Wilson v. Home-Savers, LLC et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
CALVERT M. WILSON,
Debtor.
____________________________
CALVERT M. WILSON,
Plaintiff,
v.
HOME-SAVERS, LLC, a foreign
limited liability company,
et al.,
Defendants.
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Case No. 01-00092
(Chapter 13)
Adversary Proceeding No.
06-10037
PRELIMINARY ORDER RE MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, Calvert M. Wilson (“Wilson”), was the owner
of real property known as 1905 2nd Street, N.E., Washington, D.C.
(the “2nd Street Property”). Wilson's complaint seeks, in part,
a declaratory judgment that a deed and a deed of trust he
executed on November 14, 2001, to convey to the defendant 1905
The order below is hereby signed.
Signed: July 17, 2006.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 The complaint refers to this defendant as 1905 2nd Street,
NE, LLC, but I will refer to this defendant by the name that
appears in the deed and the deed of trust.
2 The plaintiff filed his complaint in the United States
District Court for the District of Columbia where it was assigned
Civil Action No. 06-0069 (JDB). The District Court read the
complaint as seeking, in part, a declaration that the transaction
at issue in the complaint was void under the Bankruptcy Code (11
U.S.C.). Because that claim arose under the Bankruptcy Code, the
District Court issued an order on April 24, 2006, referring the
claim (and any related counterclaim by the defendants) to this
court for disposition pursuant to 28 U.S.C. § 157(a) and DCt.LBR
5011-1. The defendants filed no related counterclaim. Other
claims raised in the complaint remain pending in the District
Court for disposition by that court.
3 The claim is a core proceeding that this court may hear
and determine under 28 U.S.C. § 157(b)(1) as it arises under the
Bankruptcy Code. Accordingly, any review of this court's final
judgment must be sought by way of appeal. 28 U.S.C. § 158(a)(1).
The claim is not a proceeding that “is not a core proceeding but
that is otherwise related to a case under title 11" under 28
U.S.C. § 157(c)(1) in which I would be required to submit to the
District Court proposed findings of fact and conclusions of law.
2
2nd ST, NE, LLC,1 interests in the 2nd Street Property, and any
other aspects of the transaction involving those instruments
(including the borrowing of money), were void under the
Bankruptcy Code (11 U.S.C.) due to the pendency of his bankruptcy
case.2 Both Wilson and the defendants have filed motions for
summary judgment regarding this claim.3
Based on an issue the parties did not brief, my preliminary
view is that the deed and the deed of trust, and other aspects of
the transaction, were not void. Unless Wilson files a further
memorandum demonstrating that my preliminary analysis below is in
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4 When a court considers an apparently dispositive issue
that the parties ignored, “it should ensure procedural fairness .
. . by providing each party with the opportunity to brief [the]
issue . . . .” Randolph v. United States, 882 A.2d 210, 227
(D.C. 2005).
3
error,4 I will grant the defendants' motion, deny Wilson's
motion, and enter a declaratory judgment that the deed and the
deed of trust, and other aspects of the transaction, are not void
under the Bankruptcy Code.
I
Wilson specifically claims that the deed and the deed of
trust, and other aspects of the transaction, are void under 11
U.S.C. §§ 362(a), 363, 364, and 549. However, as explained in
part II, below, that claim is necessarily premised on the 2nd
Street Property having been property of the estate in his
bankruptcy case when the instruments were executed. The file in
Wilson's bankruptcy case demonstrates that as a matter of law the
property had ceased to be property of the estate prior to
Wilson's executing the instruments. Summary judgment in favor of
the defendants is thus appropriate.
A.
Wilson filed a Statement of Undisputed Facts in support of
his motion for summary judgment. Wilson apparently intended that
document to serve as his “statement of material facts as to which
the moving party contends that there is no genuine issue” which
is required by LCvR 56.1 of the District Court (made applicable
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4
by LBR 7056-1). That Statement recites that “[t]he 2nd Street
Property is an asset of Wilson's Chapter 13 Estate. 11 U.S.C. §
541.” Under Rule 56.1, “the court may assume that facts
identified by the moving party in its statement of material facts
are admitted, unless such a fact is controverted in the statement
of genuine issues filed in opposition to the motion.” (Italics
added.) The defendants have not controverted Wilson's statement
that the 2nd Street Property “is an asset of Wilson's Chapter 13
Estate” and, indeed, appear to have assumed that it was property
of the estate when Wilson executed the deed and the deed of
trust.
