In re Demis

• Decision Date: 02 February 1996
• Docket Number: Bankruptcy No. 94-11784-7. Adv. No. 95/00056.
• Citation: 191 BR 851
• Parties: In re Genia Gale DEMIS, Debtor. Joseph V. WOMACK, Trustee, Plaintiff, v. E. Howard EGGEBRECHT, and M. Pauline Eggebrecht, Genia Gale Eggebrecht Demis, Sweetacres # 1, LLC, a Montana Limited Liability Company, and Shiloh Village, LLC, a Montana Limited Liability Company, Defendants.
• Court: U.S. Bankruptcy Court — District of Montana

191 B.R. 851 (1996)

In re Genia Gale DEMIS, Debtor Joseph V. WOMACK, Trustee, Plaintiff, v. E. Howard EGGEBRECHT, and M. Pauline Eggebrecht, Genia Gale Eggebrecht Demis, Sweetacres # 1, LLC, a Montana Limited Liability Company, and Shiloh Village, LLC, a Montana Limited Liability Company, Defendants.

Bankruptcy No. 94-11784-7. Adv. No. 95/00056.

United States Bankruptcy Court, D. Montana.

February 2, 1996.

COPYRIGHT MATERIAL OMITTED

Joseph V. Womack, Trustee, Terry Spear, Billings, Montana, for plaintiff.

George T. Radovich, Billings, Montana, for defendants.

ORDER

JOHN L. PETERSON, Chief Judge.

In this adversary proceeding, the Chapter 7 Panel Trustee ("Trustee") filed a complaint on July 28, 1995, to avoid transfer of real property as an alleged fraudulent conveyance. The Defendants, Debtor Genia Gale Demis Eggebrecht, E. Howard Eggebrecht, et al., ("Defendants") in the action filed an amended answer July 31, 1995, denying the substantive basis of the complaint, and pleading four affirmative defenses, including an allegation that the Statute of Limitations on the Trustee's avoidance powers bars this action. All parties acknowledge the Court has jurisdiction in the matter under 28 U.S.C. § 1334 and this is a core proceedings under 28 U.S.C. § 157(b)(2)(H).

After due notice hearing was held on December 14, 1995, in which the parties appeared represented by counsel. The Trustee offered the testimony of three witnesses, Debtor Genia Gale Demis ("Debtor"), Pauline Eggebrecht and Debra Demis, and Debtor testified for the Defendants. The parties also mutually submitted exhibits 1-20, 22-29 and 30 into evidence as well as Exhibits A and B.

The Trustee contends, inter alia, the two year state law statute of limitations for avoidance of fraudulent conveyances does not bar this action since, although the Debtor executed two quit-claim deeds to the same real property in the case in 1991 and 1992, the only valid transfer took place within two years before the filing of bankruptcy or other actions by creditors. The Trustee claims the earlier of the two quit-claim deeds is either "inoperable" or void because at the time of its execution, a Colorado court had temporarily enjoined Debtor from conveying any property in a divorce action, and therefore the earlier purported conveyance could not begin the limitations clock running. In the alternative, the Trustee also argues the statute of limitations for a fraudulent conveyance does not begin to run until a judgment giving rise to a debt was entered for creditor.

Defendants admit in their amended answer the Colorado divorce court issued a restraining order against Debtor and the injunction was in effect at the time Debtor executed the first quit-claim deed. Nevertheless, Defendants argue the Debtor's transfer, although in violation of the injunction, does not void or otherwise impair the properly executed, recorded and perfected quit-claim deed from Debtor to the Eggebrechts of real property in the jurisdiction of Montana. Defendants conclude the earlier transfer having occurred more than two years prior to Debtor's filing for bankruptcy, the Trustee may not now avoid it. The issue of the statute of limitations being dispositive, the Court finds for the Defendants.

I.

In portions of the "Parties Agreed Statement of Facts" filed December 12, 1995, the litigants formally specified in writing to the following relevant facts.

1. Debra Kay Demis, ("Debra"), a resident of Colorado, is a creditor of the Debtor in this case. (Parties Agreed Statement of Facts, p. 2.)

2. In 1987, Debra and Debtor entered into a contract retaining a lawyer to represent them both in a suit to determine their interest in certain real property in Roosevelt and Yellowstone Counties, Montana, owned among Debtor, Defendants Eggebrecht, the Estate of Mark K. Eggebrecht, David Kent Eggebrecht and Debra as a joint venture. Debra and Debtor each agreed to pay half of the fees and costs incurred, but as to the obligation to the lawyer's firm, both were jointly and severally liable. In accord with the contract, the lawyer appeared on behalf of Debra and Debtor in DV 87-1061, Thirteenth Judicial District, Yellowstone County, Montana, Demis v. Eggebrecht (hereafter "the 1987 Demis v. Eggebrecht action"). (Parties Agreed Statement of Facts, p. 5.)

3. Subsequently, Debtor failed to pay fees and costs due the lawyer, including accountant's fees for the accountant obtained as an expert witness, and, during the pendency of the 1987 Demis v. Eggebrecht action, directed the lawyer to withdraw the firm as Debtor's counsel. Thereafter Debtor acted pro se in the lawsuit. (Parties Agreed Statement of Facts, p. 6.)

