Yelverton v. Webster (In Re Yelverton)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
IN RE: STEPHEN THOMAS
YELVERTON,
Debtor.
STEPHEN THOMAS YELVERTON
Appellant,
v. Case No. 1:12-cv-01539 (CRC)
WENDELL W. WEBSTER, et al., Bankruptcy No. 09-00414
Appellees.
STEPHEN THOMAS YELVERTON,
Appellant,
v. Case No. 1:13-cv-00454 (CRC)
WENDELL W. WEBSTER, et al., Bankruptcy No. 09-00414
Appellees.
STEPHEN THOMAS YELVERTON,
Appellant,
v. Case No. 1:13-cv-01544 (CRC)
WENDELL W. WEBSTER, et al., Bankruptcy No. 09-00414
Appellees.
MEMORANDUM OPINION
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
1
Yelverton later filed two additional cases regarding Yelverton Farms—Yelverton v. Yelverton
Farms, 14-365 (E.D.N.C.) and Yelverton v. Edmundson, et al., 13-1543 (N.C. Sup. Ct, Wayne
Cnty.)—and he has filed two new adversarial matters in bankruptcy court this year. All of these
cases assert the same facts and law as his prior cases.
2
While the parties do not dispute that Yelverton is entitled to 1,333 shares of Yelverton Farms’
2
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
stock, Edmundson and Marm hold the physical stock certificates. Thus, settling Yelverton’s
litigation claims, as discussed below, also resolves his ownership rights in the company.
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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.
4
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
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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
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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 court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” United States v. U.S. Gypsum
Co., 333 U.S. 364, 395 (1948). Courts should review questions concerning the application of the
controlling law de novo on appeal. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990).
III. Analysis
Yelverton makes numerous related arguments in his three briefs on appeal, which the Court
will address in turn. The Court will not consider arguments that Yelverton raises for the first time
in his reply briefs or in supplemental filings made after briefing concluded. See Taitz v. Obama,
754 F. Supp. 2d 57, 61–62 (D.D.C. 2010) (“Courts ordinarily decline to consider arguments that are
raised for the first time in a reply to an opposition.”) (citing Pub. Citizen Health Research Grp. v.
Nat’l Institutes of Health, 209 F. Supp. 2d 37, 43–44 (D.D.C. 2002)).
A. Yelverton I
In Yelverton I, Yelverton seeks review of bankruptcy court orders approving the settlement
agreement between Edmundson, Marm, Yelverton Farms, and the Trustee. A bankruptcy court
may approve a settlement pursuant to Federal Rule of Bankruptcy Procedure 9019(a). “A
bankruptcy court’s decision to approve a settlement must be an informed one based upon an
objective evaluation of developed facts. Indeed, a bankruptcy judge cannot accept the proponent’s
word that the settlement is reasonable, nor may the judge merely rubber stamp a proposal.” In re
Andre Chreky, Inc., 448 B.R. 596, 609 (D.D.C. 2011) (quoting Advantage Healthplan, Inc. v.
Potter, 391 B.R. 521, 554 (D.D.C. 2008)). To determine whether a settlement is “fair and
equitable,” “‘the bankruptcy court should consider: (1) probability of success in the litigation; (2)
difficulties, if any, with collection, (3) the complexity of the litigation, including the expense,
inconvenience, and delay attendant to the litigation; and (4) the interest of creditors.’” Id. (quoting
7
Advantage Healthplan, 391 B.R. at 554). “In determining the reasonableness of a settlement, a
bankruptcy judge must decide only whether the settlement falls between the lowest and highest
points in the range of reasonableness.” Id. (citing In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir.
1983)).
The bankruptcy court found that Yelverton likely owned one-fourth of Yelverton Farms, not
one-third as he had claimed. Bankruptcy Proceeding Dkt. 546 at 216:19–218:7. The court reached
this conclusion because Yelverton offered no evidence to dispute that a valid issuance of stock by
the company—to which he had not objected—had diluted his ownership share. Id. The bankruptcy
court next found that the Trustee properly valued the company at $400,000 or less because it did not
own the land on which it operated, its lease was set to expire in a year, and its value to a new owner
was limited by whatever terms Edmundson might offer to renew the lease. Id. at 218:25–221:12.
