Vieira v. Whitfield (In re Shiver)

• Decision Date: 27 February 2019
• Docket Number: C/A No. 17-05318-DD,Adv. Pro. No. 18-80023-DD
• Citation: 598 B.R. 221
• Court: U.S. Bankruptcy Court — District of South Carolina
• Parties: IN RE, Michael T. SHIVER, Debtor. Michelle L. Vieira, Chapter 7 Trustee for Michael T. Shiver, Plaintiff, v. Anthony Whitfield, Defendant.

598 B.R. 221

IN RE, Michael T. SHIVER, Debtor.Michelle L. Vieira, Chapter 7 Trustee for Michael T. Shiver, Plaintiff,

v.Anthony Whitfield, Defendant.

C/A No. 17-05318-DD

Adv. Pro. No. 18-80023-DD

United States Bankruptcy Court, D. South Carolina.

Signed February 27, 2019

Entered February 28, 2019

Michael T. Shiver, Mount Pleasant, SC, pro se.

Barbara George Barton, Christine E. Brimm, Barton Brimm, PA, Murrells Inlet, SC, for Plaintiff.

Reid E. Dyer, Moore & Van Allen, PLLC, Charleston, SC, for Defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

David R. Duncan, Chief US Bankruptcy Judge

This matter is before the Court on motions for summary judgment filed by the plaintiff, Michelle L. Vieira, and the defendant, Anthony Whitfield. Both motions were filed on December 18, 2018. Both parties filed objections to the opposing party's motion on January 2, 2019. A hearing was held on the motions on February 5, 2019. For the reasons set forth below, the Court now grants the plaintiff's motion and denies the defendant's motion.

UNDISPUTED FACTS

1. At the time of his chapter 7 bankruptcy filing, Michael T. Shiver, the debtor, was the owner of real property located at 727 Bradburn Drive, Mount Pleasant, SC (the "Property").¹ The Property is

property of the bankruptcy estate.²

2. Permacoat of Charleston, SC ("Permacoat") filed a state court action to foreclose a mechanic's lien against the defendant in November 2006 in state court.

3. The defendant counterclaimed against Permacoat in the state court litigation, and obtained a judgment against Permacoat in June 2014 (the "2014 Judgment").

4. In late 2014, the defendant commenced supplemental proceedings against Permacoat.

5. On August 11, 2017, the defendant filed a lis pendens against the Property (the "Lis Pendens").

6. On August 24, 2017, the Master in Equity for Charleston County issued a Decree of Foreclosure and Order of Sale, ordering that the Property be sold to satisfy the judgment lien obtained by the defendant against Permacoat in June 2014 (the "Foreclosure Decree"). The Foreclosure Decree stated, "Plaintiff Permacoat of Charleston S.C. is an unincorporated association, to which Michael T. Shiver and James Russell Shiver are owners and co-partners (per their own admittance) and therefore are personally liable for the June 25, 2014 $ 127,866.54 judgment in favor of Anthony M. Whitfield pursuant to S.C. Code § 15-35-170." The Foreclosure Decree further stated, "Anthony M. Whitfield's judgment in the original amount of $ 127,866.54 constitutes a fifth (5th) lien on the subject real property."

7. Although the Foreclosure Decree stated that the debtor is personally liable for the 2014 Judgment, no judgment was recorded and indexed against the debtor personally prior to the filing of the bankruptcy case.

8. The debtor filed his chapter 7 bankruptcy case on October 26, 2017.

BACKGROUND

9. The plaintiff commenced this adversary proceeding on March 30, 2018. The plaintiff's initial complaint asserted causes of action for avoidance of the Foreclosure Decree pursuant to 11 U.S.C. § 547 and preservation of the avoided transfer pursuant to 11 U.S.C. § 551.

10. The defendant filed an answer and counterclaims to the initial complaint on April 30, 2018. The defendant's counterclaims requested a declaratory judgment regarding the extent, validity and priority of his lien. The plaintiff filed a reply to the counterclaim on May 7, 2018.

11. The plaintiff filed an amended complaint on May 10, 2018. The amended complaint asserted causes of action for avoidance of the Foreclosure Decree under § 547, avoidance of the Foreclosure Decree and the 2014 Judgment pursuant to § 544(a), and preservation of the avoided transfer pursuant to § 551.

12. The defendant filed an answer and counterclaims to the amended complaint on May 22, 2018, again requesting a declaratory judgment regarding his lien, and the plaintiff filed a reply to the counterclaims on May 23, 2018.

