Davis v. SCBT, N.A. (In re Davis), C/A No. 11-06003-dd
| Decision Date | 31 July 2013 |
| Docket Number | Adv. Pro. No. 12-80190-dd,C/A No. 11-06003-dd |
| Court | U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re, Wesley O'Neal Davis, Debtor. Wesley O'Neal Davis, Plaintiff, v. SCBT, N.A. f/k/a South Carolina Bank and Trust, N.A., Crop Production Services, Inc., Helena Chemical Co., Blakes Service Center, and Meherrin Agricultural and Chemical Co., Defendants. |
Adversary Proceeding Number: 12-80190-dd
The relief set forth on the following pages, for a total of 17 pages including this page, is hereby ORDERED.
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David R. Duncan
Chief US Bankruptcy Judge
District of South Carolina
This adversary proceeding comes before the Court on the complaint of the plaintiff, Wesley O'Neal Davis ("Debtor"), seeking to determine the value and priority of liens creditors hold on three parcels of real property located in Orangeburg County, South Carolina in which Debtor owns a 50% interest. Jurisdiction for this proceeding is premised upon 28 U.S.C. §§ 1334 and 157(a). This adversary proceeding is a core proceeding. See 28 U.S.C. § 157(b)(2)(K). Venue of this adversary proceeding is proper pursuant to 28 U.S.C. § 1409.
Creditors named as defendants in the adversary proceeding are SCBT, N.A. f/k/a South Carolina Bank and Trust, N.A. ("SCBT"), Crop Production Services, Inc. ("CPS"), Helena Chemical Co. ("Helena"), Blakes Service Center, and Meherrin Agricultural and Chemical Co. Blakes Service Center and Meherrin Agricultural and Chemical Co. did not answer the complaint, the Clerk of Court entered their default, and the Court entered an Order valuing theirjudgment liens at zero. SCBT, CPS, and Helena answered the complaint. In its answer, CPS asserted counterclaims to which SCBT responded and treated as crossclaims.1 SCBT moved for partial summary judgment on the issue of priority of the various lien holders with respect to their interests in the three parcels of real estate, and CPS was the only party to respond in opposition. The Court held a hearing on the motion for partial summary judgment on January 22, 2013. The Court granted SCBT's motion for partial summary judgment, after which CPS filed a motion to reconsider. SCBT responded in opposition and, the Court held a hearing on the motion to reconsider on May 13, 2013. The court granted CPS's motion to reconsider, and a trial was held on June 11, 2013.
After careful consideration of the applicable law, arguments of counsel, and evidence submitted, the Court issues the following findings of fact and conclusions of law under Federal Rule of Civil Procedure 52(a), made applicable by Federal Rule of Bankruptcy Procedure 7052.2
1. On September 28, 2011, Debtor filed a voluntary petition for relief under Chapter 12 of the Bankruptcy Code. Debtor's bankruptcy case is captioned In re Wesley O'Neal Davis,
Case No. 12-06003-dd, and is pending in the United States Bankruptcy Court for the District of South Carolina.
2. On July 27, 2012, Debtor filed this adversary proceeding to determine the value and priority of liens creditors hold on three parcels of real property located in Orangeburg County, South Carolina (the "Property").
3. Prior to trial, Debtor, SCBT, CPS, Helena, and the chapter 12 trustee entered into a consent order stipulating that the total value of the Property is $423,000. These parties also agreed that the outcome of this proceeding has no effect on the extent or validity of liens on the interest of Debtor's wife, Mary Jane Davis, in the Property.
4. The bankruptcy estate has a 50% interest in the Property. The value of the estate's 50% interest is $211,500.
5. On June 2, 2005, Debtor and Mary Jane Davis executed a promissory note to SCBT in return for a loan in the amount of $191,375. Pl.'s ex. 1.
6. As security for the loan, Mr. and Mrs. Davis executed a mortgage dated June 2, 2005, on the Property, and the mortgage was recorded on June 9, 2005. Pl.'s ex. 3.
7. The June 2005 mortgage defines "Borrower" as "WESLEY ONEAL DAVIS AND MARY JANE DAVIS JOINTLY." Id.
8. The June 2005 mortgage contains a future advance clause that states "[t]he lien of this Security Instrument shall secure the existing indebtedness under the Note and any future advances made under this Security Instrument up to 150% of the original principal amount of the Note plus interest thereon, attorneys' fees and court costs." Id. 9. On March 14, 2007, Debtor executed a promissory note to SCBT in return for a loan in the amount of $138,600. In the area for describing the security for the note, the note states "SEE ADDENDUM." Pl.'s ex. 7.
10. The addendum to the March 2007 note is signed by Debtor and lists various security agreements Debtor executed during the preceding years, including the entry: "Mortgage dated 06-02-2005 in the name of Wesley O'Neal Davis and Mary Jane Davis." Pl.'s ex. 8.
