Pierce v. Time Inv. Co. (In re Pierce)

• Decision Date: 12 November 2020
• Docket Number: Adversary Proceeding No. 19-50159,Case No. 19-05324-JMC-13
• Citation: 621 B.R. 434
• Parties: IN RE: Sally Ann PIERCE, Debtor. Sally Ann Pierce, Plaintiff, v. Time Investment Company, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Indiana

621 B.R. 434

IN RE: Sally Ann PIERCE, Debtor.Sally Ann Pierce, Plaintiff,

v.Time Investment Company, Inc., Defendant.

Case No. 19-05324-JMC-13

Adversary Proceeding No. 19-50159

United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.

Signed November 12, 2020.

Konstantine G Orfanos, Indianapolis, IN, for Plaintiff.

Chris Chicoine, Christopher R Chicoine, PLLC, Duvall, WA, for Defendant.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND JUDGMENT ON THE PLEADINGS

James M. Carr, United States Bankruptcy Judge

THIS PROCEEDING comes before the Court on Time Investment Co., Inc.'s Motion for Summary Judgment and Judgment on the Pleadings filed by Time Investment Co., Inc. ("Creditor") on July 16, 2020 (Docket No. 19) (the "Motion"). The Court, having reviewed and considered the Motion; Time Investment Co., Inc.'s Brief in Support of its Motion for Summary Judgment filed on July 16, 2020 (Docket No. 20) (the "Creditor's Brief"); the evidence designated in and attached to the Creditor's Brief, including the affidavits of Christopher Chicoine (the "Chicoine Aff."), Toni E. Steldt (the "Steldt Aff."), and Wendy Dubois (the "Dubois Aff."); Plaintiff's Motion in Opposition to Defendant's Motion for Summary Judgment and Judgment on the Pleadings filed by Sally Ann Pierce ("Debtor") on August 20, 2020 (Docket No. 23); Plaintiff's Memorandum in Opposition to Defendant's Motion for Summary Judgment and Judgment on the Pleadings filed on August 20, 2020 (Docket No. 24); Plaintiff's Designation of Evidence filed on August 20, 2020 (Docket No. 25); Time Investment Co., Inc.'s Reply in Support of its Motion for Summary Judgment filed on September 2, 2020 (Docket No. 28) (the "Reply"); the Complaint to Avoid Wholly Unsecured Uniform Commercial Code Lien of Time Investment Company, Inc. filed by Debtor on September 16, 2019 (Docket No. 1) (the "Complaint"); and the Answer filed by Creditor on October 4, 2019 (Docket No. 5); having heard the arguments and representations of counsel for Creditor and counsel for Debtor at a hearing on September 30, 2020, and being otherwise duly advised, now DENIES the Motion.

Summary Judgment Standard

Creditor moves the Court to enter summary judgment in its favor and against Debtor pursuant to Fed. R. Civ. P. 56, made applicable to this adversary proceeding by Fed. R. Bankr. P. 7056.

To obtain summary judgment, Creditor must show that there is no genuine dispute as to any material fact and Creditor is entitled to judgment as a matter of law. Fed R. Civ. P. 56(a). The burden rests on Creditor, as the moving party, to demonstrate that there is an absence of evidence to support the case of Debtor, the nonmoving party. Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S. Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). If Creditor demonstrates the absence of a genuine issue of fact for trial, the responsibility would shift to Debtor to "go beyond the pleadings" to cite evidence of a genuine issue of material fact that would preclude summary judgment. Id. at 324, 106 S. Ct. at 2553. In that event, if Debtor did not come forward with evidence that would reasonably permit the Court to find in her favor on a material issue of fact and if the law is with Creditor, then the Court would enter summary judgment against Debtor. Waldridge v. American Hoechst Corp. , 24 F.3d 918, 920 (7th Cir. 1994) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 585-87, 106 S. Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986) ; Celotex , 477 U.S. at 322-24, 106 S. Ct. at 2552-53 ; and Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249-52, 106 S. Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986) ).

Judgment on the Pleadings Standard

Creditor also moves the Court to enter judgment on the pleadings in its favor pursuant to Fed. R. Civ. P. 12(c), made applicable to this adversary proceeding by Fed. R. Bankr. P. 7012(b). "In a motion for judgment on the pleadings, the court considers the pleadings alone, which consist of the complaint, the answer, and any written instruments attached as exhibits." Housing Auth. Risk Retention Group, Inc. v. Chicago Housing Auth. , 378 F.3d 596, 600 (7th Cir. 2004) (citations omitted). "The ... court may also take judicial notice of matters of public record." United States v. Wood , 925 F.2d 1580, 1582 (7th Cir. 1991) (citations omitted).

