Matter of Crawford

• Decision Date: 04 February 1980
• Docket Number: 79 B 4943.,Bankruptcy No. 79 B 4942
• Citation: 2 BR 589
• Parties: In the Matter of William E. CRAWFORD and Clara V. Crawford, Debtors. UNITED STATES of America, Plaintiff, v. William E. CRAWFORD and Clara V. Crawford, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

2 B.R. 589 (1980)

In the Matter of William E. CRAWFORD and Clara V. Crawford, Debtors UNITED STATES of America, Plaintiff, v. William E. CRAWFORD and Clara V. Crawford, Defendants.

Bankruptcy Nos. 79 B 4942, 79 B 4943.

United States Bankruptcy Court, N.D. Illinois, E.D.

February 4, 1980.

COPYRIGHT MATERIAL OMITTED

Melvin J. Kaplan, Chicago, Ill., for debtors.

Thomas P. Sullivan, U.S. Atty., Kevin J. Egan, Asst. U.S. Atty., Chicago, Ill., for plaintiff.

OPINION AND ORDER

RICHARD L. MERRICK, Bankruptcy Judge.

This cause comes on to be heard upon the complaint of the mortgagee¹ under Bankruptcy Rule 13-401(d) for a dissolution of the stay provided by Rule 13-401(a). The present posture of the proceedings is that it is being considered by the Court upon the plaintiff's motion for summary judgment.

In opposition to the motion the defendants have contended that Rule 56 of the Federal Rules of Civil Procedure places a burden upon the moving party to establish that there are no genuine issues of fact. As a matter of precision the applicable rule is Bankruptcy Rule 756, which adopts Federal Rule 56, subsection (c) of which provides in pertinent part:

"The judgment shall be rendered forthwith if the pleadings . . . show that there is no genuine issue as to any material fact",

which is the affirmative method of stating that a judgment shall not be rendered if there is a genuine issue as to a material fact.

The defendants urge that the moving party has the burden of establishing that there is no factual issue in dispute, but that type argument of itself raises the philosophical question of the difficulty of establishing a negative. The mere filing of a motion for summary judgment is an assertion by the moving party that there is no genuine issue of material fact; the next move becomes that of the adverse party. If there should be a genuine issue, it is a simple matter for the adverse party to demonstrate the nature of the dispute. He only has to identify it and has no present obligation of substantiation.

The answer of the defendants consists in part of a general denial and in part of special defenses. The general denial aspect will be discussed first as it is affected by Bankruptcy Rules 708 and 911. Rule 708 adopts Federal Rule 8 except that it eliminates the necessity of stating grounds of jurisdiction. Rule 911 is an adaptation of Federal Rule 11. The principal factual allegations of the complaint are:

1. The existence of a mortgage—admitted 2. Allegation of default and foreclosure —general denial in spite of the fact that a copy of the foreclosure complaint is attached as an exhibit to the complaint;

3. Allegation of decree of foreclosure and sheriff\'s sale—general denial in spite of the fact that a copy of the foreclosure decree is attached as an exhibit to the complaint;

4. Allegation that the state court approved the sheriff\'s sale—general denial in spite of the fact that a copy of the order is attached as an exhibit to the complaint;

5. Identification of purchaser at foreclosure sale—general denial;

6. Identification of transferee from purchaser —general denial.

The general denial of paragraphs 5 and 6 is in spite the fact that there is attached to the complaint as an exhibit an assignment of the property at issue from Federal Home Loan Mortgage Corporation to the Administrator of Veteran Affairs. Bankruptcy Rules 708 and 911 parallel Federal Rules 8 and 11 in establishing specific denials as the norm but in permitting a general denial where a signed pleading is the attorney's certificate that to the best of his knowledge, information and belief there is good ground to support it and that it is not interposed for delay. The attorney for the defendants signed the answer, and we can only feel that for him to "demand strict proof" of the allegations supported by exhibits was for the purposes of delay.

A general denial is appropriate only where the pleader intends in good faith to controvert the preceding pleading. Reed v. Turner²; United States v. Long³; In re William A. Early⁴. The proposition was well stated in American Photocopy Equipment Co. v. Rovico, Inc.⁵,

"We hold that . . . this failure of plaintiff to frankly reply on a matter, which it . . . must have had within its knowledge, exhibits a lack of fairness which completely discredits its statement that it is without knowledge of or information sufficient to form a belief as to the truth of said averment . . ."

