S. Bank & Trust Co. v. Alexander (In re Alexander)
| Decision Date | 16 December 2014 |
| Docket Number | Civil No. 2:14cv465.,Bankruptcy No. 11–74515.,Adversary No. 13–07146. |
| Citation | 524 B.R. 82 |
| Parties | In re Darvin ALEXANDER and Bonita Renee Alexander, Debtors. Southern Bank & Trust Company, James M. Pickrell, Jr., Trustee, Janice P. Anderson, Trustee, Appellants, v. Darvin Alexander, Bonita Renee Alexander, Leontine Brown, Rogers Lee Brown, United States of America, and Clara P. Swanson, Chapter 7 Trustee, Appellees. |
| Court | U.S. District Court — Eastern District of Virginia |
Jeffrey L. Marks, Esquire, Kaufman & Canoles PC, Virginia Beach, VA, for Appellants.
Kelly M. Barnhart, Esquire, Lawrence H. Glanzer, Esquire, Roussos, Glanzer & Barnhart, P.L.C., Norfolk, VA, for Appellees.
This matter is before the court on appeal, pursuant to 28 U.S.C. § 158(a), from the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”). The Appellants, Southern Bank and Trust Company, Trustee James M. Pickrell, Jr., and Trustee Janice P. Anderson (collectively, the “Bank”), appeal the Bankruptcy Court's dismissal of their Complaint by Memorandum Opinion of July 16, 2014. This matter is also before the court on the “Objection to Exhibits to Brief and Motion to Strike Same, with Points and Authorities” (“Motion to Strike Exhibits”), filed on October 9, 2014, by the Appellee, Clara P. Swanson, Chapter 7 Trustee (the “Trustee”). ECF No. 7. For the reasons stated herein, the Trustee's Motion to Strike Exhibits is DENIED, and the Bankruptcy Court's decision is AFFIRMED in all respects.
Upon examination of the briefs and the record on appeal, the court concludes that oral argument is unnecessary to decide the issues presented on this appeal, as “the facts and legal arguments are adequately presented in the briefs and record and the decisional process would not be significantly aided by oral argument.” Fed. R. Bankr.P. 8012 ; see, e.g., In re Smoot, No. 305cv482, 2006 WL 848120, at *1 (E.D.Va. Mar. 30, 2006).
On July 28, 2014, the Bank filed the timely Notice of Appeal, appealing the Bankruptcy Court's dismissal of the Complaint against the Defendants Darvin Alexander (“Mr. Alexander”), Bonita Renee Alexander (“Mrs. Alexander,” and collectively with Mr. Alexander, the “Debtors” or the “Alexanders”), Leontine Brown (“Mrs. Brown”), Rogers Lee Brown (“Mr. Brown,” and collectively with Mrs. Brown, the “Browns”), the Internal Revenue Service (“IRS”), and the Trustee. See Notice of Appeal, ECF No. 2.
By valid and recorded deed of January 29, 1999 (“1999 Deed”), Mrs. Alexander and her mother Mrs. Brown acquired all interests in the real property and improvements known as 700 Pleasant Ridge Court, Chesapeake, Virginia, 23320 (the “Property”). Appellant Br. at 6, ECF No. 4. On that same date, Mrs. Alexander and Mrs. Brown entered into a loan (“1999 Loan”) with BNC Mortgage, Inc. (“BNC”). Id. On February 8, 1999, Mrs. Alexander and Mrs. Brown entered into a properly recorded deed of trust to secure the note payable to BNC (“1999 Deed of Trust”), in the principal amount of $200,000.00. Id. at 6–7.
On April 19, 2006, Mrs. Alexander and Mrs. Brown executed a deed (“2006 Deed”), which conveyed all of their interests in the Property to Mrs. Brown and Mr. Brown. Id. at 7. However, the 2006 Deed was never recorded in the Clerk's Office. Id.2
On May 5, 2006, the Browns entered into a loan (“2006 Loan”), which consists of a $475,000.00 Note (“2006 Note”) payable to the Bank of the Commonwealth and a properly recorded deed of trust (“2006 Deed of Trust”) to secure the payment of the 2006 Note. Id. $194,174.27 of the proceeds from the 2006 Loan fully paid off and satisfied the 1999 Loan that was previously owed by Mrs. Alexander and Mrs. Brown. Id.
On September 19, 2006, the Browns entered into a line of credit (“Line of Credit”) in the amount of $80,000.00, payable to the Bank of the Commonwealth. Id. On that same date, the Browns signed a deed of trust (“Line of Credit Deed of Trust”) to secure the payment of the Line of Credit, which was recorded in the Clerk's Office on September 26, 2006. Id. at 7–8. Subsequently, there were changes in terms agreements dated December 30, 2008, and September 23, 2010, as well as a modification on September 23, 2010. Id. at 8.
On September 27, 2010, the Browns entered into a deed of trust (“2010 Deed of Trust”) with the Bank of the Commonwealth, conveying the Property in trust to secure the payment of the 2006 Note, the Line of Credit, and any other obligations the Browns owed to the Bank of the Commonwealth. Id.
Southern Bank and Trust Company acquired the assets of the Bank of the Commonwealth from the Federal Deposit Insurance Corporation as Receiver for the Bank of the Commonwealth, and the obligations under the 2006 Loan and the Line of Credit, and the rights and benefits under the three deeds of trust were assigned to the Bank. Id.
