In Re Kenneth Weaver, Jr.

Filing 7

ORDER, this court finds that the ruling of the bankruptcy judge is due to be REVERSED, and Bedgood's claim in the amount of $16,013.02 is hereby ALLOWED.Signed by Judge Callie V. S. Granade on 4/10/2012. (mab)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
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IN RE: KENNETH WEAVER, JR.

ORDER
This matter is before the court on the bankruptcy appeal of Charles Bedgood,
doing business as Fletcher Smith Service Station (“Fletcher Smith”). (Doc. 4, p. 5).
On June 30, 2011, Bedgood filed a $16,013.02 claim in Kenneth Weaver, Jr.’s
Chapter 13 bankruptcy proceeding .1 (Bankruptcy Doc. 80). Weaver filed an
objection to Bedgood’s claim in which Weaver asserted that the debt in question was
a corporate and not a personal debt. (Bankruptcy Doc. 62). After a hearing on
November 16, 2011, the bankruptcy judge determined that the debt was a corporate
debt and not a personal debt and disallowed Bedgood’s claim. (Bankruptcy Doc. 80).
This court disagrees and, as explained infra, finds that Weaver’s objection to
the claim did not contain the requisite “substantial factual basis” necessary to
overcome the presumption of validity enjoyed by Bedgood. Accordingly, the decision
of the bankruptcy court is due to be reversed.

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See case number 11-01916, United States Bankruptcy Court for the Southern District of
Alabama.

