In re Rothchild's Jewelers, Inc.

337 B.R. 561, 2004 Bankr. LEXIS 2424, 2004 WL 3685545
CourtUnited States Bankruptcy Court, E.D. Virginia
DecidedSeptember 27, 2004
DocketNo. 03-41187-DOT
StatusPublished
Cited by1 cases

This text of 337 B.R. 561 (In re Rothchild's Jewelers, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Rothchild's Jewelers, Inc., 337 B.R. 561, 2004 Bankr. LEXIS 2424, 2004 WL 3685545 (Va. 2004).

Opinion

MEMORANDUM OPINION

DOUGLAS O. TICE, JR., Chief Judge.

This issue comes before the court on the separate motions of Anne Hinkler Hutch-ins and the chapter 7 trustee for an award [564]*564of sanctions against Marvin Harris for his bad faith filing of the bankruptcy petition in this case. For reasons set forth below, the court will both grant the motions and award monetary sanctions.

Findings of Fact.

On November 26, 2003, the day before Thanksgiving, Marvin A. Harris filed a voluntary petition under Chapter 7 of the Bankruptcy Code on behalf of Rothchild’s Jewelers, Inc. On that date, Rothehild’s was engaged in the fine jewelry business in Richmond, Virginia. Rothchild’s was operated by Anne Winkler Hutchins. There was a long history of disputes between Hutchins and Harris at the time of the filing of this bankruptcy case.

On November 26, 2003, Roy M. Terry Jr. was appointed interim Chapter 7 trustee in the Rothchild’s bankruptcy case. Harris, through counsel, advised the trustee that the inventory of the jewelry store was at risk under its current management. The trustee consulted with the United States Trustee and determined that the store should be secured and an inventory and appraisal be conducted. The trustee, on an emergency basis, then obtained the services of 1) Motley’s Group to provide appraisal and inventory services to the estate, 2) Keiter, Stephens, Hurst, Gary and Shreaves, P.C., to provide accounting services to the estate, and 3) Durrette-Bradshaw, P.C. to provide legal services to the estate. In addition, the trustee filed a motion to authorize the business to be continued to permit a going out of business sale.

On November 26, 2003, representatives of the trustee, Motley’s, Keiter Stephens and DurretteBradshaw met at Rothchild’s to obtain possession of its assets pursuant to 11 U.S.C. § 704. The locks and alarm system were changed, mail and bank accounts were transferred to the trustee, and an initial inventory was conducted. The premises were secured. Over the next several days, the inventory and appraisal were continued by Motley’s, and Durrette-Bradshaw prepared the various expedited motions to employ the professionals whose services the trustee had obtained. Durret-teBradshaw also conducted legal and factual research regarding title to consigned jewels, as well as responding to contacts from consignors and customers.

On December 1, 2003, Hutchins filed a motion to dismiss the bankruptcy case. An expedited hearing was held on December 4, 2003. At hearing, evidence was presented relative to the right of Harris to file the bankruptcy petition. The evidence as revealed in the pleadings and proffered in court revealed that Hutchins was the owner of Rothchild’s Jewelers, Inc. On April 25, 1997, she had entered into an agreement with Harris whereby she and Rothchild’s would sublet retail space from Harris and allow him to display his merchandise in their retail jewelry store. In return, Harris was to give business advice to Rothchild’s and would also guarantee a bank loan from First Union in the amount of $100,000.00.1 As a part of the transaction, Hutchins also pledged to Harris her shares of common stock in Rothchild’s, Inc., as security for her obligations. There were continuing disputes between the parties, culminating in February of 2003, when Harris allegedly seized some of the Rothchild’s inventory and locked Rothchild’s out of the store. Roth-child’s sought an injunction from the Circuit Court for the City of Richmond. The [565]*565injunction was granted, with Harris being ordered to return the inventory and readmit Rothchild’s to the store premises “until such time as Rothchild is lawfully evicted.” Order entered February 27, 2003, Case Nos. CH03-225 & CH03-226, of which the court takes judicial notice. Noteworthy, however, is the fact that in its order, the circuit court also ordered Rothchild’s to furnish Harris a daily inventory of its merchandise sold and to permit Harris access to the store one time per day in order to view the inventory.

At hearing on the motion to dismiss the bankruptcy case for bad faith, Harris testified that he caused the stock in Rothchild’s to be signed over to him and that he put Rothehild’s into bankruptcy because Hutchins owed him a substantial sum, and there was significant debt outstanding with the bank. After hearing the arguments of the parties, this court ruled from the bench that the petition had been filed in bad faith and granted the motion to dismiss, further commenting that the parties had serious state law issues that should be handled in the state courts.

At the conclusion of the hearing, the trustee requested that he be permitted ten days in which to file a motion for sanctions to recover costs and fees incurred by himself and his professionals. The court indicated that sanctions motions would be considered. An order was entered on December 8, 2003, dismissing the case.

The trustee filed a motion for sanctions on December 18, 2003. A similar’ motion was filed by Hutchins on December 19, 2003. Hearing on the motions was held February 24, 2004, at which the court reserved ruling.

The trustee claims fees and expenses incurred during the tenure of his appointment as follows:

[[Image here]]

In connection with her motion to dismiss the case, Hutchins claims legal fees and expenses totaling $6,278.47.

Discussion and Conclusions of Law.

As revealed above, Harris and debtor’s owner, Hutchins, had been engaged in a dispute over their contractual arrangements relating to debtor’s retail business. Harris, who held a pledge of the corporate stock, took matters into his own hands by causing the stock to be signed over to him, whereupon he caused debtor to file bankruptcy without the consent of Hutchins. His actions were in violation of a previous order by a City of Richmond court to return the store premises to Hutchins.

The court finds that Harris’s filing of a bankruptcy petition to effect a civil remedy in his dispute with debtor and Hutchins was a blatantly improper use of the Bankruptcy Code. His conduct led the court to dismiss the case as a bad faith filing, and his conduct is a basis for the court to sanction him for the damages that resulted from the filing.2

Both the trustee and Hutchins have filed motions for sanctions against Harris and seek recovery of their fees and costs in[566]*566curred in connection with the bad faith Rothchild’s filing. Harris has responded to the motions by asserting that the court has no personal or subject matter jurisdiction over him. Harris also argues that the actions taken by the trustee and his professionals were largely unnecessary because the trustee was aware that a motion to dismiss might be filed. He further argues that Hutchins is not entitled to an award of sanctions because she comes to the court with “unclean hands.”

PERSONAL JURISDICTION

Harris has asserted that the court has no personal jurisdiction over him because he never appeared individually in the bankruptcy case and was not a party in the case.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Walsh v. Free (In re Free)
466 B.R. 48 (W.D. Pennsylvania, 2012)

Cite This Page — Counsel Stack

Bluebook (online)
337 B.R. 561, 2004 Bankr. LEXIS 2424, 2004 WL 3685545, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-rothchilds-jewelers-inc-vaeb-2004.