The bankruptcy court next found that Yelverton’s claim for back rent against Yelverton Farms was
barred by the statute of limitations, his malicious interference with a prospective contract claim was
not supported by evidence and would be very costly to litigate, and he had no facts to support his
claim for a distribution of corporate profits. Id. at 223:1–225:22. It also rejected Yelverton’s
argument that he had control over the company’s production contract with Maxwell Foods, Inc.
because: (1) the contract is assigned to Yelverton Farms as profits are paid to the company, not
Yelverton; (2) the settlement did not dispose of the estate’s ownership of the contract, whatever it
might be; and (3) the contract was valueless because nothing prevented Maxwell Foods from
canceling the contract and creating a new one with Yelverton Farms directly. Id. at 225:23–227:12.
The bankruptcy court further accepted the Trustee’s determination, along with that of retained
North Carolina counsel, that litigation would be expensive and success would be uncertain, at best.
Id. at 227:13–230:12. Finally, the bankruptcy court found that the Trustee did not need to secure a
formal appraisal of Yelverton Farms because the settlement was premised on the upward ceiling of
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any expected appraisal. Id. at 230:13–20. These findings were made after an extensive, day-long
evidentiary hearing and were supported by substantial record evidence. Based on these findings,
this Court concludes that the bankruptcy court did not abuse its discretion in approving the
settlement agreement. The bankruptcy court correctly applied the legal standard and relied on
factual findings that were properly supported by record evidence.
Yelverton argues that the Trustee was compromised “and thereby was unable to exercise
independent judgment to protect the interest of the Creditors” because the Trustee was “forced into
being substituted for Yelverton as the plaintiff” in the North Carolina litigation while the
bankruptcy estate lacked funds to litigate the case. Appellant’s Br. at 22–23, Yelverton I.
Yelverton cites to cases holding that a bankruptcy trustee cannot have a personal interest in the
bankruptcy estate, e.g., Mosser v. Darrow, 341 U.S. 267, 271 (1951), but the cashflow of the
bankruptcy estate has nothing to do with whether the Trustee was self-interested in the settlement.
Yelverton provides no evidence to indicate any self-interest. Moreover, it was perfectly within the
Trustee’s business judgment to compare the cost of litigating Yelverton’s claims to their likelihood
of success in determining whether to settle.
Yelverton further claims that Edmundson and Marm fraudulently represented to the
bankruptcy court that Yelverton had previously transferred his stock in Yelverton Farms to an
associate, Wade H. Atkinson, and that the Trustee relied on these representations in valuating
Yelverton’s claims. Appellant’s Br. at 24–26, Yelverton I. 3 But the Trustee did not base his
valuation on this assumption. At the settlement hearing, Yelverton asked the Trustee whether he
relied on the argument that Atkinson owned the stock, and the Trustee replied “Mr. Yelverton, I
3
Yelverton also argues that the settlement must be invalidated because the Trustee believed the
stock was Atkinson’s, yet had no authority to control the disposition of Atkinson’s property. Id. at
26. This claim is obviously without merit, as Yelverton himself represents that the stock was his,
not Atkinson’s, and thus is the property of the bankruptcy estate.
9
have never thought that there was a dispute that you did not own stock in Yelverton Farms and the
defendants have never taken the position that you did not own stock in Yelverton farms.”
Bankruptcy Proceeding Dkt. 546 at 159:11–14. Moreover, the Court has reviewed Edmundson and
Marm’s filings in the bankruptcy proceeding, and they do not assert that Atkinson owned this stock.
Yelverton continues to make this meritless claim in an assortment of filings with this Court and
others, but there is no support for it. See Opinion and Order, Yelverton III, Dkt. 19 (Aug. 6, 2014)
(issuing a pre-filing injunction against Yelverton and detailing his extensive history of asserting this
and other meritless claims).
