In re Pavich
| Decision Date | 02 January 1996 |
| Docket Number | Bankruptcy No. 92-27109-A-13. Adv. No. 93-2054. |
| Citation | 191 BR 838 |
| Court | U.S. Bankruptcy Court — Eastern District of California |
| Parties | In re John PAVICH, Debtor. Leslie BERNSTEIN and Elaine Bernstein, Plaintiffs, v. John PAVICH, et al., Defendants. |
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Richard Bernstein, Brodovsky & Brodovsky, Sacramento, California, for plaintiffs/creditors Leslie Bernstein and Elaine Bernstein.
Eric Schwab formerly with Law Office of W. Scott de Bie, Sacramento, California, for defendant/debtor John Pavich1.
Clyde O. West, Sacramento, California, for defendant Thomas Freeburger.
Michael Peritore, Sacramento, California, for defendant Zarko Stojanovich.
Jeffrey R. Meyer, U.S. Department of Justice, Washington, DC, for defendant Internal Revenue Service.
Yvonne Aldama, Sacramento, California, for Chapter 13 Trustee Lawrence J. Loheit.
Defendant Ljubica Pavich, Elk Grove, California, in pro per (who did appear, however, at the hearing).
Debtor John Pavich brought this motion for summary judgment in this adversary proceeding to determine the order and priority of liens and to determine the distribution of the remaining funds on hand from the sale of the Debtor's residence. Plaintiffs Leslie and Elaine Bernstein joined in this motion. The Internal Revenue Service ("IRS") filed a separate motion for summary judgment to determine its priority, admitting subordination to the consensual lien of Plaintiffs Leslie and Elaine Bernstein.
Prior to July 2, 1987, Debtor John Pavich and his wife, Defendant Ljubica Pavich ("Ljubica"), owned as joint tenants, the real property at 9440 Grant Line Road, Elk Grove, California (hereinafter "the property" or "the residence"), subject to a deed of trust held by Citibank. They also owned an adjacent parcel of real property which they sold on June 29, 1987 to Robert D. and Jo Ann Bertram. The grant deed for this sale was recorded a few days later on July 2. On August 14, 1987, Defendants executed a promissory note in the amount of $25,000 in favor of Plaintiffs Leslie Bernstein and Elaine Bernstein (hereinafter "Plaintiffs"). The deed of trust intended to secure the Plaintiffs' loan was recorded in the Sacramento County Recorder's Office on August 24, 1987 (hereinafter "the 1987 deed of trust"). However, the property description contained in that deed of trust actually described the adjacent parcel previously sold to the Bertrams.
In November and December 1987 two abstracts of judgment, each against the Debtor individually, and doing business as J & B Painting, were recorded in the Sacramento County Recorder's Office. Defendant Thomas Freeburger recorded his abstract on November 9 in the amount of $3,300.12, and on December 24, Defendant Zarko Stojanovich recorded his abstract for $50,841.
When the title company handling the Bernstein loan transaction discovered that the 1987 deed of trust described the adjacent parcel rather than the residence, it requested the Debtor and Ljubica to execute a new deed of trust in favor of Plaintiffs. The new deed containing the legal description of the residence was recorded on January 6, 1988 (hereinafter "the 1988 deed of trust").
On March 11, 1988, Debtor filed an individual petition for relief under Chapter 7 of the Bankruptcy Code in this court (case No. 288-01628-A-7), listing Defendants Freeburger and Stojanovich as creditors. The Debtor received his discharge on August 8, 1988, and the case was subsequently closed. Neither he nor the trustee, however, took any action to avoid any of the liens against the property.
Defendant Kerr Stock Farm was not listed as a creditor, although its claim apparently pre-dated the filing of the Chapter 7 petition. On November 16, 1989, Defendant Kerr Stock Farm recorded an abstract of judgment against the Debtor individually in the amount of $10,059.
On July 30, 1991, the IRS recorded a tax lien against John and Ljubica Pavich in the amount of $7,413 for the 1986 tax year. The IRS recorded a second tax lien on September 27, this time in the amount of $1,029.97 for the 1990 tax year. Prior to the second IRS lien, Sacramento Prosthodontic recorded an abstract of judgment on September 18, 1991 against the Debtor individually for $2,709.47.
