Martin v. Jurgens (In re Jurgens)
| Decision Date | 03 May 2019 |
| Docket Number | Adv. No. 16-00032,Adv. No. 16-00009,Case No. 15-60592 |
| Parties | IN RE: BRENDA K. JURGENS, Debtor. GARY MARTIN, Plaintiff, v. BRENDA JURGENS, and FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., Defendant. GARY MARTIN, Plaintiff, v. BRENDA JURGENS, Defendant. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Montana |
Brenda Jurgens ("Debtor") filed a chapter 13 petition on June 30, 2015, commencing Case No. 15-60592.1 This case was converted to chapter 7 on November 5, 2015, on the motion of creditor Gary Martin ("Martin") and Victor Properties LLC.2 On January 23, 2019, Martin filed a Motion to Modify Stay. Doc. No. 289 ("Stay Motion"). Debtor filed an objection to the Stay Motion. Doc. No. 291 ("Objection"). This matter was heard on February 21, 2019, and it was taken under advisement.
In Martin v. Jurgens, Adv. No. 16-00009, an action brought by Martin seeking a declaratory judgment and imposition of a constructive trust, Martin filed a Motion for Return of Cash Security. Adv. Doc. No. 81 ("Return Motion"). Debtor filed an objection to the Return Motion. Adv. Doc. No. 86. That matter was also heard on February 21, 2019, and it was taken under advisement.
In Adv. No. 16-00009, Martin filed a Motion for Scheduling Conference, id. at Adv. Doc. No. 79, and he also filed a companion Scheduling Motion in an action seeking a determination of nondischargeability of debt under § 523(a)(4), Martin v. Jurgens, Adv. No. 16-00032, id. at Adv. Doc. No. 33 (together, the "Scheduling Motions"). The parties were heard on January 18, 2019, as to these matters.
This decision constitutes the Court's findings and conclusions to the extent required under Rules 7052 and 9014 as to all such motions.
Martin and Debtor are brother and sister, and the children of Alice Jean Martin and John William Martin. Both parents are deceased. Debtor was the executor of Alice Jean Martin's estate, administered in the courts of Midland County, Texas, and was also the executor of John William Martin's estate. Her brother, Martin, filed a will contest alleging misconduct by Debtor in the administration of their parents' estates. See generally Doc. No. 216 ().3
Debtor's bankruptcy schedules listed two contiguous parcels of real property in Ravalli County, Montana, with the address of 948 Bumpy Lane, Victor, Montana (the "Property"). Debtor asserted a value of $1,975,000 for the Property on which there was a secured debt of $762,966.18. Doc. No. 21 at 3. Debtor claimed a $250,000 homestead exemption in the Property under Mont. Code Ann. §§ 70-32-104 and 25-13-615. Id. at 9.
The chapter 7 trustee proposed to sell the Property under § 363 for a total of $1,500,000 (of which $1,475,000 was attributed to the real property and $25,000 to certain personal property). Doc. No. 144. Martin filed a limited objection. Doc. No. 153. The Court, following a contested hearing, ruled on February 5, 2016, that the Property would be sold under § 363(f) free and clear of all liens and interests, and anyvalid liens or interests would attach to the proceeds of sale. Doc. No. 171. The Court noted that the parties agreed Martin would receive payment of his first and third lien against the Property from the sales proceeds and that a judicial lien would take precedence over Debtor's claimed homestead exemption. Id. However, Martin's limited objection was overruled on procedural grounds but without prejudice to renewal. Id.
On February 8, 2016, Martin objected to Debtor's claimed homestead exemption. Doc. No. 174. Martin filed the complaint commencing Adv. No. 16-00009 the following day. This action sought an injunction against Debtor obtaining her homestead exemption from the Property until Martin could seek imposition of a constructive trust against the homestead. In Adv. No. 16-00009, the Court granted a temporary restraining order on February 10, 2016, conditioned on Martin depositing with the Clerk a $260,000 bond, and also authorizing the title company handling the trustee's sale of the Property to interplead $250,000 (representing the homestead exemption amount) rather than paying it to Debtor. Adv. Doc. Nos. 6, 7.4 In the chapter 7 case, the Court ordered that Martin's objection to the homestead exemption would be "held in abeyance" until the parties reported the outcome of the will contest in Texas, and advised that the Texas decision was final. Doc. No. 230; see also Doc. No. 240.
On May 1, 2018, the Court required the parties to submit a status report in Adv. No. 16-00009.5 After reviewing the submitted reports, Adv. Doc. Nos. 68 and 69, theCourt required the parties to file a "joint status report" in both adversary proceedings within 30 days of any order or judgment by the Texas state court. Adv. Doc. No. 70.
