In re Technical Land, Inc.
| Decision Date | 30 December 1994 |
| Docket Number | Civ. A. No. 94-1368,94-1584. |
| Parties | In re TECHNICAL LAND, INC., Debtor. N. William JARVIS and Ralph D. Kaiser Company, Inc., Appellees/Plaintiffs, v. TECHNICAL LAND, INC., William E. Moore and Judith Deitz, Appellants/Defendants. |
| Court | U.S. District Court — District of Columbia |
Janet Marsha Nesse, Gins & Seeber, P.C., Washington, DC, James Joseph Levin, Rockville, MD, for Technical Land, Inc.
James Joseph Levin, Rockville, MD, for William E. Moore and Judith Deitz.
Patrick John Kearney, Emil Hirsch, Freedman, Levy, Kroll & Simonds, Washington, DC, David Howard Cox, Jackson & Campbell, P.C., Washington, DC, for Ralph D. Kaiser Co., Inc.
Paul Rainey Webber, IV, Thompson, Hine & Flory, Washington, DC, for N. William Jarvis.
Joan Margaret Stentiford, Office of Corp. Counsel, D.C., Washington, DC, for Harold Bardonille, in his official capacity as Recorder of Deeds for Dist. of Col.
These companion cases are on appeal from a decision of the Bankruptcy Court. The primary issue in the case below was who owned 1631-1644 Kalorama Street, N.W., Washington, D.C. ("Property"). On June 2, 1994 the bankruptcy judge granted summary judgment for the plaintiffs/appellees ("appellees") invalidating both the title defendants/appellants (appellants) had obtained to the property through a marshall's sale and the liens that appellants had on the property. 172 B.R. 429. On June 27, 1994 the bankruptcy judge granted appellee's motion for summary judgment on all remaining issues.
There are four issues on appeal. The first is whether the bankruptcy judge erred by invalidating a marshall's sale of property. At the time of the sale the property was in custody of a state court appointed receiver. No approval of the sale was obtained from the receiver.1 Second, appellants claim that the June 2, 1994 grant of partial summary judgment for the appellees was improper because there were material issues of fact in dispute. The third issue is whether the bankruptcy judge erred in granting Ralph D. Kaiser's (RDK) emergency motion for a protective order prior to a hearing on RDK's motion for partial summary judgment. Finally, appellants state that the court below improperly denied them discovery on the remaining issues. For the reasons stated below and those set forth in Judge Teel's well reasoned opinion, the decision of the Bankruptcy Court in Adversary Proceeding 94-0020 will be affirmed.
The appellees are RDK and N. William Jarvis ("the Receiver"). RDK claims to have made certain loans between 1987 and 1990 secured by the disputed property. On March 11, 1991 RDK petitioned for the appointment of a receiver for the property in Superior Court for the District of Columbia. The next day the Court appointed a receiver to collect income and rents from the property. In a November 4, 1991 order, the Court expanded the receiver's authority to that of a general receivership for the property and Jarvis was appointed to replace the previous receiver. At all relevant times since then, Jarvis was in possession of the property, collecting the rents, paying the bills and maintaining the property.
On August 4, 1986 Techniarts Video, Inc., William Moore and Judith Deitz filed a complaint with the Superior Court of the District of Columbia against the then-owner of the property, the general partnership 1631 Kalorama Associates, for breach of contract and related claims. On December 11, 1991, nine months after the receiver was appointed, judgment was entered against 1631 Kalorama and in favor of Moore and Deitz in the amount of $131,055.13. During 1992, Moore and Deitz obtained a writ directing the sale of the property. The marshall held an execution sale at which Moore and Deitz were the high bidders at $1.00. Subsequently, Moore filed an ex parte motion with the Superior Court to name Technical Land Institute (TLI) as the substitute purchaser of the property, which was granted in December, 1992.
On April 1, 1993 the appellees filed a suit in the Superior Court for the District of Columbia seeking both to invalidate the deed from the marshall's sale and to eject TLI from the property. In November, 1993 TLI filed a voluntary petition for bankruptcy relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court of this district. TLI listed the property as its primary asset.
