Davis v. Dunmore Properties, Inc. (In re Davis)

503 B.R. 609, 2013 WL 6501180, 2013 Bankr. LEXIS 5205
CourtUnited States Bankruptcy Court, M.D. Pennsylvania
DecidedDecember 12, 2013
DocketNo. 5:11-bk-06193-RNO
StatusPublished
Cited by2 cases

This text of 503 B.R. 609 (Davis v. Dunmore Properties, Inc. (In re Davis)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Davis v. Dunmore Properties, Inc. (In re Davis), 503 B.R. 609, 2013 WL 6501180, 2013 Bankr. LEXIS 5205 (Pa. 2013).

Opinion

OPINION1

REOBERT OPEL, II, Bankruptcy Judge.

Before the Court are two motions for summary judgment filed by William and Lori Davis (“Davis” or “Debtors”) against Dunmore Properties, Inc. (“Dunmore”). The first motion for summary judgment seeks to reject an alleged executory contract between the Debtors and Dunmore (“Executory Contract Motion”). The second motion for summary judgment moves the Court to disallow Dunmore’s proof of claim (“POC Motion”). For the reasons stated herein, both motions are granted.

I. JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), and (K).

II. FACTS AND PROCEDURAL HISTORY

The relevant facts in this case originate in the winter of 2007. In December of that year, the Debtors and AgChoice Farm Credit, ACA (“AgChoice”) executed two mortgages in the amounts of $20,200.00 and $708,950.00, respectively. Movant’s Mot. for Summ. J. as to Mot. of Dunmore Properties, ECF. No. 147 3-4 [hereinafter First Mot. for Summ. J.]; Jones Aff. ¶ 2; Fogal Aff. ¶ 2. On October 24, 2008, the Debtors and AgChoice executed a third mortgage in the amount of $10,000.00. First Mot. for Summ. J. 4; Jones Aff. ¶ 2; Fogal Aff. ¶2. The parties executed a fourth and final mortgage on December 16, 2008, in the amount of $20,000.00. First Mot. for Summ. J. 4; Jones Aff. ¶ 2; Fogal Aff. ¶ 2. Each of the four mortgages (collectively “AgChoice Mortgages”) was duly recorded. First Mot. for Summ. J. 3-4; Jones Aff. ¶ 2; Fogal Aff. ¶ 2.

Particularly important to this matter is the following language that appears, verbatim, in all of the AgChoice Mortgages:

[612]*612MORTGAGOR hereby further covenants and agrees with the Mortgagee, its successors and assigns, as follows:
Fifth: That he hereby assigns to the Mortgagee as additional collateral all royalties or other monies due or to become due from any surface or subsurface right or for any right or privilege other than for agricultural purposes in any way affecting or pertaining to the property hereby conveyed and all monies which may become due in any condemnation proceedings affecting the said premises and all sums received may be applied, at the option of the Mortgagee, to the discharge of any part or all of the indebtedness secured hereby, whether or not the same be due and payable, or at the option of the Mortgagee, such sums may be returned to the Mortgagor and the Mortgagor will not grant any surface or subsurface rights without the written consent of the Mortgagee. Without in any way limiting the generality of the foregoing, the above mentioned rights and privileges ... shall include, but not limited to, surface or subsurface mineral easements and profits ....

See Ex. B, EOF No. 149-58 (emphasis added). Debtors argue that this provision conditions any purported transfer of mineral rights to a third party on the express written consent of AgChoice. First Mot. for Summ. J. 4. In support of this argument, Debtors filed affidavits taken by two officers of AgChoice: Bobby R. Jones, the Loan Officer for Special Assets, and Brian Fogal, the Vice President Credit Leader. Under oath, both individuals state that “prior written consent of AgChoice is required for the [Debtors] to grant, convey or assign any mineral rights.... ” Jones Aff. ¶ 3; Fogal Aff. ¶ 3.

Notwithstanding this language, Debtors and Dunmore entered into an agreement on July 15, 2010 (“Dunmore Agreement”), allegedly transferring ownership interest of said mineral rights. Mot. to Assume Executory Contract ¶¶ 10-12; First Mot. for Summ. J. 5-6; Resp’t’s Br. in Opp’n to Debtor’s Mot. for Summ. J. 2-3. In the mostly-handwritten agreement, Davis ostensibly transfers a 33% ownership interest in the mineral rights to Dunmore, as well as a right of first refusal to the remaining 67% interest, with a settlement date of September 30, 2010. Mot. to Assume Executory Contract ¶¶ 10-12; First Mot. for Summ. J. 5-6; Resp’t’s Br. in Opp’n to Debtor’s Mot. for Summ. J. 2-3. Dunmore paid Davis a $10,000.00 deposit as consideration for the Dunmore Agreement. Mot. to Assume Executory Contract ¶ 12; Resp’t’s Br. in Opp’n to Debt- or’s Mot. for Summ. J. 3. Also, paragraph 12 of the Dunmore Agreement reads as follows:

RECORDING. This Agreement shall not be recorded in the Office for the Recording of Deeds or in any other office or place of public record and if Buyer causes or permits this Agreement to be recorded, Seller may elect to treat such act as a breach of this Agreement.2

Mot. to Assume Executory Contract Ex. 1. Finally, it should be noted that, according to the filed affidavits, AgChoice “has not given its written consent to [the] contract and does not consent to it now.” Jones Aff. ¶ 5; Fogal Aff. ¶ 5.

After the parties failed to close on September 30, 2010, Dunmore sought remediation in state court. On November 24, 2010, Dunmore recorded a Writ of Summons and perfected a praecipe for Lis Pendens in the Court of Common Pleas of Susquehanna County. Mot. to Assume [613]*613Executory Contract ¶ 19. After a Rule to File Complaint was issued on December 29, 2010, Dunmore filed its complaint to the state court docket on January 15, 2010 (“State Court Complaint”), a copy of which is attached as Exhibit 1 to Dunmore’s Motion to Assume Executory Contract. First Mot. for Summ. J. 5. The State Court Complaint states the same alleged terms of the Dunmore Agreement mentioned above and prays for specific performance of the agreement or, in the alternative, monetary damages totaling $594,682.44. Mot. to Assume Executory Contract Ex. 1.

The Debtors filed their voluntary Chapter 18 petition on September 7, 2011, which stayed the state court action. That same day, the proof-of-claim bar date was set for January 22, 2012. The Debtors’ initial Chapter 13 plan was filed on October 25, 2011, but was not confirmed. Similarly, the Debtors’ first amended plan was filed on March 18, 2012, but it too was not confirmed. It is important to note that although Dunmore filed an objection to the first amended plan, it allowed the claims deadline to expire without filing a timely proof of claim.

The Debtor’s second amended plan (“Second Amended Plan”) was filed on September 22, 2013. Section l.B. of the Second Amended Plan, i.e., the section devoted to liquidation of assets, reads:

Debtor(s) shall dedicate to the plan, proceeds in the estimated sum of $1,100,000.00 from the sale of the farm, store, rental property and mineral rights, with the proceeds to be applied first to the real estate taxes due on these properties, then to the secured claims of AgChoice and Ellis, the balance to be paid into the plan resulting in a 100% plan with payments to all creditors whose claims are duly allowed.... All sales shall be completed on or before 12 months following plan confirmation.

Debtors’ Second Am. Plan, Sept. 22, 2012, 2-3, ECF No. 105. Within section 2.G.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
503 B.R. 609, 2013 WL 6501180, 2013 Bankr. LEXIS 5205, Counsel Stack Legal Research, https://law.counselstack.com/opinion/davis-v-dunmore-properties-inc-in-re-davis-pamb-2013.