On February 9, 2012, the Browns filed for Chapter 11 bankruptcy protection (“Brown Bankruptcy”), which case was converted to a Chapter 7 bankruptcy proceeding on January 10, 2013, and the Honorable Stephen C. St. John presided over the Brown Bankruptcy. Id. The Browns included the Property in their schedules, as well as their obligations under the 2006 Loan and Line of Credit. Id. at 8–9. On January 8, 2013, the Bankruptcy Court entered a Relief Order, which granted the Bank the ability to enforce its rights under the Loan documents. Id. at 10. The Browns received their Chapter 7 discharge on May 21, 2013, and the Brown Bankruptcy case was closed on May 29, 2013. Id. at 9.
On October 10, 2011, the Debtors, the Alexanders, filed their Chapter 13 bankruptcy petition, which case was converted to Chapter 7 on November 6, 2013, and Chief Judge St. John presided over the case. Id. at 5, 10. The Debtors did not initially schedule any interest in the Property, but upon their conversion to Chapter 7, they filed an amended schedule, in which they asserted that Mrs. Alexander has a tenancy-in-common interest in the Property with her mother Mrs. Brown. Id. at 10. However, the Debtors did not schedule themselves as being liable under either the 2006 Loan or the Line of Credit. Id. at 11.
The Bank filed the Complaint on November 25, 2013, in which it asserted nine causes of action: (I) declaratory judgment as to the validity of the Bank's lien; (II) reformation of the deeds of trust; (III) equitable subrogation; (IV) constructive trust; (V) equitable lien; (VI) implied or resulting trust; (VII) unjust enrichment; (VIII) specific performance; and (IX) equitable relief pursuant to 11 U.S.C. § 105. The Trustee filed a Motion to Dismiss the Complaint on January 13, 2014, in which she argued that her strong-arm powers under 11 U.S.C. § 544 and status as a bona fide purchaser (“BFP”) defeated the various forms of equitable relief sought by the Bank. See Mem. Supp. Mot. Dismiss at 4, ECF No. 2.
After full briefing by the parties and a hearing on March 12, 2014, the Bankruptcy Court granted the Trustee's Motion to Dismiss all counts of the Complaint by Memorandum Opinion of July 16, 2014 (“Bankruptcy Memorandum Opinion”). See Bankr.Mem. Op. at 28, ECF No. 2. The Bankruptcy Court dismissed the declaratory judgment sought in Count I, on the grounds that a ruling in the Bank's favor on the other equitable claims would resolve all its claims. Id. at 9–10. The Bankruptcy Court dismissed the claims in Counts II through VIII in recognition of the Trustee's strong-arm powers pursuant to 11 U.S.C. § 544(a). Id. at 11. Further, the Bankruptcy Court dismissed Count IX, because the substantive relief sought under Title 11 U.S.C. § 105 would go beyond the provisions of the Bankruptcy Code and beyond the authority of the Bankruptcy Court. See id. at 25–28.
On September 25, 2014, the Bank filed its Brief (“Appellant Brief”), appealing the Bankruptcy Court's dismissal of its Complaint, and attached four exhibits. See ECF No. 4. Exhibit A is a copy of the schedules from the Brown Bankruptcy. ECF No. 4–1. Exhibit B is a copy of the Motion for Relief from Automatic Stay (“Relief Motion”), which the Bank filed on December 5, 2012, in the Brown Bankruptcy case, and in which the Bank alleged that the 2006 Deed of Trust, Line of Credit Deed of Trust, and 2010 Deed of Trust encumber the Property. ECF No. 4–2. Exhibit C is a copy of the Browns' Response to the Relief Motion, which the Browns filed on December 14, 2012, in the Brown Bankruptcy case, and in which they state that they owned the Property and that the Bank has a lien on an entire 100% interest in the Property. ECF No. 4–3. Exhibit D is a copy of the Relief Order entered by the Bankruptcy Court in the Brown Bankruptcy on January 8, 2013, in which the Bankruptcy Court granted the Bank's Relief Motion. ECF No. 4–4.
On October 9, 2014, the Trustee filed her Brief (“Appellee Brief”), in which she asserts that the Bankruptcy Court correctly dismissed the Complaint and correctly held that the Trustee's power as a bona fide purchaser pursuant to 11 U.S.C. § 544(a) defeats the Bank's prayer for various forms of equitable relief. Appellee Br. at 2, ECF No. 6. The Bank filed its Reply Brief (“Appellant Reply Brief”) on October 23, 2014. ECF No. 9.
The Trustee filed the Motion to Strike Exhibits on October 9, 2014, in which the Trustee argues that the Bank's four exhibits attached to the Appellant Brief were expressly excluded from the record on appeal by the Bankruptcy Court and that this court “must decide the propriety of the Bankruptcy Court's ruling based on the record before that court.” Mot. Strike Exs. at 3. The Trustee notes that the Bankruptcy Court excluded the exhibits from the Designation of the Record on Appeal. See id. at 2. Specifically, the Trustee states that “[t]he four exhibits filed by the Appellants with their brief are the exact exhibits that Judge St. John expressly exc...
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S. Bank & Trust Co. v. Alexander (In re Alexander)
...524 B.R. 82In re Darvin ALEXANDER and Bonita Renee Alexander, Debtors.Southern Bank & Trust Company, James M. Pickrell, Jr., Trustee, Janice P. Anderson, Trustee, Appellants,v.Darvin Alexander, Bonita Renee Alexander, Leontine Brown, Rogers Lee Brown, United States of America, and Clara P. ......