Nevertheless, I will not treat Wilson's statement that the
2nd Street Property “is an asset of Wilson's Chapter 13 Estate”
as an admitted fact. First, in making the statement, Wilson
failed to comply with the requirement in Rule 56.1 that the
statement “shall include references to the parts of the record
relied on to support the statement.” Second, the statement is
one not of fact but of law (based on what transpired in Wilson's
bankruptcy case). The parties may not stipulate to legal
conclusions to be reached by the court. Case v. Los Angeles
Lumber Prods. Co., 308 U.S. 106 (1939); NLRB Union, Local 6 v.
FLRA, 842 F.2d 483, 485 n.6 (D.C. Cir. 1988); Sebold v. Sebold,
444 F.2d 864 (D.C. Cir. 1971). Third, by use of the word “may,”
Rule 56.1 recognizes that in appropriate circumstances a court
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has discretion not to treat an uncontested statement as admitted.
Finally, “a court may consider an issue 'antecedent to . . . and
ultimately dispositive of' the dispute before it, even an issue
the parties fail to identify and brief.” U.S. Nat'l Bank of Or.
v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 447 (1993)
(quoting Arcadia v. Ohio Power Co., 498 U.S. 73, 77 (1990)).
B.
In January 2001 Wilson filed a petition in this court
commencing a case under chapter 13 of the Bankruptcy Code.
Included in the property of the estate under 11 U.S.C. § 541 was
Wilson's 2nd Street Property. Under 11 U.S.C. § 1321, Wilson was
required to file a plan, and he filed an initial plan and then an
amended plan. Once a plan is confirmed under 11 U.S.C. § 1325,
the provisions of that plan “bind the debtor and each creditor .
. . .” 11 U.S.C. § 1327(a). On May 21, 2001, the clerk entered
the court's order confirming Wilson's amended plan, and he thus
became bound by its terms. Under 11 U.S.C. § 1327(b):
Except as otherwise provided in the plan or the order
confirming the plan, the confirmation of a plan vests
all of the property of the estate in the debtor.
Neither the confirmed plan nor the order confirming that plan
included a provision to alter the general rule that confirmation
vests the property of the estate in the debtor. Accordingly, the
property of the estate in existence on May 21, 2001, including
the 2nd Street Property, vested in Wilson upon confirmation of
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the plan on that date. In part II, below, I conclude that this
resulted in the 2nd Street Property no longer being property of
the estate. The confirmed plan and the order confirming it were
never modified to alter that result, and in 2004, despite the
pendency of Wilson's bankruptcy case, the 2nd Street Property
remained vested in Wilson, and not property of the estate, when
he executed the deed and the deed of trust at issue.
C.
The deed and the deed of trust that Wilson attacks as void
were executed on November 14, 2004, when Wilson was facing a
foreclosure of the 2nd Street Property by ABN AMRO (which had
obtained relief from the automatic stay of 11 U.S.C. § 362(a) to
permit it to proceed with foreclosure). On November 14, 2004, in
exchange for a $30,525.14 emergency loan used to bring ABN AMRO's
loan current, Wilson executed an agreement with Home Savers Plus,
LLC (the “Agreement”). Both parties treat Home Savers Plus, LLC
and the defendant Home Savers, LLC (“Home Savers”) as one and the
same, and so will I. Pursuant to the Agreement, Wilson was given
60 days to refinance the 2nd Street Property and, out of the
refinance proceeds, pay off ABN AMRO's loan, and pay to Home
Savers “$122,656.07 plus any costs advanced to stop the
foreclosure.” The Agreement required Wilson to execute “needed
documents to protect the interests of Home Savers Plus,
including, deeds, deeds of trusts, and related settlement
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5 Had Wilson achieved a timely refinance, a third document
appears to have required payment to be made to 1905 2nd ST NE,
LLC (and not Home Savers Plus, LLC) out of the refinance
proceeds: Wilson executed an Assignment of Proceeds assigning to
1905 2nd ST NE, LLC “from settlement on the property” (presumably
meaning the settlement of the refinance contemplated by the
agreement with Home Savers Plus, LLC):
proceeds from settlement [to] be distributed completely up
to the amount of $122,656.07. This includes the monies
advanced to stop the foreclosure sale.
