In re Judd, C/A No. 06-01888 (Bankr. S.C. 9/10/2009)
| Decision Date | 10 September 2009 |
| Docket Number | C/A No. 06-01888.,Adv. Pro. No. 08-80034. |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re: Lee Holt Judd, Chapter 7, Debtor(s). Robert F. Anderson, Trustee, Plaintiff(s), v. Carol Simpson, Lillian Maresch, Van Wilson and Serepta Wilson, Defendant(s). |
THIS MATTER comes before the Court on cross motions for summary judgment pursuant to Fed. R. Civ. P. 56, made applicable to this adversary proceeding by Fed. R. Bankr. P. 7056. Plaintiff Robert F. Anderson ("Trustee") filed this adversary proceeding seeking recovery of $231,000.00 resulting from the pre-petition sale of property owned by Lee Holt Judd ("Debtor"). The amount in controversy was transferred to Defendant Carol Simpson ("Simpson") and then disbursed to Defendants Lillian Maresch ("Maresch"), Van Wilson and Serepta1 Wilson ("the Wilsons"). Trustee's Complaint claims that he can avoid the transfer as a pre-petition preferential transfer of the Debtor's property pursuant to 11 U.S.C. § 547(b), or alternatively that he may avoid the transfer as an unauthorized post-petition transfer of property of the estate pursuant to 11 U.S.C § 549.2 At the hearing on the motions, the parties proffered evidence and directed the Court's attention to certain portions of the record in this adversary and the underlying case as follows:
FACTS
1. This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157, 1334, and Local Civil Rule 83.IX.01 (DSC). This is a core proceeding pursuant to 28 U.S.C. § 157.
2. The Debtor filed for Chapter 11 protection on May 4, 2006. The Trustee was appointed in this case after it was converted to Chapter 7 on May 4, 2007.
3. On or about March 24, 2005, the Debtor executed a Mortgage of Real Estate in favor of Maresch. On or about March 24, 2005, the Debtor executed a Mortgage of Real Estate in favor of the Wilsons (collectively referred to as the "March 24 Mortgages").
4. Each of the March 24 Mortgages state that they secure loans existing on that date, plus future advances for a total not to exceed $198,000.00 (Wilson Mortgage) and $200,000.00 (Maresch Mortgage), costs, attorneys' fees incurred in collection and any payments made by the mortgagee to protect the mortgagee's interests in the property upon Debtor's default.
5. The March 24 Mortgages are virtually identical and they attach exhibits that refer to security including several Units at Mariner's Club in Moore County, Key Largo, Florida. The units are listed therein in the following order: Unit 708, 704, 206, 603, 711 and 806.3 After each Unit number, a more detailed property description is provided. Starting with Unit 704, the description states that each property is "more particularly described as Lot 4, Block 7, Key Largo North . . . ." This lawsuit involves the sale of Unit 603. While this "more particularly described as" information is correct for Unit 704, it is not correct for Unit 603.4 A portion of the exhibit appears as follows:
NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE
6. The parties stipulated at the hearing that the March 24 Mortgages were properly recorded and that Florida uses a Grantor-Grantee index for recordation of official real estate records. The parties agreed that there is only one Unit 603 at Mariner's Club and that it is visibly marked "Unit 603" at the property site.
7. The March 24 Mortgages were not recorded with the Monroe County Clerk of Court until November 2, 2005. The recording information on the March 24 Mortgage to Maresch appears as follows:
NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE
The recording information on the March 24 Mortgage to Wilson appears as follows:
NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE
8. Defendant Simpson filed an Affidavit (the "Simpson Affidavit') which includes the following information: Defendants Simpson and the Wilsons are related. Defendant Simpson is a lawyer engaged in real estate transactions and maintains an escrow account for that purpose. In the Fall of 2005, Maresch and the Wilsons asked Simpson to serve as escrow agent to receive payments owed to them by the Debtor. Maresch and the Wilsons held mortgages on multiple properties that the Debtor owned. As the Debtor sold or refinanced each property, Simpson stated that her duties were "to receive funds into my trust account and disburse the funds as instructed by Maresch and the Wilsons." She stated that any funds resulting from the sale of Debtor's properties were deposited into her escrow account and disbursed as instructed by Maresch and the Wilsons. She states that she had no control over the funds and her role was to "get the funds from the Debtor to Maresch and/or the Wilsons in amounts determined by them in their sole discretion." 9. The following agreement, executed between Defendants one day after the March 24 Mortgage was recorded, further evidences the relationships between the Debtor and Defendants:
10. The record includes a letter (the "April 2006 Letter") from an attorney in Florida to Simpson discussing negotiations between the Debtor and Defendants to settle outstanding business:
11. The Defendants assert that the transfer the Trustee seeks to recover was a payment to Maresch and the Wilsons on account of and applied to debts owed to each of them that are secured by the March 24 Mortgages on Unit 603. The Trustee's Complaint alleges that on or about June 28, 2005, Maresch loaned the Debtor $200,000.00 evidenced by a Promissory Note of the same date. Defendants admit this allegation in their Answer. The Note states that it "is secured by a mortgage of even date . . . ." although no such mortgage is in the record. This Note was dated more than three months after the March 24 Mortgages.
