In re Dickson

• Court: U.S. Court of Appeals — Sixth Circuit
• Writing for the Court: ARGUED:
• Citation: In re Dickson, 655 F.3d 585, 66 Collier Bankr.Cas.2d 527 (6th Cir. 2011)
• Decision Date: 26 August 2011
• Docket Number: No. 10–5580.,10–5580.
• Parties: In re Nancy E. DICKSON, Debtor.Nancy E. Dickson, Plaintiff–Appellee,v.Countrywide Home Loans, dba America's Wholesale Lender, Defendant–Appellant.

655 F.3d 585

66 Collier Bankr.Cas.2d 527

In re Nancy E. DICKSON, Debtor.Nancy E. Dickson, Plaintiff–Appellee,

v.Countrywide Home Loans, dba America's Wholesale Lender, Defendant–Appellant.

No. 10–5580.

United States Court of Appeals, Sixth Circuit.

Argued: July 26, 2011.Decided and Filed: Aug. 26, 2011.

ARGUED: John P. Brice II, Wyatt, Tarrant & Combs, LLP, Lexington, Kentucky, for Appellant. Jon Jay Lieberman, Atkinson, Simms & Kermode P.L.L.C., Lexington, Kentucky, for Appellee. ON BRIEF: John P. Brice II, Wyatt, Tarrant & Combs, LLP, Lexington, Kentucky, for Appellant. John M. Simms, Atkinson, Simms & Kermode P.L.L.C., Lexington, Kentucky, for Appellee.Before: NORRIS, GIBBONS, and GRIFFIN, Circuit Judges.

OPINION

GRIFFIN, Circuit Judge.

Plaintiff-debtor Nancy E. Dickson filed a voluntary Chapter 13 bankruptcy petition on July 16, 2007, seeking to reorganize her debts. As a part of this process, Dickson successfully sought to avoid a lien on her manufactured home held by defendant-appellant Countrywide Home Loans (“Countrywide”). Before this court, Countrywide appeals the judgment of the Bankruptcy Appellate Panel for the Sixth Circuit (“BAP”) affirming the bankruptcy court's judgment and order avoiding Countrywide's lien. Countrywide asserts that Dickson does not have standing to avoid the lien, and that even if Dickson possessed standing, the lien is not avoidable. We disagree and affirm.

I.

The BAP recited the facts as follows:

On September 19, 1998, [Dickson] executed a promissory note and mortgage on her real property, which she had purchased in 1997, in consideration for a $79,000 loan from Countrywide. At the time the promissory note and mortgage were executed there were no improvements on the mortgaged real property. The mortgage in favor of Countrywide stated that Countrywide was granted a lien against the real property and “all improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of that property.” The mortgage was duly and properly recorded with the Harrison County Clerk on September 22, 1998. [Dickson] then used the proceeds of the loan to purchase a manufactured home which she placed on the mortgaged real property.

On March 22, 1999, [Dickson] filed a petition for relief under Chapter 7 of the Bankruptcy Code. On May 13, 1999, the Chapter 7 trustee filed a notice of intent to abandon both the manufactured home and the real property. [Dickson] was granted a Chapter 7 discharge on September 8, 1999, and the bankruptcy court entered its Final Decree on September 13, 1999. [Dickson] did not reaffirm the debt with Countrywide.

Subsequently, [Dickson] defaulted on the loan with Countrywide. As a result, Countrywide initiated foreclosure proceedings on June 15, 2006, in the Commonwealth of Kentucky Harrison Circuit Court (“State Court”). Countrywide's complaint in the State Court asserted that [Dickson] granted Countrywide a security interest in both the real property and the manufactured home. Countrywide asserted in its complaint that while the parties intended the mortgage to secure a valid, first lien on the manufactured home, [Dickson] failed to surrender the title to the manufactured home preventing Countrywide from noting its lien on the title. Countrywide sought a judgment from the State Court that it had a valid lien on the home, as well as an order that the home be deemed a fixture on the property and sold in satisfaction of its lien. On July 13, 2006, Countrywide filed a notice of lis pendens in the office of the Harrison County Clerk which specifically referenced the manufactured home.

On May 25, 2007, Countrywide filed a motion for In Rem Judgment in the State Court foreclosure proceeding. In its motion, Countrywide acknowledged that it had not noted its lien on the certificate of title nor obtained an affidavit of conversion of the manufactured home to real property in accordance with Kentucky Revised Statute § 186A.297. The motion further sought a judgment from the State Court ordering that the property be deemed converted to real property and sold as part of the real property to satisfy Countrywide's lien. [Dickson] did not oppose Countrywide's motion. On June [7], 2007, the State Court granted the In Rem motion and [entered] an order finding that Countrywide held a first priority and superior lien against the real property, that the real property be sold to satisfy Countrywide's lien, and that the manufactured home be “deemed converted to real estate and considered to comply with K.R.S 186A.297.” The State Court judgment also ordered that the “County Clerk shall accept for recording an affidavit of conversion from the purchaser of the property, and this Court's order converting the home to real estate, herein. Alternatively, the Clerk shall issue a new certificate of title to the purchaser of the property.” [Dickson] did not appeal the State Court judgment.

