In re Best, Bankruptcy No. 08-17185bf.
| Citation | 417 B.R. 259 |
| Decision Date | 12 June 2009 |
| Docket Number | Adversary No. 09-0048.,Bankruptcy No. 08-17185bf.,Adversary No. 09-0084. |
| Parties | In re Ervin J. BEST, Debtor. Ervin J. Best, Plaintiff, v. David A. Galloway, Steven L. Lange, American Residential Equities XXXXI LLC, John D. Green, solely in his official capacity as sheriff of the City of Philadelphia, and William C. Miller, standing chapter 13 trustee, Defendants. Steven L. Lange and David A. Galloway, Plaintiffs, v. Ervin Best, Defendant. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Irwin Lee Trauss, Philadelphia Legal Services, Philadelphia, PA, for Plaintiff/Defendant Ervin J. Best.
Andrew L. Miller, Andrew L. Miller & Associates P.C., Bala Cynwyd, PA, for Defendants/Plaintiffs David A. Galloway and Steven L. Lange, and Defendants John D. Green and William C. Miller.
Peter J. Mulcahy, Phelan Hallinan & Schmieg, LLP, Philadelphia, PA, for Defendant American Residential Equities XXXXI, LLC.
There are two motions before this court filed by Messrs. David A. Galloway and Steven L. Lange: a motion to dismiss the amended complaint filed by the chapter 13 debtor, Mr. Ervin Best, docketed at Adversary Proceeding No. 09-0048; and a motion to remand a state court proceeding removed to this court by Mr. Best and docketed at Adversary Proceeding No. 09-0084. The proceeding removed had been initiated by Messrs. Lange and Galloway against Mr. Best.
A consolidated hearing to resolve these two motions was held, and neither party offered any evidence concerning the request for remand. Instead, the parties offered oral argument and supporting memoranda.
In connection with the motion to remand Adversary No. 09-0084, this proceeding concerns an ejectment action brought by Messrs. Lange and Galloway against Mr. Best involving real property located on West Allegheny Avenue in Philadelphia. Adversary No. 09-0048 was commenced by Mr. Best against Messrs. Lange and Galloway and, after amendment, American Residential Equities XXXXI, LLC, Philadelphia Sheriff John D. Green and standing chapter 13 trustee William C. Miller, Esq. were added as defendants. That adversary proceeding, as will be discussed, also concerns the West Allegheny Avenue property.
The facts surrounding Messrs. Lange's and Galloway's motion for remand do not appear to be disputed. Similarly, for purposes of the outstanding motion to dismiss, to the extent it is based upon the plaintiff's failure to state a cause of action, I shall accept the allegations in the amended complaint as true in determining whether the plaintiff has stated a claim, with those averments construed in a light most favorable to the plaintiff. See, e.g., Ashcroft v. Iqbal, ___ U.S. ___, ___-___, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009); Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008).
On January 19, 1999, Ameriquest Mortgage Company obtained a mortgage on Mr. Best's real property, located at 3422 West Allegheny Avenue, Philadelphia, Pennsylvania. Amended Complaint, ¶ 12. Apparently, that mortgage fell into default and on July 15, 2004, Ameriquest commenced a foreclosure action in the Philadelphia Court of Common Pleas against the West Allegheny Avenue property. Id., at ¶ 20. On September 7, 2004, a judgment in foreclosure was entered by default. Id., at ¶ 21.
On December 2, 2004, after the foreclosure judgment was entered, Ameriquest assigned its mortgage to defendant American Residential Equities XXXXI LLC. Id., at ¶ 28. Thereafter, beginning in January 2005, American Residential, through its agent Select Portfolio Servicing, sent notices to Mr. Best and communicated with him via telephone. Id., at ¶¶ 42, 45, 47, 59, and 60. Mr. Best avers that among those communications was a notice informing him of his right to cure his mortgage delinquency within thirty days. Id., at ¶¶ 60, 70.
Mr. Best asserts that on March 8, 2005, without prior notice to him, the Sheriff of Philadelphia County conducted a foreclosure sale of the West Allegheny Avenue property, purportedly based upon Ameriquest's judgment in foreclosure and the writ of execution issued thereupon. Id., at ¶¶ 66, 71-72.1 The West Allegheny Avenue property was purchased at this foreclosure sale by Messrs. Galloway and Lange. Id., at ¶ 87. The sheriff then issued a deed dated May 21, 2005, to Messrs. Galloway and Lange, purporting to convey to them title to 3422 West Allegheny Avenue. Id., at ¶ 88. The movants recorded the deed on June 21, 2005. Id., at ¶ 91.
