In re Bartlett
| Decision Date | 01 November 2006 |
| Docket Number | Bankruptcy No. 05-10340.,Adversary No. 06-1021. |
| Citation | 353 B.R. 398 |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re Allen John BARTLETT, Dawn Marie Bartlett, Debtors. United States of America, Plaintiff, v. Allen John Bartlett and Dawn Marie Bartlett, Defendants. |
Geoffrey Walsh, Esq., Vermont Legal Aid, Springfield, VT, for Defendants.
Melissa Ranaldo, Esq., Assistant U.S. Attorney, Burlington, VT, for Plaintiff.
The United States of America, acting on behalf of the Rural Housing Service ("RHS" or "Plaintiff"), has filed a complaint" presenting two counts: the first seeks revocation of the August 15, 2005 confirmation order entered in the bankruptcy case of Allen and Dawn Bartlett (the "Bartletts" or "Defendants"), and the second seeks a declaration that the subject real property — the Bartletts' residence — is not property of their bankruptcy estate (doc. # 1). The parties have cross-moved for summary judgment on the second count of the complaint (doc. ## 12, 13). For the reasons set forth below, the Court finds that the Bartletts had an interest in the subject property at the time they filed their bankruptcy petition and therefore it is property of the estate. Accordingly, the Court grants the Defendants' motion for summary judgment and denies the Plaintiffs motion for summary judgment on Count II of the complaint.
The Court has jurisdiction over this adversary proceeding and the pending motions for summary judgment under 28 U.S.C. §§ 1334 and 157(b)(2)(B), (K), (0).
The question presented is whether the Bartletts had any interest in their residential real property (the "Property") as of the date they filed their bankruptcy petition, and hence whether the Property was property of their bankruptcy estate. Since the Property was the subject of two foreclosure actions prior to the filing of the petition, one of which proceeded as a strict foreclosure and one that resulted in a judgment authorizing a sale, discerning who had what interest in the Property at various stages of the two foreclosure actions and at the time the Bartletts filed their bankruptcy case is less than straightforward. To reach its ultimate response to this question, the Court must determine: (1) the effect of a state court strict foreclosure judgment by a second mortgagee on a mortgagor's equitable right of redemption, and (2) whether a U.S. District Court judgment of foreclosure can reinstate a mortgagor's previously-extinguished equitable right of redemption.
A complete answer to these questions also requires the Court to address whether either the District Court foreclosure decree or the Bankruptcy Court confirmation order, or both, have res judicata effect, which would preclude the Plaintiff from now challenging the Defendants' interest in the Property.
Summary judgment is proper only if the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Fed. R. Bankr.P. 7056. A genuine issue exists only when "the evidence is such that a reasonable [trier of fact] could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. See Anderson, 477 U.S. at 247, 106 S.Ct. 2505. In making its determination, the court's sole function is to determine whether there is any material dispute of fact that requires a trial. See id. at 249, 106 S.Ct. 2505; see also Palmieri v. Lynch, 392 F.3d 73, 82 (2d Cir.2004); Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir.1990). Factual disputes that are irrelevant or unnecessary are not material. See Anderson, 477 U.S. at 247, 106 S.Ct. 2505. The court must view all the evidence in the light most favorable to the nonmoving party and draw all inferences in the nonmovant's favor. See Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir.1992). Only disputes over facts which might affect the outcome of the suit under the governing law preclude entry of judgment. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505.
Here, the parties both assert that there are no material facts in dispute and that summary judgment is proper. The Court agrees.
The parties have stipulated that the following facts — which generally outline the filings in the related federal district court and state court cases — are both material and undisputed:
1. The Court has jurisdiction over this proceeding pursuant to 28 U.S.C §§ 1334 and 157(b)(2)(A), (J), and (O), and this is a core proceeding.
2. The Plaintiff is the United States of America, acting on behalf of the United States Department of Agriculture, Rural Housing Service. The Rural Housing Service ("RHS") has a State Office at 89 Main Street, City Center, Montpelier, Vermont.
3. The Defendants, Allen John Bartlett and Dawn Marie Bartlett ("the Bartletts") are a married couple residing at 1512 Fowler Road, Whitingham, Vermont.
