649 B.R. 264
Bankr. E.D. Mich.2023Background
- Celia Williams bought 18405 Prairie St. in 2011, died intestate on June 15, 2019; her husband Edward Williams (the Debtor) filed Chapter 7 on Nov. 17, 2020.
- Trustee sued Debtor’s three adult children (Camile, Gregory, Camron) on Jan. 25, 2021, seeking a declaration that the Property is estate property by intestacy; the defendants did not answer and a default judgment was entered Feb. 26, 2021.
- After the default judgment, Camile executed a written purchase agreement (and three addenda) to buy the Property from the Trustee for $75,000 and paid $10,000 in deposits; the sale was approved but never closed.
- Defendants later produced an unrecorded March 14, 2019 quitclaim deed (and a June 15, 2021 recorded “Affidavit of Deed”) purporting to transfer the Property from Celia to the three children; the original deed could not be produced.
- Defendants moved to set aside the default judgment under Fed. R. Civ. P. 60(b) and sought stay/relief to open probate proceedings, arguing (a) they owned the Property via the 2019 deed and (b) they never received the summons/complaint; after an evidentiary hearing the court found the defendants were served, the deed is a forgery, the estate owns the Property, and denied both motions (also voiding the Affidavit of Deed as an automatic-stay violation).
Issues
| Issue | Plaintiff's Argument (Gold) | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 60(b)(1) relief is warranted because the default judgment was a "mistake" (Debtor did not own Property at petition) | Trustee: Debtor inherited the Property on intestacy; defendants have no meritorious defense | Defendants: March 14, 2019 quitclaim deed transferred title to them before Celia died, so Debtor never owned it | Denied — court finds quitclaim is forged, Celia owned Property until death, Debtor inherited it, so no factual/legal mistake supports relief |
| Whether the default judgment is void for lack of service (Rule 60(b)(4)) or relief is otherwise warranted under Rule 60(b)(6) | Trustee: Summons/complaint were properly mailed to defendants’ residence; no due‑process violation; no extraordinary circumstances | Defendants: They never actually received the mailed summons/complaint; lack of personal jurisdiction renders judgment void | Denied — court finds defendants actually received mailed documents; service proper and not a due‑process defect; no basis for 60(b)(4) or 60(b)(6) relief |
| Whether defendants are entitled to relief for "excusable neglect" under Rule 60(b)(1) | Trustee: Defendants offer no excusable excuse and have no meritorious defense; prejudice to estate | Defendants: Nonreceipt of process excused their default | Denied — court finds no excusable neglect; Pioneer factors weigh against relief and defendants lack a meritorious defense |
| Whether the probate exception or state probate jurisdiction requires staying this adversary or lifting the stay to open probate (stay‑relief motion) | Trustee: Federal court has jurisdiction under 28 U.S.C. § 1334; probate exception inapplicable; Property is estate property; stay should not be lifted | Defendants: Probate court must determine whether Celia’s intestate estate included the Property; probate exception divests federal jurisdiction | Denied — court holds probate exception does not apply (Marshall and Chevalier); federal bankruptcy court has exclusive jurisdiction over estate property and will not stay or relinquish jurisdiction |
Key Cases Cited
- Marshall v. Marshall, 547 U.S. 293 (probate exception is narrow; federal courts may adjudicate matters outside probate confines)
- Chevalier v. Estate of Barnhard, 803 F.3d 789 (probate exception applies only in limited circumstances)
- Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380 (standard for "excusable neglect")
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (judgment is void only for jurisdictional error or denial of due process)
- Bratton v. Yoder Co. (In re Yoder Co.), 758 F.2d 1114 (mailbox rule presumption of receipt; rebuttable by non‑receipt testimony)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (notice must be reasonably calculated to inform interested parties)