Gordon v. U.S. Bank, N.A. (In re William)
| Decision Date | 03 December 2020 |
| Docket Number | ADVERSARY PROCEEDING NO. 19-5265-BEM,CASE NO. 15-55766-BEM |
| Parties | IN RE: Moses Samuel William, Sr. and Victoria Zor William, Debtors. Neil C. Gordon, Chapter 7 Trustee, for the Estates of Moses Samuel William and Victoria Zor William, Plaintiff, v. U.S. Bank, National Association, Victoria Zor William, and Maybelline Sinue, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
IT IS ORDERED as set forth below:
On March 31, 2015, Debtors Moses Samuel William, Sr. and Victoria Zor William ("Debtors") filed chapter 7 bankruptcy case number 15-55766 (the "Case"). Debtors were discharged on December 22, 2015. Plaintiff Neil Gordon ("Plaintiff" or "Trustee") initiated the above-captioned adversary proceeding on July 31, 2019 by filing the Complaint [Doc. 1] against Defendants U.S. Bank, National Association ("US Bank"), Maybelline Sinue ("Ms. Sinue") and Victoria Zor William ("Ms. William" and with US Bank and Ms. Sinue, "Defendants").
The deadline for Defendants' responses to the Complaint was extended by consent to May 4, 2020. [Doc. 30]. On that day, US Bank responded to the Complaint by filing Defendant U.S. Bank National Association's Motion To Dismiss For Failure To State A Claim Pursuant To Rule 12(b)(6) (the "Motion") [Doc. 33] and supporting brief. [Doc. 33-1]. This matter has been fully briefed and the Court heard oral argument on October 8, 2020. [Docs. 40, 42]. For the reasons set forth below, the Motion to Dismiss will be GRANTED.
Fed. R. Civ. P. 8(a)(2), made applicable in adversary proceedings by Fed. R. Bankr. P. 7008, sets forth a liberal pleading standard that requires the complaint contain only a "short and plain statement of the claim showing that the pleader is entitled to relief[.]" When deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), made applicable in adversary proceedings by Fed. R. Bank. P. 7012, the Court "must take the factual allegations of the complaint as true and make all reasonable inferences from those facts to determine whether the complaint states a claim that is plausible on its face." Cline v. Tolliver, 434 F. App'x 823, 825 (11th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference thatthe defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S. Ct. at 1949 (citations omitted).
Because the Court must accept all well-pleaded facts as true in considering the Motion, the facts from the Complaint are reproduced below, omitting legal conclusions and general statements of the law.
On March 31, 2015 (the "Petition Date"), Debtors filed under penalty of perjury a voluntary petition (the "Petition") constituting an order for relief pursuant to 11 U.S.C. § 301, thereby initiating the Case as a Chapter 7 proceeding. [Doc. 1 at 2 ¶ 8]. On the Petition Date, Debtors filed their Statements "A" through "J" ("Schedules"), Statement of Financial Affairs ("SOFA") and other bankruptcy documents under penalty of perjury. [Id. at ¶ 9.] On the Petition Date, Plaintiff was appointed to the Case as the interim Chapter 7 trustee pursuant to 11 U.S.C. § 701. [Id. at ¶ 10.] On May 6, 2015, the Meeting of Creditors was held pursuant to 11 U.S.C. § 341(a) (the "341 Meeting"), at which time Plaintiff became the permanent Chapter 7 trustee pursuant to 11 U.S.C. § 702(d). [Doc. 1 at 3 ¶ 11].
In the Schedules, Ms. William scheduled her undivided one-half ownership interest in real property located at 5501 The Vyne Avenue, Atlanta, Georgia 30349 (the "Property"), encumbered by one "mortgage" with a loan payoff in the amount of $144,804.00 (the "Mortgage"). [Id. at ¶ 12.] On April 14, 2009, Ms. William alone purchased the Property for $185,000.00, pursuant to the Special Warranty Deed (the "Warranty Deed") recorded on the Property with the Clerk of Superior Court of Fulton County, Georgia on June 30, 2009. [Doc. 1 at 3 ¶ 13].
Five years later, on June 19, 2014 (the "Closing Date"), Ms. William executed certain loan closing documents in favor of Community Mortgage Services, Inc. (the "ClosingDocuments"). [Id. at ¶ 14.] As part of the Closing Documents executed on the Closing Date, Ms. William signed a Note, referencing Loan No. 68002524211 (the "Note") and Security Deed (the "Initial Security Deed") in the original principal amount of $162,800.00. It appears that the scheduled Mortgage is the Initial Security Deed. [Id. at ¶ 15.]
Ms. William executed a Quitclaim Deed ("QC Deed") dated May 5, 2014 and recorded in the real estate records (the "Real Estate Records") of the Superior Court of Fulton County, Georgia on May 6, 2014, transferring title to the Property jointly to herself and Ms. Sinue. [Id. at ¶ 16.] A true and correct copy of the QC Deed was attached to the Complaint and incorporated by reference. [Id. at ¶ 17.]