7
documents” but provided that the executed documents would be held
in escrow “until the expiration of this agreement.” Incident to
the Agreement, Wilson also executed on November 14, 2001:
• a Deed conveying the 2nd Street Property to Home
Savers' affiliate and co-defendant, 1905 2nd ST NE,
LLC; and
• a Deed of Trust in favor of 1905 2nd ST NE, LLC as
“Lender” to secure repayment of a debt of $30,535.14,
plus interest, recited to be evidenced by an agreement
of the same date.5
The foregoing are the deed and the deed of trust that Wilson
seeks to declare void. The Agreement with Home Savers provided:
In the event that that [sic] the refinance does not take
place with the specified time-frame, the documents held in
escrow shall be released and recorded. This includes the
deed that transfers ownership of the property.
Pursuant to that provision, the defendants have now recorded with
the District of Columbia Recorder of Deeds the Deed conveying
title to the 2nd Street Property to 1905 2nd ST NE, LLC.
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II
As discussed above, under § 1327(b) the 2nd Street Property
had remained vested in Wilson since his plan was confirmed in
2001. The critical issue is whether the 2nd Street Property
nevertheless remained “property of the estate” when Wilson
executed the deed and the deed of trust in 2004. If it was no
longer property of the estate, none of the provisions upon which
Wilson relies in pursuing his claim to void the deed and the deed
of trust provide a basis for such relief.
A.
When the provisions of a confirmed plan or the order
confirming the plan do not override the general rule of § 1327(b)
that the property of the estate vests in the debtor, the courts
have given § 1327(b) varying interpretations regarding whether
any property of the estate remains in the case. Some courts have
held that § 1327(b) results in there being no property of the
estate in the case. See Oliver v. Toth (In re Toth), 193 B.R.
992 (Bankr. N.D. Ga. 1990). Under that interpretation, the 2nd
Street Property ceased to be property of the estate.
Other decisions hold that at least some property of the
estate remains despite confirmation of the plan, but they
disagree regarding the extent. Under the interpretation of §
1327(b) that I find most reasonable and thus adopt, property of
the estate in existence at the time of confirmation vests in the
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6 It is appropriate to treat plan payments received by the
trustee and required by the plan's terms to be paid to creditors
as remaining estate property upon confirmation despite § 1327(b),
or at least as property held in trust for creditors or as to
which they have a superior right by reason of the binding terms
of the plan. See In re Parrish, 275 B.R. 424 (Bankr. D.D.C.
2002); 18 U.S.C. § 153(a)(subjecting a trustee to criminal
penalties if she embezzles property belonging to “the estate of a
debtor”). This is consistent with Barbosa, because Barbosa
addresses the impact of § 1327(b) on property as to which the
confirmed plan failed to alter the general rule of § 1327(b), and
a confirmed plan plainly alters § 1327(b) as to a debtor's rights
in payments received by the trustee. It is unnecessary to rely
on the amorphous test of Telfair and Heath to achieve the same
result.
9
debtor and ceases to be property of the estate. See Barbosa v.
Soloman (In re Barbosa), 235 F.3d 31, 36-37 (1st Cir. 2000).
An alternative view of § 1327(b) is that such property as is
necessary for the execution of the chapter 13 plan remains
property of the estate. See Telfair v. First Union Mortgage
Corp. (In re Telfair), 216 F.3d 1333 (11th Cir. 2000); Black v.
U.S. Postal Service (In re Heath), 115 F.3d 521, 524 (7th Cir.
1997). However, that interpretation of § 1327(b) necessarily
entails uncertainty in the determination of what property is
necessary to the completion of the plan.6 In any event, there is
no indication here that the 2nd Street Property was necessary to
the success of the chapter 13 plan: Wilson obtained a discharge
despite the execution of the deed and the deed of trust. That
suffices under the Telfair and Heath approach to demonstrate that
the 2nd Street Property was not property of the estate. See
Telfair, 216 F.3d at 1340 n.14.
