In Re: Curtis Roy Fox
| Decision Date | 15 March 2011 |
| Docket Number | CASE NO. 03-60547 JPK |
| Parties | In re: CURTIS ROY FOX, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Indiana |
The Chapter 7 case of Curtis Roy Fox ("Fox") was initiated by a voluntary petition filed on February 12, 2003. Stacia L. Yoon was appointed as the Chapter 7 Trustee to administer Fox's bankruptcy estate ("Trustee"). The Trustee filed her final report on September 14, 2004, and an order closing the case was entered on May 18, 2005. On March 8, 2007, the Trustee filed a motion to reopen the case, which was granted by an order entered on March 13, 2007. On March 15, 2007, the Trustee filed an application to employ Attorney Richard E. Vawter as special counsel for the Chapter 7 Trustee, which was granted by an order entered on March 15, 2007. The order of appointment provided that Attorney Vawter's compensation would be based upon a contingency fee arrangement. The focus of Attorney Vawter's appointment was litigation involving a parcel of real estate of approximately eight acres in which the bankruptcy estate had an interest, litigation in which the debtor Fox had originally been designated as the defendant, and in which Attorney Vawter filed a counterclaim on behalf of the Chapter 7 bankruptcy estate. The litigation-conducted in the Porter County Superior Court presided over by the Honorable William E. Alexa-proceeded apace until a proposed arrangement was arrived at among the parties to the litigation: the plaintiff Elsie Beiswanger and the Chapter 7 Trustee, who had assumed the position of defendant/counter-claimant with respect to Fox's interests in the case.
On October 12, 2009, the Trustee filed her Motion to Approve Compromise inSettlement, to which Fox responded by his Objection to Trustee's Motion to Approve Compromise in Settlement filed on November 1, 2009. The contested matter to which this memorandum relates was thus joined.
The court has jurisdiction over this contested matter pursuant to 28 U.S.C. § 1334(a) and (b); 28 U.S.C. § 157(a); and N.D.Ind.L.R. 200.1. The contested matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (O).
The issue before the court is whether the Trustee's Motion to Approve Compromise in Settlement should be approved under the standards provided by applicable law.1
Many of the facts pertinent to the issue will be addressed below in conjunction with discussion of the law applicable to determination of the contested matter. However, it is instructive to begin by elucidating the manner in which issues concerning the subject eight-acre parcel of real estate arose.
Prior to the filing of his bankruptcy case, Fox had purchased two separate parcels of real estate in Starke County, Indiana, one of which was a one-acre parcel, and the other of which was an eight-acre parcel (the areas of the parcels are stated descriptively to differentiate them; the eight-acre parcel has been perhaps more accurately described as 8.1 acres). At the trial of the contested matter held on July 21, 2010, Fox testified that he had purchased the one-acre parcel in the Spring of 1998, and that he purchased the eight-acre parcel six or eight months later in the Fall of 1998. Fox obtained a mortgage loan to build a house on the one-acre parcel, with respect to which he testified he began construction in November of 1998 and finished the house and moved in in May of 1999. This house is entirely located upon the one-acre parcel. Fox made no improvements to the eight-acre parcel.
Fox defaulted on a mortgage with respect to the one-acre parcel, and a foreclosure was initiated and concluded with respect to that mortgage. The Sheriff's sale with respect to the foreclosure took place in July of 2002, and by that point Fox had vacated the house. Elsie Beiswanger ("Beiswanger") purchased the foreclosed property from the successful mortgagee bidder at the Sheriff's sale in August of 2003. Although mortgages encumbered only the one-acre parcel, all parties agree that Beiswanger, based upon her transactions with a broker or brokers involved in the sale, believed that she was purchasing a nine-acre parcel comprised of the one-acre tract upon which the foreclosure had been effected and the additional eight acres which are now involved in this contested matter. Acting upon that belief, between August and October of 2003, Beiswanger built a pole barn on the eight-acre tract, in a corner of the property which adjoined the one-acre tract.
Subsequently, Fox was advised by a friend that he had read something concerning a tax sale of property which appeared to be the eight-acre tract, which designated Fox as the owner of the property. Fox brought this matter to the attention of Attorney Richard Vawter, who was his bankruptcy counsel, who advised Fox to pay the amount necessary to redeem the property form the tax sale purchaser, which Fox did. The Trustee was notified of the potential interest of the bankruptcy estate in the eight-acre parcel, which resulted in the Trustee's reopening of the Chapter 7 bankruptcy case on March 13, 2007.
