Malcolm McFall Babb

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
MALCOLM MCFALL BABB,
Debtor. 	Case No. 06-03003-8-JRL
______________________________________________________________________________
ORDER
This case is before the court on the trustee’s motion to employ a real estate agent, the
trustee’s motion to bind Malcolm Babb to his representations regarding rights to certain
properties, the trustee’s motion for a 2004 examination of Mitchell Babb, and the trustee’s
motion for appointment of a guardian ad litem for Mitchell Babb. The court conducted a hearing
on these matters in Wilmington, North Carolina on August 21, 2007.
On September 22, 2006, the debtor filed a petition for relief under chapter 13 of the
Bankruptcy Code. On February 26, 2007, the court converted the debtor’s chapter 13 case to a
case under chapter 7. There has been much discussion during the debtor’s case regarding the
ownership of certain real property. The real property located at 4668 River Road, Little River,
South Carolina is titled in the name of M. McFall Babb. Additionally, M. McFall Babb owns a
half interest in 10.3 acres of real property located in Charlotte, North Carolina. The debtor,
SO ORDERED.
SIGNED this 04 day of September, 2007.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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Malcolm McFall Babb, contends that his son Mitchell McFall Babb is the owner of both
properties. The trustee disagrees and instead believes that the debtor is the true owner of the real
estate. In an attempt to determine the true ownership of these properties and properly administer
the debtor’s estate, the trustee has filed the above motions.
The first motion before the court is the trustee’s motion to employ real estate agent,
Kemp Nash. Mr. Nash would be employed in order to assist the trustee in the sale of real
property located at 4668 River Road. The debtor objected to the trustee’s motion on the basis
that the property belongs to Mitchell Babb and is not property of the estate. Although, the trustee
believes this property to be a potential asset of the estate, he concedes that no sale may be
consummated until after a determination of the property’s ownership. Based on the evidence, the
trustee’s motion to employ real estate agent Kemp Nash is allowed.
The second motion before the court is the trustee’s motion to bind Malcolm Babb to his
representations regarding his rights in certain properties. The trustee contends that the debtor has
represented that the Little River Property, the Charlotte Property, and $1500 in condemnation
proceeds from the proceeding held by the Clerk of Court with respect to the Charlotte Property
do not belong to the debtor but instead are owed by Mitchell Babb. The trustee asserts that the
court should use its equitable powers under 11 U.S.C. § 105 to bind the debtor to his
representation that Mitchell Babb owns the above assets. In other words, the trustee seeks the
court to determine that any distribution that would generally be made to the debtor with respect
to the proceeds of the dispute assets pursuant to § 726 should be made to Mitchell Babb. Since
the court has not made a determination as to the ownership of the above assets, the trustee’s
motion to bind the debtor is premature. The court will defer ruling on this motion until after a
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determination has been made as to the ownership of the disputed property.
The third and fourth motions before the court are the trustee’s motion to conduct a 2004
examination of Mitchell Babb and the trustee’s motion to appoint a guardian ad litem for
Mitchell Babb. After an order allowing the 2004 examination had been entered, Malcolm Babb
filed an objection to the 2004 examination as attorney-in-fact and next friend of his son. On July
31, 2007, the court issued an order staying the 2004 examination of Mitchell Babb until the court
could make a determination as to the competency of Mitchell Babb.
Under Federal Rule of Civil Procedure 17, made applicable in bankruptcy by Bankruptcy
Rule 7017, the capacity of an individual to sue and be sued shall be determined by the law of the
individual’s domicile. Mitchell Babb is clearly domiciled in North Carolina, and North Carolina
law governs whether he is competent for purposes of determining whether a guardian ad litem
should be appointed. Based on North Carolina law, an “incompetent adult means an adult or
emancipated minor who lacks sufficient capacity to manage the adult’s own affairs, or to make
or communicate important decisions concerning the adult’s person, family, or property whether
the lack of capacity is due to mental illness, mental retardation, epilepsy, cerebral palsy, autism,
inebriety, disease, injury, or similar cause or condition.” N.C. Gen. Stat. § 35A-1101(7).
After listening to extensive testimony by Mitchell Babb, the court finds that he is not
capable of managing his own affairs or making important legal decisions concerning his
property. When Mitchell was nine years old he was involved in a serious automobile accident in
which his mother was killed and his neck was broken. Likely as a result of the effect of this
injury, he suffered a permanently disabling stroke during his final semester of law school at the
University of South Carolina. He currently resides in an assisted living facility. During
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Mitchell’s testimony it was apparent to the court that he was easily misled, was unable to
recollect what happened at certain times in the past, had difficulty comprehending written
documents shown to him, and was often confused. Currently, there are no matters pending that
implicate Mitchell Babb’s potential interest in the disputed property. However, based on the
debtor’s assertion of Mitchell Babb’s ownership of the property, Mitchell Babb will be a party to
any motion for sale of the disputed property. Upon such motion for sale or at such other time as
the court deems appropriate, the court will appoint Mitchell Babb a guardian ad litem to
represent his potential property interests.
Mitchell Babb’s ability to testify as a witness is determined under Federal Rule of
Evidence 601. The rule provides that “[e]very person is competent to be a witness except as
otherwise provided in these rules. However, in civil actions and proceedings, with respect to an
element of a claim or defense as to which State law supplies the rule of decision, the competency
of a witness shall be determined in accordance with State law.” Fed. R. Evid. 601. The potential
issues to be determined involve the title of real property, which is a state law concern. Therefore
state law will determine the standard of competency of the witness. The North Carolina Rules of
Evidence provide that:
(a) General rule – Every person is competent to be a witness except as otherwise
provided in these rules.
(b) Disqualification of witness in general – A person is disqualified to testify as a
witness when the court determines that he is (1) incapable of expressing himself
concerning the matter as to be understood, either directly or through interpretation
by one who can understand him, or (2) incapable of understanding the duty of a
witness to tell the truth.
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1 The court notes that one of the disputed properties is located in North Carolina and the
other is located in South Carolina. However, the standard for disqualification of a witness is the
same in South Carolina and North Carolina. See South Carolina Rules of Evidence, Rule 601(a)-
(b).
2The court will determine the proper method of compensation at such time as a guardian
ad litem is appointed.
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North Carolina Rules of Evidence, Rule 601(a)-(b).1
Based on Mitchell Babb’s testimony the court determines that he is not qualified to be a
witness based on his inability to express himself regarding the matters to be understood. Mitchell
Babb appeared to be willing to testify truthfully, but as a result of his current physical and mental
condition he was unable to do so. As set forth above, Mitchell Babb was easily misled, was
unable to recollect what happened at certain times in the past, and was often confused as to the
questions he was being asked. Based on these findings, Mitchell Babb is incompetent to serve as
a witness. Any previous oral testimony by Mitchell Babb or any prior statements made by him
under oath are inadmissible. At this time the court finds that the trustee’s request for a 2004
examination has been satisfied, and to the extent additional information in needed from Mitchell
Babb a guardian ad litem will be appointed for him by the court.2
Based on the foregoing, the motion to employ a real estate agent is allowed. The motion
to bind Malcolm Babb to his representations regarding rights to certain properties is premature
and ruling on that motion is deferred until ownership of the disputed properties has been
determined. The trustee’s motion for a 2004 examination of Mitchell Babb is denied. The
trustee’s motion for appointment of a guardian ad litem for Mitchell Babb is allowed to the
extent set forth above.
“END OF DOCUMENT”
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