United States District Court, E.D. Virginia, Norfolk Division
JOHN C. MCLEMORE, Chapter 7 Trustee, Plaintiff,
FARRIS M. JONES, Defendant.
OPINION & ORDER
Coke Morgan, Jr. Senior United Slates District Judge.
matter comes before the Court on the Report and
Recommendation of the Bankruptcy Judge, Doc. 2 at 167-180,
the objections of John C. McLemore, Chapter 7 Trustee for
Bly-Holland Land Company, LLC (the "Trustee"),
14 at 246-69, and the objections of
Defendant Farris M. Jones ("Jones"), Id.
at 180-84. For the reasons stated herein, the Court
SUSTAINS the Trustee's objections
IN PART and RECOMMITS the
matter to the bankruptcy court.
Party objects to the recitation of the procedural and factual
background of this case contained in the R&R, instead
only objecting to the legal effect of the background. See
generally Id. at 180-84, 246-69. A limited
portion is relevant to the procedural question presented in
the R&R regarding the status of Count I of the complaint,
and thus, only that portion need be recounted here.
September 2, 2015, Debtor Bly-Holland Land Company, LLC (the
"Debtor") filed a voluntary petition under Chapter
7 of the Bankruptcy Code. Id. at 169. On September
30, 2015, Jones filed a motion seeking relief from the
automatic stay to allow him to pursue remedies in state court
against the Debtor's commercial sports facility (the
"Property"). Id. at 169-70. On December
16, 2015, the Trustee requested authority to sell the
Property and filed a complaint initiating an adversary
proceeding. Id. at 170.
January 20, 2016, the Parties appeared before the bankruptcy
court and represented their intent to settle the pending
motions and adversary proceeding. Id. Their proposal
involved allowing the Trustee until February 29, 2016, to
sell the Property and distribute the proceeds. Id.
The bankruptcy court approved the compromise at a hearing on
February 2, 2016, and in an Order dated February 9, 2016.
Id. at 171.
on June 3, 2016, the Parties filed various motions reflecting
that the Trustee had failed to timely sell the Property and
that the settlement had failed. Id. The bankruptcy
court determined in light of that failure that it should
reissue summons for the adversary proceeding and have the
Trustee serve the complaint on Jones. Id. at 172.
The Trustee served the summons and complaint on Jones on July
21, 2016. Id.
August 15, 2016, Jones moved to dismiss all five (5) counts
of the complaint. Id. Once the Motion to Dismiss was
ripe, the Court held a hearing on November 15, 2016, and
subsequently dismissed Counts I-III with leave to amend in an
Order dated December 5, 2016. Id. at 172-73; see
also Id. at 11-16 (a copy of the dismissal
Order). On Count I, the bankruptcy court found that the
Trustee could not state a claim for constructive trust under
Virginia law because Jones had committed no misconduct and
was not unjustly enriched. Id. at 13, 173.
December 21, 2016, the Trustee filed an Amended Complaint.
Id. at 174. Under Count I, he pled as follows:
This Count has been removed pursuant to the Court's Order
entered on December 5, 2016 granting Mr. Jones' Rule
12(b)(6) Motion with regard to Count II [sic] of the
Complaint. It is not intended as a waiver of this claim.
Id. at 36 (Am. Compl. ¶ 42). He pled similarly
for Count II while adding facts to renew Count III in the
Amended Complaint. Id. at 174.
January 6, 2017, Jones filed a Renewed Motion to Dismiss the
Amended Complaint. Id; see also
Id. at 83-93 (a copy of the motion). The Renewed
Motion to Dismiss did not address Counts I and II, instead
discussing only Counts III-V. Id. at 174-75. It
stated as follows regarding Counts I and II:
Final disposition of the non-re-pled legal theories of
constructive trust (Count I) and equitable subordination
(Count II) remains subject to this Court's report and
recommendation to the district court, the submission
objections and supporting statements by the parties, and
entry of a final order.
Id. at 86 (Renewed Motion to Dismiss ¶ 10). At
a pretrial conference on January 31, 2017, the Trustee
indicated that he would voluntarily dismiss Counts II-V of
the Amended Complaint, and the bankruptcy court dismissed
those Counts with consent of the Parties. Id. at
175. Because of the dismissal of all but one (1) of the
Counts, the bankruptcy court ORDERED further briefing on