4. On or about August 3, 1984, the Bartletts executed and delivered to the United States a promissory note in the amount of $49,500.00. A true and accurate copy of the promissory note was filed with RHS's proof of claim, dated April 19, 2005.
5. On that same date, in order to secure repayment of the promissory note given to RHS, the Bartletts executed and delivered to the United States a Mortgage Deed pledging, inter alia, the house and land located at 1512 Fowler Road, Whitingham, Vermont ("the Property"). The Mortgage Deed is filed in the land records of the Town of Whitingham, Vermont in Book 72, Page 86.
6. On or about March 4, 2002, the Bartletts executed and delivered to Champion Mortgage, a Division of Key Bank, USA, National Association, ("Champion Mortgage"), a promissory note in the amount of $14,000.
7. On that same date, in order to secure repayment of the Promissory Note given to the Champion Mortgage, the Bartletts executed and delivered to Champion Mortgage a second mortgage deed. The second mortgage deed is filed in the land records of the Town of Whitingham, Vermont in Book 114, Page 554.
8. On or about July 19, 2003, Champion Mortgage filed a complaint against the Bartletts for strict foreclosure of the second mortgage deed in Windham Superior Court. The United States was not named as party in that action. A copy of the Champion Mortgage complaint was recorded on July 22, 2003 in the land records for the Town of Whitingham at Book 119, Page 574.
9. On October 10, 2003, the Windham Superior Court entered a Judgment and Decree of Foreclosure ("the Decree") against the Bartletts. The Decree states that the Bartletts were served on July 25, 2003, judgment was entered for Champion Mortgage, and an accounting was taken on October 8, 2003. The Decree set a final redemption date of April 12, 2004.
10. On March 30, 2004, the United States filed a Complaint for Foreclosure by Power of Sale in United States District Court for the District of Vermont (the "District Court"). The Complaint was recorded in the land records for the Town of Whitingham at Vol. 122, Page 182 on April 1, 2004.
11. In Champion Mortgage's state court foreclosure action, a Certificate of Non-redemption was issued on April 20, 2004. The Certificate of Non-redemption, along with the Judgment and Decree of Foreclosure and a Vermont Property Transfer Tax Form were recorded in the land records for the Town of Whitingham on April 23, 2004 at Vol. 122, Page 294 and 296.
12. In the RHS' federal court foreclosure action, judgment by, default was entered in favor of the United States and against the Bartletts and Champion Mortgage, an accounting was taken and on July 23, 2004, and a Judgment Order, Decree of Foreclosure and Order for Judicial Sale was entered. The final redemption date, January 25, 2005, expired without action by any defendant and a Certificate of Non-redemption was entered on January 26, 2005.
13. The United States' Foreclosure Decree and the Certificate of Non-redemption were recorded on February 2, 2005 in the land records for the Town of Whitingham in Vol. 125, pages 58 and 59.
14. The Bartletts filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code ("the Petition") on March 21, 2005 (In re Allen John Bartlett and Dawn Marie Bartlett, Bankruptcy Case No. 05-10340 cab).
15. As of the date of the bankruptcy filing, the judicial sale authorized by the federal court foreclosure decree had not occurred.
(doe. # 10).
The parties' stipulated time-line ends at the point when the Defendants filed their bankruptcy petition. By filing their chapter 13 petition, the Defendants proposed, inter alia, to cure their pre-petition default on their home mortgage pursuant to 11 U.S.C. § 1322(b)(3), (5) (doc. # 8). The Defendants provided a Supplemental Statement of Undisputed Material Facts (doe. # 13) which recited the filings made by the Parties in the chapter 12 case. Those filings are summarized as follows:
a. In. May 2005, RHS filed an Objection to Confirmation of the Chapter 13 plan as well as an Amended Proof of Claim.
b. In June 2005, the Defendants filed a First Amended Chapter 13 Plan and RHS filed Objections to that Plan.
c. "Following a hearing at which RHS appeared by counsel and waived objections except as recognized in the plan confirmation Order," the Court entered an Order confirming the Amended Chapter 13 Plan on...
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In re Willette
...55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). The pertinent state law is the Vermont foreclosure statute. In United States v. Bartlett (In re Bartlett), 353 B.R. 398 (Bankr.D.Vt. 2006), this Court described the impact of Vermont's strict foreclosure statute, 12 V.S.A. chapter 163, subchapter 6, ......