Callaway, Trustee v. Hargrove et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
DENISE SHARON HARGROVE
CASE NO. 05-04037-5-JRL
Debtor. CHAPTER 7
JOSEPH N. CALLAWAY, Chapter 7 ADVERSARY PROCEEDING
Bankruptcy Trustee for the Bankruptcy NO: 06-00038-5-JRL
Estate of Denise Sharon Hargrove,
Plaintiff,
v.
DENISE SHARON HARGROVE,
BETTY HARGROVE HILLIARD, and
CHAVON ANTOINETTE HILLIARD
Defendants.
JOSEPH N. CALLAWAY, Chapter 7 ADVERSARY PROCEEDING
Bankruptcy Trustee for the Bankruptcy NO: 06-00095-5-JRL
Estate of Denise Sharon Hargrove,
Plaintiff,
v.
WALTER H. HARGROVE,
STATE EMPLOYEE’S CREDIT UNION, and
RUBEN FREEMAN
Defendants.
____________________________________________________________________________
SO ORDERED.
SIGNED this 16 day of February, 2007.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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ORDER
This matter is before the court on the plaintiff’s motion to consolidate the above-captioned
adversary proceedings. On January 29, 2007, the court conducted a hearing in Raleigh, North
Carolina.
Denise Sharon Hargrove filed Chapter 7 on May 19, 2005, and there are two adversary
proceedings pending in her bankruptcy case. The first adversary proceeding is Callaway v. Denise
Sharon Hargrove, et al. (06-00038-5-AP), filed on January 15, 2006 (the “38 Proceeding”), and
the second is Callaway v. Walter H. Hargrove, et al. (06-00095-5-AP) filed on July 27, 2006 (the
“95 Proceeding”). The plaintiff now seeks to consolidate the two adversary proceedings. The only
party in opposition to the consolidation is Ruben Freeman, one of the defendants in the 95
Proceeding.
A court may consolidate legal actions where they involve “a common question of law or
fact pending before the court[.]” Fed. R. Bankr. P. 7042. In making this determination, “the court
should weigh the risk of prejudice and possible confusion versus the possibility of inconsistent
adjudication of common factual and legal issues, the burden on the parties, witnesses, and judicial
resources by multiple lawsuits[.]” In re Cree, Inc. Sec. Litig., 219 F.R.D. 369, 371 (M.D.N.C.
2003) (citing Arnold v. Eastern Airlines, 681 F.2d 186, 193 (4th Cir. 1982).
The plaintiff asserts that the issues in both adversary proceedings arise from a series of
related events and transfers that involve a common question of law and fact. In the 38 Proceeding
the plaintiff alleges that the transfers made by Denise Hargrove, Betty Hilliard, and/or Chavon
Hilliard to State Employee’s Credit Union are avoidable, either as preference payments,
fraudulent transfers, and/or post petition transfers. One of the defenses asserted by Betty and
Chavon Hilliard, and State Employee’s Credit Union relates to the 2002 Franklin County land
transfers from Walter Hargrove to Denise Hargrove. It is the validity of those land transfers that is
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at the core of the 95 Proceeding. Therefore, the court finds that a prevailing issue in both adversary
proceedings is the validity of the 2002 Franklin County land transfers from Walter Hargrove to
Denise Hargrove.
Since the adversary proceedings have a common issue of law and fact, the court may
consolidate the cases but it is not required to do so. The court should look at the possibility of
inconsistent verdicts, the possibility of confusion, and the potential burden on the parties and the
court in determining whether consolidation is appropriate. Ruben Freeman was involved as the
notary in the 2002 Franklin County land transfers from Walter Hargrove to Denise Hargrove. As a
result of that role two claims in the 95 Proceeding are asserted against Mr. Freeman, the first for
negligence and the second for fraud. Mr. Freeman contends that consolidation of the two adversary
proceedings would cause him to incur additional unnecessary legal fees and costs that would
profoundly prejudice him. Mr. Freeman argues that if the validity of the transfers in the 38
Proceeding is upheld, then the claims in the 95 Proceeding against him disappear. He contends that
it would be prejudicial for him to be a defendant in a proceeding with six defendants involving
multiple transfers, with only the 2002 Franklin County land transfers relating to him. The court
finds that the claims against Mr. Freeman are distinct, and it would be an extreme burden to
require him to incur the costs of a potentially lengthy trial when he is only a minor player in this
situation. The prejudice of Mr. Freeman’s additional expense outweighs the efficiency of his
participation as a defendant in the consolidated adversary proceedings.
The other defendants are not opposed to the adversary proceedings being consolidated.
Consolidation would not create a burden on them and would remove the possibility of inconsistent
findings of common factual and legal issues between the two proceedings. Therefore based on the
record, the court orders that adversary proceedings Callaway v. Denise Sharon Hargrove, et al.
(06-00038-5-AP) and Callaway v. Walter H. Hargrove, et al. (06-00095-5-AP) be consolidated.
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1 “Any claim against a party may be severed and proceeded with separately.” Fed. R.
Bankr. P. 7021.
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However, due to the burden consolidation would place on defendant Freeman, the court orders that
the claims against defendant Freeman be severed from the consolidated adversary proceeding and
stayed at this time.1
END OF DOCUMENT
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