In re Barr

• Decision Date: 11 August 1994
• Docket Number: Bankruptcy No. 193-16528-260. Adv. No. 193-1537-260.
• Citation: 170 BR 772
• Parties: In re Jacob L. BARR, Debtor. Jacob L. BARR, Plaintiff, v. William G. ALLEN a/k/a Jerry Allen, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of New York

170 B.R. 772 (1994)

In re Jacob L. BARR, Debtor Jacob L. BARR, Plaintiff, v. William G. ALLEN a/k/a Jerry Allen, Defendant.

Bankruptcy No. 193-16528-260. Adv. No. 193-1537-260.

United States Bankruptcy Court, E.D. New York.

August 11, 1994.

Glasser & Rossi by Sheila M. Rossi, New York City, for debtor.

Reaves & Moore by George G. Reaves, Florence, SC, for defendant.

DECISION

CONRAD B. DUBERSTEIN, Chief Judge.

This adversary proceeding arises out of and relates to this Chapter 13 case filed by Jacob L. Barr ("Barr" or "Debtor" or "Plaintiff-Debtor") on July 26, 1993. The Chapter 13 Trustee's motion to dismiss the case was granted at a hearing held before this Court on May 11, 1994. The order granting the motion was signed on July 6, 1994. It provided for the Debtor's right to convert the case to a Chapter 7 within fifteen days from the date of the entry of the order. The Debtor did not convert his Chapter 13 case by July 21, 1994, the time period permitted by the order, and it was deemed dismissed. Because of the pendency of the instant adversary proceeding initiated in that case, it was not closed by the Clerk of this Court.

Notwithstanding the foregoing facts, on June 9, 1994, Barr filed a second petition for relief under Chapter 13 of the Code. The Chapter 13 Trustee's motion to dismiss that case was granted at a hearing held before this Court on July 27, 1994. An order granting the motion was presented for settlement and signed on August 10, 1994. Like the order entered dismissing Barr's prior petition, it provided for his right to convert the case to a Chapter 7 within fifteen days from the date of the entry of the order. Such time period has not yet expired. However, on August 9, 1994, Barr filed a third petition for relief under Chapter 13 which the Clerk accepted for filing.

FACTS

In February of 1989 Plaintiff-Debtor Jacob L. Barr purchased a parcel of land in Florence County, South Carolina from defendant, William G. Allen ("Allen" or "Defendant"), for approximately $156,000. Barr paid $75,000 cash and assumed an existing mortgage of approximately $38,000 held by Middlesex Federal Savings and Loan Association and serviced by First Citizens Mortgage Corporation ("First Citizens Mortgage"). Additionally, Barr gave Allen a note ("the Note") for the balance ($38,201.34). The Special Referee in a Decree of Foreclosure entered in an action initiated by Allen, hereinafter discussed, found that a mortgage securing the Note was filed in the office of the Clerk for Florence County, South Carolina on June 7, 1989, creating a second lien on the property.

The Note fell due on June 7, 1992. When Barr failed to satisfy the debt, the parties agreed to extend the due date to December 30, 1992. In July of 1992, Barr paid $22,000 to Allen towards the satisfaction of the Note. However, Barr did not fulfill his obligation by the extended due date and Allen subsequently initiated the foreclosure action in Florence County on January 11, 1993. Barr failed to answer the complaint in the action which resulted in a default.

The Special Referee, after a hearing, issued the Decree of Foreclosure, dated April 20, 1993, ordering the sale of the subject property by public auction. The Decree contained the Special Referee's conclusions of law and findings of fact, which included that:

(1) Both Barr and Middlesex Federal Savings and Loan Association were served and notified of the time, place, and date of the hearing;

(2) The Note executed by Barr in favor of Allen was secured by a mortgage thereby creating a second lien on the subject property, as hereinabove noted; and

(3) The total debt due Allen was fixed at $41,446.23 inclusive of interest.¹

Documents submitted to this Court by the Plaintiff and Defendant reflect the following:

Pursuant to the laws of the State of South Carolina, the property was sold at public auction on July 7, 1993, resulting in the sale of the property to Allen, the highest bidder, for $500. The bid was subject to the First Citizens Mortgage in the amount of $30,882.70,² Florence County taxes, and assessments. Allen's bid took into account the balance due to him on the Note which was fixed at $41,446.23 on the date of the Decree of Foreclosure, plus interest at the statutory rate of 14% thereafter. Thus, in essence, Allen's bid in the aggregate amounted to $500 plus the additional sum of approximately $72,000 due under the mortgages.

