In re Inv. Sales Diversified, Inc.
| Decision Date | 24 May 1985 |
| Docket Number | 4-82-763 and 4-82-764,Adv. No. 4-84-72.,Bankruptcy No. 4-82-740 |
| Citation | 49 BR 837 |
| Parties | In re INVESTMENT SALES DIVERSIFIED, INC., f/k/a Developers' Sales, Inc., Developers' Sales, Inc., Developers' Sales Escrow, Inc., Debtors. William J. JOANIS, Trustee, Plaintiff, v. WAYZATA BANK & TRUST COMPANY, Helen Argue, Carole E. Zajac, Christine Muegge, First Guaranty Corporation, Richfield Bank & Trust Company as Trustee for Gordon Christianson, Sylvester Killeen and Anne Regan, Defendants. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Michael D. Schwartz, Schwartz & Corey, P.A., Minneapolis, Minn., for debtors.
Manly A. Zimmerman, Zimmerman & Bix, Minneapolis, Minn., for Wayzata Bank & Trust.
William J. Joanis, Briggs & Morgan, P.A., St. Paul, Minn., Trustee.
Ronald H. Groth, Thompson, Wahlfors, Moran & Groth, Minneapolis, Minn., for Argue & Muegge.
The above-entitled matter came on before the Honorable Margaret A. Mahoney, Bankruptcy Judge, upon the parties' stipulated facts and written arguments. The Plaintiff, the Chapter 7 Trustee in the related bankruptcy cases, alleges in his complaint that certain transfers of real property to the Defendants in this matter are voidable and includable as property of the estate pursuant to 11 U.S.C. §§ 544, 550, and 541 and applicable state law. This court has jurisdiction to hear and decide this matter pursuant to 28 U.S.C. §§ 1334 and 157, and Judge Lord's July 27, 1984, Order of Reference.
The Plaintiff in this matter is the acting Chapter 7 Trustee in three inter-related bankruptcies: Investment Sales Diversified, Inc. (ISD), Developers' Sales, Inc. (DSI), and Developers' Sales Escrow, Inc. (DSEI). ISD filed its Chapter 7 proceeding on April 23, 1982, and DSI and DSEI filed Chapter 7 petitions on April 27, 1982. ISD was in the business of buying and selling mortgages and vendor's interests in contracts for deed. DSI was the broker for the transactions in which ISD was involved. Moreover, DSEI served as manager and servicing agent for those contracts and mortgages. The Debtor companies were intertwined to the extent that it is nearly impossible to distinguish one from the other in that they maintained a common office and a common filing system. For the purpose of this adversary proceeding, the Debtor companies will be referred to collectively as the "Debtors," except where specific reference to one of the Debtors is necessary.
The property which is the subject of the dispute herein is the ownership of a vendor's interest in a contract for deed covering real estate situated in Hennepin County, Minnesota, and legally described as Lot 10, Block 2, Fisk's Addition to Minneapolis. The file number utilized by the Debtors with respect to this transaction was 8536A.
Prior to April 1, 1981, Richard C. and Delores J. Simonson, husband and wife, were the equitable owners of the real estate which they were purchasing from Leander James and Mary E. Schlosser, husband and wife. On June 5, 1981, the Schlossers delivered a warranty deed to the Simonsons and that deed was recorded on June 22, 1981. Approximately two months earlier, on April 1, 1981, the Simonsons had entered into a contract for deed with Shane E. Cunningham whereby the Simonsons sold the real estate to Cunningham, who remained in possession of such real estate at the time the bankruptcy petitions were filed.
On or about June 5, 1981, ISD purchased the vendor's interest in the contract for deed and obtained an assignment of the contract for deed and warranty deed from the Simonsons. That warranty deed was recorded on June 22, 1981.
On April 14, 1981, the Defendant Wayzata Bank and Trust Company (Bank), as trustee for Clinton Bliss, entered into an agreement with DSI under which agreement the Bank purchased an undivided 19 percent vendor's interest in the contract for deed between the Simonsons and Cunningham. Pursuant to that agreement, DSEI was to manage the contract. On June 19, 1981, ISD assigned the aforesaid 19 percent vendor's interest in the contract for deed between the Simonsons and Cunningham to the Bank as trustee for Bliss. Although both the assignment of the contract for deed and the warranty deed from ISD to the Bank were dated June 19, 1981, they were not notarized until February 16, 1982. Neither document was filed of record at the time the bankruptcy petitions were filed. On or about June 19, 1981, the Bank paid ISD the consideration previously agreed to on April 14, 1981.
