In re Hale

511 B.R. 870, 2014 WL 2922347, 2014 Bankr. LEXIS 2874
CourtUnited States Bankruptcy Court, W.D. Michigan
DecidedJune 27, 2014
DocketNo. GL 11-08217
StatusPublished
Cited by2 cases

This text of 511 B.R. 870 (In re Hale) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Hale, 511 B.R. 870, 2014 WL 2922347, 2014 Bankr. LEXIS 2874 (Mich. 2014).

Opinion

[872]*872 OPINION RE: (1) DEBTORS’ REQUEST TO CONVERT FROM CHAPTER 7 TO CHAPTER 13; AND (2) DEBTORS’ POTENTIAL EXEMPTION CLAIM IN CERTAIN REAL PROPERTY

JAMES D. GREGG, Bankruptcy Judge.

I. JURISDICTION

This court has jurisdiction over this chapter 7 bankruptcy case and all proceedings and contested matters. 28 U.S.C. § 1334. This case and all related proceedings have been referred to this court for decision. 28 U.S.C. § 157(a) and L.R. 83.2(a) (W.D.Mich.). The matters before the court are core proceedings. 28 U.S.C. § 157(b)(2)(A) (administration of estate) and (B) (allowance or disallowance of exemptions). This summary opinion constitutes the court’s findings of fact and conclusions of law. Fed. R. Bankr.P. 7052.

II. FACTS

The facts are based upon the court’s docket and the pleadings and papers filed by the parties in this case. Judicial notice of the court’s file is appropriate in this instance. Fed.R.Evid. 201. See Alofs Mfg. Co. v. Toyota Mfg. Kentucky, Inc. (Matter of Alofs Mfg. Co.), 209 B.R. 83, 96 n. 9 (Bankr.W.D.Mich.1997); accord In re Brown, 293 B.R. 865, 868 n. 9 (Bankr.W.D.Mich.2003) (court takes judicial notice of pleadings and papers in its file to determine bad faith conversion from chapter 7 to chapter 13).

This chapter 7 bankruptcy case has a long and checkered history. Mark Anthony Hale and Mary Ellen Hale (“Debtors”) filed their bankruptcy petition under chapter 7 on August 3, 2011. (DN 1.) The Debtors’ attorneys, the Dietrich Law Firm (“Dietrich”), were paid $1,051.00 to advise the Debtors and file the chapter 7 petition on their behalf. (See Disclosure of Compensation of Attorney for Debtors, DN 2.)

In their original schedules, filed with their petition, the Debtors listed real property located in Munith, Michigan as property of the estate. No other real property was listed. (DN 1.) On Schedule G, pertaining to unexpired leases, the Debtors listed a “month to month lease from Mark’s (one of the Debtors) father” relating to Stockbridge, Michigan real property. The father is stated to be Buck Hale. (DN 1.) On Schedule J, pertaining to the Debtors’ expenditures, the monthly rent payment is stated to be $750.00. (DN 1.)

The Debtors also disclosed that their residence, and the contents thereof, was damaged by fire on May 15, 2011. Insurance covered $40,000.00 in losses. (Statement of Financial Affairs, ¶ 8, DN 1.) On their Schedules, there is no disclosure that Mark Hale actually is a co-owner of the Stockbridge, Michigan real property (a house and 100 acres). The Debtors each signed their petition, Schedules, and Statement of Financial Affairs under penalty of perjury. (DN 1.)

Kelly Hagan (“Trustee”) filed her Report of First Meeting of Creditors on September 14, 2011. (DN 12.) The Trustee subsequently gave Notice of Possible Dividends to Creditors on September 21, 2011. (DN 14.) Later, on September 28, 2011, the Trustee filed her application to employ an attorney for the estate. (DN 18.) For some unknown reason, the predecessor bankruptcy judge delayed signing and entering the Trustee’s attorneys’ appointment order until November 2, 2011. (DN 31.) This successor judge has treated the appointment order as being effective nunc pro tunc to the date of the Trustee’s application.

On October 19, 2011, the Trustee filed a Motion to Compel Debtors to Turnover Property of the Estate. (DN 24.) The [873]*873motion pertained to the Debtors’ claim to, or receipt of, $40,000.00 in postpetition fire insurance proceeds. On November 17, 2011, the predecessor judge adjourned the hearing pertaining to the requested turnover to January 13, 2012. The undersigned judge was to preside over the Lansing bankruptcy docket on January 2, 2012, and he assumed those duties as scheduled.

On October 28, 2011, the Debtors filed an Amended Schedule C and an Amended Statement of Financial Affairs. (DN 26.) Two things are noteworthy: First, Schedule B was not amended to disclose co-ownership of the Stockbridge, Michigan “leased” property and, second, no exemption on Schedule C was listed regarding the Stockbridge, Michigan real property.

Also on October 28, 2011, the Debtors responded to the Trustee’s motion for turnover of the $40,000.00 in insurance proceeds. The Debtors asserted, as of the petition date, they had an equitable interest in the fire insurance proceeds and that the proceeds to be received would be for replacement of otherwise exempt household goods and furniture. (DN 27.) Because the Debtors’ Amended Schedule C first formally claimed the fire insurance proceeds as exempt, the Trustee timely objected to the amended exemption claimed in the fire insurance proceeds. (DN 34.)

During this timeframe, the Trustee also filed another motion for turnover pertaining to “requested information.” (DN 34.) After a hearing eventually took place, the court entered its Order Denying Trustee’s Motion to Compel Debtors to Turnover Property of the Estate [Documents]. (DN 53.) On the record, the court noted that the Trustee’s request was not really for turnover of documents but was based upon the asserted failure by the Debtors to cooperate in case administration.

On February 23, 2012, the Trustee’s Motion for Approval of Settlement Agreement With Debtors Resolving the Estate’s Interest in Insurance Proceeds was filed and served. (DN 56.) In that motion, the Trustee requested approval of a settlement whereby the estate would receive $3,151.70 (with $2,000.00 paid in equal monthly installments of $85.00 per month) and the balance of the insurance proceeds would belong to the Debtors as exempt property. On March 28, 2012, the court entered an order approving that settlement. (DN 58.)

Next, apparently without any prior disclosure by the Debtors or Dietrich, the Trustee discovered the Debtors actually had an oimership interest in the Stock-bridge real property, rather than merely leasing the property from Buck Hale. Therefore, yet another turnover motion by the Trustee was necessary. On July 24, 2013, nearly two years after the bankruptcy petition was filed, the Trustee filed a motion for turnover regarding the Stock-bridge, Michigan real property. (DN 67.) The Trustee alleged that in February 2009, Buck Hale conveyed the Stock-bridge, Michigan real property to himself and Debtor Mark Hale, his son, as joint tenants with rights of survivorship. Attached to the Trustee’s motion were copies of three deeds recorded on December 3, 2009. Also, in this turnover motion, the Trustee alleged that Debtor Mark Hale, with Buck Hale, obtained insurance on the real property and they were jointly covered on the property. (DN 67.) In the motion, the Trustee also alleged that a postpetition fire relating to the real property took place on or about May 15, 2011, which destroyed the premises.

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Bluebook (online)
511 B.R. 870, 2014 WL 2922347, 2014 Bankr. LEXIS 2874, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-hale-miwb-2014.