In re Howard
| Decision Date | 10 December 2009 |
| Docket Number | Adversary No. 09-02127JAD.,Bankruptcy No. 08-22224JAD. |
| Parties | In re John W. HOWARD, Debtor. Carlota M. Bohm, (Trustee for the Bankruptcy Estate of John W. Howard), Plaintiff, v. Victoria M. Howard, Defendant. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania |
Carlota M. Bohm, Mary-Jo Rebelo, Houston Harbaugh, P.C., Pittsburgh, PA, for Plaintiff.
Avrum Levicoff, Levicoff Silko & Deemer PC, Pittsburgh, PA, for Defendant.
This Adversary Proceeding concerns the competing rights of the Plaintiff, the Chapter 7 Trustee for the bankruptcy estate of John W. Howard, and the Defendant, Victoria M. Howard, with respect to certain mineral rights, including oil, gas and coal, underlying that certain tract of land situate in Whitley Township, Greene County, Pennsylvania and described more fully in that certain Quit Claim Deed annexed to this Memorandum Opinion at Appendix 1 (collectively, the "Mineral Rights").
By this Adversary Proceeding, the Trustee contends that due to her "strong arm" powers found at 11 U.S.C. § 544, the Trustee's interest in the Mineral Rights is superior to any interest claimed by Victoria M. Howard in such property. As such, the Trustee is requesting that the Mineral Rights, and any proceeds relating to the same, be turned over to the Trustee pursuant to 11 U.S.C. §§ 542(a) and 550(a).
Because the Defendant Victoria Howard caused the Mineral Rights to be quit claimed to herself after the filing of this bankruptcy case, the Trustee further requests that the Court declare the conveyance evidenced by the quit claim deed void pursuant to 11 U.S.C. §§ 362(a) and 549. In support of this request, the Trustee contends that the transfer violated the automatic stay and constitutes an unauthorized post-petition transfer because no prior bankruptcy court approval was sought or obtained in connection with the execution and recording of the quit claim deed. The Trustee also seeks compensatory and punitive damages pursuant to 11 U.S.C. § 362(k) as a result of the Defendant's willful violation of the automatic stay.
After the Adversary Proceeding was filed, and the pleadings closed, the Defendant filed a Motion for Summary Judgment requesting that the Adversary Proceeding be dismissed. The Chapter 7 Trustee objected to the Defendant's motion, and the Chapter 7 Trustee filed her own Cross-Motion for Summary Judgment.
After due consideration of the dueling motions and related submissions filed by the parties, along with the record made in these proceedings, it appears that there is no genuine issue of material fact and that the Trustee is entitled to a judgment as a matter of law with respect to (a) the Trustee's superior interest in the subject Mineral Rights and the proceeds associated with the same; (b) the Trustee's right to compel turnover of the subject Mineral Rights and its proceeds; (c) the voidability of the Defendant's claimed interest in the Mineral Rights and the voidability of the Defendant's attempt to improperly convey the Mineral Rights to or for the benefit of herself; (d) the liability of the Defendant with respect to her dissipation of proceeds of property of the estate; and (e) the liability of the Defendant's willful violation of the automatic stay.
The Court, however, also finds that the record of these proceedings is not currently developed enough to make any findings with respect to whether Ms. Howard should be required to pay the Chapter 7 Trustee any additional compensatory or punitive damages (above and beyond the turnover of the Mineral Rights and its proceeds) under the facts of this case. Given these circumstances, and for the reasons set forth herein, the Court will enter an order which (a) denies the Defendant's Motion for Summary Judgment, and (b) grants, in part, the Chapter 7 Trustee's Cross-Motion for Summary Judgment.
On April 4, 2008, John W. Howard, ("Debtor"), filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. (See Dkt. #1, Case No. 08-22224JAD). When he commenced this bankruptcy case, the Debtor was the sole shareholder of two closely held corporations, John Howard Chrysler Jeep Dodge, Inc. and John Howard Pontiac Buick-GMC, Inc. (collectively, the "Dealerships"). The Dealerships are also debtors in bankruptcy before this Court—with John Howard Chrysler Jeep Dodge, Inc. having filed for bankruptcy relief on February 7, 2008 at Case No. 08-20777-JAD and John Howard Pontiac Buick-GMC, Inc. having filed for bankruptcy relief on April 4, 2008 at Case No. 08-22223-JAD.
Shortly after the filing of John W. Howard's individual bankruptcy case, and upon motion of the Debtor's major creditor (United Bank), this Court ordered the appointment of a Chapter 11 Trustee on April 29, 2008. (See Dkt. #26, Case No. 08-22224-JAD).
