Emberton v. Lobb (In Re Emberton)

263 B.R. 817, 2001 Bankr. LEXIS 768, 2001 WL 739915
CourtUnited States Bankruptcy Court, W.D. Kentucky
DecidedMay 22, 2001
Docket17-31767
StatusPublished
Cited by3 cases

This text of 263 B.R. 817 (Emberton v. Lobb (In Re Emberton)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Emberton v. Lobb (In Re Emberton), 263 B.R. 817, 2001 Bankr. LEXIS 768, 2001 WL 739915 (Ky. 2001).

Opinion

MEMORANDUM-OPINION

JOAN LLOYD COOPER, Bankruptcy Judge.

This case involves a claim by Plaintiffs Johnnie and Stacey Emberton, Debtors under a joint Chapter 13 petition with confirmed plan, against Defendants Sidney and Doris Lobb and Terry Geoghegan, the Hart County Commonwealth’s Attorney, for a willful violation of the automatic stay of 11 U.S.C. § 362(a). The court held a trial on the merits and after considering all of the evidence before it, including the contents of the Court’s adversary proceeding file in the instant case, the contents of the bankruptcy case, and the testimony of the witnesses and documentary evidence tendered, determines that the Defendants committed a willful violation of the automatic stay. Accordingly, the Court enters judgment for the Plaintiffs/Debtors. The following constitutes the Court’s Findings *819 of Fact and Conclusions of Law pursuant to Fed. R. Bankr.P. 7052.

FINDINGS OF FACT

On November 10,1999, Johnnie and Stacey Emberton (the “Embertons”) entered into a Contract for Deed to sell certain real property (the “Contract”) to Sidney and Doris Lobb (the “Lobbs”). The Lobbs own several pieces of real estate in central Kentucky, at least two of which involve farming operations. The Contract provided that the Lobbs would make principal payments to the Embertons over three years totaling the sum of $27,169.50, consisting of a down payment and three consecutive annual payments beginning on December 30, 1999 and ending on December 30, 2001. The Contract provided that the principal payments would be made without interest and the Lobbs could not accelerate payments under the Contract, ie., prepay and force the Embertons to perform their end of the bargain ahead of the Contract schedule.

Upon completion of the annual payments on December 30, 2001, the Embertons were to transfer the real estate to the Lobbs by way of a General Warranty Deed. While the Contract provides limited other details of the agreement, it does not include any representations or warranties concerning the state of the title at the time of the execution of the Contract. The Embertons testified at trial that they made Mr. Lobb aware of the mortgage lien on the property held by Kentucky Banking Centers, but were unaware of the existence of a judgment lien filed against the property by Norwest Financial.

Mr. Emberton testified further that given the time set out in the Contract, the payments to be made by the Lobbs, his future earnings and his retirement savings with his employer, that he would be able to perform his end of the Contract on December 30, 2001. Indeed, at the time of trial in April 2001 the time for performance of the Contract had not yet expired and the Embertons then had only one remaining encumbrance on the property, the mortgage held by Kentucky Banking Centers.

By December 30, 1999, the Lobbs had paid the Embertons the down payment and the first annual installment, totaling the sum of $13,056.50. On February 11, 2000, the Embertons filed a Chapter 13 bankruptcy petition, schedules of their assets and liabilities, a statement of affairs and a Plan. On the date the petition was filed, the Embertons served a copy of their Plan upon all of their creditors, including the Lobbs. The Plan provided, among other things, for rejection of the Contract with the Lobbs due to the fact that the Debtors were unable to perform by tendering to the Lobbs a General Warranty Deed upon completion of payments at the end of the term. The Plan also erroneously provided for voidance of five judgment liens allegedly encumbering the real property. It is clear that at the time the Chapter 13 case was proceeding a diligent search of the real property records in the Hart County Clerk’s Office would have reflected that there was only one mortgage hen and one judgment lien encumbering the property.

The Lobbs retained bankruptcy counsel who entered an appearance in the case and filed an Objection to the Plan on March 20, 2000. The Objection was based on the invalidity of rejection, as an executory contract, of a land sale contract under Kentucky law and a lack of feasibility of the Plan itself. It should be noted that the Lobbs did not make any claim of fraud in the execution of the Contract in their Objection.

After a series of continuances of the first meeting of creditors in the case and a July 20, 2000 amendment to the Plan, the *820 amended Plan was confirmed on September 6, 2000. At the confirmation hearing, the Lobbs’ through their bankruptcy counsel, articulated that they did not intend to press their Objection. Confirmation of the Plan resulted in rejection of the Contract and the provision for repayment to the Lobbs of their full claim with interest at the rate of 8% over 35 months.

While the creditors’ meeting and confirmation process were moving along, a separate, hidden and disturbing track of activity was taking place. J.D. Craddock, the Hart County Attorney, testified at trial that on or about March 13, 2000, Mr. Lobb visited his office and gave him a copy of the Contract and the Plan filed in the bankruptcy. Mr. Craddock testified that Mr. Lobb asked whether a crime had been committed when the Embertons signed the Contract knowing there were five judgment liens on the property. He further testified that he investigated the matter utilizing his paralegal and that as a result of his investigation he determined that a crime had indeed been committed pursuant to KRS 514.040(d), Theft by Deception over $300.00. He then referred the matter to Terry Geoghegan, the Hart County Commonwealth’s Attorney.

While both Mr. Lobb and Mr. Craddock testified that Mr. Lobb did not ask the County Attorney to take criminal action against the Embertons, Mr. Craddock’s letter dated March 16, 2000 to the Hart County Commonwealth’s Attorney, attached as Commonwealth’s Exhibit 1, clearly indicates Mr. Craddock’s understanding that Mr. Lobb wanted the case presented to the Grand Jury and that he would be present to testify. The letter further outlines Mr. Craddock’s belief that there were multiple judgment liens on the property, the crime allegedly committed and requests the presentment of an indictment against the Embertons for a violation of KRS 514.040(d). Mr. Craddock testified that his investigation included a title search, yet it is undisputed by the parties that only one judgment lien was of record at the time. The letter indicates a copy of it was sent to Mr. Lobb.

Mr. Craddock failed to explain to the Court why he thought fraud had occurred when the Embertons did not make any representations or warranties as to the state of the title to the real estate in the Contract. A misrepresentation of a material fact was and is not evident from the face of the Contract. The Contract was prepared by Jon W. Goodman, a Munford-ville, Kentucky attorney.

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Cite This Page — Counsel Stack

Bluebook (online)
263 B.R. 817, 2001 Bankr. LEXIS 768, 2001 WL 739915, Counsel Stack Legal Research, https://law.counselstack.com/opinion/emberton-v-lobb-in-re-emberton-kywb-2001.