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White v. Gordon

United States District Court, D. New Hampshire

September 27, 2016

June White
v.
Olga Gordon Opinion No. 2016 DNH 174

          ORDER ON APPEAL

          Joseph N. Laplante United States District Judge.

         This appeal from an order of the Bankruptcy Court in a Chapter 7 proceeding delves into the question of when and whether property held by a trust becomes part of a debtor's bankruptcy estate. June White, the appellant, argues that the Bankruptcy Court erred in concluding that a certain parcel of property, which the debtor, Thomas L. Morgenstern, had conveyed to a trust, and upon which White held a mortgage lien, should be treated as property of Morgenstern's bankruptcy estate. White argues that the Bankruptcy Court further erred in concluding that White's attempts to foreclose on the mortgaged property after Morgenstern petitioned for bankruptcy violated the automatic stay imposed by 11 U.S.C. § 362 and awarding attorneys' fees to Olga Gordon, the trustee of the Morgenstern's bankruptcy estate, under 11 U.S.C. § 105(a).

         This court has jurisdiction to hear appeals from “final judgments, orders, and decrees” of the Bankruptcy Court under 28 U.S.C. § 158(a)(1). See also L.R. 77.4. Finding no error in the Bankruptcy Court's treatment of the property in question or its determination that White violated the statutory stay, the court affirms the Bankruptcy Court's decision.[1]

         I. Standard of review

         When hearing an appeal from the Bankruptcy Court, this court applies the same standards of review governing appeals of civil cases to the appellate courts. Cf. Groman v. Watman (In re Watman), 301 F.3d 3, 7 (1st Cir. 2002). As such, this court reviews the Bankruptcy Court's “findings of fact for clear error and conclusions of law de novo.” Old Republic Nat'l Title Ins. Co. v. Levasseur (In re Levasseur), 737 F.3d 814, 817 (1st Cir. 2013). The Bankruptcy Court's decision to award damages, costs, and fees is reviewed for abuse of discretion. See Prebor v. Collins (In re I Don't Trust), 143 F.3d 1, 3 (1st Cir. 1998).

         II. Background

         Morgenstern acquired title to real property located at 8 Maple Avenue in Rye, New Hampshire, in September 1992. In 2009, he transferred the property to the Carlear Realty Revocable Trust (the “Carlear Trust”), and recorded the trust the same day. Morgenstern was a 25% beneficiary of the Carlear Trust and Alexander Sekulic was appointed the trustee. At the time the bankruptcy petition was filed, the Carlear Trust contained only the Maple Avenue property.

         In November 2009, the Carlear Trust mortgaged the property to the appellant, June White, to secure a $40, 000 loan. The trust then defaulted on the loan. White sued the Carlear Trust, Sekulic, and Morgenstern in Rockingham County Superior Court and obtained authority from that court to conduct a foreclosure sale of the Maple Avenue property.

         Before White could foreclose, Morgenstern filed for bankruptcy protection on July 8, 2013.[2] White then began attempting to secure title to the Maple Avenue property. Appearing pro se, she moved the Bankruptcy Court to dismiss Morgenstern's bankruptcy petition in December 2013. She also engaged in efforts to foreclose on the Maple Avenue property by recording a series of affidavits in the Rockingham County Registry of Deeds on February 10, 2014, attempting to show her possession of the property.[3] Then, on March 29, 2014, White obtained Sekulic's signature, as trustee of the Carlear Trust, on a deed conveying that property to White in exchange for $50, 000. White also recorded this deed. White then began attempting to auction the property. Sekulic, contesting the authenticity and validity of that deed and asserting that Morgenstern's bankruptcy estate had a continuing interest in the property, moved the Rockingham County Superior Court to enjoin the sale, which it did.

         Gordon, the trustee of Morgenstern's bankruptcy estate, then sought the Bankruptcy Court's permission to revoke the Carlear Trust pursuant to New Hampshire law, see N.H. Rev. Stat. Ann. § 564-B:6-602, which the court granted on July 28, 2014. Several months afterward, Gordon filed an adversary proceeding against White in the Bankruptcy Court, seeking a declaratory judgment that the deed transferring the Maple Avenue property to White was void and requesting compensatory and punitive damages, see 11 U.S.C. § 362(k), as well as damages pursuant to 11 U.S.C. § 105(a). After a trial, the Bankruptcy Court found that the Maple Avenue property constituted “property of the estate, ” and thus that White violated the automatic stay through her several actions taken in an effort to gain control of that property. See 11 U.S.C. § 362(a). The Bankruptcy Court awarded Gordon her attorneys' fees and costs in the amount of $29, 627.29, see id. § 105(a), but rejected her request for damages pursuant to § 362(k). White, proceeding pro se, has timely appealed the Bankruptcy Court's decision of December 24, 2015, and the subsequent entry of judgment against her.

         III. Analysis

         A bankruptcy petition triggers “a stay, applicable to all entities, of, ” among other actions:

the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the [bankruptcy proceeding]; any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; [and] any act to create, perfect, or enforce any lien against property of the estate . . . .

11 U.S.C. § 362(a)(2)-(4). There is no dispute here that Morgenstern's bankruptcy petition, filed under chapter 13 of the Bankruptcy Code, see 11 U.S.C. § 1301 et seq., triggered the stay contemplated by § 362(a). White challenges, instead, three determinations by the Bankruptcy Court: (1) that the Maple Avenue property was property of the estate and, therefore, subject to the stay's provisions; (2) that White violated the stay through non-ministerial attempts to enforce the Superior Court judgment against and take possession of the Maple Avenue property; and (3) that those actions warranted sanctions, in the form of attorneys' fees, under 11 U.S.C. § 105(a) .[4]

         These issues call into question “[t]he bankruptcy court's interpretation of the relevant statutes, ” which “presents a question of law, ” as well as “its application of those statutes to the facts of this case, ” which “presents a mixed question of law and fact that [this court] review[s] for clear error unless its analysis was ‘infected by legal error.'” Prudential Ins. Co. of Am. v. SW Boston Hotel Venture, LLC (In re SW Boston Hotel Venture, LLC), 748 F.3d 393, 402 (1st Cir. 2014) (quoting Winthrop Old Farm Nurseries, Inc. v. New Bedford Inst. for Sav. (In re Winthrop Old Farm Nurseries, Inc.), 50 F.3d 72, 73 (1st Cir. 1995)). The court addresses each of White's allegations of error in turn.

         A. Property of the bankruptcy estate

         “The commencement of a bankruptcy case creates a debtor's estate, which is comprised of ‘all legal or equitable interests of the debtor in property as of the commencement of the case.'”[5] NTA, LLC v. Concourse Holding Co., LLC (In re NTA, LLC),380 F.3d 523, 527-28 (1st Cir. 2004) (quoting 11 U.S.C. § 541(a)(1)). State law defines the contours of a debtor's interest in a given property. See Butner v. United States,440 U.S. 48, 55 (1979) (“Property interests are created and defined by state law.”). ...


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