chapter 11 corporations and not Defendant, individually, who was represented by separate counsel. Any confidential information Christy learned while representing the corporations belonged to the corporations, not to Defendant. Furthermore, this adversary proceeding is not “substantially related” to the corporations’ bankruptcy cases. This adversary proceeding concerns decisions Defendant made in 2014 regarding her brother’s trust, which are not related to Defendant’s financial condition in 2019. Also, Defendant’s financial information is now public knowledge, having been disclosed in her bankruptcy schedules.
Chief Judge Austin E. Carter
Plaintiff moved for summary judgment on lien priority dispute seeking equitable subrogation and declaratory judgment. Plaintiff advanced funds to satisfy existing first priority lien on Debtor’s property as part of refinance transaction, with the intention and understanding that its new lien would be in first priority position. Unbeknownst to Plaintiff at the time of the refinance, however, was Defendant’s junior lien, which did not appear on Plaintiff’s title search. Defendant challenged jurisdiction, requested abstention, and argued that Plaintiff was chargeable with inexcusable neglect. The Court declined to abstain and granted summary judgment in favor of the Plaintiff, finding no issues of material fact existed as to the elements of equitable subrogation under Georgia law.
The Debtor asserted that a pawned vehicle was property of the estate and moved for turnover under § 542(a). The redemption period expired prior to the petition date—passing title to Respondent under state law—but Respondent failed to repossess the vehicle at that time, so it was in the Debtor’s possession when she filed her case. The Debtor’s confirmed plan provided for surrender of the vehicle, which was shown as inoperable. After confirmation, Respondent did not attempt to retrieve the vehicle. Several months later, the Debtor had repairs made, which substantially increased the vehicle’s value. Much later, the Respondent repossessed the vehicle, after which the Debtor filed a motion to modify her plan to retain the vehicle and pay the Respondent’s claim through monthly payments. The modified plan drew no objection and was confirmed. The Debtor argues that the modified plan is res judicata and deems the vehicle estate property subject to turnover. The Debtor argues, alternatively, that: (1) Respondent abandoned its ownership interest in the vehicle via its failure to repossess; (2) Debtor’s repairs to vehicle give her an ownership interest or an equitable or mechanic’s lien; and (3) Debtor is owed recovery under unjust enrichment or quantum meruit due to the increase in value from the Debtor’s repairs. The Court held that, because the redemption period expired before the petition date, the vehicle was excluded from the estate and the Debtor could not transform it into estate property through plan modification. In addition, the Court found that the equities did not favor the Debtor because she repaired a vehicle owned by the Respondent under Georgia title pawn law, and that she was obligated to surrender through her confirmed plan. Additionally, Debtor benefited from use of the repaired vehicle while representing that it was inoperable in two proposed modified plans filed after repairs were made.