Doss v. Norhardt Crossing Condo. Ass'n (In re Doss)
| Decision Date | 28 June 2018 |
| Docket Number | Adversary No. 18-2091,Case No. 17-21492-beh |
| Citation | 588 B.R. 516 |
| Parties | IN RE: David A. DOSS, Debtor. David A. Doss, Plaintiff, v. Norhardt Crossing Condominium Association, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Wisconsin |
Laurie A. Bigsby, Horizons Law Group, LLC, Brookfield, WI, for Plaintiff.
Iana A. Vladimirova, Husch Blackwell, LLP, Madison, WI, for Defendant.
In Celtic lore, a selkie was a seal who could take human form on land, and become a seal again upon returning to the sea. Unfortunately for the debtor's argument, statutory liens do not have that same transformative quality and do not become avoidable judicial liens when the creditor returns with a money judgment.
The debtor, David Doss, filed this adversary proceeding against Norhardt Crossing Condominium Association Inc., which has a statutory lien against the debtor's condominium unit, by virtue of Wis. Stat. § 703.165(3). The debtor asserts that Norhardt's lien is wholly unsecured, and therefore can be avoided under 11 U.S.C. sections 506(a) and 506(d). Norhardt responded to the complaint with a motion to dismiss, which the Court converted to a motion for summary judgment. For the reasons explained below, the Court will grant Norhardt's motion.
The debtor filed a Chapter 13 bankruptcy petition on February 27, 2017, and converted the case to a Chapter 7 in October 2017. Because he failed to file a certificate showing that he had completed a course in personal financial management, see § 727(a)(11), the debtor's case was closed without a discharge on March 7, 2018. The debtor subsequently moved to reopen his case to file the certificate and obtain his discharge. Shortly before the Court granted his motion, on April 4, the debtor's counsel filed correspondence asking that the case be reopened, but not be closed immediately after discharge, explaining:
Case No. 17-21492-beh, CM-ECF, Doc. No. 88.
The Court reopened the case on April 5, and later that same day the debtor filed a motion to reimpose the stay, citing as authority 11 U.S.C. section 362(c)(3)(B). The Court summarily denied the motion, noting that the cited section of the Code did not apply, and that the only way to "reimpose" the stay once it has lapsed as a matter of law is to seek injunctive relief, which requires an adversary proceeding. The Court's order also pointed out that the debtor appeared intent on initiating a proceeding to avoid Norhardt's lien based solely on its purportedly unsecured status, and that Supreme Court precedent precludes a Chapter 7 debtor from avoiding or "stripping off" a valueless lien. See Dewsnup v. Timm , 502 U.S. 410, 417, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) ; Bank of America v. Caulkett , ––– U.S. ––––, 135 S.Ct. 1995, 1999, 192 L.Ed.2d 52 (2015). The Court therefore ordered the debtor to show cause why his case should remain open once his discharge issues, requiring him to "demonstrate that the relief he appears to be seeking—the avoidance of a lien on his residence based on its purportedly unsecured status—is not prohibited as a matter of law, in light of the Supreme Court's ruling in Caulkett , or otherwise." Case No. 17-21492-beh, CM-ECF, Doc. No. 92.
The debtor responded by initiating this adversary proceeding. His complaint seeks injunctive relief, as well as the avoidance of Norhardt's lien under 11 U.S.C. sections 506(a) and 506(d). It also asserts that Norhardt's claim/lien is dischargeable under section 523(a)(16). The debtor did not move for a preliminary injunction, but instead filed a "Notice of Request for Injunctive Relief," purporting to set a 10-day response deadline to the complaint. The Court issued a summons on April 16 and set a 30-day response deadline (May 16), as prescribed by Bankruptcy Rule 7012(a). On May 8, before the time to respond to the complaint had passed, the debtor filed a proposed order granting his requested injunctive relief "to prevent the confirmation of the sheriff sale now pending in Waukesha County Court." Norhardt objected to the proposed order, arguing that the debtor could not unilaterally shorten the time to respond to the complaint. The Court took no action on the proposed order, indicating that it would address Norhardt's objection at the previously-scheduled pretrial conference on May 31, 2018. On May 16, Norhardt moved to dismiss the complaint and for sanctions under Bankruptcy Rule 9011. The Court considered both of these motions at the May 31 pretrial conference.
