Scott David Cushing and Lisa Diane Cushing v. Household Finance Corporation III (In re Cushing); Adversary No. 03-7120 (F. Schwinn, K. Trainor) (J. Karlin) (January 21, 2005)
MEMORANDUM AND ORDER DENYING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT
Facts:
On April 14, 2003, the debtors Scott David Cushing and Lisa Diane Cushing (“debtors”) refinanced their home mortgage with Household Finance Corporation III (“Mortgagee”). The debtors did not dispute that the property was the principal dwelling for Ms. Cushing; however, the parties did dispute whether Mr. Cushing resided there. The debtors filed for Chapter 7 bankruptcy relief and in that process sought to extend the period to rescind the transaction under the Truth-in-Lending Act (“TILA”). On the basis the notice of right to cancel failed to comply with TILA requirements [see Holding 1] and that Mortgagee failed to supply two copies of the notice to the debtors [see Holding 2]. The Mortgagee disputes whether the debtor Mr. Cushing resided at the home, and therefore, had the right to rescind the transaction [see Holding 3].
Holdings:
1. The Notice of Right to Cancel supplied by the Mortgagee to the debtors complies with TILA requirements, even though the Mortgagee did not use the model form provided in Regulation Z. The notice was “substantially similar,” and therefore, did not violate the Truth-in-Lending Act or Regulation Z.
2. The TILA regulations that require two copies of the notice to be provided to the borrowers is not irrational, and if the Mortgagee failed to provide the required number of copies, the right to rescind this transaction should be extended to three years. However, there is sufficient disagreement as to whether the requisite number of copies were provided, and the issue cannot be decided on summary judgment.
3. Whether or not Mr. Cushing resided at the property and that, therefore, has the right to rescind the transaction cannot be factually intensive and cannot be decided on summary judgment.
In re Alva Leonard Hartman, Jr. ; Case No. 04-42526-13 (L. Graham, D. Troup) (J. Karlin) (February 3, 2005)
MEMORANDUM AND ORDER DENYING
Facts:
The debtor Alva Hartman (“debtor”) and Jeanette Ewert (“Ex-Wife”) were divorced on August 25, 2004, and a divorce decree was entered in District Court. The divorce decree awarded the homestead to the debtor and the debtor agreed to certain payments to the Ex-Wife and confessed to a judgment, in the amount of $56,910.00, in favor of the Ex-Wife to equalize and secure the property division.
On September 10, 2004, the debtor filed a Chapter 13 bankruptcy petition and a plan that sought to avoid the Ex-Wife’s judgment lien on his homestead and treat the confessed money judgment as an unsecured, non-priority claim. The Ex-Wife objected to the plan confirmation on the basis that the judgment lien cannot be avoided. The money judgment was not for alimony, maintenance or support.
Holding:
Pursuant to 522(f)(1), a judicial lien may be avoided if the debtor can establish (1) that the lien is a judicial lien, (2) that the lien impairs an exemption, and (3) the lien was fixed on an interest of the debtor in the property before the judicial lien was fixed. The only issue is whether the debtor may avoid the fixing of the ex-wife’s lien on the property interest that he obtained in the divorce decree. A joint marital estate in the real property was created on the date the divorce petition was filed. Later, the divorce decree granted the debtor a new fee-simple interest in the real property, and simultaneously granted the ex-wife a judicial lien on the same property. The debtor never possessed a fee-simple interest before the judicial lien was attached, and therefore, may not use 522(f) to avoid the lien.
In re Cheryl Lou Rothwell; Case No. 04-41153-13 (J. Hooge, D. Berkowitz) (J. Karlin) (February 3, 2005)
MEMORANDUM AND ORDER SUSTAINING IN PART, AND DENYING IN PART, OBJECTION TO CHAPTER 13 PLAN
Facts:
The debtor Cheryl Rothwell (“debtor”) and Harold Rothwell (“Ex-Husband”) filed for divorce, and on February 3, 2004, the final divorce decree was entered by the District Court wherein the debtor was to retain the homestead and agreed to make certain payment to the Ex-Husband as part of the property division. The amount was not for alimony, maintenance or support. The parties also stipulated and agreed that, in the event payment was in default, a money judgment would be entered and serve as a lien on all real property owned by the debtor. The debtor made the initial payment and three subsequent payments and then found herself in default.
On May 6, 2004, the debtor filed a Chapter 13 bankruptcy petition and plan. The plan proposed to pay the remaining debt owed to the Ex-Husband through the plan as an unsecured, non-priority claim. It was unlikely that the general unsecured creditors would receive disbursement through the Chapter 13 process. The Ex-Husband objected to plan confirmation. The debtor asserted that the ex-husband did not have standing to object to confirmation, because he failed to file a proof of claim [see Holding #1]. The debtor also sought to avoid the Ex-Husband’s judicial lien on the homestead [see Holding #2]. The Ex-Husband asserted that the debtor failed to file the bankruptcy in good faith [see Holding #3].