12. The Complaint alleges that on or about July 1, 2005, the Wilsons loaned the Debtor the sum of $198,000.00, evidenced by a Promissory Note of the same date. The Note was dated more than three months after the March 24 Mortgages. The Note states that it "is secured by a mortgage of even date . . . ." although that document is not in the record. In Defendants' jointly filed Answer they deny that the loan from the Wilsons to the Debtor was made on July 1, 2005, and instead state that the Wilsons "loaned $198,000.00 to Debtor in December 2004."
13. On April 27, 2006, Debtor sold/transferred her interest in Unit 603 to her father, John T. Holt ("Holt"). Holt financed the transfer of the property from Debtor with loans from and granted mortgages to third party lenders, and the resulting sales proceeds were placed in the closing agent's escrow account to pay claimed encumbrances. The Settlement Statement indicates a sales price of $1,350,000.00 and indicates payments for "Payoff of first mortgage loan to American Home Mtg" and "Payoff of second mortgage loan to EMC Mortgage," and the sum of $231,000.00 was earmarked to "Payoff of third and fourth mortgage." Defendants assert that the last amount was a payment to Maresch and the Wilsons to obtain a Partial Release of Unit 603 from the March 24 Mortgages. The Settlement Statement indicates significant funds remaining from the sale of Unit 603 for the Debtor/Seller. Trustee's Memorandum asserts that some of the figures in the Settlement Statement are incorrect, but does not elaborate. Comprehensive Title Company served as the closing agent.
14. The Debtor's bankruptcy petition was received electronically at 3:35 p.m. on May 4, 2006 per the Court's records.5
15. At the time of the Debtor's bankruptcy filing Defendants Maresch and the Wilsons had not personally received any funds earmarked for the "Payoff of third and fourth mortgage." On May 4, Comprehensive wired $231,000.00 to Simpson. Defendants proffered a portion of the deposition testimony of an officer of the closing agent wherein he speculated that "he was uncertain as to the exact time of day the wire was sent, but he knew that it had to be before 3:00 pm because his bank did not send wires after that time." The money was present in Simpson's trust account on May 5, 2006, at 11:14 a.m. However, there is no evidence in the record regarding the exact status of the funds prior to the time they reached Simpson's account on May 5.
16. At the time the Debtor filed bankruptcy, the deed transferring Unit 603 to her father and the mortgages thereon that he obtained to accomplish the transfer were not yet recorded on the public record. The Trustee previously filed related A/P No. 08-80012, Anderson v. John T. Holt, SunTrust Mortgage, Inc., and EMC Mortgage Corp., seeking recovery of Unit 603 from Holt as a fraudulent conveyance pursuant to 11 U.S.C. § 548. Holt did not Answer the Complaint, and the Court entered a default judgment against Holt voiding the deed received from Debtor. Holt's default resulted in Trustee's recovery of Unit 603. The Trustee sold Unit 603 pursuant to an order of this Court and is holding the sum of $391,336.78, with any liens attaching to the proceeds of the sale pending resolution of any lien issues. Co-defendants in that adversary, SunTrust and EMC, asserted liens on the proceeds and the Trustee challenged their liens pursuant to 11 U.S.C. § 544(a)(3). This Court granted summary judgment to SunTrust and EMC Mortgage in that matter on August 6, 2009, which would require payment of the sales proceeds to those co-defendants. At this time an appeal of that decision is pending. 17. The Wilsons submitted an affidavit (the " Wilson Affidavit") dated September 5, 2008, which provides details regarding the closing of the sale of Unit 603:
5. In April 2006, the Debtor sold Unit 603 and wired $231,000...
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