470 B.R. 731
Bankr. M.D. Penn.2012Background
- Debtors borrowed three personal loans from AgChoice totaling $540,000, secured by notes and mortgages on Debtors' home (approx. 6,600 sq ft on a 14-acre parcel).
- AgChoice also loaned $550,000 to Grogle Development Company, LLC, guaranteed by Debtor Albert Glenn, with a fourth mortgage on the Property securing that guaranty.
- Mortgages cover the Property include a broad lien to all improvements, fixtures and accessories now or hereafter annexed and attached, with a duty to maintain in good repair.
- Default occurred around August–September 2010; AgChoice foreclosed and Debtors listed the Property for sale at $689,900 with sales materials describing extensive features and upgrades.
- Judgments totaling $457,123.54 (April 2011) and $541,561.54 (March 2011) were entered against Debtors; Debtors filed bankruptcy on March 29, 2011.
- After relief from stay, Debtors vacated the Property and removed numerous fixtures and attached items, causing visible damage; Debtors claimed items were personal property and not part of the mortgage collateral.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtors' removal of fixtures amounts to willful and malicious injury under 523(a)(6). | AgChoice contends removal was willful/malicious destruction of collateral. | Glenns contend items were personal property not subject to liens and removed in good faith. | Summary judgment denied; issue reserved for trial on intent. |
| Whether Debtors' conduct constitutes conversion under state law. | AgChoice argues conversion of its collateral occurred through removal. | Glenns contend items were not fixtures or subject to the mortgage encumbrance. | Conversion found; however, willfulness/malice must be proven to discharge under 523(a)(6); summary judgment denied pending trial on intent. |
Key Cases Cited
- Davis v. Aetna Acceptance Co., 293 U.S. 328 (1935) (willful injury standard for nondischargeability)
- In re Conte, 33 F.3d 303 (3d Cir. 1994) (definition of willful injury under 523(a)(6))
- Clayton v. Lienhard, 312 Pa. 433, 167 A.2d 321 (1933) (fixtures vs. personal property when attached to real estate)
- Lehmann v. Keller, 454 Pa. Super. 42, 684 A.2d 618 (1996) (fixtures and real estate; consent required for removal)
- Feingold v. Win-Vent, Inc., 386 Pa. Super. 127, 562 A.2d 830 (1989) (goods become fixtures under real estate law)
- Sovereign Bank v. Schwab, 414 F.3d 450 (3d Cir. 2005) (title vs. lien theory in Pennsylvania mortgage law)
- Pines v. Farrell, 577 Pa. 564, 848 A.2d 94 (2004) ( Pennsylvania mortgage and fixture principles)