Williams v. Farris (In re Williams)

• Decision Date: 06 April 2021
• Docket Number: CASE NO: 19-32784,ADVERSARY NO. 19-3683
• Parties: IN RE: KYLE KINCAID WILLIAMS, Debtor. KYLE KINCAID WILLIAMS and RENEE ARCEMONT WILLIAMS, Plaintiffs, v. PENNEY ELAINE FARRIS and MATTHEW FARRIS and PATRICK FARRIS and GARY LYNN LAUGHLIN, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Texas

IN RE: KYLE KINCAID WILLIAMS, Debtor.KYLE KINCAID WILLIAMS and RENEE ARCEMONT WILLIAMS, Plaintiffs, v. PENNEY ELAINE FARRIS and MATTHEW FARRIS andPATRICK FARRIS and GARY LYNN LAUGHLIN, Defendants.

CASE NO: 19-32784

ADVERSARY NO. 19-3683

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

April 6, 2021

CHAPTER 13

MEMORANDUM OPINION

Much like the timeless "The Song That Doesn't End," litigation over the property at issue in this case "goes on and on, my friends."¹ Defendants Penney Elaine Farris, Matthew Farris, and Patrick Farris seek entry of an order granting partial summary judgment as to (i) Plaintiffs Kyle Williams and Renee Arcemont Williams' claims for turnover and fraudulent transfer and (ii) Defendants'² counter claims for suit to quiet title and declaratory relief as it pertains to the property located at 9706 Ellen Street, Baytown, Chambers County Texas. A hearing was held on the Motion on March 29, 2021.

For the reasons stated herein, the Court grants in part and denies in part Defendants' Motion for Partial Summary Judgment and grants Defendants' counter claims for suit to quiet title and declaratory relief. Kyle Kincaid Williams and Renee Arcemont Williams's cause of action for turnover pursuant to 11 U.S.C. § 542(a): (i) regarding the promissory note in the amount of $237,008.42 executed by Penney Elaine Farris and Ken Farris and Gary Laughlin in partial payment of the purchase price of real property located at 9706 Ellen Drive, Baytown, Texas 77521, is not dismissed and will proceed to trial solely as the issue pertains to whether Kyle Kincaid Williams and Renee Arcemont Williams are entitled to such funds; and (ii) regarding the remainder of Kyle Kincaid Williams and Renee Arcemont Williams's claims for turnover are dismissed with prejudice. Kyle Kincaid Williams and Renee Arcemont Williams's cause of action for voidance of a fraudulent transfer pursuant to 11 U.S.C. §§ 544(b)(1) and 548, and Texas Business and Commerce Code sections 24.005(a) and 24.006(a)-(b) is dismissed with prejudice. Kyle Kincaid Williams and Renee Arcemont Williams's objection to Penney Elaine Farris, Matthew Farris, and Patrick Farris's Proof of Claim Number 8 will proceed to trial.

Penney Elaine Farris, Matthew Farris, and Patrick Farris's counterclaim for suit to quiet title to the real property located at 9706 Ellen Drive, Baytown, Texas 77521 is granted. The lien created by Kyle Kincaid Williams and Renee Arcemont Williams's Abstract of Judgment in the amount of $477,380.47, plus pre-judgment interest at a rate of 5% per annum commencing on December 6, 2006, and attorney's fees in the amount of $35,000, filed for record in Chambers County on July 20, 2009, with the County Clerk of Chambers County, under document number 2009-46382, is invalid and unenforceable as to the real property located at 9706 Ellen Drive, Baytown, Texas 77521, and title is quieted in Penney Elaine Farris, Matthew Farris, and Patrick Farris. Kyle Kincaid Williams and Renee Arcemont Williams, and any person claiming under them hasno estate, right, title, lien, or interest in or to the real property or any part of such property.

Penney Elaine Farris, Matthew Farris, and Patrick Farris's counterclaim for declaratory relief is granted in part and denied in part: (i) Penney Elaine Farris, Matthew Farris, and Patrick Farris's request for declaratory relief that they own 9706 Ellen Drive, Baytown, Texas 77521 free and clear of all claims asserted by Kyle Kincaid Williams and Renee Arcemont Williams's, and Kyle Kincaid Williams and Renee Arcemont Williams have no legal or equitable interest in the 9706 Ellen Drive, Baytown, Texas 77521 property whatsoever is granted; (ii) Penney Elaine Farris, Matthew Farris, and Patrick Farris's request for declaratory relief regarding whether all Notices or other Instruments that Kyle Kincaid Williams and Renee Arcemont Williams and/or their court-appointed receivers have recorded in the Official Public Records of Real Property of Chambers County, Texas and/or served on Stewart Title Company, the escrow officer, and any other persons relating to 9706 Ellen Drive, Baytown, Texas 77521 are null and void for all purposes is granted; and (iii) Penney Elaine Farris, Matthew Farris, and Patrick Farris's request for declaratory relief regarding whether the escrow officer may proceed to record the Laughlin Release of Lien³ in the Official Public Records of Real Property of Chambers County Texas is denied and is reserved for trial.

The remainder of Kyle Kincaid Williams and Renee Arcemont Williams's claims and Penney Elaine Farris, Matthew Farris, and Patrick Farris's counterclaims will be resolved by final trial on the merits. All other relief is denied.