"We disagree and hold that plaintiff has not in effect denied the aforesaid averment of defendant. Rule 8(b) affords no shelter of plaintiff, in view of the facts . . ."

In speaking of a National Labor Relations Board rule similar to Federal Rule 8, the Ninth Circuit said in Harvey Aluminum Inc. v. National Labor Relations Board⁶,

"Under a comparable provision of the Federal Rules of Civil Procedure, an answer asserting want of knowledge sufficient to form a belief as to the truth of facts alleged in a complaint does not serve as a denial if the assertion of ignorance is obviously sham. In such circumstances the facts alleged in the complaint stand admitted."

During the past several years this Court has administered in excess of 6,000 Chapter XIII cases, in at least 1,000 of which Melvin J. Kaplan, the attorney for the debtors herein, was attorney for the debtor. This Court will take judicial notice of the fact that in this district Kaplan is the only "regular filer", as they are termed in the practice, who will accept wage earner cases after foreclosure and sale of the debtor's residence has been approved by an order of the Circuit Court of Cook County. It is inconceivable that when he accepted this case Kaplan was not aware of the circumstances surrounding the debtors' residence. For example, in the schedule of creditors Federal Home Loan Mortgage Corporation, at the address of its attorneys, followed by the number of the foreclosure proceeding, 78 CH 3200, is listed as being owed $17,143.24, of which $4,067.34 is listed as "mortgage arrears 12/77 to 5/31/79."

The Court finds that the general denial of paragraphs 2-7, inclusive, of the complaint constitutes a sham that was interposed solely for the purpose of delay and to cause the complainant to undertake unnecessary expense. On its own motion the Court strikes the answers to paragraphs 2-7 inclusive, of the complaint and holds that the allegations contained in those paragraphs are admitted.

Paragraphs 12-15, inclusive, of the complaint also are denied generally but the denials to some extent are accompanied by special defenses, which merely will be outlined at this juncture.

Paragraph 12 alleges that the debtors have little or no equity in the property; a special defense contends that there is substantial equity. As will be explained more fully below, the debtors no longer have an ownership interest in the property, so that it is immaterial whether or not there is an equity.

Paragraph 13 alleges that there is no justification for debtors' continued possession, to which there is a general denial. The paragraph states a legal conclusion, so that the denial does not raise a genuine issue of material fact.

Paragraph 14 alleges that the equity of the debtors in the property has been extinguished, to which there is a general denial and a special defense. Here again the paragraph states a legal conclusion, so that its denial does not raise an issue of material fact.

Paragraph 15 states that the property is not necessary to the completion of the plan, to which there is a general denial and a special denial. Here also the paragraph states a legal conclusion, so that the denial does not raise an issue of material fact.

The special denials referred to above do not plead specific facts which controvert the allegations of the complaint but are general assertions which are little more than stating affirmatively what had been denied generally. As such they do not bring any material facts into issue.

The crux of the instant case, and of all other Chapter XIII cases with which this Court is familiar where the petition has been filed after a state court order approving a sheriff's sale, is to determine what interest, if any, the debtor has in the property. Under some circumstances this might be a combined question of law and of fact. The first phase would consist of determining as a theoretical legal matter whether the debtor had any property rights. If a positive answer should be obtained as to the first phase, the second phase would be a factual question of valuation to determine what would be the worth of any rights which might exist. As will be described more fully below, we do not get to the second phase in the instant case because as a matter of law the debtors do not have any rights in the property at issue. (For the purposes of this decision we will ignore that under local law a debtor may not be dispossessed except by consent or prescribed statutory procedures. Those rights to a peaceful existence are more in the nature of civil rights than property rights).

A century old analysis of mortgage law is as true today as it was then,

"There is, perhaps no species of ownership known to the law which is more complex, or which has given rise to more diversity of opinion, and even conflict in decisions, than that which has sprung from the mortgage of real property."⁷

In Illinois, as in other jurisdictions which are a part of the Anglo-American tradition, mortgage law is not so much a matter of logic as it is of history. A brief review of the historical development of mortgage law should bring the issues of the instant case into an understandable focus.

From about 1350 until the present time in England, and throughout the nineteenth century in most of the United States, the customary method of creating a real estate mortgage was by an absolute deed of conveyance of the fee, subject to defeasance upon timely payment of the debt secured. Why an absolute conveyance should be used in...