On September 20, 2018, Martin filed a Notice that an Amended Final Judgment had been entered against Debtor, in the amount of $774,396.38 in the Texas litigation, and advising that there had been no bond, deposit in lieu of bond, or other action taken to suspend enforcement of such judgment. Adv. Doc. No. 72.
A status conference was vacated after reviewing the parties' submissions. Adv. Doc. Nos. 75, 76. Debtor filed a motion in the Texas state court seeking a new trial or modification of the judgment. She asserted that, in the event the motions were unsuccessful, she would "seek to appeal the Texas state court ruling (and presumably seek a stay pending appeal)." See Order, Adv. Doc. No. 77 (Oct. 23, 2018).
On December 7, 2018, Martin filed the Scheduling Motions in the adversary proceedings based on the Texas court's effective denial of Debtor's motion for a new trial and Debtor's filing of a notice of appeal. Adv. Doc. No. 79. Debtor's notice of appeal expressly represented she was not filing, nor was she going to file, a supersedeas bond. Debtor responded on December 21, 2018, and set the Scheduling Motions for hearing on January 18, 2019. Adv. Doc. No. 80.
Martin then filed the Return Motion on January 14, 2019, asking for an order allowing the Clerk to return his previously posted $260,000 cash security. Adv. Doc. No. 81. Those funds had been deposited in 2016 to satisfy a condition imposed by the Court in connection with its entry of a temporary restraining order at the outset of the case. See Adv. Doc. No. 6. The Court had earlier refused to order the release of the security,stating, in part, "[i]f Martin wishes release of his $260,000 bond, he may accomplish that by filing a decision and judgment from the Texas litigation; or by otherwise filing a resolution of this adversary proceeding with the Defendant." Adv. Doc. No. 54 at 5-6. Debtor timely objected to the Return Motion. Adv. Doc. No. 86.
On January 18, 2019, counsel for the parties were heard on Martin's Scheduling Motions. The Court asked for additional submissions to be made, and those have been filed. Adv. Doc. Nos. 84, 85. Both parties agree that Debtor's November 2018 appeal to the Eleventh District Court of Appeals will take 9 to 12 months (i.e., between August and November 2019), and that further appeal to the Texas Supreme Court would take an additional year. Debtor also notes her understanding that an appeal to the Texas Supreme Court is discretionary and not a matter of right in most cases.
On October 8, 2015, the Court granted Martin relief from the § 362(a) stay in order "to proceed to entry of judgment" in the Texas litigation but specifically provided that "the automatic stay remains in effect with respect to the enforcement of any judgment against Debtor or estate property arising from such litigation[.]" See Doc. No. 85 at 5. Martin's Stay Motion, Doc. No. 289, asserts that the judgment has now been entered; that it is "final" under Texas law; that there is no bond to stay enforcement of the judgment under Texas law; and that he requests modification of the stay and, in effect, modification of the prior order Doc. No. 85, in order to "seek execution of the Texas judgment in accordance with applicable non-bankruptcy law." Simply put, Martin wantsstay relief as to the "enforcement of any judgment" which the Court in 2015 specifically declared in Doc. No. 85 would be stayed.
Debtor's objection asserts that the dischargeability or nondischargeability of the debt reflected by the Texas judgment remains an open issue. The Texas court made the unequivocal assertion in the judgment that "Defendant committed fraud upon Defendant [sic, Plaintiff] and any damages resulting therefore shall be nondischargeable in any proceeding under Title 11 of the United States Code[.]"6 However, the Texas court lacks jurisdiction to make that specific judgment. Ackerman v. Eber (In re Eber), 687 F.3d 1123, 1128 (9th Cir. 2012) () (citing Grogan v. Garner, 498 U.S. 279, 284 n.10 (1991)); Jenkins v. Mitelhaus (In re Jenkins), 2015 WL 735799 *9 (9th Cir. BAP Feb. 20, 2015) (citing Eber and Rein v. Providian Fin. Corp., 270 F.3d 895, 904 (9th Cir. 2001)).7
The issue of such nondischargeability still pends in Adv. No. 16-00032. The enforcement of and collection on a judgment—even one that is entered after the Court modifies the stay to allow a state court to adjudicate liability—remains stayed. If andwhen the judgment is adjudicated to be nondischargeable, the situation would be different. Martin's Stay Motion is premature and will be denied.
As noted, $249,000 of the proceeds of sale of the Property were held aside, reflecting Debtor's potential homestead. These funds are presently held by the Clerk in the Court's registry. Martin was required by the Court to, and did, deposit...
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