Sullivan v. Buckhorn Ranch Partnership

• Decision Date: 14 June 2005
• Docket Number: No. 100,618.,100,618.
• Citation: 2005 OK 41,119 P.3d 192
• Parties: John R. SULLIVAN, an Individual, Plaintiff/Appellant, v. BUCKHORN RANCH PARTNERSHIP, a Texas General Partnership; Joe P. Sullivan, an Individual; Mark J. Sullivan, an Individual; BH Ranch, Ltd., a Texas Limited Partnership; Grand Prairie State Bank, a Texas State Banking Institution, Defendants/Appellees.
• Court: Oklahoma Supreme Court

Page 192

119 P.3d 192

2005 OK 41

John R. SULLIVAN, an Individual, Plaintiff/Appellant, v. BUCKHORN RANCH PARTNERSHIP, a Texas General Partnership; Joe P. Sullivan, an Individual; Mark J. Sullivan, an Individual; BH Ranch, Ltd., a Texas Limited Partnership; Grand Prairie State Bank, a Texas State Banking Institution, Defendants/Appellees.

No. 100,618.

Supreme Court of Oklahoma.

June 14, 2005.

COPYRIGHT MATERIAL OMITTED

Certiorari to the Court of Civil Appeals, Division III; Honorable John H. Scaggs, Trial Judge.

¶ 0 The plaintiff/appellant, John R. Sullivan, a Texas resident, brought a quiet title and ejectment action against the defendant/appellees, various Texas companies and residents. Sullivan asserted ownership of approximately 1,600 acres of land in Murray County, Oklahoma. He sought to invalidate a 1992 deed in which he attempted to convey the acreage to a non-existent legal entity. Sullivan moved for summary judgment, insisting that the deed was void. The appellees argued that Sullivan was barred from challenging the validity of the conveyance by the statute of limitations and equitable defenses. One of the appellees also counterclaimed for reformation of the deed, contending that it merely contained a scrivener's error. The trial judge, Honorable John H. Scaggs, determined that Sullivan's claims were barred by the statute of limitations and equitable defenses and he granted summary judgment to the appellees, dismissing all of Sullivan's claims. Sullivan appealed and the Court of Civil Appeals affirmed. We hold that property conveyed after the bankruptcy court enters an order abandoning it from the bankruptcy estate does not qualify as a "judicial sale" under 12 O.S.2001 § 93; and 2) genuine issues of material fact concerning the application of equitable defenses preclude summary judgment.

CERTIORARI PREVIOUSLY GRANTED THE COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT REVERSED AND CAUSE REMANDED.

Jon R. Running, Tulsa, OK, for Plaintiff/Appellant.

Phil S. Hurst, Sulphur, OK, for Defendants/Appellees Buckhorn Ranch Partnership, Joe P. Sullivan, and Mark Sullivan.

Mark W. Kuehling, Oklahoma City, OK, for Defendants/Appellees BH Ranch, Ltd., and Grand Prairie State Bank.

KAUGER, J.

¶ 1 Title 11 U.S.C.A. § 554¹ of the United States Bankruptcy Code governs abandonment of bankruptcy estate property. It allows the court to order the trustee to abandon any estate property that is burdensome or of inconsequential value and benefit to the estate.² When an asset has been abandoned by the trustee, it is no longer part of the bankruptcy estate. It reverts to its pre-bankruptcy status as if no bankruptcy petition had been filed, and it is removed from the jurisdiction of the bankruptcy court.³ The issues presented are: 1) whether the cause is time barred because property conveyed after it has been abandoned from bankruptcy court constitutes a "judicial sale" under 12 O.S.2001 § 93;⁴ and 2) if timely filed, whether summary judgment is precluded by the existence of material issues of fact concerning the application of equitable defenses. We hold that: 1) property conveyed after the bankruptcy court enters an order abandoning it from the bankruptcy estate does not qualify as a "judicial sale" under 12 O.S.2001 § 93; and 2) genuine issues of material fact concerning the application of equitable defenses preclude summary judgment.

FACTS

¶ 2 This cause concerns a Texas family's dispute over the establishment of title to real estate located in Oklahoma. On September 19, 1985, the plaintiff/appellant, John R. Sullivan (Sullivan), a Texas resident, acquired title to 3,200 acres of real property, commonly known as the Buckhorn Ranch (ranch), in Murray County, Oklahoma.⁵ The ranch was secured by a mortgage in favor of Prudential Insurance Company of America (Prudential).

¶ 3 In 1991, Sullivan filed for bankruptcy in the Northern District of Texas. On August 12, 1991, the bankruptcy court issued an order abandoning the ranch from the bankruptcy estate, finding that no equity existed for the benefit of the estate over and above the lien held by Prudential. On March 13, 1992, the bankruptcy court entered an order holding that the sale of the ranch and release of the mortgage lien for $758,600.00 could proceed without court approval and that it would not violate the automatic stay previously entered by the court.

