In re Pina

• Decision Date: 06 March 2007
• Docket Number: No. 06-12205-JNF.,06-12205-JNF.
• Citation: 363 B.R. 314
• Parties: In re Patricia Renee PINA, Debtor.
• Court: U.S. Bankruptcy Court — District of Massachusetts

Page 314

363 B.R. 314

In re Patricia Renee PINA, Debtor.

No. 06-12205-JNF.

United States Bankruptcy Court, D. Massachusetts.

March 6, 2007.

COPYRIGHT MATERIAL OMITTED

Richard J. Cohen, Richard J. Cohen, Esq., P.C., Centerville, MA, for Debtor.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matter before the Court is the "Motion of KAC Associates, LLC and Brian Conefrey to Compel Compliance with State Court Order or, in the Alternative, to Dismiss the Case or Grant Relief from Stay" (the "Motion to Compel"). Pursuant to the Motion to Compel, KAC Associates, LLC ("KAC") and Brain Conefrey ("Conefrey")(collectively, "KAC") primarily seek an order compelling this Court to give effect to a final, non-appealable judgment of the Massachusetts Superior Court, Department of the Trial Court, dated October 11, 2005. That order required the Debtor, Patricia Renee Pina (the "Debtor"), to convey her 51% interest in a 36.51 acre property located at 59 Parsonage Road, Plympton, Massachusetts, known as Aces Wild Farm & Ranch (the "Property"), to KAC under the terms of a Co-Tenancy Agreement. Both the Chapter 7 Trustee of the Debtor's bankruptcy estate, Donald Lassman, Esq., and the Debtor filed Oppositions to. KAC's Motion to Compel.

The Court heard the Motion to Compel on December 13, 2006 and directed the parties to file briefs by December 20, 2006. The Debtor did not file a brief in support of her position as it mirrors that of the Trustee. KAC and the Trustee timely filed briefs, as well as supplemental briefs.

The principal issue for determination is whether the Trustee's status as a bona fide purchaser for value under 11 U.S.C. § 544(a)(3) is superior to KAC's rights under the October 11, 2005 judgment. For the reasons set forth below, the Court concludes that the Trustee's statutory status prevails over the pre-petition rights of KAC to enforce its state court judgment.

The facts necessary to decide the issue are not in dispute, although the legal import given to those facts is contentious. Because the material facts are not in dispute, and because neither KAC nor the Trustee requested an evidentiary hearing, the Court shall treat the Motion to Compel and the alternative requests for relief set forth in the motion as a motion for summary judgment. See Fed. R. Bankr.P. 7076. The Court now makes its findings of fact and rulings of law in accordance with Fed. R. Bankr.P. 7052.

II. FACTS

The Debtor filed a voluntary Chapter 7 petition on July 10, 2006. She failed to list three prior bankruptcy cases on her petition, specifically a Chapter 13 case (Case No. 01-17221-CJK), which was filed on September 17, 2001, and two Chapter 12 cases: Case No. 02-11307-CJK, which was filed on February 25, 2002, and Case No. 02-13593-CJK, which was filed on May 12, 2002. In the Chapter 12 case immediately preceding this Chapter 7 case, Case No. 02-13593-CJK, the Debtor procured financing from KAC and Conefrey, proposed a Chapter 12 Plan through which she paid her unsecured creditors in full, and obtained a discharge on March 15, 2004.

In obtaining confirmation of her Chapter 12 plan, the Debtor disclosed that she was a licensed equine professional and that she purchased the Property in 1998 for the purpose of operating a horse breeding farm for American Quarter Horses. She stated that it had been her intention to breed, train, and sell Quarter Horses for profit, but that her business plans went awry because of "dropped foal syndrome," the result of the ingestion by mares of debris and pests associated with wild cherry trees.

The Debtor's Chapter 12 Plan required a loan from investors which was contingent upon a sale of 49% of her interest in the Property to Conefrey for $140,000.00, subject to all preexisting liens and encumbrances, as well as Conefrey's agreement, as joint owner, to co-sign a loan from, and first mortgage to, the investors. The Debtor further disclosed her intention to execute the Co-Tenancy Agreement within thirty days of confirmation.

Judge Kenner confirmed the Debtor's Chapter 12 Plan on September 17, 2002. In accordance with the representations in her Chapter 12 Plan, the Debtor and KAC executed a Co-Tenancy Agreement on October 17, 2002. Its purpose was

to establish the rights of each Co-Tenant as they relate to the Property and to establish a framework in which the Co-Tenants will (a) own, operate, maintain, develop in any way deal with the Property and (a) [sic] own, operate, maintain, develop a horse farm business that will include, but not be limited to breeding, boarding and lessons.