The Bank and DSI entered into an agreement dated April 14, 1981, pursuant to which the parties agreed that DSEI would manage the contract for deed for the Bank at a cost of $36 per year. The Bank and DSEI further executed a management agreement which described the rights of the parties in relation to the servicing of the contract. Pursuant to the agreement, Cunningham's payments on the contract for deed were received by DSEI on behalf of the Bank. Such an arrangement was in effect at the time the bankruptcy petitions were filed.
On or about June 19, 1981, at the same time as the Bank was completing its transaction, Richfield State Bank, as trustee for Harold E. Hilbrand, paid for the remaining 81 percent vendor's interest in the contract for deed between the Simonsons and Cunningham, and obtained the necessary documents to record its interest in the premises. Those documents were recorded prior to the filing of the bankruptcy petitions, and the Plaintiff has not attempted to avoid the interest of Richfield State Bank as trustee in its 81 percent of such contract for deed.
Subsequent to the filing of the bankruptcy petitions, Lakes Realty purchased from Cunningham the real estate by extending the contract for deed. In order to approve such extension, the parties agreed that the Bank would hold the title for convenience purposes and in trust pending the resolution of this dispute. The total equity in the 19 percent vendor's interest in the contract for deed is approximately $4,000.
The property which is the subject of the dispute between the Plaintiff and Defendant Argue is real estate situated in Ramsey County, Minnesota, and legally described as Lot 9, Block 4, Excelsior Park, according to the recorded plat thereof. The file number utilized by the Debtors with respect to this transaction was 8520. The record fee owner of the subject real estate has at all relevant times been the Administrator of Veterans' Affairs (Administrator).
The Administrator entered into a contract for deed with Arthur D. and Sharon M. Larson, which contract for deed was subsequently filed of record. The Larsons sold the real estate to Johnny and JoAnne Byers on a contract for deed dated February 5, 1980, and filed of record on February 14, 1980. The Byers subsequently entered into a contract for deed with Thomas J. Geermscheid on September 28, 1981. It was filed of record on November 16, 1981. Geermscheid remained in possession of the real estate at the time the bankruptcy petitions were filed.
The Byers assigned their interest in the contract for deed with Geermscheid to ISD by an assignment dated September 28, 1981, and a quit claim deed dated September 28, 1981. The quit claim deed was filed of record on November 16, 1981. ISD assigned its interest in that contract for deed to defendant Argue by an assignment of contract for deed and a quit claim deed, each of which are dated September 29, 1981. Neither the assignment of contract for deed or the quit claim deed were filed of record.
Argue and DSI entered into an agreement dated September 14, 1981, pursuant to which the parties agreed that DSEI would manage the contract for deed for Argue at a cost of $36 per year. The parties further executed a management agreement which delineated the rights of the parties in relation to the servicing of the contract. Pursuant to the agreement between Argue and the Debtors, Geermscheid's payments on the contract for deed were received by DSEI on behalf of Argue. Such an arrangement was in effect at the time the bankruptcy petitions were filed.
The property which is the subject of this dispute between the Plaintiff and Defendant Muegge is real estate situated in Scott County, Minnesota, and legally described as Lot 1, Block 1, Grommesch Estates. The file number utilized by the Debtors with respect to this transaction was 8316B. The record fee owner of the real estate was, as of August 11, 1980, David J. and Linda L. Grommesch.
The Grommeschs sold the real estate on a contract for deed to Michael G. and Margaret D. LaPlant by a contract dated August 11, 1980, which was filed for record on August 12, 1980. The Grommeschs transferred their interest in the real estate to ISD by warranty deed dated May 8, 1981, and filed May 11, 1981.
On August 25, 1981, ISD assigned an undivided 21.5 percent interest in that contract for deed to Defendant Muegge. The assignment was dated August 25, 1981, and was filed on May 3, 1982. The LaPlants remained in possession of the real estate at the time the bankruptcy petitions were filed.
Muegge and DSI entered into an agreement dated August 18, 1981, pursuant to which the parties agreed that DSEI would manage the contract for deed for Muegge. The parties further executed a management agreement which delineated the rights of the parties in relation to the servicing of the contract. Pursuant to the agreement between Muegge and the Debtors, the contract for deed payments were received by DSEI on behalf of Muegge and such an agreement was in effect at the time the bankruptcy petitions were filed.
Pursuant to an agreement between the plaintiff and Muegge dated June 17, 1983, the parties conveyed fee title to the LaPlants, the vendees of the contract for deed described above. The Court entered an Order dated May 10, 1983, approving the making of that agreement. Pursuant to...
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