¶ 4 On March 16, 1992, Sullivan and his wife divided the 3,200 acre ranch and executed two warranty deeds. Sullivan sold half of the ranch (about 1,600 acres) to the Ardmore Institute of Health (Ardmore) for $738,824.80. The Ardmore deed was recorded March 18, 1992. The second deed conveyed the other half of the ranch to Buckhorn Ranch Partnership I, a Texas limited partnership (Partnership I). The Partnership I deed was recorded July 8, 1992. Partnership I did not exist when the conveyance was made or at the time the deed was recorded, and apparently has never existed.

¶ 5 The settlement statement relating to the Ardmore sale reflects that Sullivan was approximately $75,000.00 short of conveying the property free and clear of all mortgage liens, brokers fees, taxes, and other charges. According to Sullivan, his father, Walter Sullivan (father) provided the money⁶ necessary to complete the Ardmore transaction, allowing him to pay the mortgage and obtain a release. Sullivan also insists that, at the time of the conveyance, he and his father had intended to form Partnership I, but never did.

¶ 6 On July 17, 1992, the father and Sullivan's brother, Joe Sullivan (J. Sullivan), entered into a partnership agreement forming a general partnership known as the Buckhorn Ranch Partners (Partnership II). J. Sullivan owned 15% and the father owned 85% of the general partnership. The stated purpose of Partnership II was to own, manage, operate, develop, sell and dispose of real property located in Murray County, Oklahoma. The Partnership II agreement was filed in Murray County, Oklahoma, on December 7, 1993. On December 12, 1993, the Partnership II secured a mortgage on the ranch from Sulphur Community Bank.

¶ 7 On October 4, 2001, Sullivan filed an affidavit of beneficial interest in the ranch in Murray County. About the same time, the father assigned his Partnership II interest to another of his sons and Sullivan's brother, Mark Sullivan (M. Sullivan/J.Sullivan and M. Sullivan, collectively, the brothers). On March 26, 2002, Partnership II conveyed its interest in the ranch to BH Ranch Ltd, a Texas limited partnership (BH Ranch) by special warranty deed.⁷ The deed was recorded April 1, 2002, and secured by a mortgage from the Grand Prairie State Bank, a Texas Bank (Bank), filed the same day.

¶ 8 On November 21, 2002,⁸ Sullivan filed a quiet title and ejectment action against Partnership II, the brothers, the BH Ranch, and the Bank, seeking free and clear title to the half of the ranch which was the subject of the July, 8, 1992, Partnership I conveyance. On June 9, 2003, Sullivan filed a motion for summary judgment, arguing that because the grantee, Partnership I, did not exist and was incapable of taking title, the conveyance was void.

¶ 9 BH Ranch counterclaimed for reformation, contending the deed merely contained a scrivener's error. On June 23, 2003, the brothers and Partnership II asserted that summary judgment would be premature because disputed material fact questions existed regarding whether: 1) the deed contained a mistake/scrivener's error which should have referred to Partnership II, a company which was formed before the deed in question was executed and before a formalized written partnership agreement was entered; and 2) Sullivan was estopped to deny the validity of the conveyance pursuant to 16 O.S.2001 § 11 because the benefits of the transaction had been received.⁹ The BH Ranch and the Bank argued that, although summary judgment would be premature regarding the scrivener's error issue, Sullivan's claims are barred by the statute of limitations, estoppel by deed and/or ratification,¹⁰ equitable estoppel, and laches.

¶ 10 The BH Ranch and the Bank attached various exhibits in support of their argument which included: 1) the Partnership II agreement and a December 9, 1993, mortgage on the ranch taken by Partnership II; 2) documentation of Sullivan's October 19, 2000, criminal probation relating to an offense of "False Statement and Aiding and Abetting;" and 3) documents from 2000-2001, which they allege indicate that Sullivan attempted to purchase interests in the ranch and/or various partnerships of the father and/or the brothers.

¶ 11 In a supplemental filing, the BH Ranch and the Bank also included: 1) a June 21, 2003, affidavit of the father and J. Sullivan stating that the deed contained a scrivener's error and that the Partnership II was formed prior to the conveyance and before the written partnership agreement was formalized; and 2) a schedule of expenses from March 16, 1992, indicating that the father issued the cashiers check for the purchase of the ranch.

¶ 12 Sullivan responded with an affidavit from the attorney who prepared the deed indicating that Sullivan had planned to form Partnership I and would be a partner. Sullivan claimed to have paid the real estate taxes on the ranch and he also submitted documentation showing that he paid operating expenses of the ranch including salaries, repair costs, and other day-to-day expenses. He also explained that: 1) any discussions of purchasing the ranch or various partnerships were only a small part of broad discussions among Sullivan family members who were attempting to settle various disputes relating to numerous real estate properties; and 2) he had no reason to bring suit until Partnership II attempted to sell the ranch to BH Ranch.

¶ 13 At the July 11, 2003, summary judgment hearing, the trial court, Honorable John H. Scaggs, determined there was no substantial controversy as to any material fact, and that Sullivan's claims...