Davis v. Millenium Development Group et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
HESTER ALICE DAVIS,
DEBTOR
CASE NO.
04-03619-5-ATS
HESTER ALICE DAVIS,
Plaintiff
v.
MILLENNIUM DEVELOPMENT GROUP, L.L.C.
and LEWIS A. THOMPSON, III,
Defendants.
ADVERSARY PROCEEDING NO.
S-05-00076-5-AP
ORDER DENYING MOTION FOR SUMMARY JUDGMENT
Pending before the court is the motion for summary judgment filed
by the defendant, Lewis A. Thompson, III. Defendant Millennium
Development Group, L.L.C. is not a party to this motion. A hearing was
held in Raleigh, North Carolina on January 10, 2005. For the reasons
that follow, the motion will be denied.
Debtor Hester Alice Davis filed a petition for relief under
chapter 13 of the Bankruptcy Code on October 6, 2004, in order to stop
foreclosure proceedings against her property. She filed this adversary
proceeding against the entity seeking to foreclose, Millennium
Development Group, LLC, on April 4, 2005. She added Mr. Thompson in
his capacity as trustee, as a defendant on April 12, 2005. Ms. Davis
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alleged that Mr. Thompson, the deed of trust trustee, breached a
fiduciary duty he owed to her, to remain neutral and impartial in the
context of foreclosure proceedings brought by Mr. Thompson against Ms.
Davis’s property.
An abbreviated version of the undisputed facts shows that Ms.
Davis entered a contract to purchase a new modular home from Millennium
in February 2003. The $125,912 debt for the house was due, per the
Note, on September 12, 2004 or upon closing, whichever came first. The
modular home was delivered to her property in September 2003, just
prior to the arrival of Hurricane Isabel. The home evidently incurred
water and other damage in the storm, and Ms. Davis did not close on the
home because, she contends, Millennium did not complete the home
according to the contract. In November of 2003, through Mr. Thompson
as trustee, Millennium indicated that it would collect the debt through
foreclosure. Def.’s Mot. for Summ. J. Ex. 1.
Ms. Davis contacted Millennium in January 2004 to demand that
Millennium provide the "new house " she had contracted for, at which
time she would close on it as agreed. Pl.’s Aff. Ex. 1. Millennium,
through its General Manager Larry Davis, responded that any future
correspondence from Ms. Davis regarding the house should be sent "to
our attorney, Mr. Lewis A. Thompson." Pl.’s Aff. Ex. 2. Ms. Davis
also contacted the Consumer Protection Section of the Attorney
General’s Office for the State of North Carolina to file a complaint
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against Millennium. Pl.’s Aff. Exs. 3, 4. She received from the State
a copy of Millennium’s response to her complaint, which was prepared by
Mr. Thompson on February 23, 2004. In the response, Mr. Thompson
indicated that Ms. Davis had a new attorney who had contacted him to
request documents concerning the matter, and opined: "From my
perspective, this is a rather straightforward foreclosure procedure.
Millennium Development has afforded Ms. Davis every opportunity to
resolve this obligation and she has failed to do so." Mr. Thompson
copied the letter to Millennium, but not to Ms. Davis. Pl.’s Aff. Ex.
5.
The foreclosure proceeding was commenced in the summer of 2004.
Ms. Davis states in her affidavit that she attended a foreclosure
hearing at which Mr. Thompson "cross-examined [her] in the best
interests of Millennium." She states that no attorney was present for
Millennium at that hearing. There was another hearing on the matter,
and Ms. Davis stated in her affidavit that Mr. Thompson again
"represented Millennium." The clerk ordered the foreclosure, and Ms.
Davis appealed on grounds that the debt was not due. She also moved
for Mr. Thompson’s dismissal as trustee. The case was then dismissed
on July 7, 2004, by Mr. Thompson. Def.’s Mot. for Summ. J. Ex. 3.
In September of 2004, Mr. Thompson initiated a new foreclosure
proceeding on grounds that Ms. Davis had defaulted on the terms of the
Note and Deed of Trust because she had not insured the home or paid
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taxes on it. Another hearing was held before the Clerk of Superior
Court of Warren County, who subsequently entered an order finding that
there had been a default and that the trustee was authorized to conduct
the sale. Def.’s Mot. for Summ. J. Ex. 4.
As outlined above, Ms. Davis then filed her petition for relief
under chapter 13 of the Bankruptcy Code, which stayed the foreclosure
action. She filed the adversary proceeding against Millennium on
April 4, 2005, and on April 12, 2005, amended her complaint to add Mr.
Thompson, in his capacity as trustee.
