Opinion
Case No. 04-62762-7.Adv No. 09-00028.
4-1-2010
In re: STANLEY E. JARVAR and BARBARA J. KRAMER-JARVAR, Debtors. BARBARA JARVAR, Plaintiff, v. TITLE CASH OF MONTANA, INC., EZ TITLE PAWN INC, and HUTCHESON ENTERPRISES INC., Defendants.
At Butte in said District this 1st day of April, 2010.
Pending in this adversary proceeding is the Plaintiff's second motion for summary judgment (Docket No. 74) against Defendants Title Cash of Montana, Inc. ("Title Cash"), EZ Title Pawn, Inc. ("EZ Title"), Hutcheson Enterprises, Inc. ("HEI"), and Roy Hutcheson ("Hutcheson") on the issue of liability only on the claims asserted in Plaintiff's 3rd Amended and Substituted Complaint (Dkt. 64) as Claims V, VII, VIII, IX, and X. Defendants filed an objection (Dkt. 98), and a hearing on the motion was held at Missoula on March 19, 2010. The parties appeared represented by counsel. Attorneys James H. Cossitt ("Cossitt") of James H. Cossitt, PC, Kalispell, Montana, appeared representing the Plaintiff and Thane Johnson ("Johnson") of Johnson, Berg, McEvoy & Bostock, PLLP Kalispell appeared representing Defendants. After hearing argument of counsel the Court took Plaintiff's second motion for summary judgment under advisement at the conclusion of the hearing. The motion and objection have been reviewed by the Court, together with the record and applicable law. This matters are ready for decision.
Plaintiff's motion seeks partial summary judgment establishing Title Cash's liability under Count I (civil contempt for violating 11 U.S.C. § 524(a)(2) discharge injunction and the automatic stay at 11 U.S.C. § 362(a)) of the First Amended and Substituted Complaint (hereinafter the "Complaint"), and Count IV (unfair and deceptive practice in violation of the Montana Unfair Trade Practices and Consumer Protection Act of 1973 (hereinafter the "CPA"), MONTANA CODE ANNOTATED ("MCA") § 33-14-101, et seq.), with the amount of damages to be determined at trial. Title Cash's opposes Plaintiff's motion contending that there are genuine issues of material fact, and moves for summary judgment barring Plaintiff's CPA claim under the 2-year statute of limitations of MCA § 27-2-211(1).
The Court allowed the amendment of the Complaint (Docket No. 16) by Order entered on June 26, 2009. Plaintiff amended the Complaint again on October 5, 2009, to which Title Cash consented. The Second Amended and Substituted Complaint does not affect the pending motions, and all references herein to the "Complaint" are to Docket No. 16.
The parties agree that this Court has jurisdiction of this removed adversary proceeding under 28 U.S.C. § 1334(b) and 28 U.S.C. § 1367, and that this is a core proceeding under 28 U.S.C. § 157(b)(2). This memorandum contains the Court's findings of fact and conclusions of law under FED. R. BANKR. P. 7052 (applying FED. R. CIV. P. 52) in adversary proceedings.
FACTS
Plaintiff set forth the following facts in support of her second motion for summary judgment in her Statement of Uncontroverted Facts at Dkt. 75:
The facts have been edited slightly for clarity and inclusion herein.
In addition Plaintiff requested the Court take judicial notice of the factual findings set forth in Dkt. 55, pages 2-5, which are incorporated by reference as though set forth in full herein.
A.CREATION AND DISSOLUTION OF TITLE CASH
On 5/27/1999, Roy Hutcheson ("Hutcheson"), as Incorporator, filed Articles of Incorporation of Title Cash of Montana, Inc. ("Title Cash"). [Exhibit 1, page 118, lines 7-8; page 128, lines 22-25 to page 129, lines 1-2; Exhibit 2].
Hutcheson was named the Director in Title Cash's Articles of Incorporation. [Exhibit 2, Page 2].
Hutcheson owns 55% of Title Cash's stock. [Exhibit 1, page 118-119].
Hutcheson's wife and children own 45% of Title Cash's stock. [Id.].
Hutcheson is Title Cash's president and director. [Exhibit 1, page 118, lines 9-11; page 33, line 18 to page 34, line 11; Exhibit 2].
Hutcheson's address was listed as 3705 Sullivan Street, Madison, AL 35758 in Title Cash's
Articles of Incorporation. [Exhibit 2, page 2].
Title Cash's principal mailing address was listed as 3705 Sullivan, Madison, AL 35758 in its Articles of Incorporation. [Exhibit 2, page 2].
8. On 8/31/2008, Title Cash and EZ Title Pawn, Inc. ("EZ Title") entered into an Asset Purchase Agreement. [Exhibit 11].
9. Hutcheson prepared the Asset Purchase Agreement. [Exhibit 1, page 39, lines 4-13].
10. Hutcheson signed the Asset Purchase Agreement as President for both the seller, Title Cash, and the purchaser, EZ Title. [Exhibit 1, page 33, line 18 to page 34, line 11; page 39, lines 4-13; See also, Exhibit 11].
11. Pursuant to the Asset Purchase Agreement, EZ Title purchased Title Cash for $692,937.46. [Exhibit 1, page 39, lines 8-25 to page 42, lines 1-17; See also Exhibit 11].
12. Pursuant to the Asset Purchase Agreement, Title Cash assumed all liabilities associated with Title Cash's loans while agreeing to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Exhibit 1, page 47, lines 1-19 (referring to the Asset Purchase Agreement discussed on page 45, lines 14-20); See also, Exhibit 11].
13. On 2/02/2009, Hutcheson, as President of Title Cash, electronically filed a Montana Corporation Annual Report so Title Cash would remain active and in good standing and prevent involuntary dissolution/revocation. [Exhibit 22].
On 3/16/2009, Hutcheson, as President of Title Cash, filed Articles of Dissolution for Title Cash. [Exhibit 23].
Hutcheson authorized Title Cash's date of dissolution as of 12/31/2008. [Exhibit 23, page 2].
B.CREATION OF EZ TITLE
On 4/18/2000, Hutcheson, as Incorporator, filed Articles of Incorporation of EZ Title. [Exhibit 3].
Hutcheson was named the director on EZ Title's Articles of Incorporation. [Exhibit 3, Article VI].
Hutcheson is EZ Title's president. [Exhibit 1, page 33, line 18 to page 34, line 11; Exhibit 3].
Hutcheson owns 55% of EZ Title's stock. [Exhibit 1, page 34, lines 12-25 to page 35, lines 1-7].
Hutcheson's wife and children own 45% of EZ Title's stock. [Id.].
Hutcheson's address listed on EZ Title's Articles of Incorporation is 4211 Oakwood Ave., Huntsville, AL 35758. [Exhibit 3, Article VII].
The principal mailing address of EZ Title listed on the Articles of Incorporation is 4211 Oakwood Ave., Huntsville, AL 35810. [Exhibit 3, Article VIII].
C.CREATION OF HUTCHESON ENTERPRISES, INC.
On 8/16/2000, Hutcheson, as Incorporator, filed Article's of Incorporation of Hutcheson Enterprises, Inc. ("Hutcheson, Inc.). [Exhibit 1, page 16, line 13 to page 17 lines 4; Exhibit 4].
Hutcheson is named the registered agent in Hutcheson, Inc.'s Articles of Incorporation. [Exhibit 4, Article V].
Hutcheson was named the Director in Hutcheson, Inc.'s Articles of Incorporation. [Exhibit 4, Article VI].
Hutcheson is the president of Hutcheson, Inc. [Exhibit 1, page 12, lines 10-12].
Hutcheson owned 55% of Hutcheson, Inc.'s stock. [Exhibit 1, page 13, lines 6-25].