I. Background Facts and Procedural History

A. Uncontested Factual History

1. On February 6, 2002, Gary and Melanie Laughlin purchased 9706 Ellen Street, Baytown, Chambers County, Texas ("Property").⁴

2. On June 18, 2004, Gary and Melanie Laughlin obtained a loan secured by a First Lien Deed of Trust from AmCap Mortgage, Ltd., to build their home on the Property. They entered into a Mechanic's Lien Contract to build the home; the lien created therein was assigned to AmCap Mortgage, Ltd.⁵

3. In 2005, after the Texas Gulf Coast suffered substantial hurricane damage, Plaintiff Kyle Williams ("Williams") began working with Gary Laughlin ("Laughlin") and others undertaking hurricane damage abatement work in the Gulf Coast area.⁶ Williams also met Ken Farris in 2004 or 2005 at a motorcycle race track.⁷

4. On March 16, 2009, Plaintiffs were awarded a $477,380.47 judgment plus $35,000 in attorney's fees and pre-and-post judgment interest against Laughlin and others in Cause No. 2006-77415 - Kyle Williams v. Abatement Incorporated, Alan Manring and Gary Laughlin, in the 127th District Court, Harris County, Texas ("State Court Action")⁸ The judgment stemmed from a soured business relationship between Williams, Laughlin, and others.⁹

5. On July 20, 2009, Plaintiffs recorded an abstract of judgment in Chambers County, Texas ("Abstract of Judgment").¹⁰

6. On August 7, 2009, Laughlin filed for bankruptcy in the Southern District of Texas.¹¹ In that bankruptcy, Laughlin included the Property in Schedule A and claimed the Property as exempt in Schedule C.¹²

7. On November 8, 2009, Plaintiffs filed a Proof of Claim in the Laughlin Bankruptcy Case with the Abstract of Judgment attached and incorporated therewith.¹³

8. Plaintiffs did not file an objection to Laughlin's claimed homestead exemption.¹⁴

9. On November 11, 2009, Williams initiated an adversary proceeding in Laughlin's bankruptcy case and after a trial on the merits, the court ruled in favor of Williams, awarding him a non-dischargeable judgment in the amount of $576,785.40 in actual damages plus post-judgment interest and costs of court ("Bankruptcy Court Judgment").¹⁵

10. On September 12, 2012, the Bankruptcy Court Judgment was domesticated in the 129thDistrict Court of Harris County, Texas.¹⁶

11. On December 5, 2014, Gary and Melanie Laughlin divorced.¹⁷

12. On April 14, 2015, Melanie deeded her interest in the Property to Laughlin and Laughlin conveyed the Property to Penney Farris and her husband, Ken Farris ("Farrises").¹⁸ At the time it was conveyed, the Chambers County Appraisal District valued the Property at $495,160.¹⁹ On the same date, the Farrises executed a note, promising to pay $237,008.42 to Laughlin ("Farris Note")²⁰ and tendered $33,613.49 to Laughlin for the balance of the purchase price, plus $22,660.65 for pro-rated property tax and closing costs.²¹ Laughlin also executed a release of lien on the same day.²²

13. On October 30, 2015, Williams filed his Ex Parte Motion for Turnover and Appointment of Receiver Pursuant to § 31.002 of the Texas Civil Practice & Remedies Code in Cause No. 2012-53113, Kyle Williams v. Gary Laughlin, in the 129th District Court of Harris County, Texas ("State Court Receivership Suit").²³

14. On December 7, 2015, Williams succeeded in the State Court Receivership Suit and a receiver was appointed.²⁴

15. On December 15, 2015, an interest in the Farris Note was claimed by the receiver and subjected to the receiver's authority.²⁵ Notice was issued.²⁶

16. On May 20, 2017, Ken Farris died and his interest in the Property passed pursuant to a family settlement agreement, giving Penney Elaine Farris, Matthew Farris, and Patrick Farris ("Defendants") an interest in the Property.²⁷

17. On April 12, 2018, Defendants filed suit in the 253rd District Court of Chambers County, Texas, to, inter alia, quiet title to the Property in Defendants in Cause No. 18DCV0252, Penney Farris, et al v. Kyle Williams, et al.²⁸

18. On April 11, 2019, the state court receiver filed another suit in state court alleging thatLaughlin's conveyance of the Property to the Farrises was fraudulent.²⁹

19. On May 16, 2019, Plaintiffs filed their chapter 13 bankruptcy petition.³⁰

B. Procedural History

Williams, and as next friend for Renee Arcemont Williams,³¹ Plaintiffs in this case, filed the instant adversary proceeding ("Complaint").³² In the Complaint, Plaintiffs pled the following causes of action: (1) turnover pursuant to 11 U.S.C. § 542(a); (2) fraudulent transfer; and (3) objection to claim against Penney Elaine Farris, Matthew Farris, Patrick Farris, and Gary Lynn Laughlin³³ Gary Lynn Laughlin never filed a response to Plaintiffs' Complaint nor did he make an appearance in this case. Defendants, which solely include Penney Elaine Farris, Matthew Farris, and Patrick Farris for purposes of this Memorandum Opinion, filed an answer, and asserted the following counterclaims: (1) quiet title; (2) slander of title; (3) tortious interference with contractual relations; and (4) request for declaratory judgment.³⁴ Plaintiffs never filed an answer to Defendants' counterclaims.

On November 16, 2020, Defendants timely filed their Motion for Partial Summary Judgment ("Motion"),³⁵ memorandum of law supporting that...