On December 27, 1993 TLI removed the Ejectment Action to the United States District Court for the District of Columbia, which referred the case to the Bankruptcy Court. The Court conducted two status conferences and scheduled a hearing for the cross-motions for summary judgment which had previously been scheduled for a hearing in the Superior Court. Eleven days before the hearing, appellants sought to depose Jarvis and RDK. On March 19, 1994 the Bankruptcy Court granted, in part, appellees' motion for a protective order. On June 2, 1994 the Bankruptcy Court issued an order granting Jarvis and RDK summary judgment, quieting title in Jarvis as the Receiver. The Court's June 24, 1994 order granted appellees' motion for summary judgment on all remaining issues.
The central question of whether property held in custody of the court may be sold without leave of that court, was properly decided by Judge Teel in his well reasoned June 1, 1994 opinion. He held that property in custodia legis is not subject to execution without leave of the court. Judge Teel relied on Wiswall v. Sampson, 55 U.S. (14 How.) 52, 14 L.Ed. 322 (1852), Hitz v. Jenks, 185 U.S. 155, 22 S.Ct. 598, 46 L.Ed. 851 (1902), and Barton v. Barbour, 10 D.C. 212 (1877), aff'd, 104 U.S. (14 Otto) 126, 26 L.Ed. 672 (1881). The rule set forth in those cases is premised on the need to allow orderly resolution of claims against property and to prevent unnecessary, complex and confusing litigation.
Appellants argue that the precedent cited is inapposite where the purchaser in the Marshall's sale did not have notice of the receivership.2 This Court finds no merit in plaintiff's position. Once a property is in the custody of a court of record, the interest in the property cannot be ousted by a lien subsequently obtained on the property. The custodial court holds the property to the exclusion of subsequent takers unless and until it determines that other interests are paramount. The acts of appellants in this case where they placed a lien on the property and bought it in at a Marshall sale without first obtaining the permission of the custodial court, are a legal nullity.3 See Hitz, infra.
Appellants also appeal the decision of the Bankruptcy Court on the ground that there were material issues of fact in dispute. They claim that there were material disputes over both the knowledge of the receiver of the marshall's sale and the possibility that RDK had cross-collateralized its loans on the property. The Court finds that no merit in appellants' claims.
Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Mere allegations or denials of the adverse party's pleadings are not enough to prevent issuance of summary judgment. The adverse party's response to the summary judgment motion must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-moving party can only defeat a motion for summary judgment by responding with some factual showing to create a genuine issue of material fact. Harding v. Gray, 9 F.3d 150, 154 (D.C.Cir.1993).
In this case, any dispute as to the receiver's knowledge of the marshall's sale was not material to the question of whether the property held in custodia legis could be transferred without the consent of the court. In Hitz, the Supreme Court found that sale without leave of the receivership court was void regardless of the receiver's knowledge of the sale. Hitz, 185 U.S. at 168, 22 S.Ct. at 603 (citing Heidritter v. Elizabeth Oil-Cloth, Co., 112 U.S. 294, 5 S.Ct. 135, 28 L.Ed. 729 (1884)). TLI's claims as to RDK's cross collateralization of its loans also are not material. Those claims go to the validity of the receivership itself; the Bankruptcy Court properly found that the receivership was not subject to collateral attack in that court. See Hemisphere Pictures, Inc. v. Lust, 36 Md. App. 67, 373 A.2d 48, 49 (1977). Any dispute about the cross-collateralization of RDK's loans was not material to the issues before the Bankruptcy Court.
Appellants have challenged the May 19, 1994 decision of the Bankruptcy Court to grant appellees motion for a protective order. An appellate court reviews decisions by the trial court on discovery matters under an abuse of discretion standard. See e.g., Carey Canada, Inc. v. Columbia Casualty Co., 940 F.2d 1548, 1559 (D.C.Cir.1991). This Court must determine if the Bankruptcy Court's decision to grant the protective order was "clearly unreasonable, arbitrary or fanciful." Northrop Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 399 (D.C.Cir.1984).
The Bankruptcy Court's decision was within the bounds of its discretion. Appellants argue that the May 19, 1994 protective order improperly denied them the chance to conduct discovery relating...
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