4. On October 24, 1989, in a Colorado divorce proceeding running parallel with the 1987 Demis v. Eggebrecht action, Debtor and Peter Demis, Debtor's spouse, entered into a "Stipulated Agreement re: Temporary Restraining Order and Injunction" that provided Debtor "shall not, without an Order of Court or written agreement of the parties, dismiss, liquidate, transfer or assign her cause of action or property rights associated with" the 1987 Demis v. Eggebrecht action. The Colorado court entered an Order dated November 16, 1989, in the Demis divorce action approving the stipulated agreement. (Parties Agreed Statement of Facts, p. 6.)

5. By Judgment dated November 6, 1991, and docketed November 6, 1991, in the 1987 Demis v. Eggebrecht action, the court determined that Debra had an undivided one-fourth interest in certain of the properties at issue and an undivided one-sixth interest in other of the subject properties. Debra's net equitable share in the properties was determined to be $279,238.00. (Parties Agreed Statement of Facts, pp. 6-7.)

6. Debtor executed a quit-claim deed dated December 17, 1991, transferring her interests in the real property located in Yellowstone County, Montana, subject to the 1987 Demis v. Eggebrecht decision. The deed was recorded with the Yellowstone County Clerk and Recorder on December 17, 1991. (Parties Agreed Statement of Facts, p. 7.; Plaintiff's Exhibit 3.) Debtor executed a second quit-claim deed on the property providing the same legal description in a slightly different format on June 11, 1992. (Parties Agreed Statement of Facts, p. 8; Plaintiff's Exhibit 4.)

7. The December 17, 1991, deed contained the following language describing the real property transferred from Debtor to the Eggebrechts.

1. Lot 3, except the West 20 feet, Block 12, of Sweet Acres Subdivision, 6th Filing, in the City of Billings, Yellowstone County, according to the official plat on file in the office of the Clerk and Recorder of said County, under Document No. 788630; and the building located thereon; and

2. Lot 4, Block 12, of Sweet Acres Subdivision, 6th Filing, in the City of Billings, Yellowstone County, Montana, according to the official plat on file in the office of the Clerk and Recorder of said County, under Document No. 788630; and

3. The North 136.125 feet of the South 544.5 feet of Lot 21, of Arnold Subdivision, Second Filing, in the City of Billings, Yellowstone County, Montana, according to the official plat on file in the office of the Clerk and Recorder of said County, under Document No. 413840, EXCEPT the Westerly 10 feet thereof condemned by the City of Billings, Yellowstone County, Montana, for street and highway purposes by virtue of Judgment and Final Order of Condemnation, Civil Case No. 83083, Yellowstone County, Montana, a certified copy of which was recorded June 2, 1978, in Book 1194, Page 4998, under Document No. 1091692, records of Yellowstone County, Montana; and

4. Phases I and II:

Tract 2, Amended Certificate of Survey 1492, filed under Document No. 1054076, records of Yellowstone County, Montana;

Subject to that certain Mortgage dated November 24, 1975, with E. Howard Eggebrecht, a/k/a Eugene Howard Eggebrecht, a/k/a Howard Eggebrecht and M. Pauline Eggebrecht, a/k/a Pauline Eggebrecht, husband and wife, Genia Gale Eggebrecht, a single woman, and Debra Kay Eggebrecht, a single woman, as Mortgagors, and Valley Credit Union, as Mortgagee, recorded December 9, 1975, in Book 1085, Page 673, under Document No. 1004945, records of Yellowstone County, Montana, which Mortgage is modified by Loan Modification Agreement dated February 11, 1987, recorded February 27, 1987, in Book 1303, Page 4534, under Document No. 1431052, records of Yellowstone County, Montana; and

Subject to that certain Mortgage dated October 27, 1977, with E. Howard Eggebrecht, a/k/a Eugene Howard Eggebrecht, a/k/a Howard Eggebrecht and M. Pauline Eggebrecht, a/k/a Pauline Eggebrecht, husband and wife, and Debra Kay Eggebrecht, a single woman, and Genia Gale Demis, f/k/a Genia Gale Eggebrecht and Peter P. Demis, wife and husband, as Mortgagors, and Valley Credit Union, as Mortgagee, recorded October 28, 1977, in Book 1175, Page 1010, under Document No. 1068748, records of Yellowstone County, Montana, which mortgage is modified by Loan Modification Agreement dated February 11, 1987, recorded February 27, 1987, in Book 1303, Page 4534, under Document No. 1431051, records of Yellowstone county, Montana; and

5. Phase III:

Tract 1-A, 2nd Amended Certificate of Survey 1492, filed under Document No. 1195958, records of Yellowstone County, Montana; and

6. Phase IV:

Beginning at a point which is the southwest corner of Tract 1-B of the 2nd Amended Certificate of Survey No. 1492 situated in the W. ½ N.W. ¼ Sec. 11, T. 1 S, R. 25 E., P.M.M., Yellowstone County, Montana; thence from said true point of beginning along the easterly right-of-way line of Shiloh Road North 00 Degrees 05 Minutes 39 Seconds West a distance of 471.45 feet; thence North 89 Degrees 41 Minutes 55 Seconds East a distance of 1257.87 feet to a point on the north-south 1/16th line of said Section 11; thence along said 1/16th line South 00 Degrees 07 Minutes 18 Seconds East a distance of 471.45 feet to the southeast corner of said Tract

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