In re Graves
| Decision Date | 25 June 1992 |
| Docket Number | Bankruptcy No. 92-12437S. |
| Citation | 142 BR 115 |
| Parties | In re Shirley GRAVES, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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F. Lee Jones, Philadelphia, Pa., for debtor.
David B. Comroe, Lipman, Freiberg, Comroe & Hing, Philadelphia, Pa., for Fleet Consumer Discount Co.
Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.
The resolution of the instant motion of Fleet Consumer Discount Co. ("Fleet") to permit it to proceed with a state-court action to evict SHIRLEY GRAVES ("the Debtor") from her home at 6133 Nassau Road, Philadelphia, Pennsylvania 19151 ("the Home"), requires this court to determine whether applicable state law was complied with and whether the Debtor received due process when she failed to receive personal notice of the sheriff's sale of the Home to Fleet. We hold that the Debtor, a part owner of the Home upon the death of her father-co-owner, was entitled to personal notice of the sale. Alternatively, we find that the Debtor's extended continuous possession of the Home provided constructive notice to the execution creditor, the first mortgagee on the Home, Liberty Bank ("Liberty"), of the Debtor's interest in the Home, which, if investigated, would have revealed her part ownership interest. As a third alternative, we also find that Fleet's actual knowledge of the Debtor's interest in the Home prior to the sale precluded its buying the Home as a bona fide purchaser at the sale. We therefore conclude that the absence of personal notice to the Debtor violated her state-law and due process rights on three alternative grounds, precluding Fleet from obtaining the relief which it seeks.
The Debtor filed the underlying individual Chapter 13 bankruptcy case on April 22, 1992. A meeting of creditors was duly conducted in this case on June 8, 1992, and a confirmation hearing is scheduled on September 15, 1992.
Fleet filed the instant motion for relief on May 12, 1992, relying solely upon its allegation that the Debtor's claim of part-title to, and right to retain possession of, the Home had been cut off by a sheriff's sale of October 7, 1991, at which it was the purchaser. See First Nat'l Fidelity Corp. v. Perry, 945 F.2d 61, 61-62 (3d Cir.1991); In re Roach, 824 F.2d 1370, 1377-79 (3d Cir.1987); and In re Brown, 75 B.R. 1009, 1012 (Bankr.E.D.Pa.1987) ().
A hearing on June 9, 1992, was conducted on the motion. Testifying were Heather Thompson, a Fleet Vice-President who presented and interpreted Fleet's file in connection with the Home, and the Debtor.
The testimony established that the Home was titled, when purchased, on October 18, 1982, in the names of Thomas Bacon, the Debtor's father ("Thomas"), and Duane Bacon, the Debtor's nephew ("Duane"). Thomas died intestate on January 7, 1986, survived by his spouse, Mamie Bacon ("Mamie"), and three children, the Debtor, her disabled brother Andrew, and another brother Norman, apparently Duane's father. Mamie died on September 5, 1990. The Debtor and Andrew, presently the sole residents of the Home, have continuously lived there since its purchase in 1982. Although the Debtor testified that she had commenced proceedings to administer her father's estate, the status of these proceedings was unclear, and the recorded title of the Premises has remained at all time in the names of Thomas and Duane.
In September, 1988, Duane made a loan from Fleet and, unknown to the Debtor, executed a mortgage on his interest in the Home as security. The payments on this loan are delinquent and the balance owed is approximately $12,000.
In November, 1990, Liberty commenced a foreclosure action against Thomas and Duane in state court. Duane had vacated the Home in September, 1990. Service was effected on both Thomas (allegedly) and Duane by certified mail and posting of the Home, which were permitted by the state court as means of alternative service and are verified as accomplished by Affidavits of record. A default judgment was ultimately entered in this action and a sheriff's sale in execution on that judgment was ultimately conducted on October 7, 1991.
The records of Liberty's foreclosure suit against the Bacons indicate that notice of the sale to the owners of the Home was provided by first-class mail addressed to Thomas and Duane, and by the posting of the Home.
