In re Marchman
| Decision Date | 04 May 2001 |
| Docket Number | Bankruptcy No. 99-6111-DHW. Adversary No. 00-172-DHW. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Alabama |
| Parties | In re Dennis Byron MARCHMAN, Debtor. Kenneth R. Jones, Trustee, Plaintiff, v. Dennis Byron Marchman, Debra Bragg Marchman Davis, Susan B. Snider, Hilda B. Jackson, Marilyn B. Jinks, Norman R. Williams, and The Estate of Edna Bragg Babcock, Deceased, Defendants. |
Mac Borland, Jr., Dothan, AL, for debtor.
Collier H. Espy, Jr., Espy, Metcalf & Poston, P.C., Dothan, AL, for Debra Bragg Marchman Davis.
E. Terry Brown, Chambless, Math, Moore, Brown & Carr, P.C., Montgomery, AL, for trustee.
Charles H. McDougle, Jr., Dothan, AL, for defendants.
The chapter 7 trustee filed a complaint under 11 U.S.C. § 363(h) on August 21, 2000 to sell real property located at 108 Breckenridge Lane, Dothan, Alabama.
The trustee claims a one-half interest in the property. The trustee does not dispute that Debra Marchman Davis, former wife of the debtor, owns the other one-half interest nor that the estate of Edna Bragg Babcock holds a valid and properly perfected first mortgage on the property. Debra Marchman Davis, Susan B. Snider, Hilda B. Jackson, Marilyn B. Jinks and Norman R. Williams are co-executrices and executor of the estate of Edna Bragg Babcock.
Debra Marchman Davis disputes the trustee's interest in the property. Following a pretrial conference, Debra Marchman Davis and the trustee submitted the issue to the court on briefs and stipulated facts. The court treats the parties' submission as cross motions for summary judgment.
The court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding under 28 U.S.C. 157(b)(N) and (O).
The following facts are stipulated:
1. Dennis Byron Marchman ("debtor") and Debra Marchman Davis ("Davis") jointly owned the real property located at 108 Breckenridge Lane, Dothan, Alabama which served as their marital residence.
2. The debtor and Davis were divorced on March 18, 1999 by a Judgment of Divorce entered in the Circuit Court of Houston County, Alabama.1 The judgment of divorce provides as follows: "The Plaintiff Davis is awarded the full title and ownership, and use of the parties' marital home at 108 Breckenridge Lane, Dothan AL, and the Defendant debtor is divested of any interest in the same."
3. At the time of the divorce, the marital residence was subject to a valid and properly perfected, and recorded, first mortgage now held by the Estate of Edna Bragg Babcock. The judgment of divorce required Davis to assume and pay the outstanding mortgage.
4. The Circuit Court of Houston County entered a subsequent order2 on October 21, 1999 which, inter alia, addressed the subject real property as follows:
Upon Davis tendering to the debtor the sum of $5,652.85 representing the debtor\'s salary in the business known as Floors, Doors, & More and equity in said business, land, and home, then Davis would be entitled to a deed from the debtor conveying to her all of his right, title, and interest in said home located on Breckenridge Lane, Dothan, Alabama.
5. The debtor filed a petition under chapter 7 of the Bankruptcy Code on December 7, 1999 by which time Davis had not paid $5,652.85 to the debtor, and the debtor had not executed a deed conveying his one-half interest to Davis. The mortgage had an estimated balance of $100,000.00.
The chapter 7 trustee seeks authority to sell the Breckenridge Lane property under § 363(h) which provides:
Davis contends that the trustee does not have an interest in the property to sell under 11 U.S.C. § 363(h). Davis contends that the debtor "merely held an undivided equitable interest in the marital residence subject to" the receipt of $5,652.85.3
The trustee claims a one-half interest in the property contending that the judgment of divorce did not effect a transfer of the debtor's interest. The trustee contends that payment of the $5,652.85 was a condition precedent to the debtor's obligation to issue a deed. Because the condition was not fulfilled, the debtor retained title to his one-half interest in the property.
The trustee relies on Grass v. Ward, 451 So.2d 803 (Ala.1984). In Grass, a husband and wife owned real property jointly. The divorce decree awarded possession of the property to the wife as long as she made the mortgage payments. The court required the husband to execute a quitclaim deed upon her satisfaction of the mortgage (on which he was liable).
The wife satisfied the mortgage, but the husband failed to execute a deed conveying his interest in the property. When years later a dispute arose over entitlement to the property, the Supreme Court held that under the doctrine of equitable conversion, equitable title transferred to the wife upon her fulfillment of the condition precedent; that is, upon her satisfaction of the mortgage.
The trustee compares Grass to the facts of the case at bar contending that payment of the $5,652.85 was a condition precedent to the debtor's obligation to execute a deed.4 Because the condition precedent was not fulfilled, the trustee contends that equitable conversion did not occur, and the debtor retained both legal and equitable title to the property. The court disagrees.
The March 1999 state court judgment of divorce unequivocally and unconditionally awards "full title and ownership" of the marital residence to Davis an divests the debtor of "any interest" in the property.5 This court concludes that the judgment of divorce transferred title to the debtor's one-half interest in the property to Davis. Therefore, the debtor owned no interest in the property when he filed the chapter 7 petition.
This court construes the October 1999 state court order differently from the trustee. The order was the result of complaints by both parties of noncompliance with the judgment of divorce.6 The order was in effect an accounting of the liabilities of the parties under the judgment of divorce. The net result was that Davis owed the debtor $5,652.85.
The intent and purpose of the divorce court, evidenced from the proceedings and decree as a whole, must control. Burnett v. Roy Martin Construction, Inc., 847 F.2d 704, 706 (11th Cir.1988) (citing Martin v. Magnolia Terrace, 366 So.2d 275 (Ala.1979)).
Reading the March and October orders together, the court concludes that the state court intended for the debtor's execution of a deed to serve as a type of security for the payment of Davis' monetary obligation. Nowhere in either of the state court orders is there any indication that the court meant for the debtor to retain any interest in the subject property or for Davis to withhold payment of the $5,652.85.
Therefore, the court finds that at the time of the filing of the bankruptcy, the debtor had no interest in the property which could become property of the estate under 11 U.S.C. § 541. At best, the estate held bare legal title in trust for Davis under the doctrine of equitable conversion. The trustee, of course, succeeds to that legal interest only. 11 U.S.C. § 541(d).
The trustee further contends the transfer of the debtor's one-half interest in the property under the judgment of divorce is avoidable by the trustee's "strongarm" powers under 11 U.S.C. § 544(a):7
The issue is whether the transfer of the debtor's interest would be avoidable by a hypothetical judgment creditor or purchaser from the debtor at the time of the commencement of the case.
The trustee contends that the transfer would be avoidable under 11 U.S.C. § 544(a) because the judgment of divorce was not recorded pursuant to Ala.Code 35-4-90 (1975).8
The question arises whether the recording statute is applicable to judgments of divorce. The recording statute in Alabama is very broad and...
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