Rouse v. Rauch (In re Spence)

554 B.R. 467, 2016 Bankr. LEXIS 2815
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedAugust 4, 2016
DocketNo. 16-6004
StatusPublished

This text of 554 B.R. 467 (Rouse v. Rauch (In re Spence)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rouse v. Rauch (In re Spence), 554 B.R. 467, 2016 Bankr. LEXIS 2815 (bap8 2016).

Opinion

SALADINO, Bankruptcy Judge.

The Chapter 7 trustee appeals from the bankruptcy court’s1 judgment and order in favor of Sunset Cove Condominium Owners Association, Inc. (“Sunset Cove”) on issues of turnover and preference. We have jurisdiction of this appeal from entry of the bankruptcy court’s final order pursuant to 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

Factual and Procedural Background

In 1996, the debtor purchased a boat slip on Table Rock Lake, near her condomini[469]*469um unit in Sunset Cove, Missouri. She later fell into arrears on her condominium homeowners’ assessments, and Sunset Cove obtained a judgment against her on July 23, 2012, in the amount of $36,262.25, plus interest, for the unpaid assessments. Subsequently, Sunset Cove filed with the Stone County Circuit Court an “Execution/Garnishment/Sequestration Application and Order” requesting a “general execution” for “other personal property levy.” The Instructions for Service on the execution application stated, “Levy on boat slip # 16 at Dock # 4 located at Sunset Cove Condominiums, bearing Corps of Engineers permit # 7904.” That same date, on the same form as the execution application, the Circuit Court of Stone County issued a Writ of Execution directing the county sheriff to execute the writ.

On September 4, 2012, a Stone County deputy sheriff posted a copy of the execution application and order on a pole bearing slip number 16 on the boat dock near the boat slip. On the second page of the document, the deputy sheriff filled out the portion certifying that he had posted it at the location and that the boat slip was “currently empty.” The boat slip was sold at a sheriffs sale on October 23, 2012, for $51,500.00. The amount of the sale proceeds exceeded the amount of the judgment debt owed to Sunset Cove. The sale proceeds were held in trust and not distributed pending the outcome of competing claims to the funds.

On January 6, 2013, the debtor filed a Chapter 11 bankruptcy petition. On May 9, 2014, the case was converted to Chapter 7, and Norman Rouse was appointed as the Chapter 7 trustee. Thereafter, he filed an adversary proceeding to determine which party was entitled to the proceeds from the sale of the boat slip. After a trial on the matter, the bankruptcy court ruled, inter alia, in a memorandum opinion, order, and judgment filed on January 26, 2016, that the execution and sale were valid, any failure to give proper notice of levy or sale caused no prejudice to the debtor or the bankruptcy estate, the sale was not a preference, and Sunset Cove was entitled to recover the amount of its judgment from the proceeds, with the balance going to the bankruptcy estate.

The Chapter 7 trustee timely filed his notice of appeal and asserted the following two assignments of error:

1. The bankruptcy court erred when it determined that the sheriffs act of posting the execution application to the boat slip constituted a “notice of levy” required by Mó. R. Civ. P. 76.06(c).

2. The bankruptcy court erred when it determined that the sheriffs act in posting the execution application to the boat slip created a lien on the boat slip pursuant to Mo. R. Civ. P. 76.07.

The matter before us is whether the sheriffs posting of the execution application and order was sufficient as a notice of levy under Missouri law. According to the trustee, if the levy did not comply with Missouri law and did not create a perfected judgment lien on the boat slip in favor of Sunset Cove, then the proceeds purportedly payable to Sunset Cove could be avoided as a preference because the sale and payment occurred within 90 days prior to the filing of the bankruptcy petition.

Standard of Review

The facts of the case are undisputed. On appeal, conclusions of law are given de novo review. Venture Bank v. Lapides, 800 F.3d 442, 443 (8th Cir.2015). Statutory interpretation is a legal question that we review de novo. Hardy v. Fink, 787 F.3d 1189, 1192 (8th Cir.2015). In performing a de novo review, the court must independently determine whether the bankruptcy court reached the correct legal [470]*470conclusion on the basis of the facts found. Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987); Finstrom v. Huisinga, 101 B.R. 997, 998 (D.Minn.1989).

Discussion

Sunset Cove took steps to collect its judgment by executing upon the debt- or’s boat slip, which the parties agree is personal property.2 The Missouri procedural rules describe how a county sheriff is to levy upon property subject to attachment for execution. Rule 76.06(c) states: “Tangible Personal Property Where Seizure is Impracticable. A levy upon tangible personal property where seizure is impracticable shall be made by the sheriff posting a notice of the levy upon the property or as near as practicable thereto.” Neither party disputes that physical seizure of a boat slip is impracticable. The parties agree that the sheriffs deputy posted the execution application and order on the pole marking the debtor’s boat slip. Under Missouri law, a levy creates a lien on the personal property. Mo. R. Civ. P. 76.07. The sheriff is then obligated to notify the judgment debtor of the levy:

Within three days after an officer has levied an execution, the officer shall notify the person against whom the execution has issued that an execution has been levied, that certain property, if any, is exempt under sections 513.430 and 513.440, RSMo, and that the person has the right to hold the property as exempt from attachment and execution. The officer shall also generally state that there are certain exemptions under state and federal law that the judgment debtor may be able to claim with respect to the property levied upon and describe the procedure for claiming the property as exempt. The notice shall also inform the person against whom the execution issues of the manner in which the person may obtain a specific description of the property upon which the levy was made. The notice may be served in the same manner as a summons or by mailing the notice to the judgment debtor at the debtor’s last known address by regular mail. Service by mail shall be complete upon mailing.

Mo. R. Civ. P. 76.075(a). It is undisputed that the sheriff did not serve the debtor personally or by mail with the required notice of levy and exemption from execution.

The Missouri procedural rules also contain specific requirements requiring public notice of the time and place of the sale. See, Mo. Ann. Stat. § 513.145 and Mo. R. Civ. P. 76.13. Concerns about the sale notice were raised to the bankruptcy court, but were not raised as errors on appeal. In fact, in his brief, the trustee states: “The Appellant is not arguing that sale pursuant to the execution order was invalid.” Accordingly, the validity of the sale is not at issue in this appeal.3

Proeedurally, once the judgment creditor makes such an application for execution to the Clerk of the Court, the Clerk issues a Writ of Execution to the sheriff, [471]

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Related

Finstrom v. Huisinga
101 B.R. 997 (D. Minnesota, 1989)
Venture Bank v. Howard L. Lapides
800 F.3d 442 (Eighth Circuit, 2015)
Rusk v. Rusk
859 S.W.2d 751 (Missouri Court of Appeals, 1993)
Hudson v. Wright
103 S.W. 8 (Supreme Court of Missouri, 1907)
Dougherty v. Gangloff
144 S.W. 434 (Supreme Court of Missouri, 1912)
Wegner v. Grunewaldt
821 F.2d 1317 (Eighth Circuit, 1987)

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Bluebook (online)
554 B.R. 467, 2016 Bankr. LEXIS 2815, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rouse-v-rauch-in-re-spence-bap8-2016.