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Estes v. Anglin

United States District Court, N.D. Alabama, Southern Division

March 20, 2015

DEBRA BOND ESTES, Debtor-Defendant/Appellant,
BETTYE ANN ANGLIN, Creditor-Plaintiff/Appellee.



This case is before the court on appeal from a judgment of the United States Bankruptcy Court for the Northern District of Alabama denying appellant Debra Bond Estes a discharge in bankruptcy pursuant to 11 U.S.C. § 727(a)(2)(B). ( See B.A.P. Docs. 174 at 46 and 175 at 2.)[1] Upon consideration of the record, the submissions of the parties, and the relevant law, the court finds that the decision of the bankruptcy court is due to be affirmed.


Appellant Debra Bond Estes was the debtor-defendant in the underlying adversary proceeding, and appellee Bettye Ann Anglin was the creditor-plaintiff. As noted in its previous Memorandum Opinion, (Doc. 10), appellant and appellee have an extensive litigation history, and thus the court will review only the relevant procedural history, which, as set forth in its previous Memorandum Opinion, is as follows:

Appellant has filed chapter 7 bankruptcy on at least three occasions, [2] two of which are relevant here. ( See [B.A.P. Doc. 174] at 4-9.) Appellant and her husband filed a joint bankruptcy petition in 2002, and appellee commenced an adversary proceeding at that time, seeking to have certain debts owing to appellee ruled nondischargeable. ( Id. at 9.) The Bankruptcy Court denied appellant a discharge in that case pursuant to 11 U.S.C. § 727(a)(4)(A) because appellant failed to list a diamond necklace as an asset on her bankruptcy schedules. ( Id. at 9, 12.)
Appellant filed the underlying bankruptcy petition on October 15, 2007, and appellee filed the underlying adversary case against appellant on November 30, 2007. ( Id. at 9.) In the underlying adversary case, appellee argued in her initial complaint that a judgment against appellant and in appellee's favor from 2002 was nondischargeable under 11 U.S.C. § 523(a)(10)[3] because the judgment resulted from a debt that existed before appellant filed the 2002 bankruptcy case, in which she was denied a discharge. ( See id. at 13.) The Bankruptcy Court disagreed and granted appellant's motion for summary judgment on that issue. ( Id. at 19.) However, the Bankruptcy Court permitted appellee to amend her complaint to include a claim under 11 U.S.C. § 727(a)(2)(B).[4] ( Id. at 24.) [The Order granting appellee's Motion to Amend Complaint was entered March 5, 2012. (B.A.P. Doc. 105.)] In considering appellee's claim, the Bankruptcy Court ruled that appellant was barred from receiving a discharge pursuant to § 727(a)(2)(B) because appellant did not list an insurance claim for a lost diamond necklace on her bankruptcy schedules. ( Id. at 45.)
A Notice of Appeal was filed in this court on May 30, 2014. (Doc. 1.) Thereafter, appellee filed a Motion to Dismiss Appeal, (Doc. 3), citing Federal Rule of Civil Procedure 11 as grounds. After the fourteen day deadline for filing a brief under Federal Rule of Bankruptcy Procedure, Rule 8009[5] had passed, appellant filed a Motion for Extension of Time, (Doc. 4), citing counsel's failure to renew his admission to the Federal District Court as the reason for the delay. Subsequently, appellant filed a response to appellee's Motion to Dismiss and a brief supporting the appeal. Appellee then filed Brief of Appellant and Renewed Motion to Dismiss Appeal, (Doc. 7), in which she moves to strike Brief in Support of Debtors Appeal, (Doc. 6), for appellant's failure to comply with Federal Rule of Bankruptcy Procedure, Rule 8010, and renews her motion to dismiss the appeal. Appellant then filed Brief of the Appellant, (Doc. 8).

(Doc. 10 at 2-4.) On January 13, 2015, this court entered an Order denying appellee's Motions to Dismiss, granting appellee's motion to strike Brief in Support of Debtors Appeal, and granting appellant's Motion for Extension of Time. (Doc. 11.)

