In re Wright
| Decision Date | 06 July 2022 |
| Docket Number | Case No. 22-42886 |
| Citation | 642 B.R. 172 |
| Parties | IN RE: Denise W. WRIGHT, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
John L. Finkelmann, Makower Abbate Guerra Wegner Vollmer PLLC, St. Clair Shores, Michigan, Attorney for Fieldstone Village Association.
Marguerite Hammerschmidt, HS&A, P.C., Royal Oak, Michigan, Attorney for Debtor.
Kimberly Shorter-Siebert, Marilyn R. Somers-Kantzer, Detroit, Michigan, Attorneys for Tammy L. Terry, Chapter 13 Trustee.
This Chapter 13 case is before the Court on the motion entitled "Fieldstone Village Association's Motion to Confirm Absence of Any Automatic Stay as to the Association and the Real Property Located at 1588 Club House Ct., Pontiac, MI 48340" (Docket # 20, the "Motion"). The Debtor objected to the Motion. The Court held telephonic hearings on the Motion on May 26, 2022 and June 30, 2022. Counsel for the movant Fieldstone Village Association ("Fieldstone"), counsel for the Debtor, and counsel for the Chapter 13 Trustee appeared at each of the hearings. At the conclusion of the June 30, 2022 hearing, the Court took the Motion under advisement.
For the reasons stated below, the Court will grant the Motion.
The material facts are not in dispute. The Debtor, Denise W. Wright (the "Debtor"), filed her Chapter 13 bankruptcy petition on April 11, 2022, commencing this case. At that time, the Debtor's husband, Aaron Wright, was the record owner of the condominium in which he and the Debtor reside. That real property is located at 1588 Club House Ct., Pontiac, MI 48340 (the "Unit"). Aaron Wright purchased the Unit in August 2015, and he was the only grantee on the deed conveying the Unit.1 At all relevant times, Aaron Wright has been the only owner of record of the Unit. The Debtor has never been an owner of record.
Aaron Wright failed to pay required monthly assessments to Fieldstone, as required by Michigan law and the governing documents for the Association.2 Fieldstone obtained a judgment in state court against Aaron Wright, which authorized a foreclosure sale of the Unit.3 Ultimately, Fieldstone caused the Unit to be sold, to a third party bidder, at a sheriff's foreclosure sale that was held on April 12, 2022. That was the day after the Debtor filed this bankruptcy case.
Neither the Debtor nor her attorney gave Fieldstone any notice of the Debtor's bankruptcy filing until April 13, 2022, the day after the foreclosure sale occurred. Soon after learning of this bankruptcy case, on April 25, 2022, Fieldstone filed this Motion. In the Motion, Fieldstone seeks an order determining that the automatic stay under 11 U.S.C. § 362(a), which arose on April 11, 2022 when the Debtor filed her bankruptcy petition, does not apply to the Unit, or to the foreclosure sale held on April 12, 2022, and that the sale did not violate the automatic stay.
In support of the Motion, Fieldstone argues that the automatic stay does not apply because as of the petition date, the Debtor did not have any legal or equitable ownership interest in the Unit. As a result, Fieldstone argues, the property of the bankruptcy estate does not include any interest in the Unit. Rather, Fieldstone argues, the Unit was owned solely by Aaron Wright.
The Debtor disputes Fieldstone's arguments, and argues that under Michigan law the Debtor has an equitable interest in the Unit, and has a "possessory interest" in the Unit, which interests are property of the bankruptcy estate. The Debtor argues that the automatic stay applies, and protected the Unit from the foreclosure sale, beginning on the day before the sale occurred.
Shortly after holding the first hearing on the Motion, the Court raised another issue, and entered an order for further briefing by the parties. In the Court's Order entered on May 27, 2022 (the "May 27 Order"),4 the Court stated, in relevant part:
The Court reiterates that there is no dispute about any of the above facts cited in the May 27 Order. The Court noted in the May 27 Order that it was not yet ruling on the disputed issue of whether the automatic stay applied.6 After the parties briefed the Easley issue, the Court held the second hearing on the Motion, on June 30, 2022. The Motion is now ready for decision.
The Court will grant Fieldstone's Motion, for two independent reasons.
First, the Court finds and concludes that when the Debtor filed this bankruptcy case, the Debtor did not own any legal or equitable interest in the Unit that Fieldstone foreclosed on. That is because (1) when the Unit was first acquired in 2015, the Unit was deeded to Aaron Wright only; (2) at all times thereafter, the Unit was titled in Aaron Wright's name only; and (3) because no divorce action was filed by either the Debtor or Aaron Wright, at any time, the Debtor acquired no interest in the Unit as marital property under Michigan law.
These conclusions are directly supported by the reasoning and holdings of the bankruptcy court in Moyer v. Slotman (In re Slotman ), No. 12-80232, 2013 WL 7823003 (Bankr. W.D. Mich. Dec. 5, 2013), cited by Fieldstone. The Court finds Slotman persuasive, and agrees with it. In that case, the issue was whether the Chapter 7 debtor, Terri Slotman, had any interest in her husband Richard Slotman's business, when Richard transferred the business to his father, about 10 months before Terri filed her bankruptcy case. The issue mattered because it arose in the Chapter 7 Trustee's action seeking to avoid Richard's transfer of the business, as a fraudulent transfer. Such an action required that there must have been a transfer of the bankruptcy debtor Terri's property.
The Chapter 7 Trustee alleged that the debtor Terri "had an ownership interest in the Business because it was, or eventually would have become, part of her marital estate." 2013 WL 7823003, at *3. The Slotman court extensively reviewed Michigan law, and concluded that when the husband Richard transferred the business, the debtor Terri did not own any marital property interest in the business. In reaching that result, the Slotman court found that the husband Richard had acquired the business from his father several years before the debtor Terri's bankruptcy filing. The Court held that even though the parties were married at that time, Michigan law allows one spouse to acquire and own property as a sole owner during a marriage. The Court further held that although the husband Richard had filed a divorce proceeding against the debtor Terri about 5 months before Terri's bankruptcy filing, Terri never had a marital property interest in the husband Richard's business. This was so, the court held, because under Michigan law, a marital property interest arises only upon the filing of a divorce action, and the husband Richard had transferred the business away to his father several months before he filed the divorce action. As a result, "the [d]ebtor did not have a marital property interest in the [b]usiness at the time it was transferred." 2013 WL 7823003, at *10.7
Based on the reasoning in Slotman , the Court finds and concludes that in this case, Aaron Wright owned the Unit exclusively; the Debtor owned no marital property interest, or any other legal or equitable interest, in the Unit.
The Debtor appears to argue that she had an interest in the Unit as of the bankruptcy petition date, as the beneficiary of a constructive trust under Michigan law. The Debtor alleges (without citing any specifics or evidence) that she "contribut[ed] to the monthly mortgage payments through her income, [and] help[ed] pay the monthly utility bills."8 A similar factual argument was made, to no avail, in the Slotman case.9 There are several flaws in the Debtor's...
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