Holdings:
1. The Ex-Husband has standing to object to confirmation. The plan proposes to void the lien on the homestead “upon confirmation.” In the event the Ex-Husband lacked standing to object to confirmation, he would be barred from challenging the proposed plan terms. Furthermore, any “party in interest” may object to plan confirmation, and in In re Davis, 239 BR at 579, the phrase, “party in interest,” generally includes all persons with an interest that is directly affected by the bankruptcy proceedings. Finally, any objection by the Ex-Husband does not impact any other creditors.
2. The debtor may not avoid the Ex-Husband’s judicial lien. A joint marital estate was created in both spouses on the date the divorce petition was filed. The later divorce decree granted the debtor a new fee-simple interest in the real property, and simultaneously granted the Ex-Husband a judgment lien on the same property.
3. The debtor met the burden of proving she filed the bankruptcy in good faith. Her explanation for why she decided to file and the timing of that decision was understandable and credible.
Ricky D. Poppitz and Yvonne S. Poppitz v. Ameriquest Mortgage Company (In re Poppitz); Adv. No. 02-6129; Case No. 02-23682 (K. Gay, C. Norkey) (R. Berger) (January 26, 2005)
MEMORANDUM AND ORDER
Facts:
On May 24, 2002, the debtors Ricky D. Poppitz and Yvonne S. Poppitz (“debtors”) entered into an agreement wherein Ameriquest Mortgage Company (“Mortgagee”) loaned the debtors $99,800.00 to refinance an existing loan secured by their home. As the security obligation, the debtors granted the Mortgagee a mortgage on the home.
The debtors filed for Chapter 13 bankruptcy relief on October 4, 2002 and commenced an adversary proceeding on December 10, 2002, to determine whether they were entitled to remedies under the Truth in Lending Act (“TILA”). The debtors allege that the Mortgagee failed to give the required TILA disclosures. [See Holding #1.] The Mortgagee denied any failings and asserted the bona fide error defense. [See Holding #2.] The debtors sought to rescind the transaction and recover statutory damages and attorneys’ fees and costs. [See Holding #3.]
Holdings:
1. After live testimony, the Court determined that the debtors’ testimony was credible as compared with that of the representative of the Mortgagee, and that the disclosure statement was not included with the packet of documents presented to the debtors at closing.
2. The Mortgagee is not entitled to the bona fide error defense, because it failed to present any evidence of procedures to avoid any violation.
3. The debtors are entitled to rescind the transaction and are accordingly entitled to statutory damages and attorneys’ fees and costs. The Court reserved judgment.
Al Muehlberger Concrete Construction, Inc. v. McQuaid Brothers Remodeling Co., Inc. (In re Al Muehlberger Concrete Construction, Inc.) Adv. Case No. 04-6088; Case No. 04-20212-11 (R. Wallace, S. King) (R. Berger) (January 30, 2005)
MEMORANDUM OPINION
Facts:
The debtor Al Muehlberger Concrete Construction (“debtor”) supplied certain labor and materials pursuant to contract to McQuaid Brothers Remodeling (“Contractor”). The work was completed in April 2002. In May 2002, the Contractor allegedly sent an invoice to the debtor, in the amount of $4,145.63. In March 2004, the debtor contacted the Contractor regarding payment, and after failure to remit payment, the debtor retained counsel who gave formal, written demand. The Contractor remitted payment by check, in the amount of $2,072.82, with “Final Payment” written on the check. The debtor negotiated the check and crossed out the “Final Payment” writing and billed the Contractor for the remaining balance. The Contractor refused to pay. In June 2004, the debtor filed its adversary action to turn over the remaining balance, and the Contractor asserted the defense of accord and satisfaction. The Court held the debtor’s actions constituted accord and satisfaction.
Holding:
Pursuant to K.S.A. §84-3-311, the Contractor provided an instrument and an accompanying written communication that contained conspicuous statement to the effect that the check was tendered in full satisfaction of the claim. The later efforts to recover the deficiency do not fall within the statutory exception.
In re Cynthia L. Henderson-Taylor; Case No. 04-20195-13 (D. Reed, W Griffin. P. Schauffler) (R. Berger) (January 26, 2005)
MEMORANDUM DECISION
Facts:
The debtor Cynthia L. Henderson-Taylor (“debtor”) purchased a vehicle that triggered a sales tax that was due and owing. The private selling party did not withhold the sales tax. The debtor filed Chapter 13 bankruptcy. The Missouri Department of Revenue (“MDOR”) filed a timely proof of claim, asserting a sales tax liability in the amount of $1,075.13 and asserted that the tax is entitled to priority classification. The selling party did not withheld sales tax. The Chapter 13 Trustee objected to the proof of claim.
Holding:
The sales tax is an excise tax that is entitled to priority classification under 507(a)(8)(b).
Marian Bonura v. Damon Layne Curry (In re Curry); Adv. No. 04-6033; Case No. 03-25196-7 (R. DeWitt, J. Holmberg) (R. Berger) (January 30, 2005)
MEMORANDUM OPINION
Facts:
The debtor Damon Layne Curry (“debtor”) sold certain energy stocks to Marian Bonura (“Buyer”). The energy stocks were later discovered to have little-to-no value. On December 12, 2003, the debtor filed a Chapter 7 bankruptcy petition. The Buyer filed an adversary complaint on March 3, 2004, seeking a determination that the debtor made false representations as to the stocks’ actual value. The Buyer failed to produce any evidence that the debtor made any representations regarding any energy stock investment or sale.