Hutcheson's wife and children own 45% of Hutcheson, Inc.'s stock. [Id.].
Hutcheson's address listed on Hutcheson, Inc.'s Articles of Incorporation was 4211 Oakwood Ave., Huntsville, AL 35758. [Exhibit 4, Article VII].
The principal mailing address of Hutcheson, Inc. listed on the Articles of Incorporation was 4211 Oakwood Ave. Huntsville, AL 35810. [Exhibit 4, Article VIII].
D.EZ TITLE'S RELATIONSHIP TO TITLE CASH
On 8/31/2008, EZ Title and Title Cash, through Hutcheson as President of both companies, signed an Asset Purchase Agreement that sold Title Cash's going concern value to EZ Title for $692,937.46. [Exhibit 1, page 33, line 22 to page 34, line 11; pages 39 to 42, lines 1-20; page 47, lines 1-19 (referring to the Asset Purchase Agreement discussed on page 45, lines 14-20); page 132, lines 13-18; page 133, lines 10-13; See also, Exhibit 11].
32. Title Cash dissolved because of ongoing litigation that Hutcheson felt would bankrupt the company. [Exhibit 1, page 21, lines 2-12].
33. Pursuant to the Asset Purchase Agreement, EZ Title agreed to pay Title Cash $692,937.46, which Hutcheson testified was subsequently used to pay debts owed to Hutcheson, in exchange for Title Cash's: 1) going concern value; 2) agreement to assume all debts including but not limited to Kramer's litigation matter; and 3) agreement to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Exhibit 1, page 131, line 20 to page 133; page 47, lines 1-19 (referring to the Asset Purchase Agreement discussed on page 45, lines 14-20); page 39, line 8 to page 42, line 20; Exhibit 11].
34. Pursuant to the Asset Purchase Agreement, EZ Title retained and is currently using the following: 1) the name d/b/a Title Cash; 2) Title Cash's phone lines; 3) Title Cash's utility, receivable bank accounts, fixed assets, petty cash, lease and other deposits; 4) Title Cash's customers files with account status of open, paid-out, charged-off and worthless checks; 5) Title Cash's leases; and 6) Title Cash's employees. [Exhibit 1, page 39, lines 22-25 (leases); page 47, lines 23-25 (leases); page 128, lines 1-7, 15-21 (leases); page 48, lines 7-11 (assets and utilities); page 128, lines 8-14 (assets); page 130, line 21 to page 131, line 1 (assets); page 132, lines 7-12 (utilities); page 48, lines 1-3 (phone lines); page 48, lines 4-6 (name); page 130, lines 13-23 (name); page 126, 127 (employees); Exhibit 11].
35. EZ Title and Title Cash hired the same attorney, Thane Johnson. [Docket 053-0; Exhibit 12].
E.HUTCHESON, INC.'S RELATIONSHIP TO TITLE CASH
Title Cash pays Hutcheson, Inc. a basic, standard monthly rate for services it provides. [Exhibit 1, page 19, line 14 to page 21, line 8].
Hutcheson, Inc. performs several services that are involved in direct management of Title Cash. [See. Id.].
Hutcheson, Inc. supervised Lisa Harshbarger while she was a manager of Title Cash. [Exhibit 1, page 20, line 14 to page 21, line 1; page 123, lines 3-8; Exhibit 5, page 51-54; page 57, lines 15-18].
Hutcheson, Inc. performs certain loans and loan administration for Title Cash. [Exhibit 1, Page 20, lines 14-21].
Hutcheson Inc. provides instructions to Title Cash employees, if the employees have something they do not know how to handle. [Exhibit 1, page 107, lines 7-13].
41. Hutcheson, Inc. provides accounting, taxes, managing facilities, human resources, and training for Title Cash. [Exhibit 1, page 19, lines 12-20; page 60, lines 17-19; Exhibit 5, page 51, line 12 to page 52, line 1].
42. Hutcheson, Inc., through Maurice Hardman, directed Title Cash in bankruptcy matters. [Exhibit 1, page 121, line 20 to page 122, line 11; Exhibit 5, page 35, lines 6-24; page 39, line 16 to page 40, line 6;].
43. Hutcheson, Inc. filed annual reports for Title Cash. [Exhibit 1, page 25, line 5 to page 26, line 2].
44. Dewanna McMeans, as a representative of Hutcheson, Inc. filed proofs of claims no. 13 & 14, in case number 01-53527. [Exhibit 1, page 81, line 17 to page 84, line 9; Exhibits 6, 7].
45. Hutcheson, Inc., provided directions regarding repossession of Kramer's 1999 Suburban. [Exhibit 1, page 100, line 15 to page 101, line 4].
46. Hutcheson, Inc. prepared spreadsheets for loan number 767 in regards to In the Matter of Title Cash of Montana, Inc., Case No. VI-01-2006 that was filed with the Department of Administration. [Exhibit 1, page 105, line 24 to page 106, line 19 (referring to Exhibit 8 as noted by the quoted language); Exhibit 8].
47. Hutcheson, Inc. directed Title Cash's operations by determining the interest rates on customer loans. [See. Exhibit 1, pages 109-112; Exhibits 9, 10].
Hutcheson, Inc., through Hutcheson and Tom Hutcheson, and pursuant to this matter, supervises and directs Harshbarger, the manager of Title Cash and EZ Title. [Exhibit 1, page 100, line 17 to page 101, line 4; Exhibit 5, page 57, lines 15-18].
Hutcheson, Inc. and Title Cash hired the same attorney, Thane Johnson, in this matter. [See. Docket No. 053-0].
F.FACTS RELEVANT TO COUNT V OF THE 3RD AMENDED AND SUBSTITUTED COMPLAINT
On 11/02/2001, Kramer signed Notes 767 and 768. [Exhibits 14, 15].
Collateral listed on Note 767 was described as a 1999 CHEV, SUB, vehicle identification number ("VIN") xxx4993. [Exhibit 14].
Collateral in Note 768 was described as a 1999 GMC, SUB, VIN xxx4991. [Exhibit 15].
Title Cash knowingly and intentionally changed the VIN on Note 768 to comply with Title Cash's software that would not allow loans over $9,999.99 to be processed. [See. Exhibit 1, page 74, line 17 to page 78, line 2; page 119, line 3 to page 120, line 5; page 120, line 17 to page 121, line 7].
On 11/23/2001, Kramer filed a Chapter 13 bankruptcy. [Case No. 01-53527-13, Docket No. 001-0].
On 01/23/2002, Trustee Robert Drummond mailed a letter to Title Cash that requested evidence of Title Cash's secured interest in Kramer's Suburban. [Exhibit 16].
On 3/29/2002, Title Cash knowingly and intentionally filed proof of claim 14, and correctly claimed that Note 767 created a security interest in Kramer's 1999 Suburban. [Exhibit 7].
On 3/29/2002, Title Cash knowingly and intentionally filed a false proof of claim #13 that falsely claimed Note 768 created a security interest in Kramer's Suburban, and attempted to prove the security interest by filing a lien notice that was filed on VIN 4993. [See. Exhibit 1, page 74, line 17 to page 78, line 2; page 119, line 3 to page 120, line 3; page 120, line 17 to page 121, line 7; Exhibit 6].
Title Cash withdrew proof of claims 13 and 14, and knowingly and intentionally filed two more proofs of claims that combined both notes and falsely claimed that both Notes 767 and 768 were secured. [Case No. 01-53527, Claim Nos. 15, 18].
On 2/03/2004, the trustee's final report was filed, which provided $6,046.00 in principal and $1,041.83 in interest for Title Cash of Kalispell's proof of claim 14. [Case No. 01-53527, Docket No. 100; Exhibit 17].