On January 17, 1992, the Debtor filed an individual petition for relief under Chapter 13 of the Bankruptcy Code in this court (Case No. 92-20505-A-13). Five days later, creditor Retailers Credit Association ("RCA") recorded an abstract of judgment against both the Debtor and Ljubica in the amount of $1,850.64. There is no indication that RCA obtained relief from the automatic stay before recording its abstract. On July 14, 1992, the case was dismissed for lack of a feasible plan.
Debtor filed the instant Chapter 13 case (Case No. 92-27109-A-13) again as an individual on August 14, 1992. He listed the residence as his homestead, claiming an exemption in the amount of $100,000 on the grounds that he was disabled. No objections were timely filed to his exemption claims.
In his Plan filed with the court on September 10, the Debtor proposed to pay $100 per month for 12 months and to sell his residence within the same time "so as to pay all debts in full." Pursuant to an order of this court filed on September 16, 1992, (hereinafter "the order of sale") the property was sold free and clear of liens and other interests for $300,000. As provided by the order of sale, Citibank, as the senior lienholder, and escrow fees and closing costs were paid through escrow, with unpaid liens and encumbrances attaching to the remaining proceeds, which were transferred to the Chapter 13 Trustee to be held in a blocked, interest-bearing account. The balance of the proceeds currently held by the Chapter 13 Trustee is approximately $84,750.00. Ljubica, the IRS, the judgment lien creditors, and the Chapter 13 Trustee all claim an interest in the sale proceeds.
On February 3, 1993, Plaintiffs Leslie Bernstein and Elaine Bernstein filed this adversary proceeding to determine the priority of the remaining claims to the proceeds of the sale of the property. Although the Debtor died in March of 1994, his former counsel filed the instant motion for summary judgment in October. Plaintiffs joined the motion and the IRS filed a concurrent motion for summary judgment. All movants seek a determination of each creditor's priority status.
These motions for summary judgment raise a number of issues. The more significant issues may be summarized as follows. First, are Ljubica's rights in the property separate from the Debtor's, and if so, what effect do the asserted liens have on her interest? Second, does the 1988 deed of trust correct and relate back to the filing of the 1987 deed of trust so as to give Plaintiffs priority over the intervening judgment liens? Third, do the Debtor's homestead rights take precedence over the judgment liens? Fourth, what is the priority of the IRS tax liens? Fifth, how should the proceeds be distributed?
Under Fed.R.Civ.P. 56, a plaintiff or defendant may bring a motion for summary judgment upon all or any part of a claim. Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). There can be no genuine issue of material fact if a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and upon which that party bears the burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).
Initially, the moving party bears the burden of proving that there is no genuine issue as to any material fact. See Fed. R.Civ.P. 56(c). Once the moving party has met this burden, the nonmoving party then must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In determining whether to grant summary judgment, the court must view the evidence presented in a light most favorable to the nonmoving party. See, e.g., United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962); Hutchinson v. United States, 838 F.2d 390, 392 (9th Cir.1988). However, the nonmoving party may not merely rest upon the allegations or denials of its pleadings. Fed.R.Civ.P. 56(e). If the nonmoving party fails to respond, then summary judgment if appropriate will be granted in favor of the moving party. Id.
In California, there is a presumption that all property acquired during the marriage by married persons domiciled in the state is "community property." Cal. Fam.Code § 760. This presumption, however, is overcome when a declaration in a deed or other title instrument indicates spouses take title to property as joint tenants. In re Rhoads, 130 B.R. 565, 567 (Bankr.C.D.Cal. 1991); accord In re Miles, 35 B.R. 52 (Bankr. E.D.Cal.1983). When spouses take title to property as joint tenants, each holds his or her interest as separate property. See Cal. Fam.Code § 850; Miles, 35 B.R. at 53; see also Marriage of Leversee, 156 Cal.App.3d 891, 203 Cal.Rptr. 481 (1984). Because the joint tenancy interest is separate, a non-debtor spouse is entitled to one-half of the proceeds from the sale of the joint tenancy property. In re Gorman, 159 B.R. 543, 546 (Bankr. 9th Cir.1993); see also 4 B.E. Witkin, Summary of California Law, Real Property § 256 (9th ed. 1987).
Ljubica is not a debtor and claimed her one-half interest in the property as a joint tenant in her answer to the complaint....
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