Collins v. Wolf, Case No.: 17-CV-2066 JLS (BLM)

Citation591 B.R. 752
Decision Date10 September 2018
Docket NumberCase No.: 17-CV-2066 JLS (BLM),Bankruptcy No.: 11-19790-LT7
Parties Charles G. COLLINS, et al. Appellants, v. Nancy L. WOLF, Appellee.
CourtU.S. District Court — Southern District of California

Susan C. Stevenson, Pyle Sims Duncan and Stevenson, San Diego, CA, for Appellants.

Kevin J. Hoyt, Estes & Hoyt, APC, San Diego, CA, for Appellee.

ORDER AFFIRMING BANKRUPTCY COURT

Hon. Janis L. Sammartino, United States District Judge

Presently before the Court is Appellants Charles G. Collins, Chadwick C. Collins, and Janelle Collins's appeal from the Bankruptcy Court's order entering judgment in favor of Appellee Nancy L. Wolf. (ECF No. 1.) Appellants filed an amended opening brief, ("Appellant Br.," ECF No. 9), Appellee filed an answering brief, ("Appellee Br.," ECF No. 16), and Appellants then filed a reply brief, ("Reply," ECF No. 17). Having considered the parties' arguments, the record on appeal, and the law, the Court rules as follows.

BACKGROUND

This lawsuit arises out of a Chapter 7 bankruptcy filing by Debtor-Appellant Chadwick Collins ("Chadwick") and the sale of a property located at 1480 Beechtree Road, San Marcos, California 92078 ("the Property"). Chadwick and his spouse, Janelle Collins ("Janelle"), purchased the Property on December 19, 2000, and took title from a third party developer, Shea Homes Limited Partnership. (Excerpt of Record ("ER"), ECF No. 9-1, at 62.)1 The grant deed from Shea Homes to the Collins was granted to "Husband and Wife as Joint Tenants." (Id. ) Only the third-party developer signed the deed. (Id. ) In 2002, the Collins subsequently decided to sell the property to Chadwick's father, Charles Collins ("Charles").

In August 2002, Charles drafted a Purchase Agreement identifying Chadwick and Janelle as "Sellers" and Charles as "Purchaser." (Id. at 65.) The Purchase Agreement intended to transfer the Collins' interest in the property to Charles, with title to be held in joint tenancy between Charles and a family trust ("The Collins Family Trust"). The Purchase Agreement quoted a $385,000.00 purchase price, which was comprised of a $93,000 down payment Charles would pay to Chadwick and Janelle and Charles' assumption of Chadwick and Janelle's $292,000 mortgage. (Id. ) Chadwick later testified that he understood that the Purchase Agreement meant that Charles would make all loan payments and Chadwick would no longer be responsible for loan payments. (Appellee Br. 13.) However, Charles never assumed the existing loan and the loan remained in Chadwick's name. (Id. at 14.) The agreement also provided that, "upon closing," title to the Property would be held by Charles in joint tenancy with the Collins Family Trust. (ER 65.)

In September 2002, before moving out of the Property, Chadwick refinanced the existing loan through an employee loan program available through Chadwick's then-employer, Merrill Lynch. (Appellee Br. 14.) At the time he applied for the new loan, Chadwick represented that he owned the Property and did not disclose the pending purchase agreement. (Id. ) Chadwick also testified that, at the time he acquired the new financing, he believed that he had not transferred any interests in the property to Charles. (Id. at 14–15.) Both the existing financing (pre-September 2002) and new financing documents—both through Merrill Lynch—provided that Merrill Lynch could demand repayment of the loan in full if Chadwick transferred his interest in the Property without prior written approval from Merrill Lynch Credit Corporation, the lender. (Id. at 14.)

In December 2002, Chadwick and Janelle vacated the Property and Charles assumed control of the Property as of January 1, 2003. (ER 81–82.) The Collins "closed" the Purchase Agreement in December 2002, but did not execute a deed transferring title. From January 2003 until December 2016, when Charles turned over the Property to Appellee, Charles had received, paid, and claimed all income and expenses for the Property on his state and federal income taxes. (Id. at 85.) Chadwick and Janelle have paid no expenses, received no income, and have not claimed either expenses or income on their income taxes. (Id. at 74–76.) Charles leased out the Property and paid the monthly mortgage, property taxes, insurance, and homeowners' association ("HOA") fees. (Appellee Br. 15.) Chadwick testified that he changed the mailing address on the Merrill Lunch statements to Charles's office, but left his own name on the account. (Trustee's Excerpt of Record ("TER"), ECF No. 16-1, at 34–37.) Chadwick also retained his property insurance policy in his own name and had billing statements mailed to his new home. Property taxes and HOA statements remained in Chadwick and Janelle's names. (Appellee Br. 15.)

In 2008, Chadwick refinanced the loan and deed trust on the property with Merrill Lynch. (ER 43.) In the loan application, Chadwick represented that he and Janelle were the sole owners of the Property and there were no unrecorded encumbrances. (Appellee Br. 15.) Chadwick testified that he did not tell Merrill Lynch that Charles had any interest in the Property. (Id. ) Charles did not sign the note or trust deed and did not make any representations to Merrill Lynch. The terms of the refinanced loan stated "[t]his loan is not assumable." (Id. at 16.) And, like the prior refinancing, Merrill Lynch could require full repayment of the loan if the Property was sold or transferred without Merrill Lynch's prior written consent. (Id. )