On 2/26/2007, Title Cash, through Peter Funk and Hutcheson Enterprise, mailed a letter to the Department of Administration with an enclosed spreadsheet for both Notes 767 and 768 that evidenced payments to both Notes during and after the Chapter 13 bankruptcy Case No. 01-53527, and after Kramer's Chapter 7, Case No. 04-62762, discharge on 1/19/2005. [Exhibit 19]. 61.
On 5/01/2007, Title Cash, through Peter Funk, signed a Settlement Agreement with the Department of Banking agreeing that it engaged in unfair and fraudulent practices and admitted: 1) several errors in the transactions which caused Title Cash to make two separate loans, one loan which was improperly documented; and 2) loan number 768 is an unsecured loan. [Exhibit 20]. 62.
On 12/9/2008, Title Cash filed an Answer and Counterclaim and asserted in the Counterclaim, paragraph 3, that "Kramer entered into two Promissory Notes and security agreements with Title Cash secured by a security interest in a 1999 Chevrolet Suburban, VIN Number 1GNFK16RXXJ564993". [Exhibit 21].
G.FACTS RELEVANT TO COUNT VII OF THE 3RD AMENDED AND SUBSTITUTED COMPLAINT
I.Hutcheson's alter ego and corresponding liability
Hutcheson is Title Cash's, EZ Title's, and Hutcheson, Inc.'s incorporator, director, and president. [Exhibit 1, page 118, lines 7-11; page 33, line 18 to page 34, line 11; page 128, line 22 to page 129, line 2; Exhibit 2].
Hutcheson owns 55% of the Title Cash's, EZ Title's, and Hutcheson, Inc.'s stock. [Exhibit 1, page 118, line 9 to page 119, line 2 (Title Cash); Exhibit 1, page 118,
line 9 to page 119, line 2 (Hutcheson, Inc.); Exhibit 1, page 34, line 12 to page 35, line 7 (EZ Title)].
65. Hutcheson's wife and children collectively own 45% of Title Cash's, EZ Title's, and Hutcheson, Inc.'s stock. [Id.].
66. Hutcheson personally capitalized Title Cash at its inception with a line of credit of $5,000,000.00 to $10,000,000.00. [Exhibit 1, page 43, lines 1-20; page 44, line 8 to page 45, line 5].
67. Hutcheson's mailing address was identical as Title Cash's, EZ Title's, and Hutcheson, Inc.'s principal mailing addresses as listed on the respective articles of incorporation. [Exhibits 2, 3, 4].
68. Hutcheson has control of Title Cash, EZ Title, and Hutcheson, Inc. as their controlling shareholder, director, and president. [Exhibit 1, page 130, lines 131-7; Supra at ¶¶ 63, 64].
69. Hutcheson dissolved Title Cash, because he believed ongoing litigation would bankrupt the company. [Exhibit 1, page 21, lines 2-12].
70. Hutcheson prepared the Asset Purchase Agreement between Title Cash and EZ Title. [Exhibit 1, page 39, lines 4-13].
71. Pursuant to the Asset Purchase Agreement, EZ Title agreed to pay Title Cash $692,937.46, which was subsequently used to pay debt's owed to Hutcheson, in exchange for Title Cash's: 1) going concern value; 2) agreement to assume all debts
including but not limited to Kramer's litigation matter; and 3) agreement to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Supra at ¶ 33].
72. Hutcheson, through Hutcheson, Inc., was involved with direct management of Title Cash including approval of certain loans and loan administration, which included writing letters to the Department of Administration regarding the Kramer matter. [Exhibit 1, page 20, line 14 to page 21, line 1; Exhibit 24].
73. Hutcheson, through Hutcheson, Inc., provided directions regarding repossession of Kramer's 1999 Suburban. [Exhibit 1, page 100, line 15 to page 101, line 4].
74. Hutcheson and Title Cash hired the same attorney, Thane Johnson, in this matter. [See.Docket No. 072-0].
II.Hutcheson, Inc.'s alter ego and corresponding liability
Title Cash pays Hutcheson, Inc. a basic, standard monthly rate for services it provides. [Exhibit 1, page 19, line 12 to page 20, line 8].
Hutcheson, Inc. performs several services that are involved in direct management of Title Cash. [Exhibit 1, page 20, lines 14-18]. Hutcheson, Inc. supervised Lisa Harshbarger while she was a manager of Title Cash. [Exhibit 1, page 20, line 14 to page 21, line 1; page 123, lines 3-8; Exhibit 5, page 51, line 12 to page 52, line 1; page 57, lines 15-18].
Hutcheson, Inc. performs certain loans and loan administration for Title Cash. [Exhibit 1, Page 20, lines 14-21].
Hutcheson Inc. provides instructions to Title Cash employees, if the employees have something they do not know how to handle. [Exhibit 1, page 107, lines 10-13].
Hutcheson, Inc. provides accounting, taxes, managing facilities, human resources, and training for Title Cash. [Exhibit 1, page 19, lines 12-20; page 60, lines 17-19; Exhibit 5, page 51, line 12 to page 52, line 1].
Hutcheson, Inc., through Maurice Hardman, directed Title Cash in bankruptcy matters. [Exhibit 5, page 35, lines 6-24; page 39, line 16 to page 40, line 6; Exhibit 1, page 121, line 20 to page 122, line 11].
Hutcheson, Inc. filed annual reports for Title Cash. [Exhibit 1, page 25, lines 5-25; page 26, lines 1-2].
Dewanna McMeans, as a representative of Hutcheson, Inc. filed proofs of claims no. 13 & 14, in case number 01-53527. [Exhibit 1, page 81, line 17 to page 84, line 9; Exhibits 6, 7].
Hutcheson, Inc., provided directions regarding repossession of Kramer's 1999 Suburban. [Exhibit 1, page 100, line 15 to page 101, line 4].
85. Hutcheson, Inc. prepared spreadsheets for loan number 767 in regards to In the Matter of Title Cash of Montana, Inc., Case No. VI-01-2006 that was filed with the Department of Administration. [Exhibit 1, page 105, line 24 to page 106, line 19; See also, Exhibits 8].
86. Hutcheson, Inc. directed Title Cash's operations by determining the interest rates on customer loans. [See. Exhibit 1, page 111, lines 6-25; Exhibits 9, 10].
87. Hutcheson, Inc., through Hutcheson and Tom Hutcheson, and pursuant to this matter, supervises and directs all Title Cash and EZ Title employees. [Exhibit 1, page 100, line 17 to page 101, line 4; Exhibit 5, page 57, lines 15-18].
88. Hutcheson, Inc. and Title Cash hired the same attorney, Thane Johnson, in this matter. [See. Docket No.'s 053-0, 072-0].
H.FACTS RELEVANT TO COUNT VIII OF THE 3RD AMENDED AND SUBSTITUTED COMPLAINT
I.Hutcheson and EZ Title's liability pursuant to successor liability
On 5/27/1999, Hutcheson, as Incorporator, filed Articles of Incorporation of Title Cash of Montana, Inc. ("Title Cash"). [Exhibit 1, page 118, lines 7-8; page 128, line 22 to page 129, line 2; Exhibit 2].
90. Hutcheson was named the Director in Title Cash's Articles of Incorporation. [Exhibit 2, Page 2].
91. Hutcheson owns 55% of Title Cash's stock. [Exhibit 1, page 118, line 9 to page 119, line 2].
92. Hutcheson's wife and children own 45% of Title Cash's stock. [Id.].
93. Hutcheson is Title Cash's president. [Exhibit 1, page 118, lines 9-11; Exhibit 2].
94. On 4/18/2000, Hutcheson, as Incorporator, filed Articles of Incorporation of EZ Title. [Exhibit 3].
95. Hutcheson was named the director on EZ Title's Articles of Incorporation. [Exhibit 3, Article VI].
96. Hutcheson is EZ Title's president. [Exhibit 1, page 33, line 18 to page 34, line 11; page 39, lines 8-13; Exhibit 3].
