Hopkins v. Wright (In re Labbee)Hopkins v. Wright (In re Labbee)
Introduction
The chapter 7
The Court has now considered the testimony and evidence presented, certain requests for admission that are deemed admitted, the briefs and arguments of the parties, as well as the applicable law. This Memorandum recites the Court’s findings of fact and conclusions of law, and its decision. See Fed. R. Bankr. P. 7052.
Findings of Fact
In 2002, Debtor purchased a 4.4 acre parcel of real property, including a small, single-family home and a shop, located on West Riverton Road in Blaekfoot, Idaho (the “Property”). Exh. 102. Later, Debt- or and Defendant met; Debtor told Defendant about the Property when she indicated she was in need of a larger home. Together, they cleaned up the home, and Defendant and her children moved into the house on the Property in 2005. At some point, Debtor moved onto the Property as well.
Defendant purchased the Property in 2007 at a foreclosure auction
Defendant continued to live on the Property and made some modest improvements, including converting the attached garage into living space. The home has three bedrooms and one bathroom; it is in “liveable” condition. Some of the acreage is utilized by neighbors to pasture their animals in exchange for their helping Defendant with some of the upkeep and maintenance on the Property. The Property is worth approximately $100,000.
Defendant suffers from macular degeneration and has been declared legally blind. As such, she can no longer drive and relies on her children, who all live locally, to help with transportation, financial, and other needs. She testified they would house her if necessary. She has applied for disability benefits and is awaiting a response. She does not work and has no savings or income at present. The Property and a 1981 Chevy truck are her only significant assets.
On October 17, 2014, Debtor filed a chapter 7 bankruptcy petition. Exh. 100.
Defendant resists Plaintiffs efforts to sell the Property. She wishes to remain on it, and believes Debtor should no longer have any rights in the Property because he moved out, deserted Defendant, and has not helped with the taxes or upkeep since 2007.
On July 7, 2015, Defendant filed a cryptic pro se answer to Plaintiffs complaint. Dkt. No. 4. On December 1, 2015, Plaintiff served interrogatories, requests for production, and requests for admission on Defendant; a response was due by January 3, 2016. Dkt. No. 17. Defendant failed to respond to the discovery requests at all. On March 3, 2016, Plaintiff filed a motion asking the Court to deem the requests for admission admitted. Dkt. No. 21. Defendant also failed to respond to this motion.
As noted above, trial was held on March 10, 2016, at which the parties offered evidence, testimony, and oral argument. Dkt. Nos. 28, 29. The Court took the issues under advisement for decision.
Conclusions of Law and Disposition
Plaintiff, as chapter 7 trustee in Debt- or’s bankruptcy case, seeks to sell the Property free and clear of Defendant’s interest pursuant to § 363(h), which provides in pertinent part:
[T]he trustee may sell both the estate’s interest ... and the interest of any co-owner in property in which the debtor had, at the time of the commencement of the case, an undivided interest as a tenant in common, joint tenant, or tenant by the entirety, only if—
(1) partition in kind of such property among the estate and such co-owners is impracticable;
(2) sale of the estate’s undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners;
(3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such co-owners; and
(4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or ofnatural or synthetic gas for heat, light, or power.
Plaintiff bears the burden of proving that all the elements of § 363(h) have been satisfied. Zimmerman v. Spickelmire (In re Spiekelmire),
In this case, the evidence shows that Debtor owns an undivided one-half interest in the Property as a tenant in common with Defendant. Tenancy in common is the most common form of concurrent ownership. The Idaho courts have determined it to exist where:
each [tenant] owning a separate fractional share in undivided property. Tenants in common may each unilaterally alienate their shares through sale or gift • or place encumbrances upon these shares. They also have the power to pass these shares to their heirs upon death. Tenants in common have many other rights in the property, including the right to use the property, to exclude third parties from it, and to receive a portion of any income produced from it.
United States v. Craft,
Via the unanswered requests for admission, which are deemed admitted,
The benefit to the estate usually consists of the proceeds the estate will realize as a result of the sale, which may be used to pay a debtor’s creditors. In contrast, the detriment to the non-debtor co-owner includes more than simple financial prejudice. See Cmty. Nat’l Bank & Trust Co. v. Persky,
In this case, sale of the Property could provide a benefit to the estate exceeding $40,000.
Accordingly, the Court concludes that Plaintiff has met his burden of proof to
Regarding Plaintiffs claim for turnover, because the Property is “property that the trustee may ... sell ... under section 363 of this title”, and because it is not “of inconsequential value or benefit to the estate,” under § 542(a), Plaintiff is entitled to take possession of the Property. White v. Brown (In re White),
Conclusion
Because all of the elements of § 363(h) have been satisfied, Plaintiff is entitled to sell the Property free and clear of Defendant’s interest. Plaintiffs request for turnover of the Property will not be granted at this time, provided Defendant cooperates with Plaintiff. Defendant also retains all rights provided to her under the Code in connection with any proposed sale of the Property by Plaintiff, including those in § 363(i) and (j)-
Plaintiff is directed to submit an appropriate form of judgment for entry by the Court.
Notes
. Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all rule references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, and all "Civil Rule” references are to the Federal Rules of Civil Procedure.
. The ownership and foreclosure history of the Property is not well established in the record. For example, on July 12, 2003, Debt- or quit-claimed the Property to Donald Sorter and moved to Chubbuck, Idaho. Exh. 102. However, Debtor must have later regained ownership in the Property so as to be able to offer Defendant the opportunity to live there. Moreover, Defendant indicated that the Property was foreclosed on December 7, 2003, Id., yet Debtor apparently still owned it in 2005 such that Defendant could move in. Finally, Defendant apparently was not required to vacate the Property during foreclosure, as she purchased the Property at auction while she was living there. While confusing, these facts are not material to the issues presented.
.See Exh. 102,
. In re Labbee, Bk. Case No. 14-41181-JDP.
. Plaintiff, in his pretrial memorandum, Dkt. No. 26, and then again at trial, contends that while a trustee has the initial burden to show that a sale under § 363(h) will produce a benefit to the estate, the burden then shifts to the affected co-owner to demonstrate a detriment, and then the burden shifts again to the trustee to prove that the benefit to the estate outweighs the burden to the co-owner, Plaintiff cites decisions by bankruptcy courts in Ohio and Massachussetts for support. See Rhiel v. Cent. Mortg. Co. (In re Kebe),
. Plaintiff's Motion to Deem Requests for Ad-' missions Admitted, Dkt, No. 21, is hereby GRANTED. Because the properly served requests for admission were never answered by Defendant, they are deemed admitted pursuant to Civil Rule 36(a)(3), made applicable to adversary proceedings by Rule 7037. Once a matter is deemed admitted under Civil Rule 36/Rule 7036, it is “conclusively established”.
. Given the undisputed evidence that this is a single parcel of Property containing but one small home and an outbuilding, it is obvious to the Court that the Property can not be fairly partitioned, and that selling the Property as a single parcel represents the best opportunity to obtain full value for it. There was also no evidence that the Property was or could be used for any energy or utility purposes. The Court therefore reaffirms its conclusions as to those three elements, §§ 363(h)(1), (2), and (4).
. It was Plaintiff's opinion that the Property was worth $100,000-$l 10,000, and that the costs of sale would be approximately ten percent of the sales price. The estate will be entitled to half of the proceeds.