Yelverton next argues that Edmundson and Marm breached their fiduciary duties as
majority stock holders in Yelverton Farms by entering into the settlement because they falsely
claimed that Atkinson owned Yelverton’s stock and told the Trustee that they would decline to
renew the lease on Yelverton Farms. Appellant’s Br. at 26–28, Yelverton I. This argument fails for
at least three reasons. First, Yelverton provides no legal support for the proposition that a breach of
a fiduciary duty by a party to an otherwise valid settlement would invalidate the settlement.
Second, as discussed above, Edmundson and Marm did not in fact make any false assertions
regarding Atkinson’s ownership of the stock. Third, the Trustee’s valuation was not based on the
assumption that Edmundson and Marm would decline to renew the lease. It was based simply on
the acknowledged fact that Yelverton Farms is worth considerably less than Yelverton maintained
because it does not own the underlying land, and its lease would soon expire.
Yelverton similarly argues that equitable estoppel prevents this settlement because
Edmundson and Marm previously represented that they would work for the benefit of Yelverton
Farms, yet now maintain that they will not renew the lease on the underlying land. Appellant’s Br.
at 28–29, Yelverton I. Equitable estoppel precludes a party from “contradicting testimony or
pleadings successfully maintained in a prior judicial proceeding. . . . The party seeking to invoke
10
the estoppel, however, must have been an adverse party in the prior proceeding, must have acted in
reliance upon his opponent’s prior position, and must now face injury if a court were to permit his
opponent to change positions.” Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C. Cir. 1980)
(citations omitted). Yelverton asserts that he acted in detrimental reliance on Edmundson’s and
Marm’s affidavits in the Eastern District of North Carolina litigation where they swore they would
preserve the corporate assets of Yelverton Farms. But Yelverton does not identify any acts that he
took in reliance on those statements; he asserts only that he “reasonably believed” they would not
damage the value of his stock. Appellant’s Br. at 29, Yelverton I. Additionally, failing to promise
to renew the company’s lease at equivalent terms does not contradict Edmundson and Marm’s prior
statements, which say nothing about Edmundson’s lease of her privately-owned land to the
company.
Yelverton next posits that the Trustee failed to submit an appraisal as required by D.C.
Local Bankruptcy Rule 6004-1, which provides that notice of the private sale of estate property
must include an appraisal or scheduled valuation. Rule 6004-1 is not applicable, however, because
the Trustee did not engage in a private sale of property; rather he negotiated the settlement of claims
owned by the bankruptcy estate. Regardless, to the extent any notice requirement existed, the Court
finds that there is good cause to suspend it pursuant to Local Bankruptcy Rule 9029-1. The Trustee
found, and bankruptcy court agreed, that a formal appraisal was not appropriate because its cost
would outweigh its benefit. A scheduled valuation was also unwarranted because the settlement
value was based on a global settlement of all litigation claims that incorporated the litigation
judgments of the Trustee and North Carolina counsel.
Yelverton makes a series of additional arguments, which the Court will address in turn.
First, he contends that the settlement agreement failed to take into account the value of the
production contract with Maxwell Foods, Inc., and the Trustee did not explain how the contract was
11
taken into account. Appellant’s Br. at 29–30, Yelverton I. The bankruptcy court found, however,
that the settlement agreement does not dispose of the bankruptcy estate’s interest in the contract, so
this issue is immaterial. Moreover, the bankruptcy court determined that the contract was valueless.
Second, Yelverton argues that the settlement denies him a “fresh start” after bankruptcy because it
undervalues his litigation claims and because the Trustee was compromised. Appellant’s Br. at 30–
31, Yelverton I. This argument simply repackages arguments that the Court has rejected above.
Third, Yelverton contends that the settlement harms the legal rights of his ex-wife, Senyi de Nagy-
Unyom, because she and Yelverton owned his stock in Yelverton Farms as tenants by the entireties.
Appellant’s Br. at 31–34, Yelverton I. But the bankruptcy court, the D.C. Superior Court, and now
this Court, as explained below, have all found that Yelverton did not hold the stock as a tenant by
the entirety. Yelverton lacks authority to assert Senyi de Nagy-Unyom’s legal rights in any event.