97. Hutcheson owns 55% of EZ Title's stock. [Exhibit 1, page 34, line 12 to page 35, line 7].
98. Hutcheson's wife and children own 45% of EZ Title's stock. [Id.].
99. Title Cash dissolved because of ongoing litigation that Hutcheson felt would bankrupt the company. [Exhibit 1, page 21, lines 2-12].
100. On 8/31/2008, Hutcheson signed the Asset Purchase Agreement that he prepared, as President for both the Seller/Title Cash and the Purchaser/EZ Title. [Exhibit 1, page 33, line 18 to page 34, line 11; page 39, lines 8-13; See also, Exhibit 11].
101. Pursuant to the Asset Purchase Agreement, EZ Title agreed to pay Title Cash $692,937.46, which was subsequently used to pay debt's owed to Hutcheson, in exchange for Title Cash's: 1) going concern value; 2) agreement to assume all debts including but not limited to Kramer's litigation matter; and 3) agreement to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Exhibit 1, page 132, lines 4-6, lines 13-18; page 133, lines 10-13; page 47, lines 1-19 (referring to the Asset Purchase Agreement discussed on page 45, lines 14-20); page 39, line 8 to page 42, line 20; Exhibit 11].
102. Pursuant to the Asset Purchase Agreement, EZ Title retained and is currently using the following: 1) the name d/b/a Title Cash; 2) Title Cash's phone lines; 3) Title Cash's utility, receivable bank accounts, fixed assets, petty cash, lease and other deposits; 4) Title Cash's customers files with account status of open, paid-out, charged-off and worthless checks; 5) Title Cash's leases; and 6) Title Cash's employees. [Exhibit 1, page 39, lines 22-25 (leases); page 47, lines 23-25 (leases); page 128, lines 1-7, 15-21 (leases); page 48, lines 7-11 (assets and utilities); page 128, lines 8-14 (assets); page 130, lines 21 to page 131, line 1 (assets); page 132, lines 7-12 (utilities); page 48, lines 1-3 (phone lines); page 48, lines 4-6 (name); page 130, lines 13-23 (name); pages 126, 127 (employees); Exhibit 11].
103. EZ Title is paying for the legal fees of both EZ Title and Title Cash. [Exhibit 12].
I.FACTS RELEVANT TO COUNT IX OF THE 3RD AMENDED AND SUBSTITUTED COMPLAINT
I.Piercing Title Cash's corporate veil and holding Hutcheson liable for Title Cash's liabilities
Hutcheson, as incorporator, director, president, and majority or controlling shareholder of Title Cash, EZ Title, and Hutcheson, Inc., controls the operations and assets of the three entities. [See.Supra at ¶¶ 1-3, 5, 16-19, 13, 25-27; Exhibit 1, page 61, lines 6-10; page 130, lines 9-17].
Hutcheson directed Title Cash's operations as an employee of Hutcheson, Inc. [Supra at ¶¶ 72, 73, 87].
Hutcheson continued conducting business as d/b/a Title Cash by transferring all of Title Cash's assets to EZ Title, another company that is owned solely by him and his family. [See.Supra at ¶¶ 100-103, 105].
Hutcheson requires Title Cash and EZ Title employees to be trained by Hutcheson, Inc. [Exhibit 1, page 19, lines 12-20; page 60, lines 17-19; Exhibit 5, page 51, line 12 to page 52, line 1].
Hutcheson has an identical equitable ownership (55% ownership)
in Title Cash, EZ Title, and Hutcheson, Inc. [Supra at ¶¶ 3, 19, 27].
109. Hutcheson's family has identical equitable ownership (45% ownership) in Title Cash, EZ Title, and Hutcheson, Inc. [Supra at ¶¶ 4, 20, 28].
110. Hutcheson operates Title Cash, EZ Title, and Hutcheson, Inc. as a single venture. [See.Supra at ¶¶ 63-103].
111. Hutcheson transferred all of Title Cash's meaningful or significant assets to EZ Title. [Supra ¶ 102; Exhibit 2].
112. Hutcheson has Title Cash offices around the country. [Exhibit 1, page 61; Exhibit 13; Exhibit 5, page 57, lines 24-25; page 58, lines 1-2].
113. Pursuant to lawsuits that could have possibly bankrupt the company, Hutcheson transferred Title Cash's assets and going concern value to EZ Title while agreeing to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Supra at ¶¶ 32-34;See also,Exhibit 2].
114. Title Cash's, Hutcheson, Inc.'s, and EZ Title's addresses were the identical to Hutcheson's in their respective Articles of Incorporation. [See,Exhibits 2, 3, 4].
115. Hutcheson concealed the identity of the financial interests of Title Cash and EZ Title until it filed the Motion to Quash. [See.AP No. 09-28, Docket No.
043-0].
116. Hutcheson, Title Cash, EZ Title, and Hutcheson, Inc. hired the same attorney, Thane Johnson, in this matter. [See.Docket No. 071-0].
II.Piercing Hutcheson, Inc.'s corporate veil
Hutcheson, as President of Hutcheson, Inc., conducted business on behalf of Title Cash in this matter. [See.Supra at ¶¶72, 73].
Hutcheson, Inc. directs some of Title Cash's legal affairs. [See.Supra at ¶¶ 424-6].
Hutcheson, Inc.'s property is used to conduct training for Title Cash and EZ Title employees. [Supra at ¶ 41].
Hutcheson, Inc. and Title Cash share the same incorporator, director, and president, and shareholders. [Supra at ¶¶ 1, 2, 5, 23, 25, 26;See also,Exhibits 2, 4].
Hutcheson, Inc. and Title Cash hired the same attorney, Thane Johnson, in this matter. [See.Docket No. 053-0].
Hutcheson, Inc. failed to maintain a proper arm's length relationship with Title Cash. [See.Supra at ¶¶ 75-88].
III.Piercing EZ Title's corporate veil
EZ Title and Title Cash share the same incorporator, director, president, and shareholders. [Supra at ¶¶ 1-5, 15-19; See also, Exhibit 2, 3].
Hutcheson, as president of both Title Cash and EZ Title, created and entered into an Asset Purchase Agreement on behalf of both companies. [Supra at ¶¶ 10, 70; Exhibit 11].
Pursuant to the Asset Purchase Agreement, EZ Title agreed to pay Title Cash $692,937.46, which was subsequently used to pay debt's owed to Hutcheson, in exchange for Title Cash's: 1) going concern value; 2) agreement to assume all debts including but not limited to Kramer's litigation matter; and 3) agreement to indemnify and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Supra at ¶ 101].
Pursuant to the Asset Purchase Agreement, EZ Title retained and is currently using the following: 1) the name d/b/a Title Cash; 2) Title Cash's phone lines; 3) Title Cash's utility, receivable bank accounts, fixed assets, petty cash, lease and other deposits; 4) Title Cash's customers files with account status of open, paid-out, charged-off and worthless checks; 5) Title Cash's leases; and 6) Title Cash's employees. [Supra at ¶ 102].
EZ Title and Title Cash hired the same attorney, Thane Johnson. [Docket 053-0; Exhibit 12].
EZ Title is paying for both Title Cash and EZ Title's legal fees. [Exhibit 12].