The deed was executed and delivered transferring title to Allen on July 20, 1993. Less than one week later, Barr filed this Chapter 13 case.

The Adversary Proceeding

On December 3, 1993, Barr commenced the instant adversary proceeding against Allen (1) to avoid the transfer of the property; (2) to declare the equity in the land as part of the bankruptcy estate; (3) ordering that title be transferred to Barr subject to any liens; (4) ordering the property to be turned over to a trustee in the related bankruptcy case; and (5) granting any other appropriate relief.

Allen answered the complaint denying that Barr had any interest at all in the property as of the commencement of the Chapter 13 case and subsequently moved this Court for summary judgment as to the same. He argues that the matter can be disposed of as a matter of law because the judicial sale completely divested Barr's interest in the property six days prior to the filing of his petition for relief. In support of his motion Allen maintains that because Barr had neither a legal nor an equitable interest in the property when his bankruptcy case was commenced, the property is not property of the bankruptcy estate pursuant to section 541 of the Bankruptcy Code.³

In opposition to Allen's motion, Barr maintains that there are material factual disputes which render summary judgment inappropriate. According to Barr, the litigable facts are:

(1) whether the Note was secured by a mortgage;

(2) whether the foreclosure sale was procedurally proper, non-collusive and properly advertised;

(3) whether all commercially reasonable steps were taken to secure the highest bidder;

(4) whether the transfer of the property was fraudulent pursuant to section 548 of the Code;⁴ and

(5) whether the deed was properly transferred.⁵

Barr maintains that he was neither served nor notified of the hearing in the state court foreclosure action nor of the sale, and claims that the auction was not properly advertised. However, Allen demonstrated, through supporting affidavits, and the Decree of Foreclosure that Barr was served and the property was duly advertised for public sale.⁶ Barr also alleges that he believed he had more time to pay the debt and that he paid $10,000 to Allen against the Note in May of 1993, after the Decree of Foreclosure. However, both of these allegations are unsupported.

The market value of the property, as computed by First Citizens, was deemed to be $180,400.⁷ The affidavit of the Special Referee sworn to on January 12, 1994, submitted to this Court states that "after due notice and after publication required by statute, he conducted a judicial sale of the property on July 7, 1993. No deficiency was requested."

Despite Allen's assumption of the First Citizens Mortgage, Barr claimed that he made three mortgage installments, corroborated by cancelled checks,⁸ to First Citizens from August 2, 1993 through December 17, 1993.

DISCUSSION

Rule 56 of the Fed.R.Civ.P., made applicable to bankruptcy proceedings pursuant to Fed.R.Bankr.P. 7056, provides that summary judgment shall be rendered if the pleadings and affidavits "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

When determining whether there is a genuine issue of material fact, the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 993, 8 L.Ed.2d 176 (1962)), cert. denied, 481 U.S. 1029, 107 S.Ct. 1955, 95 L.Ed.2d 527 (1987); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). Without sufficient evidence for a finder of fact to find in favor of the non-moving party, there is no issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50, 106 S.Ct. at 2511 (citations omitted). Thus, a motion for summary judgment although denied when there are genuine issues as to any material fact, must be granted when there is no such issue and the movant is entitled to judgment as a matter of substantive law. Id. at 247-51, 106 S.Ct. at 2509-11; Rattner v. Netburn, 930 F.2d 204, 209 (2d Cir.1991); Kenston Mgt. Co. v. Lisa Realty Co. (In re Kenston Mgt. Co.), 137 B.R. 100, 108 (Bankr.E.D.N.Y.1992).

In the instant matter, despite Barr's assertion of the above listed factual issues, the papers, supporting affidavits, and the findings of fact and conclusions of law contained in the Decree of Foreclosure all submitted to this Court, and the related proceedings held before this Court, clearly establish the facts surrounding the foreclosure sale and that the Note was secured by a mortgage. Thus, there are no issues of material fact requiring trial. The remaining issue of whether the foreclosure sale was a fraudulent transfer pursuant to section 548 of the Code is a matter of substantive law.

The Section 548 Issue

Pursuant to section 548 of the Bankruptcy Code, a trustee or debtor may avoid a transfer if, inter alia, the debtor received "less than reasonably equivalent value in exchange for such transfer." 11 U.S.C. § 548(a)(2)(A). For some time the...