On July 16, 2007, [Dickson] filed a petition for relief under Chapter 13 of the Bankruptcy Code. Countrywide filed a motion for relief from stay seeking to sell [Dickson's] property. [Dickson] and the Chapter 13 trustee (“Trustee”) opposed Countrywide's motion on the grounds that Countrywide failed properly to perfect its lien on the manufactured home. On October 9, 2007, the bankruptcy court issued an order granting the Trustee thirty days in which to file an adversary proceeding to determine the interest of Countrywide. The bankruptcy court further ordered that if the Trustee did not file such an adversary proceeding, [Dickson] would then have an additional fifteen days to do so. If no adversary was filed, the stay would be lifted.

The Trustee did not file an adversary proceeding. [Dickson], therefore, filed an adversary complaint pursuant to 11 U.S.C. §§ 544, 547, 550, and 551 on November 14, 2007, in which she asserted that Countrywide did not properly perfect its lien on her manufactured home. On March 20, 2008, Countrywide filed a motion for summary judgment in which it asserted that [Dickson] lacked standing to bring the adversary proceeding because the mortgage lien was consensual and she may not exercise the Trustee's avoidance powers under 11 U.S.C. § 544, that [Dickson]'s claim is barred by res judicata as a result of the actions of the trustee in [Dickson]'s Chapter 7 case in relation to her property, that the lis pendens filing provided [Dickson] with constructive notice of Countrywide's lien preventing avoidance, and finally, that the prior State Court judgment prevented avoidance of Countrywide's lien. [Dickson] responded with a cross motion for summary judgment in which she asserted that she had standing as a result of the bankruptcy court's October 9, 2007 order and Countrywide's failure to object to same, that her prior bankruptcy case did not have res judicata effect, that Countrywide's lien on the manufactured home was unperfected because it failed to note its lien on the certificate of title, and that the State Court's judgment did not preclude avoidance of the lien.

Following a hearing on April 29, 2008, the bankruptcy court denied both motions for summary judgment and stated:

[Countrywide] argues that [Dickson] does not have standing because the mortgage lien is consensual. However, the lien was created by the non-consensual judgment lien; thus, [Dickson] does have standing.

...

This Court finds that whether the Defendant holds a valid lien is determined by the intent of the parties at the time of contract formation and whether [Dickson] granted [Countrywide] a lien on the mobile home. There is nothing in the record of this case that demonstrates the intent of the parties or the intent of [Dickson] in not responding to the Motion for In Rem Judgment in State Court, nor is there any evidence that [Dickson] granted a lien to [Countrywide] on the mobile home.

Following the bankruptcy court's ruling on the motions for summary judgment, Countrywide took [Dickson]'s deposition and questioned her regarding her intention at the time of contract formation. While [Dickson]'s testimony at that deposition was equivocal regarding her intention to grant a lien to Countrywide on the manufactured home, she ultimately agreed that she was granting a lien on the manufactured home in favor of Countrywide. The deposition of Countrywide's designated representative, Kelly Darraugh, was also taken. Kelly Darraugh testified that neither she, nor anyone else at Countrywide, had direct knowledge of Countrywide's intention regarding the manufactured home at the time of contract formation, nor had she ever seen the certificate of title or an affidavit documenting affixing of the manufactured home to the real estate.

Subsequently, [Dickson] and Countrywide filed renewed cross motions for summary judgment and moved, via an agreed order, to submit the matter for determination on briefs as if tried before the court. The bankruptcy court then ordered the parties to submit proposed findings of fact and conclusions of law. On April 30, 2009, the bankruptcy court issued a Judgment Order in which it adopted [Dickson]'s proposed findings of fact and conclusions of law and entered judgment in favor of [Dickson]. The adopted conclusions of law concluded, among other things, that [Dickson] had standing, that the only manner in which to perfect a lien on a manufactured home under Kentucky law is by noting the lien on the certificate of title, that Countrywide had failed to perfect its lien, and that even if Countrywide had perfected its lien, such lien was avoidable as a preference.

On May 5, 2008, Countrywide filed a Motion to Amend Findings of Fact and Conclusions of Law and to Alter, Amend, or Vacate the Judgment. In response, [Dickson] filed a motion nunc pro tunc for derivative standing. The bankruptcy court granted [Dickson]'s motion, and largely denied Countrywide's motion, granting it only with respect to amending the Court's findings of fact as to...