On or about May 8, 2015, Trustee filed a notice (the "Notice") of Debtors' Case and the Petition in the Real Estate Records beginning at page 562 of deed book 54941 of the Real Estate Records. [Doc. 1 at 4 ¶ 18].
On or about September 30, 2016, after the Petition Date, Ms. William signed a Security Deed (the "First Security Deed") granting an interest in the Property to US Bank (the "First Transfer"). [Id. at ¶ 19.] Ms. Sinue also signed the First Security Deed. [Id. at ¶ 20.] The First Security Deed was filed and recorded in the Real Estate Records on January 26, 2017. [Doc. 1 at 4 ¶ 21]. The First Security Deed purports to secure the repayment of a debt in the original principal amount of $144,400.00. [Id. at ¶ 22.]
On or about September 30, 2016, after the Petition Date, Ms. William signed a second Security Deed (the "Second Security Deed") granting an interest in the Property to US Bank (the "Second Transfer"). [Id. at ¶ 23.] Ms. Sinue also signed the Second Security Deed. [Id. at ¶ 24.] The Second Security Deed was filed and recorded in the Real Estate Records on January 26, 2017. [Id. at ¶ 25.] The Second Security Deed purports to secure the repayment of a debt in theoriginal principal amount of $50,000.00. [Id. at ¶ 26.] Upon information and belief, the First Transfer has a value to the Estate of $72,200.00, and the Second Transfer has a value to the Bankruptcy Estate of $25,000.00.1 [Doc. 1 at 5 ¶ 28].
On September 19, 2017, Plaintiff filed a Complaint (the "Prior Complaint") against US Bank, initiating adversary proceeding No. 17-05243 (the "First AP"), seeking to (i) avoid the First Transfer and the Second Transfer (collectively, the "Transfers") as unauthorized post-petition transfers under 11 U.S.C. § 549; (ii) recover the avoided Transfers under 11 U.S.C. § 550; and (iii) and preserve the avoided Transfers under 11 U.S.C. § 551. [Id. at ¶ 29.]
US Bank failed to timely file an answer or otherwise respond to the Prior Complaint. [Id. at ¶ 30.] On Plaintiff's request, on February 5, 2018, the Clerk's Entry of Default was entered pursuant to Bankruptcy Rule 7055. [Id. at ¶¶ 30-31.] On February 8, 2018, Plaintiff filed a Motion for Default Judgment, which was granted by Order of the Court on March 22, 2018 and a judgment was entered in accordance therewith (together, the "Order and Judgment"). [Doc. 1 at 5 ¶¶ 32-33]. True and correct copies of the Order and Judgment are attached to the Complaint and incorporated by reference. [Id. at ¶ 34.] Pursuant to the Order and Judgment, "(i) the Transfers were avoided under 11 U.S.C. § 549; (ii) Plaintiff is entitled to recover the avoided Transfers or the equivalent value thereof under 11 U.S.C. § 550(a); and (iii) the avoided Transfers are preserved for the benefit of the Estate under 11 U.S.C. § 551." (emphasis added). [Doc. 1 at 5-6 ¶ 35].
Ms. Sinue and Ms. William jointly own the Property, all improvements thereon, and fixtures attached thereto. [Id. at 6 ¶ 40]. Partition in kind of the Property is, in Trustee's opinion, not practicable. [Id. at ¶ 41.] The Bankruptcy Estate would derive very little benefit attempting to sell an undivided one-half interest in the Property to anyone other than Ms. William or Ms. Sinue. [Id. at ¶ 42.] Most of, if not all, of the Property's benefit to the Bankruptcy Estate would be eliminated if Plaintiff were unable to sell Ms. Sinue's interest in the Property. [Doc. 1 at 7 ¶ 43]. By selling the Property itself, there is a significant benefit—that of an increased value that far outweighs any detriment to Ms. Sinue, because she would receive one-half of any net sale proceeds. [Id. at ¶ 44.] The Property is not used in the production, transmission, or distribution for sale of electric energy or of natural synthetic gas for heat, light, or power. [Id. at ¶ 46.]
Plaintiff seeks an order and judgment against US Bank for turnover of the value of the avoided Transfers in the amount of $97,200.00 under 11 U.S.C. § 542, or alternatively, a judgment authorizing the sale of Ms Sinue's interest in the Property and reimbursement for all costs incurred in this action, including interest and attorneys' fees under 11 U.S.C. § 363(h), and immediate turnover of the Property by Ms. Sinue and Ms. William or, alternatively, an order and judgment of turnover effective immediately, so Plaintiff may proceed with the marketing, showing, and selling of the Property.
At issue in this proceeding is whether the Complaint states a claim that the Order and Judgment entitles Plaintiff to recover the value of the First and Second Security Deeds from US Bank under § 542, which provides for turnover of "property that the trustee may use, sell, or lease under section 363" of the Bankruptcy Code. 11 U.S.C. § 542(a). Plaintiff argues that the Order and Judgment permits him to seek turnover of the value of the Transfers because it statesthat ...
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