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FACTUAL BACKGROUND
Although neither party states precisely when, at some point in late 2008 or
January of 2009, Weaver approached Bedgood and asked to be able to purchase fuel
on credit for his business, KW Trucking, Inc., as well as for himself, his wife and his
daughter. (Doc. 2, pp. 12-13). Bedgood agreed, and thereafter, Weaver and
members of his family used the account to purchase fuel. See Debtor’s Ex. 1; Doc. 2,
p. 13. Approximately one year’s worth of invoice slips, dating from January 2009
through December 2009, reflect that Weaver and a number of other people signed
for fuel on Weaver’s account, including members of Weaver’s family. (Debtor’s Ex.
1), (Doc. 2, p. 15). Weaver generally paid Bedgood by a check drawn on the
corporate bank account of KW Trucking, Inc. Id. at 17. This arrangement came to
a presumably abrupt end in October 2010, when Weaver presented a check to
Bedgood in the amount of $16,054.06, which was later returned due to insufficient
funds. Debtor’s Ex. 2. On May 12, 2011, Weaver filed a voluntary Chapter 13
bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of
Alabama. (Bankruptcy Doc. 1). Bedgood’s claim and Weaver’s objection soon
followed.
STANDARD OF REVIEW
“In reviewing a bankruptcy court judgment as an appellate court, the district
court reviews the bankruptcy court's legal conclusions de novo. The district court
must accept the bankruptcy court's factual findings unless they are clearly
erroneous, and give due regard to the bankruptcy court's opportunity to judge the
credibility of the witnesses.” In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996).
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STATEMENT OF THE LAW
A verified proof of claim against the bankruptcy estate is presumed valid
until the debtor objects. 11 U.S.C. § 502(a). The objection must contain some
substantial factual basis to support its allegation of impropriety, and overcome the
creditor's prima facie case. In re Bagget Bros. Farm Inc., 315 Fed. Appx. 840, 843
(11th Cir. 2009) (quoting Matter of Mobile Steel Co., 563 F.2d 692, 701 (5th Cir.
1977) and Matter of Multiponics, Inc., 622 F.2d 709, 714 (5th Cir. 1980)) (quotation
marks omitted). If the debtor satisfies his obligation, the burden then shifts back to
the creditor “to prove the validity of the claim by a preponderance of the evidence.”
Id. (quoting 4 Collier on Bankruptcy ¶ 502.02[3][f] (15th ed. rev. 2007)).
LEGAL ANALYSIS
In order to overcome the presumption of validity that attaches to Bedgood’s
claim, Weaver offered several dozen Fletcher Smith invoice slips indicating that
multiple people charged fuel onto KW Trucking’s account (Doc. 2, Debtor’s Ex. 1),
plus a photocopy of the $16,054.06 check that Weaver gave to Bedgood. (Doc. 2,
Debtor’s Ex. 2). Most of the slips say “KW Trucking” on them (although at least two
dozen say simply “KW”), and the check clearly states that the account was in the
name of “KW Trucking, Inc.” Id. Weaver also submitted a printed report from the
Alabama Secretary of State’s online corporate database, which demonstrates that
KW Trucking is a domestic Alabama corporation. (Doc. 2, Debtor’s Ex. 3). These
exhibits are the only record evidence offered by Weaver.
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Bedgood’s testimony, on the other hand, constitutes prima facie evidence that
(1) an oral agreement existed between Bedgood and Weaver whereby Weaver would
purchase fuel on credit and that (2) Weaver established the account at Fletcher
Smith at least in part for his and his family’s personal use. (Doc. 2, p. 12:16-18).
Weaver’s evidence does not contradict this testimony. The fact that Weaver
generally paid Bedgood from his company’s corporate checking account, and offered
a bad check written from that account, or that Fletcher Smith employees handwrote “KW Trucking” on most of the fuel invoice slips may be circumstantial
evidence that the debt was one of the corporation, but those facts do not necessarily
negate Bedgood’s sworn testimony in support of his claim as to the agreement
between the parties. That testimony is the only evidence of what the agreement
was between Bedgood and Weaver concerning the account. Although present at the
hearing, Weaver chose not to testify concerning the credit arrangement.
Weaver attempts to controvert Bedgood’s testimony with arguments that are
unsupported, conclusory, and factually incorrect, such as his assertion that
“Bedgood offered no evidence of an oral or written contract,” (Doc. 5, p. 6), and his
assertion that “there was no testimony given as to an agreement for the credit
extended by Bedgood to KW Trucking, Inc.” Id. These statements overlook
Bedgood’s testimony before the bankruptcy court, in which he stated that Weaver
approached him and said that he wanted to open the account for his use and that of
his wife, daughter, and family. (Doc. 2, p. 12:16-18 and p. 13:1-10). Weaver also
asserted in his brief that “there was no testimony that [Weaver’s] family did not
work for the Corporation.” (Doc. 5, p. 5). In fact, Bedgood did testify that Weaver’s
wife and children did not work for KW Trucking, Inc. (Doc. 2, p. 13). This
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testimony was neither impeached nor contradicted by other testimony. Finally,
Weaver states that “the State Court” ruled that his account at Fletcher Smith
constituted a corporate debt rather than a personal debt, (Doc. 5, p. 6), when in fact
the Circuit Court of Mobile County stayed the civil proceeding upon the suggestion
of Weaver’s bankruptcy and made no legal findings at all. (Doc. 6, p. 10). And the
only evidence concerning the criminal charge filed in connection with the “bad”
check was that “the judge said it was a civil matter.” (Doc. 2, p. 11:21)
Thus, the court finds that Weaver has not offered a “substantial factual
basis” to contradict Bedgood’s testimony before the bankruptcy court, and Bedgood’s
claim still enjoys its initial validity. See In re Bagget Bros. Farm, supra. In
addition, even if Weaver did show a “substantial factual basis” to contradict the
claimant’s case, the preponderance of the evidence indicates that the agreement
between the parties, which determines the nature of the debt, was that the account
was personal to Weaver, on behalf of his family and his business. Accordingly, for
the reasons enumerated above, this court finds that the ruling of the bankruptcy
judge is due to be REVERSED, and Bedgood’s claim in the amount of $16,013.02 is
hereby ALLOWED.
DONE and ORDERED this 10th day of April 2012.
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE

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