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In re Yelverton

United States District Court, District of Columbia

August 6, 2014

IN RE STEPHEN THOMAS YELVERTON, Debtor.
v.
WENDELL W. WEBSTER, et al., Appellees. STEPHEN THOMAS YELVERTON Appellant, STEPHEN THOMAS YELVERTON, Appellant,
v.
WENDELL W. WEBSTER, et al., Appellees. STEPHEN THOMAS YELVERTON, Appellant,
v.
WENDELL W. WEBSTER, et al., Appellees. Bankruptcy No. 09-00414

MEMORANDUM OPINION

CHRISTOPHER R. COOPER United States District Judge

In these three related cases, Debtor Stephen Thomas Yelverton has appealed a series of orders of the bankruptcy court approving a settlement agreement between the bankruptcy Trustee and Yelverton’s two sisters, Phyllis Edmundson and Deborah Marm, and denying Yelverton’s requests to exempt his stock in the family’s poultry farm from the bankruptcy estate. Because the Trustee adequately justified the terms of the settlement and Yelverton improperly sought to exempt property, the Court affirms each of the bankruptcy court’s orders.

I. Background

Yelverton filed a Chapter 11 Voluntary Petition for bankruptcy in May 2009. In re Yelverton, 9-414 (“Bankruptcy Proceeding”) Dkt. 1 (Bankr. D.C. May 14, 2009). After Yelverton proposed five plans for the reorganization of his debts, the bankruptcy court in 2010 converted the case to a Chapter 7 liquidation and appointed Wendell W. Webster as trustee. Id. Dkts. 336, 1, 323. Yelverton’s initial bankruptcy schedule listed, as his solely-owned property, 1, 333 shares of Yelverton Farms, Ltd., a closely-held North Carolina corporation. Id. Dkt. 22.

In July 2009, Yelverton filed suit in the Eastern District of North Carolina against Yelverton Farms and his two sisters, Edmundson and Marm, the majority stock holders. The suit alleged breach of contract and malicious interference with a contract and sought judicial dissolution of Yelverton Farms or a mandatory buyout, as well as $3, 000, 000 in damages. Webster v. Yelverton Farms, Ltd., 9-331, Dkt. 3 (E.D. N.C. July 29, 2009). In March 2011, the district court entered an order finding that Yelverton lacked standing to bring the case because his claims were the property of the bankruptcy estate and directed the Trustee to file a notice of substitution, which he did on March 15, 2011. Id. Dkts. 120, 122.[1]

Yelverton also filed two adversary proceedings in bankruptcy court in January 2010. The first sought a transfer of 1, 333 shares of stock in Yelverton Farms from Edmundson, her husband, and the company. Webster v. Edmundson, 10-10003, Dkt. 1 (Bankr. D.C. Jan. 14, 2010).[2] The Trustee was substituted as plaintiff in December 2010. Id. Dkt. 57. The second proceeding sought to prevent Marm and her husband from selling a 276-acre tract of land in Wayne County, North Carolina. Yelverton v. Marm, 10-10004, Dkt. 1 (Bankr. D.C. Jan 14, 2010). The bankruptcy court granted summary judgment against Yelverton, id. Dkt. 36; this Court upheld that decision, In re Yelverton, 10-1494, Dkt. 10 (D.D.C. Apr. 5, 2011); and the D.C. Circuit stayed review of that decision pending approval by this Court of the settlement agreement discussed below, id. Dkt. 21.

The Trustee then entered into negotiations with Edmundson, Marm, their spouses, and Yelverton Farms on behalf of the bankruptcy estate. The parties reached a settlement agreement on March 23, 2012, dismissing all claims brought by Yelverton and transferring the bankruptcy estate’s 1, 333 shares of Yelverton Farms to Edmundson and Marm in exchange for a lump sum payment of $110, 000. Bankruptcy Proceeding Dkt. 451 Ex. 1. The Trustee moved for approval of the settlement by the bankruptcy court on May 4, 2012. Id. Dkt. 451.

The bankruptcy court subsequently held an evidentiary hearing in which the Trustee explained his determination that the $110, 000 settlement payment for Yelverton’s share of the company and his litigation claims was in the best interests of the bankruptcy estate and its creditors because Yelverton had overvalued both the stock and claims. Id. Dkt. 546 at 30:14–31:2. The Trustee relied on a North Carolina appraiser’s informal estimate that the business would be worth no more than $400, 000 because Yelverton Farms owned the swine facility it operated but only leased the underlying land from Edmundson. Id. at 35:9–15; 39:9–40:1. Yelverton contested that valuation based on a 2003 appraisal that valued the business at $900, 000. The Trustee discounted Yelverton’s appraisal because the appraiser was specifically instructed not to consider the lease in valuing the business and instead valued the land and business together. Id. at 36:7–37:9. The Trustee did not order a formal appraisal because, in his view, the costs would outweigh any potential benefit. Id. at 40:2–10. Although Yelverton claimed his stock amounted to a one-third ownership interest in the company, the Trustee found Yelverton’s ownership interest to be in dispute because Yelverton Farm’s tax records all reflected that Yelverton only owned a one-fourth interest after an apparently valid stock issuance by the company. Id. at 124:2–21. The Trustee also explained that he obtained counsel in North Carolina in order to determine the probability of success in Yelverton’s litigation efforts against Edmundson, Marm, and Yelverton Farms. Id. at 37:14–38:7. The North Carolina counsel opined that discovery alone on Yelverton’s common law claims could cost as much as $25, 000, while the bankruptcy estate had no cash on hand to pursue litigation. Id. at 40:11–41:5. Moreover, the Trustee determined that the value of Yelverton’s various litigation claims aside from recovering his stock was minimal because they lacked evidentiary support and were likely barred by a number of defenses. Id. at 41:16–46:6. On the basis of the testimony at the evidentiary hearing, the bankruptcy court approved the settlement agreement the next day. Id. Dkt 477.