Fourth, Yelverton argues that the settlement improperly dismisses his claims in Adversary
Proceeding No 10-10004—in which he sought to prevent Marm and her husband from selling a
tract of land—although the Trustee has not been substituted as a party in that case. Appellant’s Br.
at 31–34, Yelverton I. This is not a justification for invalidating the settlement, however.
Yelverton provides no support for his argument that a procedural defect or an overly broad
settlement is void ab initio; this is not the law. Moreover, the Trustee need not substitute himself as
a party in this case before the claims become property of the bankruptcy estate.
Lastly, Yelverton asserts that the Trustee must abandon the claims because he is “giving
only nominal or no value to these litigation claims[.]” Appellant’s Br. at 35, Yelverton I. Under
the relevant statute, a Trustee can abandon property that is burdensome to the estate or is of
inconsequential value. 11 U.S.C. § 554. The Trustee was able to acquire $110,000 for the
bankruptcy estate in exchange for Yelverton’s stock and a global settlement of all litigation claims.
While Yelverton maintained at the settlement approval hearing, and reasserts before this Court, that
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the Trustee is treating his litigation claims as valueless, this is not so. He simply took a less
optimistic view of the likely of success of some of Yelverton’s litigation claims than Yelverton did.
B. Yelverton II
Yelverton II concerns Yelverton’s claimed exemptions of his stock in Yelverton Farms as
property held as tenants by the entireties, under the wildcard exemption, 4 and as a claim for lost
future earnings. A debtor may amend his claimed exemptions without requesting approval of the
bankruptcy court at any time before the case is closed. Fed. R. Bankr. P. 1009. The party opposing
the exemption has the burden to prove that the exemption is improper. Fed. R. Bankr. P. 4003(c).
Under 11 U.S.C. § 522(b)(1), a debtor must elect to claim exemptions under either subsection
522(b)(3) or 522(d), but not both. Yelverton filed claims under both subsections, stating that he
was doing so in the alternative. The bankruptcy court permitted him to do so and, after determining
the validity of each of his claimed exemptions, selected the exemption scheme that provided the
largest exemptions, which was subsection 522(d). Bankruptcy Proceeding Dkt. 587 at 10–11. This
Court will review the bankruptcy court’s determinations as to each of Yelverton’s claimed
exemptions.
Under 11 U.S.C. § 522(b)(3)(B), a debtor may exempt from bankruptcy any interest in
property held as a tenant by the entirety. In the proceedings below, Yelverton and the Trustee
disagreed over whether to apply North Carolina or District of Columbia law regarding property held
as tenants by the entireties, but the bankruptcy court concluded that the result would be the same
under either. Bankruptcy Proceeding Dkt. 587 at 13. Under North Carolina law, personal property
cannot be property held as tenants by the entireties in any circumstance. Lovell v. Rowan Mut. Fire
Ins. Co., 274 S.E.2d 170, 174 (N.C. 1981) (“an estate by the entirety in personal property is not
4
The wildcard exemption permits a debtor to exempt a statutorily specified dollar amount from the
bankruptcy estate. See 11 U.S.C. § 522(d)(5);
13
recognized in North Carolina”) (citing Bowling v. Bowling, 91 S.E.2d 176, 180 (N.C. 1956)).
Thus, Yelverton’s stock and related litigation claims cannot be held by tenants by the entireties if
North Carolina law applies.
Under D.C. law, property of a married couple may be held as tenants by the entireties if the
four common law unities of interest are present: “unity of time, title, interest and possession.”
Daniel v. Wright, 352 F. Supp. 1, 3 & nn.5–6 (D.D.C. 1972). “That is to say, the interests must be
identical, they must accrue by the same conveyance, they must commence at the same time and the
estate must be held by the same undivided possession.” Harrington v. Emmerman, 186 F.2d 757,
760 n.8 (D.C. Cir. 1950). The only interest Senyi de Nagy-Unyom arguably may have acquired in
the stock was through a writing from Yelverton in 2008, which promises to give her $100,000 from
the sale of his stock. The four unities are not present here because: (1) the interest are not identical,
under the writing as Senyi de Nagy-Unyom only acquired a right to proceeds from the sale of the
stock, while Yelverton maintained an ownership interest; (2) Senyi de Nagy-Unyom acquired her
interest by a separate conveyance than Yelverton; and (3) Yelverton acquired his interest in
Yelverton Farms, and thus the legal claims that arose from his ownership of that stock, well before
his conveyance to Senyi de Nagy-Unyom. Thus, the stock is clearly not property held as tenants by
the entireties.