On October 9, 2007, Messrs. Lange and Galloway commenced an ejectment action against Mr. Best in the Philadelphia Court of Common Pleas, docketed as Lange v. Best, October Term 2007, No. 999. The movants asserted in that state court civil action two counts: ejectment from the realty, and damages for mesne profits (rent). Mr. Best answered the state court complaint, denying the movants' allegations and asserting new matter (i.e., affirmative defenses). In his state court answer, he averred that the original Ameriquest mortgage was invalid, as was the foreclosure judgment. He also asserted that Ameriquest had no authority to schedule the sheriff sale of his property based upon its foreclosure judgment because it no longer held the mortgage at the time of sale, having assigned it to American Residential Equities.
Accordingly, Mr. Best maintained in state court that the sheriff sale of his property was invalid and the sheriff's deed to the West Allegheny Avenue property did not convey title to Messrs. Galloway and Lange. Mr. Best requested that the state court dismiss the ejectment action with prejudice as well as the claim for rent.
On June 27, 2008, the state court plaintiffs moved for summary judgment, which was opposed by Mr. Best. On October 31, 2008, Mr. Best filed the above-captioned voluntary chapter 13 bankruptcy petition. On November 6, 2008, the state court granted summary judgment to Messrs. Galloway and Lange based upon their pre-bankruptcy motion. Mr. Best filed a notice of appeal from that order.
As this state court adjudication occurred after the debtor's bankruptcy filing, its validity under section 362 was at issue. Messrs. Lange and Galloway therefore moved to terminate and annul the bankruptcy stay, which motion was opposed by Mr. Best. By order dated February 20, 2009, accompanied by a statement of reasons, I granted the motion to terminate the stay filed by Messrs. Lange and Galloway, which order allowed them to exercise their non-bankruptcy law rights, if any, to obtain possession of the West Allegheny Avenue real property. I also lifted the stay for Mr. Best to defend the state court litigation. In so doing, I denied the request of Messrs. Lange and Galloway to retroactively validate the state court summary judgment decision entered after the debtor's bankruptcy case had been filed and after notice of that bankruptcy filing had been provided in that state court litigation. See Raymark Industries, Inc. v. Lai, 973 F.2d 1125, 1132 (3d Cir.1992); see also In re Benalcazar, 283 B.R. 514, 529 (Bankr.N.D.Ill.2002). Similarly, I determined that the debtor's appeal from that decision was invalid. See, e.g., In re Krystal Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631 (3d Cir.1998); In re Highway Truck Drivers & Helpers Local Union No. 107, 888 F.2d 293, 298 (3d Cir.1989); Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448-49 (3d Cir.1982).2
In granting relief from the bankruptcy stay in February 2009, I expressed no position on the underlying merits of the ejectment action or Mr. Best's opposition thereto.3
No party appealed the February 20th lift stay order.
On March 23, 2009, Mr. Best removed the state court ejectment action to this court, thereafter docketed at Adv. Proc. 09-0084. On April 14, 2009, Messrs. Galloway and Lange filed the instant motion to remand the matter back to state court. Mr. Best filed a response opposing remand.
Meanwhile, on February 10, 2009, Mr. Best filed the adversary proceeding docketed at Adv. Proc. 09-0048 against Messrs. Galloway and Lange. On April 6, 2009, he filed an amended complaint, inter alia adding defendants American Residential Equities, John D. Green, as sheriff of the City of Philadelphia, and William C. Miller, as chapter 13 trustee.4 On April 24, 2009, Messrs. Galloway and Lange filed a motion to dismiss the amended complaint.
Similar to his allegations in opposing the state court ejectment action, in this amended complaint Mr. Best alleges that on December 2, 2004, Ameriquest assigned the mortgage it held on his West Allegheny property to American Residential Equities XXXXI, LLC, which assignment was of record before the sheriff sale at which movants purchased the property. Amended Complaint, ¶¶ 28, 83. Mr. Best thus contends again in his amended complaint that the March 2005 sheriff sale was defective and did not convey any title to his property because, at the time of sale, American Residential Equities held the mortgage and had not authorized the sale. Id., ¶¶ 54, 107.
Mr. Best has asserted four counts in his amended complaint; the first two counts are against movants Galloway and Lange only. Counts three and four are against American Residential Equities only.
In Count I of the complaint, Mr. Best seeks a declaratory judgment that any interest in the West Allegheny Avenue property claimed by Messrs. Galloway and Lange is invalid—because it is based on a deed that was obtained after a sheriff's sale that was conducted without authority under Pennsylvania law—and that the realty is property of the debtor's chapter 13 bankruptcy estate. Alternatively, in Count II he requests that this court "avoid" the sheriff's deed pursuant to 11 U.S.C. § 544(a)(3); preserve the avoided...
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