Genevievette Walker-Lightfoot
Case Information
Entered: March 27th, 2024
Signed: March 27th, 2024
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MARYLAND at Baltimore
In re: *
* Genevievette Walker-Lightfoot, * Case No. 19-26957-MMH
*
Debtor. * Chapter 13
* * * * * * * * * * * * * *
MEMORANDUM OPINION
This matter is before the Court on the Objection to Claimed Exemption (the “Objection”),
filed by the Chapter 13 Trustee (the “Trustee”), and the Response thereto filed by Ms. Genevievette
Walker-Lightfoot, the above-captioned chapter 13 debtor (the “Debtor”). ECF 100, 102. The
Objection pertains to the Debtor’s exemption claim for the proceeds of a legal malpractice cause
of action under
A. Relevant Background
The Debtor filed a petition for relief under chapter 13 of the Bankruptcy Code [2] on December 23, 2019. ECF 1. The Debtor has filed her proposed chapter 13 plan and has amended that proposed plan on several occasions. The Court has not yet confirmed the plan. The confirmation process in this case has been delayed, in part, by a disagreement concerning the treatment of a prepetition cause of action identified by the Debtor.
The cause of action at issue concerns the Debtor’s legal representation in a prior chapter 13 case. The Debtor asserts that her counsel in that case committed legal malpractice (the “Malpractice Claim”). The Debtor filed a lawsuit against her formed counsel in the Maryland circuit court. The Debtor and her former counsel ultimately settled the lawsuit for $25,000.00.
The Debtor listed the Malpractice Claim as an asset of her bankruptcy estate and as exempt
on her amended Schedules A/B and C, respectively. ECF 99. Specifically, the Debtor described
the Malpractice Claim as a “Malpractice claim against [former counsel] related to Case
Number 17-18147” and claimed three separate exemptions under
B. The Hearing
The Hearing in this matter was somewhat unusual procedurally. The Hearing began with a
lengthy discussion regarding whether the Trustee would be permitted to rely on any evidence at
all or any evidence other than what was on the docket of this case at the time of the Hearing. The
Trustee argued that he could rely on the Debtor’s pre-filed exhibits and the Debtor’s testimony;
and the Debtor argued that the Trustee was foreclosed from offering any additional evidence. The
Court took this question under advisement and now rules that the Trustee may not introduce any
documents (other than the Debtor’s schedules, including amended Schedule C) or testimony in
support of his case in chief. Based on that record and at the close of the Trustee’s case in chief, the
Debtor’s counsel moved for a judgment on partial findings under
This being a bench, not a jury, trial the Court preserved the Debtor’s objections and moved on to the Debtor’s case in chief. The Debtor offered several documents that were admitted into evidence, and she testified in support of her claimed exemptions. Although the Court allowed the Trustee to question the Debtor both on cross-examination and on certain independent issues as if the Trustee had called the Debtor as an adverse witness in his own case, the Trustee did not separately identify any witnesses to offer testimony in support of the Objection. In this Opinion, the Court relies only upon evidence that it finds is admissible under all applicable rules.
The Court addresses the Trustee’s evidentiary case and his burden under the Code and the Bankruptcy Rules, as well as the Debtor’s motion for judgment on partial findings, in the findings of fact and conclusions of law below.
C. Findings of Fact
The Trustee relied primarily on the docket in this case to support his position. Hrg. Rec.
1:25. The Trustee did not file a separate exhibit or witness list; rather, he relies upon the doctrine
of judicial notice. The Court noted at the Hearing that it could take judicial notice of the fact that
certain documents were filed but was unsure whether judicial notice was sufficient in this matter.
Id
. at 1:26. The Court has now reviewed applicable law and the most relevant document, namely
the Debtor’s amended Schedule C, and finds that
The Debtor’s testimony focused on the nature of her allegations against her former counsel and her primary source of damages, which she described as emotional distress damages. Hrg. Rec. 1:42–1:58:50. The Debtor explained that, from her perspective, her former counsel’s actions caused her to lose her home and to experience a wide range of emotional harm and significant stress. Id . She provided examples of interactions with the ultimate buyer of her home and how she had to struggle and scramble to find a place for herself and her young daughter to live. Id . at 1:47:30–1:49. She spoke at several points about how these matters affected her and her daughter and triggered deep feelings of sadness, depression, and hopelessness. Id . at 1:49–1:54; 1:56. The Debtor mentioned in passing her assistance from a therapist, but no evidence was presented to support this testimony. Id . at 1:52:30.
In addition to the Debtor’s testimony, the Debtor offered into evidence her original
Schedules in this case and her prior chapter 13 case (Case No. 17-18147), as well as her amended
reasonably be questioned.”
Schedules and the release agreement executed in connection with the settlement of the Malpractice Claim. ECF 135. The Debtor relied on the two sets of original Schedules to show, among other things, that she had no equity in her home at the time of the foreclosure. D. Ex. 1, 2. Hrg. Rec. 1:43:30. The Debtor asserted this as a basis to support her position that her only (or at least primary) damages in connection with the Malpractice Claim were emotional distress damages.