J.FACTS RELEVANT TO COUNT X OF THE 3RD AMENDED AND SUBSTITUTED COMPLAINT
Hutcheson, as incorporator, director, president, and majority or controlling shareholder of Title Cash, EZ Title, and Hutcheson, Inc., controls the operations and assets of the three entities. [See. Supra at ¶¶ 1-3, 5, 16-19, 13, 25-27; Exhibit 1, page 61, lines 6-10; page 130, lines 9-17].
The transfer of Title Cash's assets and going concern value to EZ Title is for the use and benefit of Hutcheson, Hutcheson, Inc. and EZ Title. [See. Supra at ¶¶ 129, 104-110, 125, 126; Exhibit 1, page 19, line 5 to page 21, line 1].
Hutcheson, Title Cash, EZ Title, and Hutcheson, Inc. concealed the identity of the financial interests of Title Cash and EZ Title until it filed the Motion to Quash. [See. AP No. 09-28, Docket No. 043-0].
Title Cash dissolved because of ongoing litigation that Hutcheson felt would bankrupt the company. [Exhibit 1, page 21, lines 2-12].
Title Cash transferred substantially all of its assets and going concern value while indemnifying and hold EZ Title, its officers, directors and shareholders, harmless from all business operations that predate the closing of the transaction, which includes but is not limited to Kramer's litigation matter. [Supra at ¶ 101].
134. The Asset Purchase Agreement occurred prior to incurring a judgment against Title Cash through this case. [Supra at ¶ 8].
1. Plaintiff is a natural person residing in Kalispell, Montana, and is a Debtor in the above Chapter 7 case, No. 04-62762-7.
2. Plaintiff is a person protected under the provisions of the Montana Unfair Trade Practices Act as found in § 30-14-101 et seq, MCA.
3. Defendant Title Cash is a corporation organized under the laws of the State of Montana that provides financial services with its office located at 2211 U.S. Highway 2 East, Kalispell, Montana.
Plaintiff's Statement at page 13, footnote 2 states: "Title Cash has appeared in this case, but the Montana Secretary of State website states that Title Cash is inactive as of 3/16/2009. Title Cash has not filed any documents with the court stating it is no longer a registered business in Montana." It appears undisputed from subsequent proceedings that Title Cash is a dissolved corporation.
4. On November 23, 2001, Plaintiff filed a voluntary Chapter 13 petition in this Court, Case No. 01-53527-13.
5. On March 29, 2002, Title Cash filed two Proof of Claims claiming:
Title Cash's address on its claims is listed as 2211 Hwy 2 E, Kalispell, MT 59901. That is the address to which the Notice of Commencement of the Chapter 7 case in Case No. 015-3527 was mailed to Title Cash according to the certificate of service on Docket No. 96.
a. a secured claimed amount for $7,290.00 for Account # 768 [Claim No. 13]; and b. a secured claimed amount for $7,290.00 for Account # 767. [Claim No. 14].
6. On May 23, 2002, Title Cash withdrew both secured claimed amounts [Claim No. 13, 14], and filed a secured claimed amount for $14,605.98 on June 5, 2002. [Claim No. 18].
This asserted facts overlooks an intervening step shown by the claims register of No. 015-3527. Claim No. 15 was filed on behalf of Title Cash on 04/02/2002, in the amount of $14,605.98, and Claim No. 18 was filed by Title Cash on 06/05/2002, in the same amount amending Claim No. 15. In addition, Plaintiff contends in footnotes 3 and 4 of her motion that Title Cash intentionally filed false claims at Claim Nos. 13 and 18 in violation of 18 U.S.C. § 152(4). Those assertions were not raised in the Complaint and are disregarded as material facts.
7. On September 18, 2003, an Order was entered granting a motion to convert Case No. 01-53527 to Chapter 7. [Docket No. 93].
The docket shows that the Debtors' amended Chapter 13 Plan was confirmed, but no discharge was entered before the case was dismissed. The amended Plan [Docket No. 56] is not viewable on the Court's CM/ECF system, which has viewable images beginning at Docket No. 68. The file in Case No. 01-53527 has been requested from archives.
8. On October 16, 2003, an Order was entered dismissing Case No. 01-53527 [Docket No. 99], and the Final Decree was entered on November 03, 2003.
9. On February 03, 2004, according to the Trustee's Final Report and Account [Docket No. 100], the estate paid $6,046.00 in principal and $1,041.83 in interest to Title Cash's Proof of Claim No. 14 secured claim.
10. On October 24, 2003, Plaintiff filed a voluntary Chapter 13 petition in this Court in Case No. 03-63421-13.
11. On March 11, 2004, this Court entered an Order granting the trustee's motion to dismiss the case.
12. On September 27, 2004, the Final Decree was entered in Case No. 03-63421-13.
13. On September 7, 2004, Plaintiff filed a voluntary Chapter 7 petition in this Court commencing Case No 04-62762-7.
14. Title Cash was listed on Schedule D as a creditor with a security interest in Plaintiff's 1999 Suburban Vehicle Identification Number 1GNFK16RXXJ564993 [the "Suburban"].
15. On September 26, 2004, and September 29, 2004, Title Cash was properly served a Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines. [Docket Nos. 5, 8].
The address to which the Notices were sent to Title Cash is 2211 Hwy 2 East, Kalispell, MT 59901-2815, which is substantially the same as the address given by Title Cash in its Proofs of Claim filed in Case No. 01-53527.
16. Plaintiff did not sign a reaffirmation agreement for Note 767 with Title Cash.
17. On January 1, 2005, a Discharge of Joint Debtors was entered. [Docket No. 12].
18. On February 3, 2005, the Final Decree was entered.
19. Pursuant to the Discharge and the Trustee's Report of No Distribution filed 1/25/05, Plaintiff's personal liability on both Note 767 and Note 768 was discharged in Case No. 046-2762-7.
20. On September 3, 2008, Plaintiff filed a Complaint against Title Cash in Montana Eleventh Judicial District Court, Flathead County, Case No. DV-08-978B.
21. On December 08, 2009, Title Cash filed an Answer and Counterclaim [Docket 26] requesting in personam relief against Plaintiff as follows:
a. a judgment for $5,550.66 with 10% interest [Note 767]; b. a judgment for $2,770.77 with 9% interest [Note 768]; c. an order foreclosing the lien upon the Suburban; d. a deficiency judgment; e. reasonable attorney fees; and f. for other and further relief as the Court deems just and proper. Title Cash did not file a Statement of Genuine Issues as required by Montana Local
Bankruptcy Rule ("LBR") 7056-1(a)(2).
DISCUSSION
I. Summary Judgment.
Summary judgment is governed by FED. R. BANKR. P. 7056. Rule 7056, incorporating FED. R. CIV. P. 56(c), states that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." "The proponent of a summary judgment motion bears a heavy burden to show that there are no disputed facts warranting disposition of the case on the law without trial." Younie v. Gonya (In re Younie), 211 B.R. 367, 373 (9th Cir. BAP 1997) (quoting Grzybowski v. Aquaslide "N' Dive Corp. (In re Aquaslide "N" Dive Corp.), 85 B.R. 545, 547 (9th Cir. BAP 1987)). The manner in which this burden is proven depends on which party has the burden on a particular claim or defense at the time of trial.
If the moving party will bear the burden of persuasion at trial, that party must support its motion with credible evidence—using any of the materials specified in Rule 56(c)—that would entitle it to a directed verdict if not controverted at trial. Such an affirmative showing shifts the burden of production to the party opposing the motion and requires that party either to produce evidentiary materials that demonstrate the existence of a "genuine issue" for trial or to submit an affidavit requesting additional time for discovery. If the burden of persuasion at trial would be on the non-moving party, the party moving for summary judgment may satisfy Rule 56's burden of production in either of two ways. First, the moving party may submit affirmative evidence that negates an essential element of the nonmoving party's claim. Second, the moving party may demonstrate to the Court that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim.