The facts of this case are largely undisputed. Appellant alleges that she lost a diamond necklace valued at $15, 000 in March 2007. (Doc. 8 at 8; see also B.A.P. Doc. 95 at 6.) Appellant's husband, James Estes, stated in a deposition taken in December 2007 that the necklace was lost.[6] (Doc. 8 at 8; B.A.P. Doc. 174 at 41 n.45.) Despite maintaining an insurance policy with Cincinnati Insurance Company covering the necklace, appellant did not file an insurance claim when she lost the necklace or report the missing necklace to the police. (B.A.P. Doc. 174 at 27.) Appellant testified that she let her husband decide whether to file a claim, ( see id. ), and her husband testified that he did not file a claim for the missing necklace because he believed the insurance company would cancel his and appellant's homeowners' insurance if he did, ( id. at 25, 37). The insurance policy covering the necklace provided that the insured must "[g]ive immediate notice to us' or our' agent" in the event of a "physical loss" to covered property. ( See Copy of Cincinnati Insurance Company Executive Form at 21.)

At the initiation of her bankruptcy case, appellant completed the required bankruptcy forms but failed to list the insurance claim for her necklace as an asset in Schedule B, the schedule for personal property. ( See B.C. Doc. 3.) Appellant also failed to list the necklace in the designated area in the Statement of Financial Affairs for "losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of this case, " instead, marking the box for "none." (B.C. Doc. 1 at 23.) The section for the disclosure of losses requires a "description and value of property, " as well as a "description of circumstances and, if loss was covered in whole or in part by insurance, " the particulars of the insurance policy. ( Id. ) As appellant did not list the loss of her necklace, she also did not provide the necessary information regarding her insurance policy.

When the Trustee discovered the unfiled insurance claim for appellant's lost necklace, he filed an insurance claim for $15, 000 with Cincinnati Insurance Company. (B.A.P. Doc. 95 at 6; B.A.P. Doc. 174 at 28.) The insurance adjuster contacted appellant and her husband to take a statement about the lost necklace, and the Esteses told the adjuster not to process the insurance claim and that the claim should be withdrawn. ( Id. ) As a result of the Esteses' statement, the insurance company denied the Trustee's claim and notified the Trustee of the denial. (B.A.P. Doc. 95 at 6.) In subsequent correspondence with the Trustee, Cincinnati Insurance Company stated that additional reasons for denying the claim included "that the Trustee did not have standing to bring the claim if the Debtor withdrew it and that there was no proof that the necklace had, in fact, been lost." ( Id. )

The Trustee and his attorney wrote Cincinnati Insurance Company a letter explaining that the Esteses were in bankruptcy and that the unfiled insurance claim was property of the estate pursuant to 11 U.S.C. § 541. (B.A.P. Doc. 174 at 29.) After negotiations, the insurance company offered the Trustee $7, 500, which is half of the necklace's appraised value. ( Id. ) After the time for filing objections to this compromise had passed and no objections were filed, the bankruptcy court approved the compromise on April 6, 2010. (B.A.P. Doc. 95 at 6.) Cincinnati Insurance Company subsequently cancelled appellant's insurance policy. (B.A.P. Doc. 174 at 39.)


This court has appellate jurisdiction over the bankruptcy court decision pursuant to 28 U.S.C. § 158(a). "In reviewing bankruptcy court judgments, a district court functions as an appellate court. It reviews the bankruptcy court's legal conclusions de novo, but must accept the bankruptcy court's factual findings unless they are clearly erroneous." In re JLJ Inc., 988 F.2d 1112, 1116 (11th Cir. 1993) (internal citations omitted). "The bankruptcy court's findings of fact are not clearly erroneous unless, in light of all the evidence, [the court is] left with the definite and firm conviction that a mistake has been made." In re Int'l Pharm. & Disc. II, Inc., 443 F.3d 767, 770 (11th Cir. 2005) (citing In re Cox, 338 F.3d 1238, 1241 (11th Cir. 2003)). Because bankruptcy courts have discretion in allowing or denying amendments to an adversary complaint, a district court reviews a bankruptcy court's decision for abuse of discretion. See Carnegia v. Georgia Higher Educ. Assistance Corp., 691 F.2d 482, 483 (11th Cir. 1982) (citing Adams v. Evans, 642 F.2d 173 (5th Cir. 1981) (holding that ...

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