The Court evaluates below the foregoing facts under the Code, the Bankruptcy Rules, and Maryland law.
D. Legal Analysis and Conclusions of Law
An individual debtor’s ability to claim exemptions is an important component of a debtor’s
fresh start. Without proper exemptions, a debtor may not have adequate financial stability after
bankruptcy and may experience more, rather than less, financial distress. For those and other
reasons, exemptions are generally construed in favor of the debtor, and the party objecting to an
exemption bears the burden of proof.
See In re Hurst
, 239 B.R. 89, 91 (Bankr. D. Md. 1999)
(“Under Maryland law exemptions are to be liberally construed to effect the purpose for which
they were enacted
. See Muhr v. Pinover
,
1. Burden of Proof
Section 522(l) of the Code provides that “[u]nless a party in interest objects, the property
claimed as exempt on such list is exempt.”
Bankruptcy courts have developed at least three different approaches to the analysis of
objections to claims of exemptions under Bankruptcy
Some of the “burden shifting” courts have held that, although Bankruptcy
In considering which approach to adopt, the Court is mindful of the policy objectives
underlying exemption statutes, including
A debtor may not simply list an asset and identify an exemption statute without some context or indication of why or how the asset is exempt under applicable law. For example, a debtor who is an accountant by trade should not be able to list an electric saw under a tools of the trade exemption without explaining the application of the chosen exemption to the identified asset. In such a scenario, a timely objection that notes the inadequacy of the claimed exemption is a facially valid objection, without requiring more—at that point—from the objecting party. Whether this approach is called a “facially valid objection” or a “facially invalid exemption,” the result is the same and akin to the burden shifting approach described above.
Under such an approach, when a debtor’s claim of exemption is found to be “facially
invalid” (in other words, the debtor has failed to identify the kind or amount of property plainly
recognized as exempt under the exemption statute), objecting parties can point to the applicable
statutory language to sustain their initial burden of proof under Bankruptcy
In
Massey
, the court addressed the adequacy of a claimed objection at 100% of fair market
value under an exemption statute that limited the amount of the exemption. Although the
deficiency in the debtor’s claimed exemption differs from that asserted in this case, the court’s
analysis and application of relevant Supreme Court decisions apply with equal force. The
Massey
court determined that an objection to an exemption may be facially valid if supported by the
language of the Code and deficiencies in the debtor’s exemption schedule. The court found its
holding consistent with Supreme Court precedent, noting that “the only burdens [the Supreme
Court’s] conclusion [in
Schwab
] imposes are burdens the Code itself prescribes, specifically, the
burdens the Code places on debtors to state their claimed exemptions accurately and to conform
such claims to statutory limits.”
Massey
,
The Court is persuaded by the discussion in Massey and those cases applying a shifting approach to the burden of production. [15] An objecting party must establish in the first instance that the exemption is not properly claimed by making a prima facie case that the objection should be sustained. [16] A showing that the claimed exemption is facially invalid meets this standard. A debtor then may provide additional evidence to support the validity of the claimed exemption, which if done, leaves the ultimate burden of persuasion on the objecting party. Such an approach is consistent with the language of the Code and the Bankruptcy Rules, the parties’ respective duties thereunder, and appropriate policy considerations.
The Court thus agrees, as an initial matter, with the Trustee’s position in the Objection.
The Debtor’s amended Schedule C provides no information that would explain why or how a legal
malpractice claim qualifies for a personal injury exemption under state law. Indeed, the Debtor’s
amended Schedule C does not either “expressly or impliedly characterize” the legal malpractice
claim as a claim for personal injury.
In re Hurst
,
The Trustee has met his burden to establish that “the exemption is not properly claimed[,]”
as the subject claim of exemption is invalid on its face.
2. Identification of an Appropriate Exemption
The conclusion that the Trustee has made a prima facie case does not end the Court’s
inquiry. Rather, the Court next considers whether the Debtor’s claim of exemption regarding the
See supra
notes 4, 18.
In re Hurst
,
the settlement as falling within the exempt category, the Trustee retains the burden of proof and must present evidence
to the court if he wishes to prevail on his objection.”) (quoting
In re Lester
,
or an abuse of the system; rather, the Debtor simply has not provided sufficient information or evidence at this stage
of the case. In addition, the Court’s ruling herein should not be read as a means to catch and penalize honest or
inadvertent mistakes by debtors trying to identify exemptions and complete Schedule C. The underlying purpose and
importance of exemptions to individual debtors should guide any analysis of exemption deficiencies and amendments.
Malpractice Claim under
With respect to the Debtor’s evidence, the Debtor demonstrated that she filed litigation against her former counsel and that such litigation was settled for $25,000.00. The Debtor’s testimony, which was uncontroverted, also established that she was distraught and affected by the conduct of her former counsel and the related issues with her home. The Court does not doubt that the Debtor’s experience was unsettling and very difficult to manage.
