In re Tyson

Decision Date07 June 2011
Docket NumberBankruptcy No. 10–13207.,Adversary No. 10–5246.
PartiesIn re Lakeyda Renee TYSON, Debtor,Lakeyda Renee Tyson, Plaintiff,v.Ricky Hunt and United States of America Department of Agriculture, Rural Housing Service of Rural Development, Defendants.Ricky Hunt, Cross–Claimant,v.United States of America Department of Agriculture, Rural Housing Service of Rural Development, Cross–Defendant.
CourtUnited States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Tennessee

OPINION TEXT STARTS HERE

Jeffrey A. Smith, Harrell & Smith, Trenton, TN, for Plaintiff.Brett D. Stokes, Della–Rodolfa, Stokes & Cole, Knoxville, TN, James Lee Croom, Jackson, TN, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW RE: (1) PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, (2) DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, and (3) CROSS–DEFENDANT'S MOTION TO DISMISS CROSS–COMPLAINT

G. HARVEY BOSWELL, Bankruptcy Judge.

The Court conducted a hearing on the Plaintiff's motion for summary judgment, the Defendant's motion for summary judgment, and the Cross–Defendant's motion to dismiss the cross-complaint on May 19, 2011. Fed. R. Bankr.P. 9014. These matters are core proceedings. 28 U.S.C. § 157(b)(2)(A). The Court has reviewed the testimony from the hearing and the record as a whole. This memorandum opinion shall serve as the Court's findings of fact and conclusions of law. Fed. R. Bankr.P. 7052.

Findings of Fact

The facts in this proceeding are essentially undisputed. The debtor, Lakeyda Renee Tyson, (Debtor), filed a petition for chapter 13 bankruptcy relief on September 22, 2010. At the time of filing, the Debtor was the owner of a house and lot located at 708 George Street in Trenton, Tennessee, (“Trenton property”). The Debtor obtained title to the property by a warranty deed from Dwayne and Sherry Burkett dated and recorded on November 24, 2004.

At the time the petition was filed, the United States of America, acting by and through the United States Department of Agriculture, Rural Housing Service of Rural Development, (USDA), possessed a valid lien on the Debtor's property which was secured by a properly recorded deed of trust. The Debtor listed “USDA Rural Development, Centralized Servicing Center, P.O. Box 66806, Saint Louis, MO 63166” on Schedule D as the mortgage holder on the Trenton property. The Debtor also listed “USDA Rural Development, Centralized Servicing Center, P.O. Box 66806, St. Louis, Mo 63166–6806,” “USDA Rural Housing Servicing, Centralized Servicing Center, P.O. Box 66879, St. Louis, MO 63166–6879,” and Jimmy Croom, AUSA, 109 S. Highland, Ste. 300, Jackson, TN 38301–6145” on her matrix. In its answer to the Debtor's complaint, USDA admitted that notice of the bankruptcy filing was sent to the P.O. Box 66806 address; however, it also stated that it was “without sufficient information to admit or deny whether its [Office of General Counsel] acknowledged that proper notice of the bankruptcy filing was given and received by USDA. USDA further stated that the USDA personnel who conducted the foreclosure sale were not aware of the bankruptcy filing at the time of the sale.

Prior to filing for bankruptcy relief, the Debtor defaulted on the mortgage on the Trenton property. Consequently, USDA conducted a foreclosure sale on October 5, 2010. Defendant Ricky Hunt, (Hunt), purchased the property at the foreclosure sale for $17,500. A substitute trustee's deed was executed on October 12, 2010 and delivered to Edward Guyton, an agent for Hunt, on October 13, 2010.

After execution of the substitute trustee's deed, but before it could be recorded, USDA learned of Debtor's bankruptcy filing. USDA alleges that it then contacted Hunt and his agent and advised them not to record the substitute trustee's deed because of problems with the sale. Hunt's agent recorded the substitute trustee's deed in the Register's Office of Gibson County, Tennessee on October 13, 2010. Hunt disputes that he and/or his agent were contacted prior to the recordation of the deed. In his response to the Debtor's motion for summary judgment, Hunt states that neither he nor his agent were contacted by USDA until 3:54 p.m. on October 13, 2010, which was allegedly after the deed had been recorded. Hunt further alleged that “the problem that arises is that the Deed was already recorded and the Department gave no reason why this shouldn't have occurred.”

