572 B.R. 220
Bankr. W.D. Mo.2017Background
- Debtor Ruby Gregory filed Chapter 13 in 2010 owning two adjacent parcels (313 and 317 N. Willow). Deeds of trust had their legal descriptions switched; daughter Rita appears on the deeds though not on the note.
- Ruby’s Chapter 13 plan proposed to retain 317 (her home) and to surrender another parcel; the plan eventually confirmed but Ruby defaulted and the case converted to Chapter 7 after reinstatement.
- In the Chapter 7 schedules Ruby filed a statement of intention indicating she would "surrender" 313 and 317 N. Willow; the trustee later abandoned any estate interest and Ruby received a discharge. Wells Fargo obtained relief from the stay during the bankruptcy but did not timely foreclose and recorded a deed of release that (by error) identified the wrong legal description.
- After the case closed, Ruby sued Wells Fargo in state court for trespass, MMPA violations, and a declaratory judgment, alleging Wells Fargo’s agents had changed locks and damaged the home and that the bank’s release was defective.
- Wells Fargo reopened the bankruptcy to seek an order compelling Ruby to dismiss the state suit, to enforce her “sworn promise” to surrender the properties (or to require reaffirmation or redemption), and to enjoin further state-court claims; the parties submitted stipulated facts and briefs.
Issues
| Issue | Gregory's Argument | Wells Fargo's Argument | Held |
|---|---|---|---|
| Does a §521(a)(2) statement of intention alone effectuate a transfer/surrender of real property to a secured creditor? | Statement of intention is only notice; it does not transfer title or give the creditor ownership. | A surrender statement effectuates relinquishment to the creditor and should prevent the debtor from later asserting ownership. | Court: §521(a)(2) is a notice statute for mortgages; it does not effectuate transfer to the creditor. |
| Can bankruptcy court enforce a debtor’s statement of intention as a binding contract or compel surrender years after discharge? | No; the statement is intent, amendable, not a contract, and enforcement to compel transfer would conflict with Code and state law. | The court should enforce the debtor’s sworn promise and use equitable powers to compel surrender and enjoin state-court claims. | Court: Statement is not an enforceable contract; equitable compulsion here is improper and would conflict with Code. |
| Can the court use §105(a) equitable powers to require reaffirmation, redemption, vacatur of discharge, or to enjoin state litigation? | Such remedies are not authorized; reaffirmation must be pre-discharge and redemption statute applies only to personal property. | §105(a) permits necessary equitable relief to prevent abuse (including compelling surrender). | Court: §105(a) cannot be used to override express Code limits; it will not compel reaffirmation, redemption, vacate discharge, or enjoin the state suit here. |
| Is judicial estoppel appropriate to bar Gregory’s state-court claims based on her prior bankruptcy statements? | Not clearly; inconsistent filings and gaps in notice/service mean estoppel is for the state court to decide. | Prior sworn surrender should preclude contrary positions in state court. | Court: Declines to decide estoppel here and abstains to let state court address it given factual uncertainties and lack of reliance evidence. |
Key Cases Cited
- In re Failla, 838 F.3d 1170 (11th Cir. 2016) (upheld bankruptcy court authority to compel debtors who stated they would surrender a home to stop opposing foreclosure)
- In re Price, 370 F.3d 362 (3d Cir. 2004) (discusses ambiguity of §521(2) and whether statute is merely a notice provision)
- In re Boodrow, 126 F.3d 43 (2d Cir. 1997) (treats §521(2) primarily as a notice statute permitting retain-and-pay option)
- Taylor v. AGE Fed. Credit Union (In re Taylor), 3 F.3d 1512 (11th Cir. 1993) (pre-BAPCPA authority rejecting retain-and-pay and requiring surrender)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (articulates factors for applying judicial estoppel)
- In re Carter, 390 B.R. 648 (Bankr. W.D. Mo. 2008) (chapter 13 surrender in confirmed plan binds parties; surrender need not transfer title by deed)