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Finally, there is a view that although the property of the
estate vests in the debtor, it does not cease to be property of
the estate until the case is dismissed, closed, or converted.
See, e.g., Riddle v. Aneiro (In re Aneiro), 72 B.R. 424, 428-29
(Bankr. S.D. Cal. 1987). However, that interpretation renders §
1327(b) meaningless, and I decline to follow it.
Because the 2nd Street Property was property of the estate
immediately prior to confirmation of Wilson's amended plan, the
2nd Street Property ceased under Barbosa to be property of the
estate upon confirmation of the plan. Accordingly, Wilson's
execution in 2004 of the deed and the deed of trust relating to
the 2nd Street Property was not an act relating to property of
the estate.
B.
It follows that the Bankruptcy Code provisions upon which
Wilson relies in attempting to void the deed and the deed of
trust are inapplicable to the extent their applicability depends
on the 2nd Street Property having been “property of the estate”
at the time of execution of those instruments. Nor are those
provisions applicable on any other basis.
First, the automatic stay of § 362(a) stays three categories
of acts:
• certain acts against property of the estate,
• certain acts relating to claims or judgments against
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7 The court granted Wilson a discharge in his bankruptcy
case on July 1, 2005. That terminated the automatic stay of §
362(a) as applicable to acts other than an act against property
of the estate. 11 U.S.C. § 362(c)(2). Accordingly, at this
time, no automatic stay is in place regarding either the 2nd
Street Property as property of the estate or acts against Wilson
or against Wilson's property.
11
the debtor that arose or were obtained before the
commencement of the case, and
• the commencement or continuation of a proceeding
against the debtor that was or could have been
commenced before the commencement of the case.
As it related to acts against the 2nd Street Property as property
of the estate, the automatic stay terminated when the 2nd Street
Property ceased to be property of the estate by reason of its
having vested in Wilson in May 2001 incident to the confirmation
of Wilson's amended plan. 11 U.S.C. § 362(c)(1).7 The
defendants did not have a prepetition claim or judgment against
Wilson, and they did not commence or continue a proceeding
against Wilson (let alone one that was or could have been
commenced before the commencement of the case).
Second, § 363 deals with the use, sale, or lease “of
property of the estate.”
Third, § 364 deals with a trustee's obtaining credit
“allowable under section 503(b)(1) as an administrative expense”
or secured by a lien “on property of the estate.” The defendants
are not asserting an administrative claim in the case, and their
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8 Moreover, § 364 is inapplicable to a debtor's obtaining
credit unless the debtor is “engaged in a business” and thus
authorized by 11 U.S.C. § 1304(b) to exercise the rights and
powers of a trustee under § 364. Wilson has not alleged that he
was engaged in a business. If he had been engaged in a business,
he would have been required to file reports regarding operation
of that business as required by 11 U.S.C. §§ 1304(c) (making the
reporting requirements of 11 U.S.C. § 704(8) applicable to a
chapter 13 debtor engaged in a business). He filed no such
reports.
12
lien is on the debtor's property, not on property of the estate.8
Finally, § 549 deals exclusively with transfers “of property
of the estate.”
III
After the initial preparation of this order, and after the
deadline for memoranda had expired, the defendants filed, without
leave of court, a supplemental memorandum in support of their
position. The supplemental memorandum is rejected both as
untimely and as advancing an erroneous argument. The defendants
argue that the 2nd Street Property ceased to be property of the
estate when Wilson claimed as exempt from property of the estate
under 11 U.S.C. § 522(b) his equity in the property and no one
timely objected to the exemption under 11 U.S.C. § 522(l).
However, an exemption of less than the full value of a property
from the estate does not operate to exempt the property in its
entirety from the estate. See In re Bregni, 215 B.R. 850 (Bankr.
E.D. Mich. 1997).
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13	O:\JUDGTEMP\Wilson vs Home Savers, LLC Decision re Mtns for Summary Jdgtv2.wpd
IV
In light of the foregoing, it is
ORDERED that within 14 days after entry of this order, the
parties may file further memoranda addressing the propriety of
the court's preliminary analysis set forth above, and that if the
plaintiff fails to file a further memorandum, the court will
enter summary judgment in favor of the defendants.
[Signed and dated above.]
Copies to:
All counsel of record; Honorable John D. Bates.
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