610 B.R. 907
Bankr. D.N.M.2019Background
- In 1998 Debtors purchased an undeveloped Rio Rancho lot under a real estate contract (REC) payable in monthly installments; American Escrow administered the contract.
- Debtors filed chapter 7 in 2008 but did not schedule the REC or list the Wright Trust; case closed with no administration of the REC.
- Debtors filed chapter 13 in 2013 (scheduled the REC) and sought to assume the REC; a default order was entered in 2014, but the 2013 case was later dismissed.
- Debtors filed a new chapter 13 in 2016, listed the REC, and filed motions to value and to assume; notices were mailed to incorrect/additional addresses (motion to value mailed to wrong person; motion to assume mailed to American Escrow).
- The Trust’s successors (Charles Wright and Brian Hoile) acquired the Lot in 2017; Wright learned Debtors had stopped paying the REC in 2013 and objected to assumption for lack of notice.
- After a 2019 hearing the court concluded the Trust did not receive actual or proper notice, the REC is an executory contract, and the REC remained property of the 2008 bankruptcy estate; Debtors’ motion to assume was denied without prejudice.
Issues
| Issue | Debtors' Argument | Wright/Trust's Argument | Held |
|---|---|---|---|
| Whether the REC is an executory contract subject to § 365 | REC should be assumable under § 365 | REC is executory and governed by § 365 | REC is an executory contract (Shaw rule applies) |
| Whether motions/plan notices were properly served | Service to listed addresses/American Escrow was adequate | Service was improper; Trust did not receive actual notice | Service was improper; no adequate notice and court lacked personal jurisdiction over Trust for those motions |
| Whether the confirmed 2016 plan and valuation bind Wright | Plan/valuation should bind creditors listed on schedules | Wright did not receive adequate notice so plan/valuation do not bind him | Confirmed plan/valuation do not bind Wright because he lacked timely/proper notice |
| Whether Debtors can assume REC in this case given 2008 non-disclosure and trustee inaction | Debtors may assume REC in current case | REC remained property of 2008 estate because it was omitted and never administered | REC remains property of the 2008 chapter 7 estate; Debtors must reopen 2008, amend schedules, obtain abandonment, then may seek to assume |
Key Cases Cited
- Shaw v. Dawson, 48 B.R. 857 (D.N.M. 1985) (treating real estate contracts as executory in this district)
- Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950) (due process requires adequate notice)
- Omni Cap. Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97 (1987) (notice alone is insufficient; proper service required for personal jurisdiction)
- St. Louis Baptist Temple, Inc. v. FDIC, 605 F.2d 1169 (10th Cir. 1979) (court may take judicial notice of its docket)
- Bellamah Cmty. Dev. v. (In re Bellamah Cmty. Dev.), 107 B.R. 337 (Bankr. D.N.M. 1989) (no modification of a real estate contract on assumption)
- Beverage Canners Int’l Corp., 255 B.R. 89 (Bankr. S.D. Fla. 2000) (contract must be assumed cum onere — in its entirety)
- RPD Holdings v. Tech Pharmacy Servs. (In re Provider Meds, LLC), 907 F.3d 845 (5th Cir. 2018) (discussing § 365(d)(1) rejection timing and notice issues)