In re Herter v. Idaho State Univ. Credit Union
| Decision Date | 21 June 2011 |
| Docket Number | Adv. Proceeding No. 10-8093-JDP,Bankruptcy Case No. 08-41160-JDP |
| Parties | In re: NICHOLE R. HERTER, Debtor. R. SAM HOPKINS, Trustee, Plaintiff, v. IDAHO STATE UNIVERSITY CREDIT UNION; NICHOLE RENAE HERTER; and DAVID HERTER, Defendants. |
| Court | U.S. Bankruptcy Court — District of Idaho |
Appearances:
Daniel C. Green, RACINE, OLSON, NYE, BUDGE & BAILEY, CHARTERED, Pocatello, Idaho, Attorney for Plaintiff.
Judy L. Geier, EVANS KEANE, LLP, Boise, Idaho, Attorney for Defendants Idaho State University Credit Union and David Herter.
Resolution of the issues in this action requires the Court to decide whether an interest in an Idaho residence, which passed unadministered through a husband's chapter 7 1 bankruptcy case, may be administered as property of the bankruptcy estate in his wife's subsequent chapter 7 case. If the house is indeed property of the second bankruptcy estate, and if the trustee is the same for both bankruptcy cases, the Court must consider whether the trustee's actions in relation to the property in either case limits his ability to avoid a post-petition transfer of an interest in the property in the second bankruptcy case.
David and Nichole Herter, as husband and wife, purchased a home in Pocatello ("the Property") in 2002. See Dkt. No. 15-2, Ex. B.2 At the time, they executed a deed of trust on the Property in favor of the predecessor in interest to Midland Mortgage Co. ("Midland") to secure a loan of $74,760. Id. In 2006, David and Nichole3 executed a second deed of trust against the Property in favor of another creditor, Defendant Idaho State University Federal Credit Union ("ISUFCU"), to secure a revolving credit line of $27,500. Dkt. No. 15-3, Ex. C.
On October 28, 2008, in anticipation of divorce, David and Nichole executed a self-drafted stipulated divorce decree. Dkt. No. 26, Ex. A. In it, among other terms, David and Nichole agreed that they "have a community interest in" the Property, and that the Property "shall be sold and the net proceeds divided 50% to [Nichole] and 50% to [David]." Id.
Having agreed to the terms of a proposed divorce decree, David and Nichole then separately filed for chapter 7 bankruptcy relief. The relevant facts of each bankruptcy case are discussed in more detail below. However, some of the fundamental facts are appropriately set forth here.
First, David filed his bankruptcy petition on November 7, 2008, while Nichole filed hers on November 19, 2008. Bankr. No. 08-41117, Dkt. No. 1; Bankr. No. 08-41160, Dkt. No. 1. Second, while David and Nichole agreed pre-bankruptcy, as between themselves, to the terms to be incorporated in their divorce decree, the state court, for reasons unknown to the Court, did not enter the decree until November 26, 2008, after the bankruptcy filings. Dkt. No. 26-1, Ex. A. And finally, while David's bankruptcy case was closed on February 12, 2009, Bankr. No. 08-41117, Dkt. No. 28, Nichole's case remains open.
As noted above, on November 7, 2008, David filed a chapter 7 petition. Bankr. No. 08-41117, Dkt. No. 1. Plaintiff R. Sam Hopkins ("Trustee") was appointed to serve as the chapter 7 trustee.
David listed the Property on his Schedule A, and claimed an Idaho homestead exemption in the Property on Schedule C. Id. David's Schedule D indicated two creditors held debts secured by the Property: Midland, with a claim of $61,377.70; and ISUFCU, with a claim of $27,027.21. Id.
There is some indication in the record that David believed his and Nichole's signing of the stipulated divorce decree had legal consequences. His bankruptcy schedules characterize Nichole as his "Ex-wife" and his marital status as "single." Id. He left the Schedule A column for characterizing the Property as separate, joint, or community property blank.4 Id. In addition, David's Schedule B list of personal property includes a "domestic support obligation from Nicole (sic) Herter for [their daughter]" for $240 per month, which he claims as exempt on Schedule C. Id. That domestic support obligation is also a product of the couple'sstipulated divorce decree. See Dkt. No. 26-1, Ex. A.
On January 12, 2009, David's counsel, Trustee, and ISUFCU stipulated to entry of an order for relief from the automatic stay as to the Property for ISUFCU. Bankr. No. 08-41117, Dkt. No. 21. The Court entered the order on February 8, 2009. Id., Dkt. No. 22.
On January 22, 2009, Midland also moved for automatic stay relief for the Property. Id., Dkt. No. 18. When no party objected to Midland's motion, the Court ordered relief on February 12, 2009. Id., Dkt. Nos. 26, 27.