On October 26, 2011, Chadwick signed a quitclaim deed to Charles and the Collins Family Trust. (Id. ) Janelle did not sign the quitclaim deed and the deed was never recorded. (Id. ) On December 7, 2011, Chadwick filed bankruptcy pursuant to Chapter 7 of the Bankruptcy Code; Janelle did not join the petition and is not a co-debtor. The Property remained in Charles' possession and he continued to rent the Property out to tenants. Chadwick scheduled the Property as "held for another person," i.e., for Charles, on his bankruptcy schedule. On March 7, 2013, the Trustee-Appellee Nancy Wolf filed suit against Chadwick, Janelle, and Charles asserting claims for declaratory relief, sale of jointly held property under 11 U.S.C. § 363(h), and turnover of the Property. (ER 4–18.) Appellee's legal theory was that Charles acquired no right, title, or interest in the Property under the 2002 Purchase Agreement; that the Purchase Agreement had lapsed and was no longer in effect; the Property was the community property of Chadwick and Janelle; and that the Property belonged to the bankruptcy estate. (See id. ) Thus, Charles had no right, title, or interest in the Property. Additionally, Appellee did not initially assert a claim for net rents against Charles for the rents he collected from tenants from when Chadwick filed his bankruptcy petition until the time Charles turned over the Property.

Appellants moved for summary judgment in 2014, asserting that Chadwick and Janelle held the Property in joint tenancy, rather than community property. Judge Peter Bowie found that Chadwick and Janelle held legal title to the property as joint tenants, i.e., as separate property and not community property. (ER 37–38.) Judge Bowie retired and the case transferred to Judge Laura Taylor's docket. Judge Taylor tried the case in two phases. At the conclusion of the first phase, Judge Taylor issued an oral ruling finding that Charles had no right, title, or interest in the property and that Chadwick and Janelle owned the property at the time Chadwick filed his bankruptcy petition. (TER 38–68.) Judge Taylor subsequently determined that Judge Bowie's previous community property holding was interlocutory and should be revisited in light of the California Supreme Court's decision in In re Marriage of Valli , 58 Cal. 4th 1396, 171 Cal.Rptr.3d 454, 324 P.3d 274 (2014). Judge Taylor then ruled that Chadwick and Janelle owned the Property as community property and, therefore, the Property belonged entirely to the bankruptcy estate. (ER 104–12.)

Judge Taylor also determined that Appellee had a valid claim against Charles for turnover of post-petition rent, (id. at 114–18), and later ordered Charles to turn over the property, (id. at 119–20). The Collins appealed the turnover order on December 27, 2016, but did not obtain a stay of the turnover order. (TER 73–75.) On September 19, 2017, Judge Roger T. Benitez granted Appellee's motion to dismiss the appeal for lack of jurisdiction. (Id. at 99–107.)

Judge Taylor tried the second phase and found that Appellee had a valid claim for post-petition net rent, (Id. at 142), and ordered Charles pay $44,313.41 in net rent to the bankruptcy estate, (id. at 148–60). In July 2017, Appellee moved to sell the Property under 11 U.S.C. § 363, which Judge Taylor approved, and the Collins did not obtain a stay of the sale order. (Id. at 90–93.) The Property was sold to a third party purchaser in August 2017. The sale proceeds were paid to several creditors and the remainder to Chadwick's bankruptcy estate. On October 4, 2017, Judge Taylor entered a final judgment against the Collins, (id. at 163–67), and this timely appeal followed the next day, (id. at 166–71).

LEGAL STANDARD

Federal district courts have jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy courts. 28 U.S.C. § 158(a)(1). A district court reviews a bankruptcy court's legal conclusions de novo and its factual findings for clear error. In re Mortgs. Ltd. , 771 F.3d 1211, 1214 (9th Cir. 2014) ; see Bronitsky v. Bea (In re Bea) , 533 B.R. 283, 285 (9th Cir. BAP 2015). "Mixed questions of law and fact are also reviewed de novo." Diamond v. City of Taft , 215 F.3d 1052, 1055 (9th Cir. 2000), as amended on denial of reh'g (July 26, 2000) (citing United States v. City of Spokane, 918 F.2d 84, 86 (9th Cir. 1990) ). A district court will affirm a bankruptcy court's findings of fact unless those findings are "(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ...

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4 cases
  • Collins v. Wolf
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • March 16, 2020
    ...on September 10, 2018, finding that neither Charles nor Janelle held any interest in the Beechtree Property. See Collins v. Wolf , 591 B.R. 752, 779 (S.D. Cal. 2018). Shortly after, Appellants filed a notice of appeal to the Ninth Circuit Court of Appeals.3 Mot. at 7. Appellants did not see......
  • Collins v. Wolf
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • March 16, 2020
    ...on September 10, 2018, finding that neither Charles nor Janelle held any interest in the Beechtree Property. See Collins v. Wolf , 591 B.R. 752, 779 (S.D. Cal. 2018). Shortly after, Appellants filed a notice of appeal to the Ninth Circuit Court of Appeals.3 Mot. at 7. Appellants 614 B.R. 59......
  • Kassebaum v. Smith (In re Smith), Case No.: 17-50808- RJK
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota
    • November 1, 2018
    ...carrying away of the property of another with the intent to convert such property to the taker's use without the consent of the owner." 591 B.R. 752 Reshetar Systems, Inc. v. Thompson (In re Thompson ), 458 B.R. 504, 510 (8th Cir. BAP 2011), aff'd , 686 F.3d 940 (8th Cir. 2012). The plainti......
  • Gajiu v. Ehrenberg (In re Goldshtadt), BAP No. CC-18-1333-LSTa
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit
    • September 4, 2019
    ...asserts that those holdings have not been adopted as controlling law in either California or the Ninth Circuit, citing Collins v. Wolf, 591 B.R. 752 (S.D. Cal. 2018). But Valli is a California Supreme Court decision. As such, it is controlling law in California. And although Brace, which ex......

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