On October 22, 2010, an attorney from USDA's Office of General Counsel contacted counsel for Debtor via email and advised him that he had contacted Hunt and asked Hunt to execute an agreement waiving the foreclosure as void, cancelling the recorded trustee's deed and reinstating the deed of trust, and that USDA would totally refund the purchase price. USDA's counsel also advised Debtor's counsel that Hunt had refused to waive the foreclosure because he felt he had a claim for expenses associated with the sale. USDA's counsel further stated that he had informed Hunt he could make a claim against USDA through an administrative procedure, but that Hunt still refused to cooperate.

On November 2, 2010, counsel for Debtor mailed a letter to Hunt explaining that Debtor had filed a petition under the Bankruptcy Code prior to the foreclosure sale and, as a result, the sale was in violation of the automatic stay and null and void. The letter asked Hunt to cooperate with USDA to resolve the matter and set aside the sale. Said letter further advised Hunt that if he refused to cooperate, counsel for Debtor would have no option but to institute an action in this Court seeking to set aside the sale. Hunt admitted that he received this letter on November 8, 2010.

Hunt refused to cooperate and on November 12, 2010, the Debtor filed a Complaint against him and USDA to declare the foreclosure sale void, to set aside and void the substitute trustee's deed and to reinstate the November 2, 2004, deed of trust. The Debtor also asked the Court to assess costs and Debtor's attorney's fees against Hunt and to impose “any such further sanctions on defendant Ricky Hunt for his willful and continuing violation of the automatic stay.” The Debtor stated that she was bringing the complaint pursuant to 11 U.S.C. § 362(a)(3) and Federal Rule of Bankruptcy Procedure 7001(7).

On December 21, 2010, Hunt filed a motion to dismiss the adversary complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) in which he alleged that the Debtor had failed to state a claim upon which relief could be granted. Hunt based his motion on the fact that he had no notice of the Debtor's bankruptcy at the time the sale was conducted or at the time the substitute trustee's deed was recorded. Hunt also alleged that 11 U.S.C. § 549(c) prevents the Court from granting the Debtor's complaint. The Court heard Hunt's motion on January 13, 2011, and denied it. An order memorializing the Court's ruling was entered on February 15, 2011. This order provided that the Hunt's reliance on 11 U.S.C. § 549(c) was inappropriate in this case, that 11 U.S.C. § 362(a)(3) is a sustainable cause of action for the Debtor, and that the Debtors' complaint was sufficient as a matter of law pursuant to Federal Rule of Civil Procedure 8(a).

On February 2, 2011, Hunt filed a cross-claim against USDA alleging he is entitled to damages from USDA for breach of contract, fraudulent conveyance, wrongful foreclosure, unjust enrichment, conversion, slander of title and fraud. Although Hunt averred in the second paragraph of his complaint that these matters are not core proceedings and he did not consent to final orders being entered by this Court, in his prayer for relief, Hunt asks the Court to issue an order granting him a money judgment for his damages and expenses, including attorney's fees. Hunt also asked the Court to declare Hunt as the legal and equitable owner of the Trenton property and to declare that the property is not property of the Debtor's estate. Hunt further sought an order from the Court granting him possession of the Trenton property within 30 days from entry of a final order “or within a reasonable time as defined by the Court.” Lastly, Hunt asked the Court to grant him relief from the automatic stay nunc pro tunc to October 4, 2010, “due to the actions of the Cross–Defendant, The United States of America, Department of Agriculture, Office of Housing Service and United States and any other responsible party not yet determined.” As an alternative basis for relief, Hunt asked for his purchase price of $17,500 to be returned to him along with an award of actual damages with interest. Hunt amended his cross-claim on March 21, 2011, to allege that USDA had also violated the Federal Debt Collection Practices Act.

The Debtor filed a motion for summary judgment on February 11, 2011, in which she alleged that there was no genuine issue of material fact and judgment could be entered as a matter of law pursuant to Federal Rule of Bankruptcy Procedure 7056. The Debtor alleged that there was no genuine issue of material fact that Hunt “willfully violated the automatic stay of § 362 and as such [the Debtor] has suffered damages in the nature of attorney's fees and emotional distress.” 1 In discussing the alleged violation of the automatic stay, the Debtor cited 11 U.S.C. § 362(a)(1), (3), (4), and (5).

Hunt filed a response to this motion on February 23, 2011, in which he alleged that the Debtor was not entitled to summary judgment for a number of reasons. First, although the Court had previously addressed the sufficiency of the Debtor's complaint in the order denying Hunt's motion to dismiss, Hunt again alleged that the Debtor's motion was insufficient as a matter of law because it failed to comply with the Federal Rules of Civil Procedure, specifically Rule 56(c). Hunt also alleged that, by citing to 11 U.S.C. § 362(a)(1), (4) and (5), the Debtor's motion for summary judgment averred additional causes of action which were not included in the original complaint and upon which the Debtor...

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