Reger v. Essex Bank (In re Landes)
| Decision Date | 01 April 2021 |
| Docket Number | Case No. 17-22481-E-7,Adv. Proc. No. 20-2130 |
| Citation | 626 B.R. 531 |
| Parties | IN RE William A. LANDES, Debtor. John Reger, Plaintiff, v. Essex Bank, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of California |
Douglas B. Jacobs, Esq., Chico, CA, Attorney for the Debtor.
Michael P. Dacquisto, Esq., Redding, CA, Attorney for the Plaintiff / Bankruptcy Trustee.
Stephen G. Opperwall, Esq., Pleasanton, CA, Attorney for the Defendant.
John Reger ("Plaintiff-Trustee") filed the instant Adversary Proceeding on July 20, 2020, against Essex Bank ("Defendant"). Plaintiff-Trustee filed a Motion for Summary Judgment ("Motion") on August 11, 2020. Dckt. 12. Defendant filed an Answer (Dckt. 54) and a Counterclaim (Dckt. 55) on January 11, 2021. This case arises out of the Chapter 7 bankruptcy case commenced by William Landes (the "Debtor") in this court, bankruptcy case number 17-22481 (the "Related Bankruptcy Case").
The court has granted in part Defendant's prior Motion to Dismiss, with the Second and Fourth Causes of Action dismissed; and denied that prior motion in part as to the First Cause of Action (to determine the extent, validity, priority of lien of Defendant in the monies at issue in this Adversary Proceeding) and the Third Cause of Action (the Objection to Claim based on 11 U.S.C. § 502(d) ). Order, Dckt. 47.
As the court has addressed at hearings in this Adversary Proceeding and in the Related Bankruptcy Case, the Plaintiff-Trustee, Defendant, and their respective attorneys have been engaged in ever expanding (in time and expense) litigation over a diminishing "pot of money." At the hearing on this Motion, counsel for Defendant reported that all of the assets in which Defendant has asserted a lien pursuant to the Notice of Lien in Debtor's State Court Marital Dissolution Action1 ("Dissolution Action") between the Debtor and his separated spouse, Marie Landes, now appeared to be of no or little recoverable value by Defendant. Though the lien created by the Notice of Lien was obtained within 90 days of the commencement of the Related Bankruptcy Case, the Plaintiff-Trustee elected not to seek to avoid it pursuant to 11 U.S.C. § 547. This lien created by the Notice of Lien was successfully used by Defendant to kill (discussed below) a sale of assets (artwork and guns) subject to such lien appears to now be of no value and not worth pursuing by Defendant.2
The court grants summary judgment for Plaintiff-Trustee on the Third Cause of Action, disallowing Defendant's claim, Proof of Claim 4-2, as an unsecured claim in the Related Bankruptcy Case, pursuant to 11 U.S.C. § 502(d), Defendant having received an avoidable transfer of a judgment lien within 90 days of the commencement of this case as provided in 11 U.S.C. § 547(b), and Defendant not having conveyed the lien rights and interests to the Bankruptcy Estate.
The application of 11 U.S.C. § 502(d) to disallow Defendant's claim in the Related Bankruptcy Case and Defendant not to receive an unsecured claim distribution from unencumbered monies of the Estate appears to have caused some confusion. As discussed herein, and hopefully clarified, Defendant is disallowed a claim for payment of an unsecured claim in the Related Bankruptcy Case. Defendant has its lien, which was not avoided by the Plaintiff-Trustee, and is not terminated by the "mere" disallowance of Proof of Claim 4-2 pursuant to 11 U.S.C. § 506(d).
Thus, though Defendant has had its claim disallowed in the Related Bankruptcy Case, there remains the determination of the validity, priority, and extent of Defendant's lien in the property at issue - the monies received for the Bankruptcy Estate's interest in the non-exempt equity in two vehicles. That is the subject of the First Cause of Action in the Complaint in this Adversary Proceeding, for which summary judgment is not granted Plaintiff-Trustee.
Plaintiff-Trustee requests the court determine pursuant to the First Cause of Action, that Defendant has no security interest over the monies at issue. In the Third Cause of Action, Plaintiff-Trustee requests that the court sustain the Plaintiff-Trustee's objection to Defendant's proof of claim and disallow it as provided in 11 U.S.C. § 502(d). Dckt. 1.
The Debtor commenced his voluntary Chapter 7 bankruptcy case, the Related Bankruptcy Case, on April 14, 2017. Six years prior to that, in 2011, Marie Landes (Debtor's wife at the time) filed a petition for dissolution of marriage in the California Superior Court. No property division had occurred in the Dissolution Action prior to the commencement of the Related Bankruptcy Case.
At the February 4, 2021 hearing on this Motion, counsel for Defendant reported that there has not yet been any division of property in the Dissolution Action. Further, that Defendant has concluded that the assets in which Defendant asserts its judgment lien in the Dissolution Action, which are asserted to be substantially all assets of the Debtor, have no value worth pursing since the Debtor and his separated spouse are not diligently prosecuting the Dissolution Action. Given that the Dissolution Action having been "pending" fourteen years and because it is still pending, Defendant states that it has been blocked from enforcing its judgment and recovering any assets. It would be rank speculation as to when, if ever, the Debtor and his separated spouse would ever diligently prosecute the Dissolution Action to final judgment during Debtor's lifetime, and Defendant would be able to unilaterally enforce its lien rights.
On April 26, 2017, Plaintiff-Trustee, as the Chapter 7 Trustee in Debtor's Related Bankruptcy Case, filed and served a "Notice of Intent to Sell Equity in Property" ("Notice of Intent"). A copy of the Notice of Intent is included as part of the 113-page exhibit document filed in support of the present Motion. Dckt. 19.
The Notice of Intent includes the following information (identified by paragraph number used in the Notice of Intent) relating to the property to be sold as relevant to this Adversary Proceeding:
Exhibit 3; Dckt. 13. The Certificate of Service for the Notice of Intent includes Defendant, providing services as follows:
Essex Bank9954 Mayland Drive Suite 2100Richmond VA 23233-1482
Exhibit 4; Id .
On May 18, 2017, Plaintiff-Trustee filed his Report of Sale, which states that the sale "to allow the Debtor(s) to buy back the equity in his 2009 Audi and a 1992 Lexus for $12,500.00" had been consummated. Exhibit 7; Id .3 The Complaint states that an additional $500.00 from two of Debtor's bank accounts were turned over to the Plaintiff-Trustee. There has been no assertion that Defendant notified the Plaintiff-Trustee of any objection it had to the sale or that it notified the Plaintiff-Trustee that it had a lien on the vehicles that were the subject of the sale. The $13,000.00 is identified as the "Funds in Dispute," with the rights and interests of the Parties to be determined in the First Cause of Action in the Complaint.
On July 17, 2017, Defendant filed a Proof of Claim #4-1 in Debtor's Related Bankruptcy Case. A copy of Proof of Claim 4-1 is filed as Exhibit 15 in support of the Motion. Id . The July 17, 2017 filing of Proof of Claim 4-1 was three months after the April 26, 2017, filing and service of the Notice of Sale, and two months after the May 18, 2017, filing of the Plaintiff-Trustee's Report of Sale.
The information and documentation provided in and with Proof of Claim 4-1 is summarized as follows:
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