The Court had ordered the appointment of a Chapter 11 Trustee because the Debtor had demonstrated a consistent pattern of either dishonesty and/or incompetence with respect to the management of his and his corporations' affairs, both before the filing of the instant case and thereafter.
Examples of the Debtor's dishonesty or incompetence included: the Debtor's failure to file an accurate list of all of his creditors when he commenced this bankruptcy case; the Debtor causing his business entities to sell vehicles "out of trust" to the detriment of United Bank; the Debtor's improper removal and transfer of records in the Dealership cases; and the transfer (or attempted transfer) of certain assets of this estate and/or the Dealership estates to friends and family of the Debtor. (See Audio Recording of Hearing, Courtroom D, 04/29/2009 from 1:28:00 PM-1:35:02, Case No. 08-22224-JAD).1
The Debtor's personal chapter 11 filing was converted to a liquidation under chapter 7 on July 14, 2008, and Carlota M. Bohm, who previously served as Chapter 11 Trustee for the bankruptcy estate of John W. Howard, was appointed as the Chapter 7 Trustee. (See Dkt. # s 162 and 191, Case No. 08-22224JAD). Ms. Bohm is the plaintiff in this action.
Defendant, Victoria M. Howard, is the Debtor's ex-spouse. The Debtor and Defendant were married on December 25, 1987 and divorced September 28, 1998. (See Dkt. # 27, pp. 3-4).2 The Defendant is also a creditor of the Debtor, having filed a proof of claim with this Court on May 27, 2008. (Claim # 5, Claims Register, Case No. 08-22224-JAD). The claim is signed by Ms. Howard, and avers that it is in the amount of "$6,000 per month" and the basis of the claim is alleged to be "permanent alimony."
It is undisputed that prior to their marriage, the Mineral Rights were owned by the Debtor. (See Dkt. # 31, Appendix 1 to the Trustee's Memorandum of Law in Response to Defendant's Motion for Summary Judgment or Partial Summary Judgment and in Support of Trustee's Cross Motion for Summary Judgment). In fact, no party has suggested otherwise in their submissions. Copies of the deeds submitted by the parties in connection with these proceedings reflect that John Howard and his prior wife, Peggy J. Howard, acquired the Mineral Rights in 1984 as tenants-by-entireties. (See Dkt. #31, Exhibit C). When that marriage ended in divorce, the Mineral Rights were essentially re-deeded by John W. Howard and Peggy J. Howard to John W. Howard only. (See Dkt. # 31, Exhibit E).3
The issues that permeate this case center solely on whether such Mineral Rights were in-fact ever conveyed to the Defendant Victoria M. Howard at any time prior to the commencement of the instant bankruptcy case, and whether Ms. Howard ever had adequately recorded her putative interest. No instrument in favor of the Defendant (reflecting that such alleged interest was duly recorded prior to the commencement of the Debtor's bankruptcy case) has been produced or filed with the Court in connection with these proceedings, and the Trustee's lien search yields none. (See Dkt. # 31, Appendix 1 to the Trustee's Memorandum of Law in Response to Defendant's Motion for Summary Judgment or Partial Summary Judgment and in Support of Trustee's Cross Motion for Summary Judgment).
When the Debtor and the Defendant Victoria Howard divorced in 1998, they executed a Property and Settlement Agreement, which was filed with and approved by the Circuit Court of Monogalia County, West Virginia. (See Dkt. # 31, Exhibit K).
A provision of the Property and Settlement Agreement states that "[a]ll of Victoria Marie Howard's interest in real estate holdings" were to be conveyed to the Debtor, excluding her interest in "the Florida home in Boca Raton, Florida ..." (See Dkt. # 31, Exhibit K, ¶ TWELFTH). The Property and Settlement Agreement further provided that the Debtor and Victoria Howard mutually remised, released and forever discharged each other from "any and all actions, suits, debts, claims, demands and obligations whatsoever, both in law or in equity, ... it being the intention of the parties ... that there shall be, as between them, only such rights and obligations as are specifically provided in this agreement." (Id. at ¶ EIGHTEENTH). In connection with the execution and approval of the Property and Settlement Agreement by and between the Debtor and Ms. Victoria Howard, Ms. Howard also deeded her Greene County real estate interests, if any, to John W. Howard and that deed was recorded in Greene County, Pennsylvania on September 23, 1998. (See Dkt. #31, Exhibit G).
Subsequent to the filing of the instant bankruptcy case and the appointment of the bankruptcy Trustee, the Defendant exercised control of the Mineral Rights on August 12, 2008 by executing a "Paid Up Oil and Gas Lease," (the "Oil & Gas Lease"), and she did so without the consent of the Trustee and without first obtaining approval of this Court. The Oil & Gas Lease entered into by the Defendant granted the right to explore and develop the Mineral Rights to an entity known as ...
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