A debtor filing a claim prior to April 1, 2010 may exempt up to $11,200 from his interest in
property that is part of the bankruptcy estate. 11 U.S.C. § 522(d)(5); see 75 Fed. Reg. 8747 (Feb.
25, 2010). A debtor may not exempt property under this exemption, only a capped dollar amount
from the debtor’s interest in the property. Schwab v. Reilly, 560 U.S. 770, 782 (2010) (“a debtor
may ‘clai[m] as exempt’ as the debtor’s ‘interest’—up to a specified dollar amount—in the assets
described in the category, not as the assets themselves”). The bankruptcy court permitted Yelverton
14
to claim $11,200 from the proceeds of the settlement agreement. This is precisely what subsection
522(d)(5) permits.
A debtor may also exempt litigation claims as compensation for lost future earnings. 11
U.S.C. § 522(d)(11)(E). The bankruptcy court denied this exemption without prejudice because
Yelverton did not specifically describe the property claimed as exempt. Bankruptcy Proceeding
Dkt. 587 at 19–20 (citing among other cases In re Bell, 179 B.R. 129, 131 (Bankr. E.D. Wis.
1995)). Yelverton had not specified which of his litigation claims sought compensation for lost
future earnings or the value of those claims. Accordingly, the bankruptcy court properly denied his
claim of exemption under section 522(d)(11)(E).
Yelverton argues that this appeal must be remanded because, after the bankruptcy court
granted summary judgment against him regarding these exemptions, he filed an additional claim for
an exemption of his stock, again under the exemption for claims of lost future earnings.
Appellant’s Br. at 9, Yelverton II. This request is moot, however, because the bankruptcy court has
found that Yelverton’s claims are not for lost future earnings. Bankruptcy Proceeding Dkt. 790.
Remand is also unnecessary because Yelverton II deals with the discrete issues of whether his stock
may be exempted as property held as tenants by the entireties or under the wild card exemption. As
a result, the Court will deny Yelverton’s motion to remand.
Yelverton further contends that the bankruptcy court may only deny a claim of an
exemption if it finds that the debtor claims the exemption in bad faith or if the exemption would
prejudice the creditors. Appellant’s Br. at 10–12, Yelverton II. This is simply incorrect as a matter
of law. A debtor may not amend his claimed exemptions, even if timely, if he does so in bad faith
or to prejudice creditors, e.g., In re Michael, 163 F.3d 526, 529 (9th Cir. 1998), but Yelverton was
permitted to amend his claimed exemptions. A debtor may never exempt property that falls outside
the statutorily permitted exemptions no matter if done in good faith.
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Yelverton next argues that because his stock and litigation claims are exempt property, the
settlement agreement is retroactively void. Appellant’s Br. at 10–12, Yelverton II. This puts the
cart before the horse, however, as both the bankruptcy court and this Court have determined that the
stock and litigation claims were not properly exempted. Moreover, Yelverton provides no support
for his contention that a later amendment to his claims of exempt property retroactively voids an
otherwise valid settlement agreement.
Lastly, Yelverton argues that the bankruptcy court erroneously denied his application to
proceed in forma pauperis. Appellant’s Br. at 13–14, Yelverton II. This Court has already
determined that Yelverton must pay for his many appeals of the bankruptcy court’s orders because
he is an abusive filer. See Memorandum Opinion and Order, In re Yelverton, 13-74, Dkts. 10, 11
(D.D.C. Nov. 12, 2013). The reasoning of that opinion applies equally to the denial of his in forma
pauperis application in this case and the Court adopts it in affirming the bankruptcy court’s order
here.
C. Yelverton III
Yelverton’s third appeal targets bankruptcy court orders denying reconsideration of the
order approving the settlement between the Trustee, Edmundson, Marm, and Yelverton Farms.