Celotex Corp. v. Catrett, 477 U.S. 317, 330-34, 106 S.Ct. 2548, 2557, 91 L.Ed.2d 265 (1986) (Brennan dissent) (citations omitted). See also Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1102-06 (9th Cir. 2000) (discussing burdens for withstanding summary judgment).
When seeking summary judgment, the moving party must initially identify those portions of the record before the Court which it believes establish an absence of material fact. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n., 809 F.2d 626, 630 (9th Cir. 1987). If the moving party adequately carries its burden, the party opposing summary judgment must then "set forth specific facts showing that there is a genuine issue for trial." Kaiser Cement Corp. v. Fischback & Moore, Inc., 793 F.2d 1100, 1103-04 (9th Cir. 1986), cert. denied, 469 U.S. 949 (1986); FED. R. CIV. P. 56(e). See also Frederick S. Wyle Prof'l. Corp. v. Texaco, Inc., 764 F.2d 604, 608 (9th Cir. 1985) ("the opponent must affirmatively show that a material issue of fact remains in dispute"). That is, the opponent cannot assert the "mere existence of some alleged factual dispute between the parties." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Moreover, "[a] party opposing summary judgment may not simply question the credibility of the movant to foreclose summary judgment." Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 997 (9th Cir. 2001).
To demonstrate that a genuine factual issue exists, the objector must produce affidavits which are based on personal knowledge and the facts set forth therein must be admissible into evidence. Aquaslide, 85 B.R. at 547. All reasonable doubt as to the existence of genuine issues of material fact must be resolved against the moving party. Liberty Lobby, 477 U.S. at 247-48, 106 S.Ct. at 2509. However, "[d]isputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., 809 F.2d at 630 (citing Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510). "A `material' fact is one that is relevant to an element of a claim or defense and whose existence might affect the outcome of the suit. The materiality of a fact is thus determined by the substantive law governing the claim or defense." Id.
If a rational trier of fact might resolve disputes raised during summary judgment proceedings in favor of the nonmoving party, summary judgment must be denied. T.W. Elec. Serv., 809 F.2d at 630; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 202 (1986). Thus, the Court's ultimate inquiry is to determine whether the "specific facts" set forth by the nonmoving party, viewed along with the undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence. T.W. Elec. Serv., 809 F.2d at 631. In the absence of any disputed material facts, the inquiry shifts to whether the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53.
Mont. LBR 7056-1 governs summary judgment motions in this Court. LBR 7056-1(a)(1) requires:
Statement of Uncontroverted Facts. A separate, short, and concise "Statement of Uncontroverted Facts" must accompany every motion for summary judgment. Failure to submit this statement constitutes grounds for denial of the motion. The statement shall set forth separately each fact, in serial, not narrative form, and shall specify the specific portion of the record where the fact can be found (e.g., affidavit, deposition, etc.).
Both sides failed to file separate statements of uncontroverted facts accompanying their motions for summary judgment. Title Cash failed to file any statement of uncontroverted facts, subjecting its cross motion for summary judgment to summary denial under LBR 7056-1(a)(1). Plaintiff did not file a separate statement, but set out her Statement of Uncontroverted Facts in Section "II" beginning at page 13 of Docket No. 18, paragraph 41, through paragraph 61 which ends at the top of page 17. The Court will consider Plaintiff's Statement of Uncontroverted Facts, but the Court will not consider the factual allegations outside Plaintiff's Statement of Uncontroverted Facts in the rest of Plaintiff's motion or supporting memorandum because, unless undisputed in the pleadings, such statements are attorney argument and are not in compliance with LBR 7056-1(a)(1). Hurley v. Student Loan Acquisition Auth. of Ariz., et al., (In re Hurley), 258 B.R. 15, 23 (Bankr. D. Mont. 2001) (An attorney's argument is not evidence); United States v. Velarde-Gomez, 224 F.3d 1062, 1073 (9th Cir. 2000); Exeter Bancorporation v. Kemper Securities Group, Inc., 58 F.3d 1306, 1312 n.5 (8th Cir. 1995) (Statements of counsel are not evidence and do not create issues of fact), citing United States v. Fetlow, 21 F.3d 243, 248 (8th Cir. 1994), cert. denied, 513 U.S. 977, 115 S.Ct. 456, 130 L.Ed.2d 365 (1994).
Title Cash combined its response brief and cross motion for partial summary judgment in Docket No. 22, and on pages 2 through 7 discusses what facts it believes create genuine issues of material fact. However, Title Cash failed to comply with LBR 7056-1(a)(2) which provides:
Opposition. Opposition to a motion for summary judgment, if any, must be filed within ten (10) days after the motion is served. A separate, short, and concise "Statement of Genuine Issues", setting forth the specific facts, which the opposing party asserts establishes a genuine issue of material fact precluding summary judgment in favor of the moving party must be filed by the party opposing the motion together with an opposition brief.
Because Title Cash failed to file a separate Statement of Genuine Issues as required by LBR 7056-1(a)(2), LBR 7056-1(a)(3) applies which provides: "Facts Admitted. All material facts in the moving party's Statement of Uncontroverted Facts are deemed to be admitted unless controverted by a Statement of Genuine Issues filed by the opposing party." For purposes of Plaintiff's motion, all of the material facts in her Statement of Uncontroverted Facts, except for footnotes 3 and 4, are deemed admitted under LBR 7056-1(a)(3).
II. Plaintiff's Motion, Count I (Civil Contempt for Violating § 524).
Plaintiff's Count I states in its title line that it is based on § 524 for violation of the discharge injunction, but adds at paragraph 35 of the Complaint allegations of violations of the automatic stay under § 362(a). Title Cash's answer denied violating either § 524 or § 362, and its brief contends that questions of fact exist whether Title Cash willfully violated the stay or the discharge injunction, thereby precluding summary judgment.
A. Automatic Stay — § 362(a).
Plaintiff contends in Count I that Title Cash violated the stay by splitting the plan payments from the Debtors in Case No. 01-53527-13 between its secured claim, Note 767, and its unsecured claim, Note 768. Title Cash concedes "that if the Chapter 13 Plan did not provide for the splitting of the Trustee's payments between the secured Note and the unsecured Note, that the same violates the automatic stay." However, Title Cash contends that a question of fact exists because it has not seen the Plan.
At this summary judgment stage, the Court agrees that the Plaintiff has failed to satisfy her burden of proof that no genuine issue of material fact exists. Put simply, Plaintiff's Statement of Uncontroverted Facts does not include any statements of fact at page 14 of Docket No. 18 that Title Cash split payments it received from the Trustee, or the dates it received payments from the Trustee and split them. Title Cash's answer Docket No. 17 denies paragraph 35 of the Complaint, and while it admits in its memorandum that Ex. E attached to Plaintiff's motion indicates that Title Cash split the payments, this Court will not consider those statements in Ex. E as uncontroverted when the Plaintiff failed to reference it in her Statement of Uncontroverted Facts.
All reasonable doubt as to the existence of genuine issues of material fact must be resolved against the moving party. Liberty Lobby, 477 U.S. at 247-48, 106 S.Ct. at 2509. Plaintiff failed to produce the confirmed Plan in Case No. 01-53527, even though it was her Plan. "[F]ailure to produce evidence, which under the circumstances would be expected, gives rise to a presumption against the party failing to produce it.". N.L.R.B. v. Advance Transp. Co., 965 F.2d 186, 195 (7th Cir. 1992), quoting P.R. Mallory Co. v. NLRB, 400 F.2d 956, 959 (7th Cir.1968), cert. denied, 394 U.S. 918, 89 S.Ct. 1191, 22 L.Ed.2d 452 (1969).