Also on February 12, 2009, the Court entered an order granting David a bankruptcy discharge, id., Dkt. No. 25, and an order discharging Trustee from his duties and closing David's bankruptcy case, id., Dkt. No. 28.
Nichole filed her chapter 7 bankruptcy petition on November 19, 2008. Bankr. No. 08-41160, Dkt. No. 1. Mr. Hopkins was also appointed trustee in that case.
Nichole listed the Property on her Schedule A, and, like David, did not characterize the Property as separate, joint, or community. Id. She did not claim an exemption in the Property. See id.
Nichole indicated Midland and ISUFCU were both owed debts secured by an interest in the Property. Id. In her Statement of Intention, Nichole indicated it was her intent to surrender the Property to Midland. Id.5
Whereas David's petition indicates he may have believed the couple's divorce decree was legally effective when they signed it, Nichole's petition, schedules, and statements certainly do not convey that impression. Instead, Nichole's petition characterizes David as her "nondebtor spouse," her marital status as "married," and her divorce as "pending." Id. She filed a Statement of Domestic Support Obligations the same day that she filed her petition, though she indicated the obligation, $240 per month to David, would not start until "11/2008." Id., Dkt. No. 8.
Trustee and ISUFCU signed a stay relief stipulation as to the Property on January 12, 2009. Id., Dkt. No. 21. Nichole's counsel signed the stipulation January 20, 2009, id., and the Court ordered relief on February 9, 2009, id., Dkt. No. 22.
Nichole was granted a discharge on March 5, 2009. Id., Dkt. No. 27.
On May 22, 2009, Midland filed a motion for stay relief as to the Property. Id., Dkt. No. 40. No one objected to Midland's motion, and the Court ordered relief on June 15, 2009. Id., Dkt. Nos. 43, 44.
On June 25, 2009, Midland recorded a Notice of Default for the Property under its deed of trust. Dkt. No. 15-10, Ex. J. A Notice of Trustee's Sale was mailed to Debtors on June 30, 2009, indicating a trustee's sale of the Property scheduled for November 3, 2009. Dkt. No. 15-11, Ex. K.
On August 31, 2009, Nichole executed, and apparently delivered, a quit-claim deed conveying her interest in the Property to David. Dkt. No. 15-12, Ex. L. David then closed a loan from ISUFCU for $102,000 to refinance the Property in exchange for a new deed of trust, which wasrecorded September 1, 2009. Dkt. No. 15-13, Ex. M. The loans of both Midland and ISUFCU were presumably satisfied by the new loan's proceeds, and the deeds of trust securing those loans were released. Dkt. No. 14. The "new" deed of trust securing the refinance loan to ISUFCU is the only remaining lien on the Property. Id.
In his status as trustee in Nichole's bankruptcy case, Trustee commenced this adversary proceeding against David and ISUFCU on October 14, 2010. Dkt. No. 1. In his complaint, Trustee seeks to avoid and recover the transfer effected by the deed from Nichole to David, and the deed of trust from David to ISUFCU, as postpetition transfers under §§ 549(a) and 550. Id. David and ISUFCU filed a joint answer denying Trustee's right to such relief; they also filed a counterclaim alleging Trustee's attempts to avoid the transfers constitute a breach of the parties' stay relief stipulation, and seeking attorneys' fees and costs . Dkt. No. 6.
On April 5, 2011, David and ISUFCU filed a motion for summary judgment, a brief, a statement of undisputed facts, and affidavits, in whichthey argue that (1) the Property was not part of Nichole's bankruptcy estate when the targeted transfers were made; (2) Trustee should be estopped from avoiding the transfers due to his actions regarding the Property in both David and Nichole's bankruptcy cases; and (3) even if Nichole's bankruptcy estate initially had an interest in the Property, Trustee forfeited that interest when he did not object to her stated intent to surrender the Property to Midland. Dkt. Nos. 12-17.
Trustee filed a response opposing the summary judgment motion, a statement of disputed and undisputed facts, and opposing affidavits on April 25, 2011. Dkt. Nos. 21-26.
David and ISUFCU filed a reply on May 2, 2011. Dkt. No. 27.
A hearing on the summary judgment motion was held May 10, 2011. Supplemental briefs were submitted by David and ISUFCU on May 24, 2011, Dkt. No. 31, and by Trustee on June 7, 2011, Dkt. 32. The issues having been fully argued, and having considered the record, the parties' submissions, and applicable law, this Memorandum disposes of the motion. Rules 7052, 9014.
Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Rule 7056 (incorporating Fed. R. Civ. P. 56(a)). Here, the parties agree that, while there may be some disputed facts peripheral to the current motion for summary judgment,6 there is no genuine issue as to any material fact. Therefore, David and ISUFCU may be awarded summary judgment, if it can be shown they are entitled to judgment as a matter of law. The Court now examines each of David's and ISUFCU's theories to make that determination.
To continue reading
Request your trial