Belfance v. Shelton (In re Shelton)
| Decision Date | 17 October 2018 |
| Docket Number | Adversary Proceeding No. 16-05068,Case No. 14-51588 |
| Parties | IN RE Angela D. SHELTON, Debtor. Kathryn A. Belfance, Trustee, Plaintiff, v. Annie Bell Tolbert Shelton, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
Steven Heimberger, Roderick Linton Belfance LLP, Akron, OH, for Plaintiff.
John C. Oberholtzer, Medina, OH, for Defendant.
On November 22, 2016, Kathryn A. Belfance (the "Trustee"), the duly-appointed chapter 7 trustee in the bankruptcy case of debtor Angela D. Shelton (the "Debtor"), filed her Complaint in the above-captioned adversary proceeding (the "Complaint"). The Complaint seeks, inter alia (a) authorization to sell the estate's interest in the real property known for mailing purposes as 101 Tolbert Circle, Montevallo, Alabama 35115, and described in Exhibit A to the Complaint (the "Real Estate"); and (b) a determination of the rights, title, and interest of all parties to this proceeding in the Real Estate. Complaint ¶ 20. In particular, the Trustee asserts that, pursuant to her strong-arm powers under 11 U.S.C. § 544, her interest in the Real Estate is superior to any interest claimed by defendant Annie Bell Tolbert Shelton (the "Defendant").
On February 9, 2017, the Defendant filed her answer to the Complaint in this adversary proceeding (Docket No. 11) (the "Answer").
On August 25, 2017, the Defendant moved for summary judgment (Docket No. 25) (the "Defendant's Motion"). On August 25, 2017, Trustee filed her own motion for summary judgment (Docket No. 26) (the "Trustee's Motion," and with the Defendant's Motion, the "Motions"). Both Motions have been fully briefed with responses by the opposing party and replies in support by the respective movant.
For the reasons set forth below, the Trustee's Motion will be denied and the Defendant's Motion granted.
This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334 and General Order No. 2012-7 entered by the United States District Court for the Northern District of Ohio on April 4, 2012. Venue is proper pursuant to 28 U.S.C. § 1409(a). This adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (K), (N), and (O).
In bankruptcy cases, including adversary proceedings, a party may move for summary judgment at any time before 30 days before the initial date set for an evidentiary hearing on any issue for which summary judgment is sought, unless a different time is set by local rule or the court orders otherwise. Fed. R. Bankr. P. 7056 (otherwise incorporating Fed. R. Civ. P. 56 ); see also Fed. R. Bankr. P. 9014(c). When a party so moves, the court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corporation v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A Plaintiff movant must establish all essential elements supporting its claim in this fashion; a defendant must establish that any one (or more) essential elements of Plaintiff's claim fails, or establish all elements of one or more of defendant's affirmative defenses, in order to obtain a defense judgment by summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Evidence presented in support of summary judgment is viewed in the light most favorable to the non-moving party, "drawing all reasonable inferences in its favor." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corporation , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). However, if a moving party meets its burden to establish a lack of genuine dispute as to a material fact, the burden then shifts to the non-moving party to "come forward with evidence which would support a judgment in its favor." Celotex , 477 U.S. at 324, 106 S.Ct. 2548 ; Fed. R. Civ. P. 56(e). In responding in this way to a motion for summary judgment, the non-moving party may not rely on a "mere scintilla of evidence" in support of its opposition to the motion. There must be enough evidence presented in which a fact-finder could reasonably find for the non-moving party. Zenith , 475 U.S. at 586, 106 S.Ct. 1348.
The parties submitted a stipulated record for the Court to take under advisement, including exhibits. (Docket No. 23.) The following facts are recounted from those stipulations, stipulated exhibits, and the Court's own docket. The parties stipulate, and the Court agrees, that there are no genuine disputes regarding the material facts relevant to the Motions.
(Docket No. 23 Ex. A at 2.) This is the most specific provision regarding the disposition and transfer of real property in the POA. The POA does not specifically authorize the Debtor to transfer real property from the Defendant to herself.