Prior to January 4, 2007, a dispute arose between Fox and Beiswanger over the ownership and improvements placed upon the eight-acre tract. Beiswanger filed a lawsuit in the Porter County Circuit Court, case number 64D02-0701-PL-694, which named Fox as the defendant. This complaint, filed on January 24, 2007, was entitled "Complaint for EquitableRelief". Count I requested that the court determine that Beiswanger "has an equitable lien on the property owned by the defendant (Fox), that such lien be foreclosed for the value of the improvements on the defendant's property...". Count II asserted that Beiswanger was entitled to recover the value of the improvements she had made to the eight-acre tract under the Indiana Occupying Claimant Statute. In other words, the plaintiff Beiswanger sought to obtain an interest in the eight-acre tract by virtue of her construction of the pole barn on the tract, or alternatively, sought to obtain the value of the pole barn itself from the defendant. As stated, Attorney Vawter was approved by the court to act as special counsel for the Trustee with respect to matters relating to the lawsuit by order entered on March 15, 2007-although no order appears to have been entered in the Porter County Superior Court case substituting the Chapter 7 Trustee for Fox (which would have been correctly done had it been done), all parties in the litigation proceeded as if the interests in the lawsuit in relation to Fox were those of the Chapter 7 bankruptcy estate. Attorney Vawter filed an answer and counterclaim on behalf of Fox on April 30, 2007: the answer was a general denial of the averments of the two counts of the complaint; the counterclaim asserted that either Beiswanger should be ordered to reimburse Fox (the Chapter 7 bankruptcy estate) for the loss of value to the real estate resulting from the construction of the pole barn, or in the alternative that she should be required to remove the pole barn and restore the property to its condition prior to that building's construction.
So, we have a circumstance in which there were originally two separate parcels of real estate: a one-acre tract upon which a house was constructed, and an eight-acre unimproved tract-both owned by Fox. Fox's default on a mortgage resulted in a foreclosure with respect to the one-acre parcel, and purchase of that parcel at the Sheriff's sale by a mortgagee. That parcel was sold to Beiswanger, through the use of a realtor. Beiswanger was not represented by counsel with respect to the sale, and Beiswanger reasonably assumed (all parties agree onthis) that she was purchasing the nine acres at the closing of this transaction.2 As a result of her understanding of the transaction, Beiswanger built a pole barn on real estate which could not have been foreclosed on and was not in fact subject to the foreclosure sale. Fox did nothing with respect to the eight acres after the foreclosure, until a friend notified him that apparently the property was listed in his name as being subject to tax sale proceedings, at which point he notified Attorney Vawter and redeemed the eight-acre tract from the tax sale purchaser. This again placed Fox in title as the owner of the eight-acre parcel, upon which now was situated a pole barn constructed by Beiswanger. Exhibit 23, submitted at the trial, establishes that at least $1133.80 is owed for delinquent taxes and related charges with respect to the eight-acre tract.
As a predicate for discussion of the legal principles applicable to this case, the court will first address its determination as to certain facts relating to the two parcels of real estate. The eight-acre tract includes a 29-30 foot frontage on a public road. This strip was developed by the construction of a driveway/road which allows access off of it to the one-acre tract upon which the house is built. While the one-acre tract has a 125 foot frontage on the county road, the legal title to that property does not include an ownership interest in the 29-30 foot strip which leads back to the eight-acre tract, which is the only presently improved access to the one-acre tract. It is clear that when Fox built the house on the one-acre tract, he was relying on use of the 29-30 foot strip for access from the one-acre tract to the county road; without discussing the nuances of the multiple types of easements recognized by Indiana law, the court determines that it is a very probable result that any Indiana state court would determine that the one-acre parcel is entitled to an easement for use of the 29-30 foot strip for access to the publicway3. The pole barn is in an extreme corner of the eight-acre parcel adjoining the one-acre tract. The eight-acre tract is presently zoned agricultural. No proceedings have ever been undertaking to re-zone the eight acres, to seek to establish...
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