Green Tree Servicing LLC v. Fleishhauer (In re Staggs)
Decision Date | 06 May 2014 |
Docket Number | Case No. 12-60517-13,Adv No. 13-00039 |
Court | U.S. Bankruptcy Court — District of Montana |
Parties | In re CHRISTINE L STAGGS, Debtor. GREEN TREE SERVICING LLC, Plaintiff. v. JAMES FLEISHHAUER, Defendant. |
At Butte in said District this 6th day of May, 2014.
Trial of this adversary proceeding to determine validity, priority and extent of liens was held at Missoula on March 26, 2014. The parties appeared represented by counsel. Witness testimony was heard and exhibits were admitted into evidence. After the conclusion of the parties' cases-in-chief the Court granted the parties time to file post-trial briefs, which have been filed and reviewed by the Court together with the record and applicable law. This matter is ready for decision. For the reasons set forth below, Judgment shall be entered against the Defendant/counterclaimant James Fleischhauer1 ("Defendant") in favor of the Plaintiff GreenTree Servicing LLC ("Green Tree" or "Plaintiff") which shall provide that Defendant's lien against the above-named Debtor's residence is invalid and subordinate with respect to Green Tree's deed of trust based on Defendant's failure to comply with the requirements of Montana lien statutes.
Green Tree was represented at the hearing by attorney Mark M. Smith of Church, Harris, Johnson & Williams, P.C., of Great Falls. Plaintiff called the Debtor Christine L. Staggs ("Christine" or "Debtor"), her spouse Bill Staggs ("Bill"), and title insurance group attorney Dwight Bickel ("Bickel"), to testify. Defendant James Fleischhauer appeared and testified, represented by attorney K. Michael Sol of Sol & Wolfe Law Firm, PLLP, of Missoula. Green Tree's Exhibits ("Ex.") 1, 2, 3, 4, 5, 6, 7,2 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, and Defendant's Ex. A, B, C, D, F, H, I, J, K, M, and N, all were admitted into evidence. At the conclusion of the parties' cases-in-chief the Court granted the parties time to file post-trial briefs, which have been filed and reviewed by the Court together with the record and applicable law.
The parties agree this Court has jurisdiction of this Chapter 7 case and adversary proceeding under 28 U.S.C. §§ 1334(a) and (b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(K) to determine the validity, extent, or priority of liens. This Memorandum of Decision includes the Court's findings of fact and conclusions of law under F.R.B.P. 7052 ( ).
The approved Pretrial Order ("PTO") (Document No. 53) sets forth the following facts:
Additional facts can be gleaned from the testimony and exhibits. Christine's debt to Defendant originated from an agreement between the Defendant and Christine's spouse Bill. Defendant testified that he has known Bill since he was a "tyke" and had done business with Bill in the past.
Bill testified that Defendant contacted him with a business proposition to perform hurricane recovery work in Mississippi after Hurricane Katrina. Defendant owned several pieces of heavy equipment and supplies located in Mississippi, and Bill testified that Defendant told Bill that there was a lot of work available. Defendant testified that he was working in Louisiana after Katrina, and that Bill called him from Mississippi where Bill was working with his cousin. Defendant testified that Bill told him that there was lots of work and equipment available for sale in Mississippi. Defendant and his wife spoke with the people who owned equipment in Mississippi, and he arrived at an agreement with Bill.
Christine had no knowledge of Bill's agreement with Defendant except that it was a "big job." She testified that Bill was gone for several months approximately in 2006 and returned before Christmas. Christine testified that Bill did not talk to her about purchasing equipment or a business from Defendant, and that Bill did not bring any equipment home from Mississippi.
Defendant described his deal with Bill as "kind of a partnership" wherein Defendant would purchase the equipment and loan it to Bill to use, and when Bill got paid he could pay Defendant for the equipment.3 Bill testified that he and Defendant began discussing Bill's purchase of Defendant's equipment about a month after Bill arrived in Mississippi, but "that hadnothing to do with the promissory note." Defendant disagreed, and testified that the promissory note covered the equipment in Mississippi.
Bill testified that he traveled to Mississippi and worked on recovery, using Defendant's equipment. He testified that Defendant did not pay him a salary, but that Defendant gave Bill $1,000 for food in Mississippi and agreed to keep Bill's house payment current, and Defendant made a house payment for Bill in March of 2006 before the promissory note was signed. Ex. K. Defendant testified that he wired Bill the $1,000, and that he made only one house payment for Bill because Bill asked him to. Bill testified that Defendant wired the $1,000 from Mississippi to Missoula, where Bill was, and that Defendant already was in Mississippi.
Bill testified that he has not been paid for his work in Mississippi other than the house payment which Defendant paid. Defendant testified that he did not work on the Mississippi work site, but that he made a trip to Gulf Port, Mississippi, where he stayed for 4 months. Bill testified that Defendant told him he was "fed up" with Mississippi, and that Defendant offered to sell Bill his equipment on contract and to provide Bill with a contact who had work available in Mississippi. Bill testified that he agreed to purchase Defendant's equipment located in Mississippi because of Defendant's representation that he had work available in Mississippi, and Bill agreed that Debtor's residence would be security for the agreement. Under cross examination Defendant denied telling Bill that there was work in Mississippi.
Bill testified that he telephoned the contact Defendant had given him and told the contact that Bill was ready to go to work. He testified that the contact told him that the contact had never set foot in Mississippi, and that the contact had no work for Bill.
Christine's debt to Defendant is based on the promissory note and addendum, Ex. A andC, also admitted into evidence as part of Ex. 7. Defendant testified that Christine had no role in negotiating the note, and that Defendant's wife drafted the promissory note. Bill testified that they reached agreement on the note in Missoula.
The note and addendum were signed by Christine and Bill on August 31, 2006, according to the notarizations. Ex. A, C, 7. Christine testified that she signed the note at Bill's request. Defendant and his wife Candace Fleischhauer ("Candace") signed the note on September 8, 2006. The note provides explains that Defendant, as Grantor, "is extending this sum of money for payment of several pieces of equipment in Montana and Gulfport, MS." Ex. A, 7. The amount of the note was $150,000 plus interest at eight percent per annum (8%). Payments were deferred for 60 months, with another 12 month automatic extension granted upon interest being paid, after which payment was to be made in full. Christine testified that the extension made the due date of the note sometime in August or September of 2012. Defendant testified that he gave the Staggs 5 years to pay the note.
The note includes a provision that the Grantee "agrees this note will be exempt and not be...
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