Mr. Thompson moved for dismissal of the complaint as to him under
Rule 12(b)(6) of the Federal Rules of Civil Procedure, but that motion
was denied in this court’s order of August 25, 2005. The court found
that Ms. Davis had stated a claim for breach of fiduciary duty based on
her allegations that Mr. Thompson, as trustee for the deed of trust in
favor of Millennium Development Group, knew or should have known that
no collateral had been delivered to the plaintiff, that Mr. Thompson
had a duty to verify the existence of collateral given in exchange for
the deed of trust, that Mr. Thompson had a fiduciary duty to remain
neutral and to be impartial in the foreclosure proceedings, and that he
breached this duty by regularly representing the interests of
Millennium.
Mr. Thompson now moves for summary judgment as to the breach of
fiduciary duty claim against him. Summary judgment is proper "’if the
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pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.’" Celotex Corp. v.
Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552 (1986). In
making this determination, conflicts are resolved by viewing all
facts and inferences to be drawn from the facts in the light
most favorable to the non-moving party. United States v.
Diebold, Inc., 369 U.S. 654, 82 S. Ct. 993 (1962). Summary
judgment should not be granted unless the moving party
establishes his right to judgment "with such clarity as to leave
no room for controversy." Portis v. Folk Constr. Co., Inc., 694
F.2d 520, 522 (8th Cir. 1982) (quoting Bellflower v. Pennise,
548 F.2d 776, 777 (8th cir. 1977)).
It is readily apparent in this matter that the remaining legal
issues are based on contested questions of fact, which cannot be
resolved through a motion for summary judgment. On the one hand, Mr.
Thompson has presented evidence tending to show that he has not
"regularly " represented Millennium; that attorney Marvin P. Rooker
represented Millennium at the hearing prior to initiation of the second
foreclosure; that in the opinion of the clerk who conducted that
hearing, Mr. Thompson’s conduct was impartial and appropriate to his
role as trustee; and that with the exception of his original
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preparation of the Note and Deed of Trust and his recordation of it for
a fee of $150, he had "no further contact with Millennium" until they
contacted him regarding foreclosure on the Deed of Trust.
In contrast, Ms. Davis has presented evidence tending to show that
Mr. Thompson did act as attorney for Millennium, and took actions
contrary to her interests, despite his position as trustee on the deed
of trust. Her evidence, if believed, would show that Mr. Thompson
began foreclosure proceedings against the property before the debt owed
to Millennium even became due, essentially represented Millennium
throughout two hearings on the matter and entry of an order allowing
foreclosure, and then dismissed the proceeding in his capacity as
Millennium’s attorney. Mr. Thompson initiated foreclosure proceedings
again two months later on grounds that Ms. Davis had not insured the
property or paid the taxes on the home, although Ms. Davis contends
that this foreclosure was wrongful in that the debt still was not due,
she had paid taxes on her land but not the house, and she could not
insure or pay taxes on a water-damaged home that she did not own or
occupy. In sum, Ms. Davis argues from her evidence that instead of
acting as a neutral trustee to facilitate resolution of these issues,
Mr. Thompson did in several significant contexts actively represent
Millennium, and further, that he worked to advance its interests to the
detriment of hers.
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Thompson counters with several explanations and further evidence.
He argues, for example, that the stipulation of dismissal document
identifying him as Millennium’s attorney is essentially a "scrivener’s
error," and offers affidavits from Millennium’s attorney and the Warren
County Clerk of Court attesting to his impartiality and appropriate
conduct. This sort of back-and-forth dispute about the facts, which
necessarily involves assessment of credibility, is precisely the sort
of matter that must be resolved in the trial of an adversary
proceeding, not through a motion for summary judgment.
Fortunately, both Ms. Davis and Mr. Thompson cite to the same
longstanding North Carolina precedent outlining the duties and
obligations of a trustee on a deed of trust. In this state, trustees
on deeds of trust serve as "impartial agents of the creditor and debtor
alike." Mills v. Mutual Bldg. & Loan Ass’n., 216 N.C. 664, 6 S.E.2d
549, 552 (1940). Among other things, the position of trustee serves to
"provide a convenient, cheap and speedy mode of satisfying debts on
default of payment; to assure fair dealing and eliminate the
opportunity for oppression; [and] . . . to attend equally to the
interest of the debtor and creditor alike . . . . He is charged with
the duty of fidelity as well as impartiality, of good faith and every
requisite degree of diligence . . . . " Mills, 6 S.E.2d at 552. There
therefore appears to be little disagreement between the parties about
the appropriate standards applicable to a trustee on a deed of trust,
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and the court expects that the parties’ presentation of the relevant
evidence at trial will be straightforward and readily assessed.
Accordingly, for the foregoing reasons, the defendant’s motion for
summary judgment is DENIED.
SO ORDERED.
DATED: January 12, 2006
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