Thompson described records of contacts of Fleet with the Debtor and Duane in June, 1991, which made Fleet aware that Thomas was deceased and that the Debtor claimed to be one of his heirs. Thompson interpreted the records as indicating that Fleet had provided actual notice to the Debtor of the pending sheriff's sale of the Home during those contacts. The Debtor, meanwhile, denied any knowledge of the impending sheriff's sale prior to its occurrence, or any contacts from Fleet prior to October 8, 1991, the day after the Home was sold to Fleet for a bid of $41,000 cash, plus $1,000 costs plus, in effect, the amount of its claim of $12,000. The Debtor claimed that no posting of the Home occurred. She also stated that the contact from a Fleet representative on October 8, 1991, had been rude and arrogant.
Fleet commenced a state-court ejectment action against the Debtor and her brother Andrew on November 8, 1991. A default judgment was entered in this action on January 15, 1992.
The Debtor ultimately hired counsel to file petitions on her behalf to contest the validity of the sheriff's sale and underlying judgment in Liberty's foreclosure action, and the default judgment against her and her brother in the ejectment action. An Order was entered by the state court denying a stay of execution in the ejectment action on April 14, 1992. On May 18, 1992, the state court entered an Order denying all relief on the Debtor's motions in the foreclosure action. However, since the Debtor had filed her bankruptcy case on April 22, 1992, prior to the entry of the Order in the foreclosure action, that Order, as to her, was violative of the automatic stay and, accordingly, void. See Borman v. Raymark Industries, Inc., 946 F.2d 1031 (3d Cir.1991); and Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448-49 (3d Cir.1982) ().
At the close of the hearing on its motion on June 9, 1992, Fleet attempted to move into evidence uncertified copies of the Affidavits of service of the Complaint and notice of the sheriff's sale and certain other documents from the state-court records. Objections of the Debtor's counsel were sustained under Federal Rule of Evidence ("F.R.E.") 902(4). Fleet's counsel then requested an opportunity to keep the record open to obtain and admit certified copies of these documents. In addition, the Debtor's counsel requested an opportunity to submit a Brief in support of her client's position. While we refused to keep the record open on that date, we entered an Order allowing Fleet to file a motion to reopen the record to add certified copies of the documents in issue on or before June 10, 1992; allowing both parties until June 17, 1992, to file any Briefs in support of their respective positions; and scheduling a hearing on any motion to reopen the record filed by Fleet on June 18, 1992.
Fleet did timely file a motion to admit certified copies of certain state-court pleadings into the record, which we granted on June 18, 1992. Only Fleet submitted a Brief. However, since our independent research indicated merit in the Debtor's position, we expended most of the hearing of June 18, 1992, in an extended dialogue with Fleet's counsel, in which we expressed most of the conclusions reached herein in response to counsel's arguments.
We credit the undisputed testimony of the Debtor that she is an heir of Thomas. As such, she was, at all times since his death in 1986, a part owner of the Home. See 20 Pa.C.S. §§ 2101, 2103(1); Blank v. Clark, 79 F.Supp. 373, 376-77 (E.D.Pa. 1948); and Quality Lumber & Millwork Co. v. Andrus, 414 Pa. 411, 415, 200 A.2d 754, 757 (1964).
In response to the holding of the Pennsylvania Supreme Court, in Luskey v. Steffron, Inc., 461 Pa. 305, 336 A.2d 298 (1975), cert. denied, 430 U.S. 968, 97 S.Ct. 1651, 52 L.Ed.2d 360 (1977), that due process of law requires personal notice of a sheriff's sale to the owner of property sold, certain Pennsylvania Rules of Civil Procedure ("Pa. R.Civ.P.") have been enacted. See generally 9 GOODRICH AMRAM 2d 312-13 (1977), and June, 1992, Supp. thereto, at 42-56. Pa.R.Civ.P. 3129.1(a), (b) provide as follows:
Pa.R.Civ.P. 3129.2(c) provides as follows:
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