The Agreement provided that "the Property shall be real property for all purposes" and that "for income tax purposes only the Co-Tenancy shall be treated as a partnership." Additionally, the Co-Tenancy Agreement contained provisions relating to a "deadlock" between the Debtor and KAC, which would be "deemed to exist whenever the Co-Tenants cannot unanimously agree on any of the decisions requiring their unanimous approval in accordance with the terms of this Agreement, within fifteen (15) business days after a Co-Tenant requests the consent or approval of the other Co-Tenants to any such decision."

On April 19, 2004, approximately a year and a half after the Debtor and KAC executed the Co-Tenancy Agreement and approximately one month after the Debtor's Chapter 12 bankruptcy case was closed, KAC offered to purchase the Debtor's 51% interest in the Property for $75,000.00, or, in the alternative, for the Debtor to purchase KAC's interest in the Property for $75,000.00. Because the Debtor failed to respond to its offer, on June 24, 2004, KAC filed a Complaint in the Superior Court seeking an order requiring the Debtor to convey her interest in the Property to it for a purchase price of $75,000.00.

On November 3, 2004, while the Superior Court action was pending, the Massachusetts Society for the Prevention of Cruelty to Animals (the "MSPCA") seized 28 horses and 33 sheep located on the Property. Although the Debtor listed a claim against the MSPCA as an asset on Schedule B-Personal Property, the MSPCA, in its proof of claim and other pleadings filed with this Court, has alleged that the animals on the Property in Plympton were in "inexcusably poor condition from prolonged mistreatment and neglect."

KAC filed a motion for summary judgment in the Superior Court action, but the court denied it, finding that under the "deadlock" provisions of the Co-Tenancy Agreement KAC's offer to purchase the Property lacked specificity with respect to the parties' future liability for the mortgages encumbering the Property. See KAC Assocs., LLC v. Pina, No.2004-799, Slip Op. at 1 n. 1 (October 11, 2005). After KAC's first motion for summary judgment was denied, it sent another letter to the Debtor dated February 17, 2005 containing a new proposal which gave the Debtor "the option to either sell her interest in the Property to KAC for $75,000.00 minus costs associated with interest on the loans and taxes on the Property, or to buy KAC's interest in the Property for the same purchase price." Id. at 3-4. KAC also proposed to pay off six outstanding mortgages on the Property which as of February 25, 2005 had a collective balance exceeding $500,000.00. Id. at 4. The Debtor refused KAC's offer and, on April 29, 2005, KAC renewed its motion for summary judgment on its claim for specific performance. Id. at 4-5.

On October 11, 2005, the Superior Court granted that KAC's second motion for summary judgment, finding that the Debtor had failed to make mortgage payments in April, May and June of 2004 and that KAC, prior to sending the April 19, 2004 offer, had proposed subdividing up to one-half of the Property into building lots to generate capital for the horse farm business, to reduce debt, and to build an indoor riding arena. According to the Superior Court, the Debtor, whose consent was required under the Agreement, failed to respond to KAC's proposal, thereby creating a deadlock under the Agreement. The Superior Court determined that under section 10.9(a)(iv)(B)(1) of the Agreement, KAC, as the "Proposing Party," had the option to designate a purchase price for the Property by giving notice of the purchase price to the "Refusing Party." Id. at 3.

After a thorough examination of the deadlock provisions, the Superior Court determined that

[w]hen Pina rejected KAC's proposal on March 16, 2005, she became obligated to sell her interest in the Property to KAC under the terms contained in the February 17, 2005 proposal. Accordingly, there is no genuine issue of material fact with respect to the enforceability of the deadlock provision of the Agreement; therefore, KAC is entitled to summary judgment as a matter of law.

Id. at 6-7. The Superior Court entered an order directing the Debtor to convey her interest in the Property to KAC under e terms and provisions of the February 17, 2005 proposal in accordance with Article 10.9 of the Agreement. Id. at 7.

The Debtor failed to comply with the Superior Court's October 11, 2005 order. She filed a Notice of Appeal, as well as an Emergency Ex Parte Motion for Stay or Injunction Pending Appeal on December 7, 2005, but the Superior Court denied her Ex-Parte Motion. The Appeals Court eventually dismissed her appeal for lack of prosecution.

Because the Debtor refused to cooperate with KAC in scheduling a closing, KAC, on January 25, 2006, filed a Complaint for Contempt in which it sought to enforce the Superior Court's order. Immediately preceding the trial, which was scheduled for June 19, 2006, KAC and the Debtor reached a settlement agreement. Pursuant to the agreement, which was reported to the Superior Court, the Debtor agreed to convey her 51% interest in the Property on July 11, 2006. The Superior Court's order, which incorporated the terms of the settlement agreement, provided:

The closing shall occur on July 11, 2006 at 10 am at the Plymouth County Registry of Deeds. The...