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Hoy v. Atkeson

United States District Court, D. South Carolina, Columbia Division

June 6, 2016

JOHN RAYMOND HOY, a/k/a Johnny Hoy, a/k/a John Raymond Hoy d/b/a White Pin, Debtor-Appellant,
v.
GEORGE ATKESON and MEADE ATKESON, Creditors-Appellees,
v.
ROBERT F. ANDERSON, Chapter 7 Trustee, Chapter 7 Trustee-Appellee.

          MEMORANDUM OPINION AND ORDER AFFIRMING THE DECISION OF THE BANKRUPTCY COURT

          MARY GEIGER LEWIS UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This is a bankruptcy appeal. The Court reviews this appeal pursuant to 28 U.S.C. § 158(a)(1) and Rule 8001(a) of the Federal Rules of Bankruptcy Procedure. Having carefully considered the briefs, the record, and the applicable law, it is the judgment of the Court that the decision by the Bankruptcy Court will be affirmed.

         II. FACTUAL AND PROCEDURAL HISTORY

         The facts in this appeal are substantially undisputed. On May 18, 2010, the Master-in-Equity for Charleston County, South Carolina, awarded Appellees George Atkeson and Meade Atkeson (the Atkesons) a judgment (Judgment) against Appellant John Raymond Hoy (Debtor) in the amount of $1, 102, 335 for breach of contract and breach of contract accompanied by a fraudulent act. On August 3, 2010, a Transcript of Judgment was filed in Lexington County, South Carolina, where Debtor resides.

         In May 2011, Gene Hoy, Debtor’s uncle, deeded thirty-eight parcels of real estate located in Oscoda County, Michigan, to White Pine, LLC. Thereafter, Gene Hoy discovered that the name White Pine, LLC, was unavailable at the Office of the Michigan Secretary of State. Thus, he consequently formed White Pin, LLC, and filed its Articles of Organization on September 22, 2011. However, no one ever corrected the title information for the thirty-eight parcels of real estate to change the ownership to White Pin, LLC.

         On May 22, 2013, Gene Hoy executed a durable Power of Attorney, giving Debtor power of attorney to act on his behalf. Debtor retained Michigan counsel who, at the direction of Gene Hoy, created the Gene Hoy Living Trust (Trust). Upon Gene Hoy’s death on June 8, 2013, Debtor became the sole trustee and sole beneficiary of the Trust. Debtor then began exercising complete dominion and control over all the Michigan real properties that remained titled in the name of White Pine, LLC, without recognizing any corporate formalities, including selling the same and personally using the proceeds.

         In May 2014, the Atkesons domesticated the Judgment in Michigan, and a Michigan court issued a Notice of Judgment Lien that it recorded with the Oscoda County Michigan Register of Deeds on August 22, 2014. Upon the motion of the Atkesons in an effort to collect on the Judgment, the Michigan court entered an Order Appointing Receiver on August 20, 2014. The Receiver Order appointed Anthony J. Caputo as the Receiver and gave him authority over all assets of Debtor including any property owned by the Trust, White Pin, LLC, or White Pine, LLC. The Receiver Order further granted the Receiver the authority to market and sell the property, subject to providing a credit to the Atkesons in an amount up to the amount of the Atkesons’ protective advances plus Debtor’s indebtedness to the Atkesons.

         Thereafter, upon Debtor’s challenge of jurisdiction, the Michigan court entered an order on September 8, 2014, finding that it had personal jurisdiction over Debtor and that the terms of the Receiver Order should continue. Debtor, represented by Michigan counsel, failed to appeal the Receiver Order. Thus, the Michigan Receiver began selling the Michigan real properties in accordance with and pursuant to the Receiver Order.

         On December 4, 2014, Debtor filed a voluntary petition for Chapter 11 relief, and the name of Debtor listed on the petition is "John Raymond Hoy d/b/a/ White Pin." As of the petition date, the balance of the Atkesons’ Judgment plus accrued judgment rate of interest was approximately $1, 500, 000. Debtor has failed to make any pre- or post-petition payments toward the Judgment. On February 19, 2015, the Bankruptcy Court entered an order converting Debtor’s case to one under Chapter 7. The Bankruptcy Court also appointed Robert F. Anderson as the Chapter 7 Trustee. Debtor’s schedules indicate his liabilities far exceed his assets.

         Pursuant to 11 U.S.C. § 362, Debtor’s voluntary petition operated as an automatic stay of the Atkesons’ attempts to collect on their Judgment. On May 27, 2015, the Atkesons filed an Amended Motion for Relief from Stay (Stay Motion), requesting they be allowed to proceed with their state court rights as to the Michigan Receivership estate and the twenty-three remaining parcels of Michigan real property, of which now only seven remain. This relief from the automatic stay would allow the Receiver to move forward in Michigan and liquidate the Michigan properties for their benefit as set forth in the Receiver Order. The Atkesons subsequently filed a motion seeking approval of a proposed agreement of the Atkesons, the Chapter 7 Trustee, and the Receiver resolving the Stay Motion. The agreement provided that the Chapter 7 Trustee agreed to the lifting of the automatic stay to allow the continuation of the Receiver Order, and set out that, after deduction of certain compromised costs and expenses and with a limitation of future expenses by agreement, the bankruptcy estate would receive twenty percent of the proceeds of the net receivership distributions.

         The Bankruptcy Court conducted a contested hearing on September 25, 2015, after due notice, during which the Bankruptcy Court received documentary evidence and testimony to consider and evaluate the basis, terms, and effect of the proposed agreement between the Chapter 7 Trustee, the Michigan Receiver, and the Atkesons. The Chapter 7 Trustee testified that the agreement is in the best interests of the estate because it would cost the estate a substantial sum to manage and liquidate the Michigan properties on its own, due to the location and condition of the Michigan properties, the risks and costs associated with pursuit of or control of those properties, and the anticipated costs of litigation to realize funds for the estate. The Chapter 7 Trustee attested that any amount realized was "found money" without the associated risks and costs. Debtor failed to present any evidence to contradict the Chapter 7 Trustee’s opinion or to indicate that a different path might result in a higher return to creditors.

         The Bankruptcy Court approved the agreement of the parties finding the Settlement Agreement fair and equitable and within the Chapter 7 Trustee’s sound business judgment. Thereafter, Debtor filed a Federal Rule of Civil Procedure 60(b)(6) Motion to Set Aside the Judgments citing most of the same arguments raised in this appeal, including advancing new arguments not raised at the initial hearing before the Bankruptcy Court. The Bankruptcy Court denied the Motion and this appeal followed.

         On April 21, 2015, the Office of the United States Trustee (U.S. Trustee) filed a complaint to deny Debtor’s discharge pursuant to 11 U.S.C. §§ 727(a)(2)(A), (2)(B), and (4)(A) citing a litany of false statements and/or omissions by Debtor on his schedules and in his testimony at the Meeting of Creditors, Second Meeting of Creditors, and Rule 2004 Examination under Oath. On May 19, 2015, the Atkesons also brought an adversary proceeding to determine the dischargeability of the judgment for breach of contract accompanied by a fraudulent act pursuant to 11 U.S.C. §§ 523(a)(2), (4), and ...


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