Factual Background

By her Complaint, Debtor seeks, in effect, to avoid any lien claimed by Creditor in real property that serves as Debtor's residence (the "Home"). Creditor asserts a lien in and against all or a portion of the Home, pursuant to documents by which (1) Debtor and her boyfriend, Willie Tarver ("Tarver"), purchased windows, siding and gutters (the "Purchased Goods") from Unique Home Solutions ("Unique") and Unique agreed to install the Purchased Goods onto Debtor's Home; and (2) Creditor financed the obligations of Debtor and Tarver to Unique for the purchase of the Purchased Goods and Unique's provision of the installation services. The documents that Creditor relies upon are:

(1) "Sales/Purchase Order", Steldt Aff., Ex. A;

(2) "Revolving Credit Application and Agreement", Steldt Aff., Ex. B (the "Credit Agreement");

(3) "Assignment", Steldt Aff., Ex. C;

(4) "Certificate of Completion", Steldt Aff., Ex. D;

(5) "UCC Financing Statement", filed on April 24, 2014, in the Office of the Recorder of Henry County, Steldt Aff., part of Ex. E (the "2014 UCC-1"); and

(6) "UCC Financing Statement" filed on November 16, 2018 in the Office of the Recorder of Henry County, Steldt Aff., part of Ex. E.

On June 28, 2013, before Creditor financed the Unique transaction, Debtor and Tarver borrowed $40,240 from MainSource Bank (the "Bank"). Debtor granted to Bank a mortgage (the "Mortgage") against her Home to secure the loan. On July 16, 2013, Bank perfected its mortgage lien against the Home by recording the Mortgage in the Office of the Recorder of Henry County. Chicoine Aff., Ex. D.

Positions of the Parties

With one major exception (referred to below as the "Residence Exception" and discussed hereinafter), Bankruptcy Code § 506 causes any asserted "secured claim" to be rendered an unsecured claim (effectively avoiding any asserted lien) if a debtor's obligations secured by a lien with senior priority exceed the value of the property claimed as collateral. Said another way, if a competing prior secured claim exhausts all of the collateral's value, then the subordinate lien is effectively avoided and creditor holds only an unsecured claim to be dealt with in a chapter 13 plan. Once the chapter 13 plan is completed and a debtor is granted a discharge of the unsecured claim, then the lien, that would have secured a claim outside of bankruptcy, is effectively avoided. Therefore, in this case, if and to the extent Bank's mortgage lien in and against Debtor's Home has priority over the lien claimed by Creditor and the debt secured by Bank's lien exceeds the value of the Home, then, unless the Residence Exception applies, Creditor holds only an unsecured claim against Debtor and Creditor's lien will be invalidated upon successful completion of Debtor's chapter 13 plan.

Debtor asserts that the value of the Home is less than the amount of the obligations Debtor owes to Bank secured by the Mortgage. For purposes of the Motion, Creditor does not contest that assertion. See Haley v. Corcoran , 2010 WL 4117267, at *3-4 (D. Md. 2010) (quotations and citations omitted) (in the context of a default judgment, a "default is not treated as an absolute confession .... Defendant Head failed to plead or otherwise assert a defense. Thus, all of Plaintiffs' factual allegations ... are deemed admitted.").

Debtor contends that (1) Bank's mortgage lien is superior to Creditor's Uniform Commercial Code ("UCC") lien and exhausts all of the value of the shared collateral (all or any part of the Home); and (2) the Residence Exception is inapplicable. Creditor contends that its UCC lien is superior to Bank's mortgage lien and, if not, that the Residence Exception applies to prevent Debtor from using Bankruptcy Code § 506 to invalidate Creditor's UCC lien and render Creditor's claim unsecured.

Reasoning

The first set of issues is – (1) what is the nature of the Purchased Goods after they were annexed or affixed to Debtor's Home; (2) what was the intent of Debtor and Tarver regarding the Purchased Goods; (3) in what property may Creditor assert a lien; (4) what is the priority of Creditor's asserted UCC lien vis-à-vis Bank's mortgage lien; and (5) what are Creditor's rights and remedies with respect to the collateral in which Creditor asserts a lien?

Debtor and Tarver purchased goods and services from Unique. All parties intended that Unique would annex the Purchased Goods to the Home owned solely by Debtor. By July 30, 2013, Unique had installed the Purchased Goods onto Debtor's Home, annexing and affixing the Purchased Goods to her Home. Creditor and Unique requested that Debtor alone certify that the installation work had been completed in a satisfactory manner. She did so on July 30, 2013, executing her "Certificate of Completion". Steldt Aff., Ex. D.

On or about July 31, 2013, Creditor provided financing for the Unique transaction and acquired the lien rights on which Creditor's claims are based. Steldt Aff., ¶10; Dubois Aff., ¶ 15. Creditor asserts that Tarver held and continues to hold an ownership interest (presumably an undivided one-half interest) in the Purchased Goods notwithstanding their incorporation into Debtor's Home. However, Creditor's position is not supported by Indiana's law regarding fixtures.

When goods are affixed to real property in a manner that satisfies Indiana's fixture test, then the personal property becomes real property and belongs exclusively to the owner of the real property. In Indiana Dep't of Nat. Res. v. Lick Fork Marina, Inc. , 820 N.E.2d 152 (Ind. Ct. App. 2005), the Indiana Court of Appeals quoted with approval the following definition of a fixture from Black's Law...