While the Court will address the merits of Yelverton’s arguments in this appeal, he may not
continue to move, ad infinitum, to reconsider each bankruptcy court order with which he disagrees.
Further frivolous appeals of this kind may warrant sanctions beyond the restrictions the Court is
issuing in a pre-filing injunction in this case contemporaneously with this opinion. See Opinion and
Order, Yelverton III, Dkt. 19 (Aug. 6, 2014).
Yelverton argues that the settlement between the Trustee and Marm was procured by fraud
on the bankruptcy court, which warrants relief under Federal Rule of Civil Procedure 60(b)(3). As
evidence of this supposed fraud, Yelverton points to an email in which the Trustee stated “[w]hy
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don’t I ask the family to agree that the pig farm lease will not be renewed as part of the settlement
and if it is renewed I reserve the right to reevaluate Mr. Yelverton’s share of the business.”
Appellant’s Br. at 18–19 & Ex. 2, Yelverton III. 5 Yelverton’s argument is baseless. This email in
no way demonstrates, as Yelverton contends, that there was a conspiracy between the Trustee,
Edmundson, Marm, their counsel, and a former U.S. Trustee for South Carolina to diminish the
value of Yelverton’s bankruptcy estate. Yelverton’s motion is untimely in any event under Federal
Rule of Civil Procedure 60(c)(1), which requires that a motion under Rule 60(b)(3) must be made
“no more than a year after the entry of the judgment or order[.]” The bankruptcy court approved
the settlement on June 19, 2012 and Yelverton did not file his second motion for relief from that
order—wherein he first raised this argument—until July 14, 2013.
Yelverton next argues that the order approving the settlement agreement is void for lack of
subject matter jurisdiction because the settlement involves the stock in Yelverton Farms, which is
marital property. Appellant’s Br. at 22–23, Yelverton III. The bankruptcy court and this Court
have already determined that the stock is not held as tenants by the entireties with Senyi de Nagy-
Unyom. See infra. More importantly, whether or not the settlement is valid, the bankruptcy court
has jurisdiction over whether to approve it. Fed. R. Bankr. P. 9019(a). Yelverton’s argument that
the contents of the settlement somehow affect the court’s jurisdiction is patently wrong.
Finally, Yelverton argues that the order approving the settlement violated due process
because he was denied an opportunity to be heard and because the decision was “based on factual
assertions that were not subject to cross-examination[.]” Appellant’s Br. at 23, Yelverton III
(emphasis omitted). The order approving the settlement was made after a full-day evidentiary
hearing that complied with any conceivable notion of due process. Having reviewed the transcript
5
Yelverton also reasserts his argument that Marm fraudulently represented that Atkinson owned
Yelverton’s stock in Yelverton Farms. Appellant’s Br. at 20, Yelverton III. That issue has already
been disposed of above.
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of that proceeding, the Court is satisfied that Yelverton was provided a full opportunity to present
his case and cross-examine witnesses.
IV. Conclusion
For the reasons stated above, the following orders of the bankruptcy court will be affirmed:
Order Granting Motion to Approve Settlement Agreement, Dkt. 477; Order Denying Amended
Motion to Compel Trustee to Abandon Litigation Claims, Dkt. 505; Order Denying Motion to
Vacate Order Approving Settlement, Dkt. 507; Order re Cross Motions for Summary Judgment
Regarding Objection to Exemptions, Dkt. 588; Memorandum Decision and Order re Motion for
Leave to Submit Supplemental Filings, Dkt 589; Memorandum Decision and Order Denying
Motion to Alter or Amend Decision, Dkt. 597; Memorandum Decision and Order Denying Motion
to Vacate Order Denying Leave to Pursue Appeal in District Court Without Prepaying Fees or
Costs, Dkt. 613; Order Denying Second Motion to Vacate Order Approving Settlement, Dkt. 682;
Order Denying Motion to Vacate Order Denying Motion for Relief from Judgment, Dkt. 696; and
Order Denying Motion to Vacate Memorandum Decision, Dkt. 704. The Court will issue an order
consistent with this memorandum opinion.
CHRISTOPHER R. COOPER
United States District Judge
Date: August 6, 2014
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