This Court has ordered the file in Case No. 01-53527 to be retrieved from archives, and it should be available for trial. Until then, with respect to the alleged violations of § 362(a) in Count I the Court finds that the Plaintiff has failed to satisfy her burden of proof under Rule 7056(c) that there is no genuine issue of material fact.
B. Violating the Discharge Injunction — § 524.
Plaintiff's other allegation under Count I is that Title Cash violated the discharge injunction of § 524(a) by filing a counterclaim in Case No. DV-08-978B in state district court "on December 8, 2009 [sic]" which sought a judgment on the unsecured Note 768 which was discharged in Case No. 04-62762-7. Title Cash's answer Docket No. 17 admits paragraph 32 of the Complaint alleging that Title Cash filed the answer and counterclaim. By failing to file a statement of genuine issues, the facts in Plaintiff's Statement of Uncontroverted Facts are deemed admitted under LBR 7056-1(a)(3) that Title Cash was served with the notice of commencement of case. The Discharge of the Plaintiff was entered in Case No. 04-62762-7 and served on Title Cash at the same address it stated on its Proofs of Claim, and discharged any personal liability of the Plaintiff for Notes 767 and 768.
Both the Complaint at paragraph 32 and Plaintiff's Statement of Uncontroverted Facts at page 16, paragraph 61, state the date on which Title Cash filed its answer as December 8, 2009, which is roughly a week ago and after the dates on which Complaint and Plaintiff's motion for summary judgment were filed. Even though Title Cash admits the facts in its answer at paragraph 32, the 2009 date is clearly a typo and should read 2008.
A discharge under 11 U.S.C. § 524(a)(2) "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor...." In re Ellett, 254 F.3d 1135, 1148 (9th Cir. 2001), cert. denied, 534 U.S. 1127, 122 S.Ct. 1064, 151 L.Ed.2d 968 (2002). The admitted facts establish that Title Cash violated the discharge injunction by filing a counterclaim in Case No. DV-08-978B seeking judgment against the Plaintiff for the discharged notes, a deficiency judgment, and attorney fees, as a personal liability of the Plaintiff. Civil contempt is the normal sanction for violation of the discharge injunction. In re Gomez, 17 Mont. B.R. 166, 170 (Bankr. D. Mont. 1998), citing 4 Collier on Bankruptcy, ¶ 524.02[2][c], at 524-18 (15th ed. 1998).
This Court addressed a motion for sanctions based upon violation of the discharge injunction in In re Gomez, 17 Mont. B.R. at 171-72 (quoting In re Killorn, 16 Mont. B.R. 364, 366-68 (Bankr. D. Mont. 1998)):
Contempt proceedings are governed by F.R.B.P. 9020. Prior to Congress reform of Rule 9020 in 1987, bankruptcy courts did not have the inherent power of contempt in the Ninth Circuit. In re Sequoia Auto Brokers, Ltd. (Plastiras v. Idell), 827 F.2d 1281, 1284 (9th Cir. 1987). Subsequent to Sequoia, the United States Supreme Court held that courts created by Congress have inherent powers, unless Congress intentionally restricts those powers. Chambers v. NASCO, Inc., 501 U.S. 32, 47, 111 S.Ct. 2123, 2134, 115 L.Ed.2d 27 (1991). The Ninth Circuit
later held that with Congress enacting Rule 9020 and § 105(a), Chambers supersedes Sequoia and bankruptcy courts have the inherent power to sanction for contempt. In re Rainbow Magazine, Inc., 77 F.3d 278, 284-5 (9th Cir. 1996). Rule 9020(b) provides that contempt "committed in a case or proceeding pending before a bankruptcy judge . . . may be determined only after a hearing on notice"
* * * *
Both the Discharge and § 524(a)(2) provide that the Discharge operates as an injunction, enjoining all creditors from commencing, instituting, or continuing any action or engaging in any act to collect discharged debts. See, In re Raiman, 172 B.R. 933, 936 (9th Cir. BAP 1994). Willful violation of the § 524(a)(2) injunction warrants the finding of contempt. In re Andrus, 184 B.R. 311, 315-16 (Bankr. N.D. Ill. 1995). To find a creditor in civil contempt the court must find that the offending party knowingly violated a definite and specific court order. Id.; In re Johnson, 148 B.R. 532, 538 (N.D. Ill. 1992). The burden under § 524(a)(2) is on the Debtors to prove the violation by clear and convincing evidence." Vertex Distributing, Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 889 (9th Cir. 1982); In re Keane, 110 B.R. 477, 483 (S.D. Cal. 1990); In re Andrus, 184 B.R. at 315; In re Ryan, 100 B.R. 411, 417 (N.D. Ill. 1989). This Court can impose upon a creditor who violates the § 524(a)(2) injunction sanctions for civil contempt, which may consist of remedial and compensatory, but not punitive, sanctions. Andrus, 184 B.R. at 315; In re Torres, 117 B.R. 379, 382 (N.D. Ill. 1990); In re Rainbow Magazine, Inc., 77 F.3d at 285. Gomez continues: Other courts have long held that where a creditor has failed to comply with an order of discharge, civil contempt is a sanction to enforce compliance with an order of the court or to compensate for losses or damages sustained by reason of noncompliance. In re Whitaker, 16 B.R. 917, 923 (M.D. Tenn. 1982) (citing McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 69 S.Ct. 497, 499, 98 L.Ed. 599 (1948)). Civil contempt is therefore an appropriate sanction for a creditor's noncompliance with or violation of the Court's order of discharge. Whitaker, 16 B.R. at 923, Matter of Holland, 21 B.R. 681, 689 (N.D. Ind. 1982); see, Matter of Batla, 12 B.R. 397, 400-401 (Bankr. N.D. Ga.1981).
The standard of proof may have been reduced to a preponderance of the evidence under the reasoning of Grogan v. Garner, 498 U.S. 279, 283-5, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Knowledge of the discharge order and knowingly violating it are necessary requirements for contempt. Holland, 21 B.R. at 689. A party's negligence or absence of intent to violate the discharge order is not a defense against a motion for contempt. In re Atkins, 176 B.R. 998, 1009-1010 (Bankr. D. Minn. 1994) (citations omitted).
17 Mont. B.R. at 172.
Title Cash contends that questions of fact exist whether its office manager Lisa Harshbarger ("Harshbarger") knowingly violated the discharge entered in Case No. 04-62762-7, that the Plaintiff did not file an answer to the counterclaim asserting the discharge as an affirmative defense in Case No. DV-08-978B, and that Title Cash relied on the Department of Administration's letter in filing its answer and counterclaim. These contentions lack merit.
In rejecting an improper corporate address argument against a finding of a willful violation of the automatic stay one court aptly noted:
[W]hile an octopus may have eight legs, it is still the same octopus. As a result, bankruptcy law not only requires, but demands, that companies, whether large or small, have in place procedures to ensure that formal bankruptcy notices sent to an internally improper, but otherwise valid corporate address are forwarded in a prompt and timely manner to the correct person/department. As a consequence, Ocwen's defense that its collection efforts against the Debtors were merely the result of a flaw in its internal organizational structure—the argument that the right hand does not know what the left hand is doing—falls on deaf ears. This rule has been universally followed by other bankruptcy courts, and is really just an extension of the principle that corporations are expected to have in place procedures to ensure that they comply with all areas of the law.
In re Perviz, 302 B.R. 357, 367 (Bankr. N.D. Ohio 2003).
In the instant case Title Cash argues that Harshbarger "was only privy to items in the file" and that a question of fact exists with regard to whether she knew that there had been a discharge entered. The uncontroverted facts establish that there was a discharge, which was served on Title Cash. Title Cash is responsible to have in place procedures to ensure that bankruptcy discharges sent to its valid address are maintained in a prompt and timely manner to the correct person/department and be kept "in the file."