Yelverton moved to have the Trustee abandon certain of the claims in the North Carolina District Court case on June 3, 2012, and amended the motion on July 5, 2012. Id. Dkts. 481, 484. The bankruptcy court rejected the motion on August 7, 2012. Id. Dkt. 505. Yelverton filed a motion to vacate the order approving the settlement on July 3, 2012, which the bankruptcy court rejected on August 8, 2012. Id. Dkts. 483, 506. Yelverton then filed a motion for relief from judgment, also seeking to reverse the order approving the settlement, on July 14, 2013, which the bankruptcy court denied on August 8, 2013. Id. Dkts. 666, 682. He filed a motion to vacate that order on August 22, 2013, which was denied August 27, 2013, and followed that up with a motion to vacate the August 27 order, which was denied September 4, 2013. Id. Dkts. 693, 696, 702, 704.

Over three years after he initially filed for bankruptcy, Yelverton sought in July 2012 to amend his bankruptcy schedules to claim an exemption for his stock in Yelverton Farms, now claiming that his stock and litigation claims were held between his former spouse, Alexandria Nicole Senyi de Nagy-Unyom, and himself as tenants by the entireties. Id. Dkt. 487. Yelverton filed another supplemental amended schedule in August 2012, claiming the stock was also exempt under the wild card exemption and as compensation for lost future earnings. Id. Dkt. 519. He then filed a motion for summary judgment as to his claimed exemptions on November 26, 2012, and the Trustee filed a cross-motion on December 7, 2012. Id. Dkts. 556, 558 The bankruptcy court held a hearing on the parties’ cross motions for summary judgment regarding Yelverton’s claimed exemptions on January 8, 2013. Id. Dkt. 576. Yelverton then filed three motions for leave to submit supplemental materials regarding the exemptions on January 14, 16, and 25, 2013 respectively. Id. Dkts. 584, 585, 586. On January 30, 2013, the bankruptcy court rebuffed Yelverton’s claims that his stock was exempt, allowed Yelverton an exemption of $11, 200 in the proceeds of the global settlement, and granted Yelverton’s motions to file additional documents. Id. Dkts. 588, 589. Yelverton filed a motion to alter the bankruptcy court’s decision on February 13, 2013, which was denied on February 19, 2013. Id. Dkts. 595, 596.

Given the numbing litigation history outlined above, it will come as no surprise that Yelverton has not hesitated to appeal orders in his bankruptcy proceeding to this Court. He has done so 14 times. This opinion addresses three outstanding appeals. First, in September 2012, Yelverton appealed bankruptcy court orders (1) approving the settlement between the Trustee, Edmundson, and Marm; (2) denying Yelverton’s motion for relief from that order, and (3) denying Yelverton’s amended motion to compel the Trustee to abandon Yelverton’s litigation claims. In re Yelverton (“Yelverton I”), 12-1539, Dkt. 1 (D.D.C. Sep. 17, 2012). Second, in April 2012, Yelverton filed an appeal challenging the bankruptcy court’s orders (1) denying his motions to have the Yelverton Farms stock exempted; (2) granting his motions to submit supplemental documents in support of his claimed exemptions—but explaining why they added nothing to the bankruptcy court’s decision; (3) denying his motion to amend or alter the bankruptcy court’s order denying the exemptions; and (4) denying his motion for leave to appeal the bankruptcy court’s orders without paying filing fees. In re Yelverton (“Yelverton II”), 13-454, Dkt. 1 (D.D.C. Apr. 5, 2013). Third, in October 2013, Yelverton appealed bankruptcy court orders that (1) denied his motion for relief from the order approving the settlement—despite his already having appealed that order in his September 2012 appeal; (2) denied his motion to vacate the bankruptcy court order denying his motion for relief; and (3) denied his motion to vacate the order denying his motion to vacate the order denying his motion for relief. In re Yelverton (“Yelverton III”), 13-1544, Dkt. 1 (D.D.C. Oct. 8, 2013).

II. Standard of Review

United States District Courts have jurisdiction over appeals of bankruptcy court decisions. 28 U.S.C. § 158(a). Orders in bankruptcy cases may be immediately appealed as final orders if they dispose of discrete disputes within the larger case. In re St. Charles Preservation Investors, Ltd., 112 B.R. 469, 471 (D.D.C. 1990). On appeal from a bankruptcy court, a district court may affirm, modify, or reverse a bankruptcy court’s judgment, or remand with instructions for further proceedings. Fed.R.Bankr.P. 8013; In re Johnson, 236 B.R. 510, 518 (D.D.C. 1999). A district court shall not set aside findings of fact unless they are clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses. Fed.R.Bankr.P. 8013; Johnson, 236 B.R. at 518. “The burden of proof is on the party that seeks to reverse the Bankruptcy Court’s holding. That party must show that the court’s holding was clearly erroneous as to the assessment of the facts or erroneous in its interpretation of the law and not simply that another conclusion could have been reached.” Johnson, 236 B.R. at 518 (citing Anderson v. Bessemer City, 470 U.S. 564, 573–74 (1985)). “A finding is clearly erroneous when, although there is evidence to support it, the reviewing ...


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