On the record before it, however, the Court cannot find that the Debtor’s claim would
qualify as an exempt personal injury recovery under Maryland law. The Court notes that
emotional distress may, in certain instances, rise to the level of physical injury and that Maryland
law does not appear to preclude emotional distress damages in the context of a legal malpractice
claim. Nevertheless, the Debtor did not offer any evidence to suggest a physical injury resulting
from emotional distress. For example, the Debtor did not produce any evidence of doctor or
therapist bills, time off from work, or the testimony of others who observed the physical
manifestation of the distress. The Court acknowledges the Debtor’s own testimony regarding how
the situation and emotional distress affected her, but that testimony alone cannot suffice. Indeed,
Maryland courts require “objective evidence” of emotional distress damages “to guard against
feigned claims.”
Vance v. Vance
,
In addition, the Court observes that the settlement between the Debtor and her former
counsel is silent regarding the exact nature of the claims being settled or the allocation of the
monies being paid under the settlement. If the Debtor had offered adequate evidence of an
emotional distress claim under Maryland law, the terms of the settlement might be less relevant.
But on the current record, the Court has no evidence of a personal injury resulting from emotional
distress and no indication of a settlement of that kind of claim. The Court rejects the Debtor’s
attempt to cast the broad language of the release as sufficient. Again, finding an allowable
exemption based on the current record would subject the process to potential fraud and abuse and
not adequately “guard against feigned claims.”
Vance
,
E. Conclusion
A debtor should be able to exempt property under applicable state law and
In this case, the Debtor may in fact be able to identify a proper exemption under
Accordingly, the Court will deny the Debtor’s motion for judgment on partial findings, sustain the Objection, and grant the Debtor leave to further amend her Schedule C. The Court will enter a separate order consistent with this Memorandum Opinion.
cc: Debtor
Debtor’s Counsel
Chapter 13 Trustee
END OF MEMORANDUM OPINION
Notes
[1]
[2]
[3] See, e.g., ECF 13, 31, 33, 38, 48, 62, 65, 90, 91, 97, 98.
[4] Under
[5] The Court acknowledges that papers filed on the docket in any given case may be relevant to a matter before the Court. Although counsel often identify such papers as proposed exhibits prior to any evidentiary hearing or trial (and that may in fact be best practices in any case), the Trustee did not do so here. Moreover, even if the Court were to consider documents on the docket other than the Debtor’s schedules, it would not change the Court’s analysis, and such expanded consideration would not include documents filed on the docket solely as exhibits in support of the Debtor’s case in chief. Those documents are filed on the docket as an administrative matter for the Court to allow electronic access to exhibits in the courtroom and carry no weight in the matter unless and until they are introduced and admitted into evidence.
[6] The Court proceeded in this manner for purposes of judicial economy and to permit the creation of as complete a record as possible in order to resolve this matter fully.
[7] The Court has jurisdiction over this contested matter pursuant to
[8]
[10] Each of these exhibits was admitted into evidence without objection. The Debtor also listed as a potential exhibit,
but did not offer, the Complaint filed in the Maryland circuit court with respect to the Malpractice Claim. Although
the Court permitted the Trustee to examine the Debtor regarding the Complaint at the Hearing, it does not consider
either the Complaint or the related testimony herein. The Court further notes that the Hearing Witness/Exhibit List
and Exhibits filed by the Debtor were not timely filed under the Evidentiary Protocol entered by the Court. ECF 120,
135. The Court, however, also notes that the United States Court of Appeals for the Fourth Circuit has “repeatedly
expressed a strong preference that, as a general matter, defaults be avoided and that claims and defenses be disposed
of on their merits.”
Colleton Prep. Academy, Inc. v. Hoover Univ., Inc.
,
[11] The Supreme Court has noted that, under Bankruptcy
[12]
See, e.g., In re Tallerico
,
[13]
See, e.g., In re Man
,
[14]
See Schwab v. Reilly
,
[15]
See, e.g., In re Man
,
[16] Black’s Law Dictionary defines prima facie case in relevant part as “[a]t first sight; on first appearance but subject to further evidence or information.” Prima facie , Black’s Law Dictionary (11th ed. 2019).
[17] The Court notes that a burden shifting approach as provided in this Opinion gives proper deference to state law
while following the
procedure
for claiming, and initiating an objection to, an exemption under
[18]
See, e.g., In re Massey
,
[22]
See Hurst
,
[23]
See, e.g
.
, In re Barton
, Case No. 05-41280 DK,
[24]
See Schafer v. Young
, No. Civ. JFM-03-16,
[25]
See, e.g., Standard Constr. & Coatings LLC v. Chrysso C. Plato Tr.
, No. 1172, Sept. term, 2018,
[26]
See also Wheeling v. Selene Fin. LP
,