13. After obtaining leave from the Court, the plaintiff filed a second amended complaint on September 17, 2018. The second amended complaint asserted causes of action for avoidance of the Lis Pendens and the Foreclosure Decree pursuant to § 547, avoidance of the 2014 Judgment and the Foreclosure Decree pursuant to § 544(a), and preservation of the avoided transfers pursuant to § 551.

14. The defendant filed an answer and counterclaims to the second amended complaint on October 3, 2018. Again, the defendant's counterclaims sought a declaratory judgment regarding his lien. Due to the previous withdrawal of his counsel, the answer and counterclaims were filed pro se. The defendant again obtained counsel on October 8, 2018.

15. The plaintiff filed a reply to the counterclaims on October 4, 2018.

ARGUMENTS OF THE PARTIES

The plaintiff argues that she is entitled to avoid the Lis Pendens because it constitutes a preferential transfer under § 547. The plaintiff argues that under South Carolina law, the Lis Pendens placed a cloud on the title to the Property, preventing the debtor from freely conveying the Property to a subsequent purchaser. At the hearing on the motions, the plaintiff compared the filing of a lis pendens to the recording of a mortgage and asserted that the effect of both actions was the same. The plaintiff argues that the Foreclosure Decree is also a preferential transfer. Finally, the plaintiff argues that the 2014 Judgment can be avoided under § 544 because it was never recorded in the name of the debtor. Therefore, it never became a lien on the Property under South Carolina law and the plaintiff did not have notice of the 2014 Judgment. The plaintiff asserts that the Lis Pendens does not provide notice that defeats her status as a bona fide purchaser because she can avoid it as a preference.

The defendant argues that the Lis Pendens is not a preferential transfer avoidable by the plaintiff because it does not constitute a transfer of an interest in property. The defendant argues that under South Carolina law a lis pendens merely provides notice of pending litigation. At the hearing, the defendant argued that a lis pendens does not actually affect a debtor's ability to convey title, it merely affects third party purchasers' rights in the property. The defendant also asserted at the hearing that there is a difference between an actual transfer and the perfection of a transfer under § 547(e). The defendant asserted that here, the Lis Pendens constituted perfection but not a transfer that can be avoided.

The defendant also argues that the Foreclosure Decree does not constitute a transfer because it merely recognized that the defendant already possessed an enforceable judgment against the debtor. Finally, the defendant argues that the plaintiff cannot avoid the 2014 Judgment under § 544 because the Lis Pendens provided notice of the 2014 Judgment, defeating the plaintiff's status as a bona fide purchaser.

LEGAL STANDARD

Summary judgment is appropriate when the "depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials ... show [ ] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a), (c) (made applicable to bankruptcy proceedings by Fed. R. Bankr. P. 7056 ). A genuine dispute of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The role of the judge in deciding summary judgment is "not himself to weigh the evidence ... but to determine whether there is a genuine issue for trial." Id. at 249, 106 S.Ct. 2505.

The party requesting summary judgment must demonstrate the absence of any genuine issues of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This initial burden requires the moving party to identify those portions of the record that it believes demonstrate the absence of a genuine dispute. Id. at 323, 106 S.Ct. 2548 ; see also Anderson , 477 U.S. at 249, 106 S.Ct. 2505. The nonmoving party must then produce " ‘specific facts showing that there is a genuine issue for trial.’ " Id. at 324, 106 S.Ct. 2548 ; see Fed R. Civ. P. 56(e). If the nonmoving party fails to provide evidence supporting an essential element of its case, then the moving party is entitled to judgment as a matter of law. Id. at 323, 106 S.Ct. 2548. The parties agree there are no disputes of material fact, disagreeing only as to the consequences to the parties of the application of the law to the facts.

DISCUSSION

1. 11 U.S.C. § 547

The plaintiff seeks to avoid the Lis Pendens and the Foreclosure Decree pursuant to § 547. Section 547 provides, in relevant part:

(b) Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property –

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made–

(A) on or within 90 days before the date of the filing of the petition; or

(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and

(5) that enables such creditor to receive more than such creditor would receive if–

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the extent provided by the provisions of this title.

The parties do not dispute that if a transfer was made, it was on account of an antecedent debt and while the debtor was insolvent, nor that the Lis Pendens was filed and the Foreclosure Decree was...