The Defendant had not been adjudicated incompetent at the time of the execution of the POA. The POA is expressly not dependent on the disability of the Defendant.
On August 2, 2010, Debtor, as attorney in fact pursuant to the POA, executed a warranty deed, conveying, or purporting to convey, Defendant's interest the Real Estate to the Debtor (Docket No. 23 Ex. B) (the "Warranty Deed"). The Warranty Deed was recorded that same day with the Shelby County, Alabama Judge of Probate. Id. The POA was also recorded with the same recording authority.1 Although the face of the Warranty Deed recites that the sum of $10,000 was paid in exchange for the transfer of the Real Estate, the parties stipulated that no sum of any kind was paid by the Debtor in consideration for the transfer of the Real Estate. (Docket No. 23 ¶ 9.)
On June 19, 2014, the Debtor filed a petition under chapter 7 of the Bankruptcy Code. The Debtor identified the Real Estate on her Schedule A.
The Trustee obtained a title report on the property, dated July 28, 2016, which the Defendant later introduced as an exhibit to the Defendant's Motion (Docket No. 25 Ex. B) (the "2016 Title Report"). Under "other matters," the 2016 Title Report provided as follows:
The next conveyance is from Annie Bell Tolbert Shelton to Angela D. Shelton, dated August 2, 2010 and recorded in Inst. No. 201008020000246240. The deed is executed by Angela D. Shelton as attorney in fact for Annie Bell Tolbert Shelton pursuant to an improperly acknowledged power-of-attorney recorded in Inst. No. 20108020006246230. The recorded Power of Attorney does not give the attorney in fact the power to convert assets to her own use and is not valid upon the incompetency of Annie Bell Tolbert Shelton.
(Docket No. 25 Ex. B at 2.) Earlier, on January 12, 2015, the Trustee obtained a "Limited Liability Title and Lien Certificate" from the Shelby County Abstract & Title Company, Inc. (Docket No. 28 Ex. A) (the "2015 Title Report") that concluded that the title to the Real Estate was vested in the Debtor. The 2015 Title Report did not contain language questioning the sufficiency of the Defendant's POA or the validity of the August 2, 2010 deed. The 2016 Title Report, including its reservations about the POA and the transfer of title to the Debtor, is not part of the record title.
On November 22, 2016, the Trustee filed her Complaint seeking, inter alia, (a) the right to sell the Real Estate pursuant to Section 363 of the Bankruptcy Code, and (b) a declaration and determination of the right, title, and interest of the parties in the Real Estate. (Docket No. 1.) In her Answer (Docket No. 11), the Defendant denied for want of knowledge that the Debtor has a fee simple interest in the Real Estate, that it is not currently encumbered by any mortgages or security interests or liens, and that the Trustee has the right to sell it free and clear of interests other than the estate's. (Answer ¶¶ 6-11.)
Under Section 544(a)(3) of the Bankruptcy Code, a bankruptcy trustee acquires the rights of a hypothetical bona fide purchaser of the debtor's real property. A bona fide purchaser under nonbankruptcy law takes title subject to any prior claims and interests of which she has either (1) actual knowledge, or (2) constructive knowledge. Such prior claims or interests prevail against the bona fide purchaser. However, the rights a bankruptcy trustee acquires pursuant to Section 544(a)(3) allow her to act as a bona fide purchaser of the debtor's real property without regard to her actual knowledge or that of any creditor. Notwithstanding the trustee's power to prime or avoid claims and interests of which she or any of the debtor's creditors have actual knowledge, a bankruptcy trustee is, like any bona fide purchaser, charged with constructive knowledge of any claim or interest that is imputed to any purchaser pursuant to applicable nonbankruptcy property law.
Under Alabama law, a power of attorney that does not specifically authorize the attorney-in-fact to transfer the principal's real property to herself does not grant the power to do so. Furthermore, applicable Alabama Supreme...
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