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In re Shekerjian

April 5, 2010


The opinion of the court was delivered by: Honorable Sean F. Cox District Judge


Appellant D.A.N. Joint Venture III, L.P. ("DAN") filed this Bankruptcy Appeal [Doc. No. 1] on December 3, 2009. DAN appeals the final ruling of Hon. Steven W. Rhodes in Bankruptcy Adversary Proceeding No. 07-55859, in which the Bankruptcy Court held that DAN failed to establish by a preponderance of the evidence that it was a creditor of Appellee John Shekerjian ("Shekerjian"). The parties have fully briefed the issues*fn1, and this Court declines to hear oral argument pursuant to FED. R. BANKR. P. 8012. For the reasons that follow, the Court AFFIRMS the holding of the Bankruptcy Court.


The relevant facts of this case are not disputed by the parties. On August 13, 2007, Mr. Shekerjian filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. On March 14, 2008, DAN filed an amended proof of claim in Mr. Shekerjian's bankruptcy proceedings. Mr. Shekerjian's amended Schedule F also listed DAN as the holder of a contingent, unliquidated, and disputed claim in an unknown amount. On April 15, 2008, the Bankruptcy Court ordered the conversion of Mr. Shekerjian's case to a Chapter 7 liquidation.

On July 21, 2008, DAN filed its Complaint Objecting to Discharge, alleging that Mr. Shekerjian should be denied his discharge in bankruptcy pursuant to 11 U.S.C. § 727. At the final pretrial conference, Mr. Shekerjian argued that one issue to be litigated was whether DAN had standing to object to Mr. Shekerjian's discharge - as Mr. Shekerjian contended there was no admissible evidence proving that DAN was a creditor of Mr. Shekerjian's estate. DAN objected to the standing issue being included as part of the hearing, as the standing issue was not raised by Mr. Shekerjian in his answer to DAN's complaint. [See Nov. 10, 2009 Tr., p.4]. The Court overruled DAN's objections on this issue, and proceeding to a hearing on November 10, 2009.*fn2

At the November 10, 2009 hearing, DAN offered the testimony of William Shaulis ("Shaulis"), the executive vice president and chief operating officer of the Cadle Company - a general partner of DAN. Mr. Shaulis testified that DAN employs approximately 130 people, and is in the business of purchasing loan portfolios from various banks and other sources across the country. Id. at 6. Mr. Shaulis testified that banks will occasionally sell DAN a single asset portfolio at a time, but the majority of times banks sell his company bundles of between fifty and fifteen-hundred accounts simultaneously. Id. at 7.

Since its inception in 1986, DAN has purchased approximately 1,000 to 1,500 such portfolios of assets, with a face value of several hundred billion dollars. Id. at pp.6-7. DAN has been purchasing loan portfolios from Fifth Third Bank ("Fifth Third") for at least ten years, in which time Mr. Shaulis estimated that DAN has purchased between twenty and twenty-five portfolios from Fifth Third totaling a hundred million dollars in face value. Id. at 10.

One such asset portfolio from Fifth Third - relevant to these proceedings - was purchased by DAN in February of 2007. Before the hearing began, Judge Rhodes had already precluded admission of the loan sale agreement in this matter, as DAN had not included it in the final pretrial order as a proposed exhibit.*fn3 Over objections from Defense Counsel, the following direct testimony from Mr. Shaulis was received by the Court at the November 10, 2009 hearing:

Q: Do you have personal knowledge of the loan sale that included the John Richards Homes obligations?*fn4

A: Yes.

Q: When was that loan sale?

A: February of 2007.

Q: Were there other obligations or other Fifth Third accounts involved in the sale, that portfolio sale?

A: Yes.

The Defense: Objection, your Honor. Under Federal Rule of Evidence 1002 if they wish to prove the contents of the sale document, the purchase agreement they need to produce the actual document.

The Court: That objection is overruled for this question. Go ahead, sir.

A: We purchased 64 accounts in that purchase from Fifth Third.

Q: And how many of those 60 [sic] accounts were pertaining to John Richards Homes?

A: Of these 64, it was - -

The Defense: Again, your Honor, objection. Same objection. If they wish to prove the contents - -

The Court: Overruled again. Go ahead, sir.

A: Three accounts.

[Nov. 10, 2009 Tr., pp.10-11].

Though the Bankruptcy Court permitted Mr. Shaulis to testify - from personal knowledge - that something related to Mr. Shekerjian's obligations to Fifth Third had been included in the February 2007 sale, the Court sustained an objection - under Rule 1002 - to Plaintiff Counsel's next question posed to Mr. Shaulis: ". . . what did Fifth Third sell you when they sold you this account?" Id. at 11.

Attempting to stay away from the loan sale agreement's language, plaintiff's counsel attempted only a few minutes later to again elicit similar testimony from Mr. Shaulis:

Q: Do you have any personal knowledge, sir - - without any reference to a loan agreement, do you have personal knowledge of what Fifth Third Bank sold to the Cadle Company?

The Defense: Again, your Honor, I'm going to object. That evidence would be - - the best evidence for that - - the Federal Rules require the document, not the witness' personal knowledge.

The Court: The objection is sustained.

Id. at 15.

Mr. Shaulis also testified that DAN never actually received the original notes from Fifth Third related to Mr. Shekerjian's alleged debt:

Q: Did your company ever receive the original notes from Fifth Third Bank?

A: No, we did not.

Q: How do you know you didn't receive the original notes?

A: Well, it's customary practice when we're purchasing loans that the seller would immediately transfer any and all loan documents that they have in their possession at the time of closing. On this particular case, they were required the day before closing to compile everything and have it available and to send all the original documents.

Q: And this is what ...

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