In Bankruptcy Case No. 97-41148, Adversary No. 98-4033United States Bankruptcy Court, S.D. Illinois
October 16, 2000
OPINION
LARRY LESSEN, United States Bankruptcy Judge.
On April 13, 1998, Plaintiff Michelle Vieira (“Plaintiff”), the Chapter 7 Trustee for the above-captioned bankruptcy case, filed a complaint to avoid an allegedly fraudulent transfer of property to the Defendants, Mike and Diana Vickery. The three-count complaint alleged that, within one year of the filing of the bankruptcy petition, the Vickerys had purchased three funeral homes from Wendell C. Bruce (“Debtor”), and that Debtor did not receive reasonably equivalent value in said transaction. Specifically, Trustee alleges that the Vickerys paid $70,000 for real estate and personal property which was worth more than twice that amount. Plaintiff sought turnover of the property or payment of its fair market value.
From the time the adversary proceeding was filed until a trial was held on November 9, 1998, all of the pretrial matters were handled by Judge Kenneth Meyers in whose Court the adversary proceeding had been filed. The file indicates that the Vickerys’ attorney was slow in responding to discovery requests made by Plaintiff. A motion to compel response to discovery was filed by Plaintiff’s counsel on October 22, 1998. That motion contained numerous allegations regarding the conduct of the Vickerys’ attorney. On November 2, 1998, Judge Meyers held a hearing on Plaintiff’s motion to compel. On the same date, Judge Meyers entered an order compelling a response to discovery requests and requiring the Vickerys to answer certain interrogatories, requests for production, and for their attorney to file an entry of appearance. On November 3, 1998, the Court held a telephone conference and ordered that the Vickerys produce certain tax returns. At that time, the Vickerys’ attorney advised that all other discovery had been mailed to Plaintiff’s counsel. There is no indication in the record that any request for continuance was made by any party. When the matter was called for trial on November 9, 1998, before a visiting judge, Plaintiff filed a motion for sanctions. That motion complains of numerous procedural deficiencies in the discovery requests, including allegations that not all documents which were required to be produced were actually produced, that the answers to interrogatories were in improper form, that four individuals were disclosed on November 4, 1998, as possible expert witness, and that such disclosure was untimely. At trial, Plaintiff asked that the Vickerys’ attorney not be allowed to call Mr. Whetstone, Mr. Bragee, Mr. Edwards, or Mr. Ninker as expert witnesses and that he not be allowed to introduce into evidence any documents not previously produced. Plaintiff’s counsel also asked for attorneys fees.
The motion for sanctions does not request that the trial be continued. In fact, it is the Court’s recollection that, upon the Court’s inquiry, both parties expressed a desire to go forward with the trial on November 9, 1998. The Court expressly noted that the motions to compel production and for sanctions could have been filed in a more timely manner. The record shows that Plaintiff had the opportunity and did take the deposition of the Vickerys and that Plaintiff’s counsel knew the names of the four witnesses who were proposed. The District Court on remand stated that it was unclear what the Court’s ruling was on the motion for sanctions.
The Court’s ruling, based upon the above-enumerated facts, was that the motion for sanctions should be denied as to all matters except the testimony of Mr. Whetstone and Mr. Bragee and the Court reserved a determination as to those witnesses at the time they might be tendered.
During the trial, the Court did not, to its knowledge, admit any document into evidence which had not been previously furnished to Plaintiff’s counsel prior to trial. Moreover, the Defendants did not tender, and the Court did not admit, either Mr. Bragee or Mr. Whetstone, as an expert witness. Rather, the Court allowed Mr.
Bragee to testify as to his personal involvement with the transaction at issue and his advise to his clients. The Court allowed his testimony and received it as simply coming from a Certified Public Accountant who had advised his clients as to what he felt was a reasonable offer to purchase the business from Debtor. He gave his clients his opinion based upon accounting principles and his examination of the cash flow which was being generated by Debtor.
Mr. Whetstone, who was a president of a bank which had made loans in this matter, testified as to the bank’s decision for loaning only $70,000 on this business to both Debtor when he purchased the business and to the Vickerys when it was sold to them. He stated that this decision was based on the cash flow that had been generated by Debtor while he was running the business.
This testimony from an accountant and from a banker was straightforward, non-expert testimony related to their firsthand knowledge and involvement with the transaction at issue. Mr. Sharp, the Plaintiff’s attorney, had adequate opportunities and did cross-examine these witnesses extensively. In his cross-examination, Mr. Sharp clearly made the point that neither witness had any background in the funeral business, nor had either bought or sold a funeral business, nor were either offering an appraisal of the property. It was clear that both witness’ testimony was offered to show the cash flow of the funeral business at issue. Under these circumstances, the Court could find no prejudice to the Plaintiff.
In her case in chief, Plaintiff tendered two expert witnesses who were allowed to testify. Unfortunately, the Court found both of the Plaintiff’s experts’ testimony to be somewhat unreliable and not entitled to a great deal of weight. As value was the crux of this case, the Court based its decision upon what it thought was the best basis for valuing the business — the cash flow.
Because the Court felt that Plaintiff was not prejudiced by the testimony of Mr. Whetstone or Mr. Bragee, the Court did not find it appropriate to strike their testimony or grant any other sanctions.
This Opinion is to serve as Findings of Fact and Conclusions of Law pursuant to Rule 7052 of the Rules of Bankruptcy Procedure.