The facts show that Title Cash failed to have in place procedures, or failed to adequately train or supervise Harshbarger, to ensure that it complied with the discharge injunction. The Court finds that Title Cash knew of the discharge order and knowingly violated it when it filed a counterclaim seeking a judgment of personal liability against the Plaintiff for the discharged debt and attorney fees. The Court finds Title Cash in civil contempt for violation of the discharge injunction of § 524(a)(2). Trial of Count I will proceed on appropriate remedial and compensatory, but not punitive, sanctions.
III. Title Cash's Cross Motion for Partial Summary Judgment.
Title Cash's motion for partial summary judgment contends that Plaintiff's CPA action was not brought within 2 years as required under MCA § 27-2-211(1), which provides:
Actions to enforce penalty or forfeiture or other statutory liability. (1)
Within 2 years is the period prescribed for the commencement of an action upon: (a) a statute for a penalty or forfeiture when the action is given to an individual or to an individual and the state, except when the statute imposing it prescribes a different limitation; (b) a statute or an undertaking in a criminal action for a forfeiture or penalty to the state; (c) a liability created by statute other than: (I) a penalty or forfeiture; or (ii) a statutory debt created by the payment of public assistance.
Title Cash quotes MCA § 27-2-102(a) for when a cause of action accrues: "A claim or cause of action accrues when all elements of the claim or cause exist or have occurred, the right to maintain an action on the claim or cause is complete, and a court or other agency is authorized to accept jurisdiction of the action[.]" Title Cash argues that Plaintiff knew of problems with the two notes in 2001 when she filed her initial Chapter 13 case, and she reported the problem to the Department of Administration, Division of Banking in December of 2006, but did not file her CPA claim until June 12, 2009, more than 2 years after Title Cash admitted to engaging in unfair and fraudulent practices, and therefore Title Cash argues that Plaintiff's CPA claim is barred by the 2-year statute of limitations.
Title Cash failed to file a separate statement of uncontroverted facts with its cross motion for partial summary judgment, which under LBR 7056-1(a)(1) constitutes grounds for denial of its motion. It failed to follow the applicable Rule to establish the absence of genuine issues of material fact relative to its statute of limitations claim. This Court will not accept piecemeal factual contentions which are not in compliance with Rule 7056-1(a)(1).
The Plaintiff argues that "continuing nuisance theory" and "permanent nuisance theory" tolled the statute of limitations until the injury is abated or the nuisance becomes permanent. It is not necessary to decide whether these theories apply, however, because certain of the acts alleged under Count IV took place within 2 years of Plaintiff's CPA claims.
Paragraph 53 of the Complaint, Docket No. 16, states that Title Cash acknowledged that "the act of collecting on a loan made on a non-existent vehicle was an unfair and fraudulent act." Title Cash's answer, Docket No. 17, on page 5 "admits" paragraph 53. Title Cash argues that Plaintiff did not file her CPA claim until June 12, 2009, which is 2 years after Title Cash admitted to engaging in unfair and fraudulent practices. However, Title Cash filed its counterclaim in DV-08-978B on December 8, 2008, continuing to collect Note 768 which was by then not only unsecured by a vehicle, but discharged. That continued collection effort by Title Cash was not more than 2 years before Plaintiff filed her CPA claim, which therefore is not barred by MCA § 27-2-211(1).
In addition, Count IV contends that the Plaintiff's Suburban was repossessed in August 2008, at paragraphs 27, 28 and 29, and Count IV at paragraph 55 contends that the repossession of the Suburban was an unfair and deceptive practice for which she is entitled to damages under the CPA. Title Cash denied those contentions, but as the moving party Title Cash has the burden to show absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law based on the 2-year statute of limitations of MCA § 27-2-211(1). Title Cash failed its burden by not filing a statement of uncontroverted facts, and therefore failed to show that the repossession which is one of the bases for Count IV's CPA claims took place more than 2 years before June 12, 2009.
IV. Plaintiff's Motion for Partial Summary Judgment — Count IV.
Plaintiff moves for summary judgment on Count IV, contending at pages 25 and 26 of Docket No. 18 that Title Cash filed false secured Proofs of Claim, filed false allegations in its answer and counterclaim in DV-08-978B, collected money from the Plaintiff on Note 768, and admitted in a settlement agreement that it engaged in unfair and fraudulent practices by collecting on Note 768 on a non-existent vehicle. None of these contentions are set forth in Plaintiff's Statement of Uncontroverted Facts at pages 13 to 17 of Docket No. 18, except for allegations that the Claims 13 and 18 were false which are in footnotes 3 and 4. Neither are the allegations of filing false proofs of claim alleged in Count IV. The Court has allowed Plaintiff to include its Statement of Uncontroverted Facts in its combined motion, statement and memorandum, and has deemed them admitted based on Title Cash's failure to file a statement of genuine issues. However, the Court draws the line at granting summary judgment based upon the word "false" placed in footnotes rather than stated plainly in the body of the Statement of Uncontroverted Facts. The above described contentions are attorney argument in Plaintiff's motion and memorandum, not facts.
The remaining contention in Plaintiff's motion for summary judgment on Count IV for CPA violations alleges that Title Cash unfairly and deceptively repossessed Plaintiff's vehicle. That contention also is not included in Plaintiff's Statement of Uncontroverted Facts at pages 13 to 17 of Docket No. 18. Title Cash denied repossessing the Suburban. Because Plaintiff failed to allege that Title Cash repossessed the Plaintiff's Suburban in her Statement of Uncontroverted Facts, the Court finds that Plaintiff has failed to satisfy her burden of proof under Rule 56(c) that there is no genuine issue of material fact regarding the alleged repossession and that Plaintiff is entitled to judgment under the CPA as a matter of law.
CONCLUSIONS OF LAW
1. This Court has jurisdiction of this matter under 28 U.S.C. § 1334.
2. This Court has jurisdiction to hear all state law claims under 28 U.S.C. § 1367.
3. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A).
4. Plaintiff failed to satisfy her burden of proof under FED. R. CIV. P. 56(c) that there is no genuine issue of material fact with respect to her contentions under Count I that Title Cash willfully violated the automatic stay of § 362(a).
5. Plaintiff satisfied her burden of proof under Rule 56(c) that there is no genuine issue of material fact and Plaintiff is entitled to judgment as a matter of law holding Title Cash in civil contempt for knowing violations of the discharge injunction of 11 U.S.C. § 524(a)(2), with amounts of remedial and compensatory damages to be determined at trial.
6. Title Cash failed to satisfy its burden of proof under Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law with respect to its contentions that Plaintiff's CPA claims under Count IV of the Complaint are barred by the 2-year statute of limitations at MONT. CODE ANN. § 27-2-211(a).
7. Plaintiff failed to satisfy her burden of proof under Rule 7056(c) that there is no genuine issue of material fact regarding the contentions in Count IV of Plaintiff's Complaint and that Plaintiff is entitled to judgment under the CPA as a matter of law.
IT IS ORDERED a separate Order shall be entered in conformity with the above granting the Plaintiff's motion for summary judgment in part and denying it in part; denying Title Cash's cross motion for partial summary judgment; and finding that Title Cash is in civil contempt and liable to the Plaintiff for violating the discharge injunction of 11 U.S.C. § 524(a)(2) by filing a counterclaim against the Plaintiff in the state court action No. DV-08-978B, Montana Eleventh Judicial District Court, Flathead County, seeking monetary judgments and attorney fees against the Plaintiff attempting to collect discharged debt, in amounts for remedial and compensatory damages, costs and attorney's fees which shall be determined at trial.