11. Mary Jane Davis did not execute either the March 2007 note or the addendum. These documents were not recorded.
12. On May 6, 2008, Debtor executed a promissory note to SCBT in return for a loan in the amount of $316,000. Pl.'s ex. 4.
13. In connection with this promissory note, Mr. and Mrs. Davis executed a mortgage dated May 6, 2008, which was recorded on May 19, 2008. Pl.'s ex. 6.
14. Beside "MORTGAGOR," the May 2008 mortgage lists "WESLEY O'NEAL DAVIS and Mary Jane Davis." Id.
15. The May 2008 mortgage states in paragraph 2 that "[f]or good and valuable consideration, the receipt and sufficiency of which is acknowledged, and to secure the Secured Debt (hereafter defined), Mortgagor grants, bargains, conveys and mortgages to Lender the following described property." The described property is the three parcels in Orangeburg County. Id.
16. Under paragraph 4, the May 2008 mortgage provides that "[t]he term 'Secured Debt' includes, but is not limited to, the following: . . . [a]ll obligations Mortgagor owes to Lender, which now exist or may later arise, to the extent not prohibited by law . . . ." Id. 17. The May 2008 mortgage also defines "Secured Debt" as including "[a]ll future advances from Lender to Mortgagor or other future obligations of Mortgagor to Lender under any promissory note, contract, guaranty, or other evidence of debt existing now or executed after this Mortgage whether or not this Mortgage is specifically referred to in the evidence of debt." The mortgage further states in connection with future advances that "[i]f more than one person signs this Mortgage as Mortgagor, each Mortgagor agrees that this Mortgage will secure all future advances and future obligations described above that are given to or incurred by any one or more Mortgagor, or any one or more Mortgagor and others." Id.
18. Under a clause entitled "JOINT AND INDIVIDUAL LIABILITY; CO-SIGNERS; SUCCESSORS AND ASSIGNS BOUND," the May 2008 mortgage provides:
All duties under this Mortgage are joint and individual. If Mortgagor signs this Mortgage but does not sign the Evidence of Debt, Mortgagor does so only to mortgage Mortgagor's interest in the Property to secure payment of the Secured Debt and Mortgagor does not agree to be personally liable on the Secured Debt.
Under paragraph 4.A., the mortgage defines "Evidence of Debt" as the "NOTE DATED 05-06-2008 I/A/O $316,000.00 I/N/O WESLEY O'NEAL DAVIS WITH A MATURITY DATE OF 05-06-2015." Id.
19. With respect to Helena, Mr. and Mrs. Davis executed a promissory note dated May 29, 2009, in return for a loan in the amount of $35,957.35. As security for the note, Mr. and Mrs. Davis signed a mortgage dated May 29, 2009, on the Property. The mortgage to Helena was recorded on June 1, 2009.
20. As for CPS, a judgment was entered in its favor in the amount of $98,711.15 against Debtor and was recorded on March 5, 2010, in Orangeburg County. This judgment is against Debtor and Davis Farms and not against Mary Jane Davis. Pl.'s ex. 11.
21. Subsequently, Blake Services Center and Meherrin Agricultural and Chemical Co. recorded judgments in Orangeburg County.
22. SCBT filed several claims in Debtor's bankruptcy case, including a secured claim in the amount of $132,597.31 with the June 2005 note and mortgage and a commercial security agreement attached, Pl.'s ex. 2; a secured claim in the amount of $125,814.49 with the May 2008 note and mortgage and a Uniform Commercial Code ("UCC") financing statement attached, Pl.'s ex. 5; and a secured claim in the amount of $98,655.79 with the March 2007 note, the June 2005 mortgage, the May 2008 mortgage, two UCC financing statements, and a commercial security agreement attached, Pl.'s ex. 9.
23. CPS filed a claim in the amount of $106,112.03 based on its judgment.
24. Helena submitted a claim based on its promissory note and mortgage in the amount of $40,000, which it later amended to $40,561.26.
25. Debtor asserts in the complaint that all three of SCBT's claims are secured and have first priority with respect to Debtor's 50% interest in the Property, that Helena has second priority, and that CPS has third priority. SCBT agrees with Debtor's contentions.
26. CPS does not dispute the priority of SCBT's $125,814.49 claim and $132,597.31 claim or that these claims are secured by Debtor's 50% interest in the Property. CPS does dispute the priority and secured status of the $98,655.79 claim arising from the March 2007 note. CPS argues that SCBT's $125,814.19 claim and $132,597.31 claim have first priority with respect to Debtor's 50% interest in the Property, that Helena's claim has second priority, and that its claim has third priority.
When applying state law, federal courts have a duty "to ascertain from all the available data what the state law is and apply it." West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940); see also Comm'r of Internal Revenue v. Bosch, 387 U.S. 456, 464-65 (1967). In this regard, a state's highest court is "the best authority on its own law." Bosch, 387 U.S. at 465; see also West, 311 U.S. at 236 (...
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