Holding:
The Buyer failed to produce any evidence of any misrepresentation.
Affordable Residential Communities v. J. Michael Morris and Mid America Credit Union (In re Knowles); Adv. Case No. 02-05250; Case No. 01-13992 (W. Zimmerman, J. Morris) (D. Somers) (February 10, 2005)
MEMORANDUM OF DECISION AND ORDER
Facts:
On March 28, 2001, the debtor Aletha Lee Knowles (“debtor”) executed a purchase agreement in which she agreed to acquire a 2001 manufactured home (“Home”) from Affordable Residential Communities (“Seller”). The real estate upon which the Home was to be affixed was owned by the debtor and subject to a mortgage to Mid American Credit Union (“Mortgagee”). The debtor was unable to obtain financing. The Seller never submitted an application for title or otherwise requested or filed a notice of security interest with respect to the Home.
On August 17, 2001, the debtor filed a Chapter 7 bankruptcy petition, and in later course the Seller acquired the interest of the Mortgagee. The Seller claims an interest in the Home. The Seller asserts that the Home is not property of the estate, because pre-petition the debtor rejected the Home, and the Home re-vested in the Seller; that the Seller is the owner of the home by operation of K.S.A. §58.4204(c) [titling of manufactured homes]; and that equity requires rescission of the purchase agreement.
Holdings:
1. The stipulations provided to the Court are insufficient to prove the Home re-vested in the Seller pre-petition, pursuant to K.S.A. §84-2-4014. There is no evidence of notice from the debtor to the Seller indicating an intent to revoke acceptance. An evidentiary hearing is necessary.
2. K.S.A. 84-2-1001 et seq. controls the sale and transfer. The Kansas Manufactured Home Act does not address ownership. As a matter of law, the Kansas title laws do not establish that the seller is the owner of the manufactured home.
3. The Seller is not entitled to invoke the equity remedy of rescission to invalidate the sale to the debtor. Article K.S.A. 84-2-507(2) implies a seller has the right to reclaim the goods if the buyer fails to make payment. K.S.A. 84-2-511 implies the right to reclaim. K.S.A. 84-2-702(2) provides that if a seller discovers the buyer received goods on credit while insolvent, the seller may reclaim the goods. Any rights under Article II, however, are circumscribed by 546(c) when the buyer is in bankruptcy. Section 546(c) provides unpaid seller’s right to demand reclamation of the goods within ten days of receipt by the buyer or twenty days after receipt if a bankruptcy occurs. The Seller failed to make any timely demand.
4. To the extent the Seller fails to establish that the Home is not the property of the bankruptcy estate, the trustee has the right to avoid the transfer and recover the proceeds of the home for the benefit of the bankruptcy estate.
Day-By-Day Enterprises, Inc. v. Franchise Mortgage Acceptance Corp. and GMAC Commercial Mortgage Corp. (In re Day-By-Day Enterprises, Inc.) Adv. Case No. 04-5246; Case No. 04-11794-11 (S. Saidian, M. Masoner) (D. Somers) (February 11, 2005).
MEMORANDUM OF DECISION
Facts:
The debtor Day-By-Day Enterprises, Inc. (“debtor”) operates seven Burger King restaurants in Kansas, including a store located in Hutchinson, Kansas (“Hutchinson Burger King”). The Hutchinson Burger King is operated under a franchise granted by Burger King Corporation (“Burger King”). Burger King owns the land and buildings, and leased the property to Douglas Day, who later assigned a fifty percent interest in the Hutchinson Burger King to his wife, and the couple later assigned all interest to the debtor. The original lease, the assignment to the wife and the assignment to the debtor (“Lease Documents”) were not filed with the Register of Deeds.
The debtor borrowed certain funds from Franchise Mortgage Acceptance Corp. , and later assigned (“Secured Lender”) and to secure payment, the debtor pledged a mortgage on his leasehold interest in the Hutchinson Burger King and a security interest in all personal property. The Secured Lender filed the appropriate financing statements to secure and properly perfect the personal property, and noted the lease on the finance statements. The Secured Lender failed to record the mortgage on the debtor’s leasehold interest until January 12, 2004. Shortly thereafter, the Secured Lender filed a state court action, seeking to foreclose its mortgage on the leasehold and its security interest in the personal property. On April 8, 2004, the debtor filed a Chapter 11 bankruptcy petition and later filed an adversary complaint to avoid its mortgage on the leasehold as a preference. The Secured Lender argued that the finance statement gave constructive notice of the mortgage outside the ninety day preference period.
Holding:
The finance statement does not give a hypothetical purchaser constructive notice of the mortgage. The debtor is entitled to avoid the mortgage on its leasehold interest in the Hutchinson Burger King as a preference.
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