At the start of the pretrial conference, the debtor's counsel informed the Court of recent developments in Norhardt's state court foreclosure proceeding: on May 24, the parties appeared at a hearing on Norhardt's request for confirmation of the sheriff's sale of the debtor's condominium unit, as well as the debtor's request for a satisfaction of a judgment lien; the state court judge deferred ruling on the requests, explaining that whether Norhardt's lien was "discharged" was a question for the bankruptcy court to decide.
Also at the May 31 pretrial conference, counsel for the debtor conceded that injunctive relief was no longer necessary, and the Court sustained Norhardt's objection to the debtor's May 8 proposed order. Turning to the lien-avoidance request, the debtor's counsel attempted to distinguish Dewsnup and Caulkett by arguing that Norhardt's lien was a judicial lien, and not a mortgage. Counsel's argument on this point was not entirely cohesive: she later conceded that Norhardt had a statutory lien, but that the lien was dischargeable under section 523(a)(16); then asserted that the lien was judicial, and appeared to use the two terms interchangeably.1
Because Norhardt's motion to dismiss attached and relied on exhibits not included in the complaint—a statement of condominium lien and a copy of its recorded lien on the debtor's unit—the Court converted the motion to one for summary judgment and allowed the parties to brief the issues and supplement the record with additional evidence relevant to the motion. See Levenstein v. Salafsky , 164 F.3d 345, 347 (7th Cir. 1998) (). The Court then took the matter under advisement.
The Court has jurisdiction under 28 U.S.C. § 1334 and this is a core proceeding under 28 U.S.C. § 157(b)(2)(K). This decision constitutes the Court's findings of fact and conclusions of law under Fed. R. Bankr. P. 7052.
Summary judgment is appropriate if the pleadings and affidavits on file show there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Bankr. P. 7056 ; Fed. R. Civ. P. 56 ; Tapley v. Chambers , 840 F.3d 370, 376 (7th Cir. 2016). A factual dispute is "genuine" only if there is sufficient evidence for a reasonable jury to find in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202, (1986). For a fact to be material, it must be "outcome determinative under governing law." Contreras v. City of Chicago , 119 F.3d 1286, 1291–92 (7th Cir. 1997). To succeed in opposing a motion for summary judgment, the nonmoving party must present "definite, competent evidence to rebut the motion." Smith v. Severn , 129 F.3d 419, 427 (7th Cir.1997) (internal quotation marks omitted). In determining whether there is a genuine issue of material fact, the Court must view the evidence and draw all reasonable inferences in the light most favorable to the non-moving party. E.E.O.C. v. Sears, Roebuck & Co. , 233 F.3d 432, 436–37 (7th Cir. 2000).
Although the debtor's response brief asserts there are "issues of fact that preclude entry of summary judgment" for Norhardt, the purported factual disputes that the debtor appears to raise are not material to the determination of whether Norhardt has a non-avoidable lien on the debtor's condominium unit.2 As a result, there are no disputes as to any material factual issues that would preclude entry of summary judgment for the defendant.
Based on the parties' briefing and the record in this case, the Court finds that the following facts are undisputed or not reasonably subject to dispute:
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The Last Dance: Righting the Supreme Court's Greatest Bankruptcy Apostasy.
...that the holding in Dewsnup does not apply to nonconsensual judicial liens) with Doss v. Norhardt Crossing Condo. Ass'n (In re Doss), 588 B.R. 516, 525 (Bankr. E.D. Wise. 2018) (holding that the Supreme Court's decisions in Dewsnup and Caulkett foreclose the use of that Code section to avoi......