Opinion
21-10230-MKN
06-08-2023
In re: ELIZABETH ANN RAMSEY, Debtor.
Date: June 7, 2023
Chapter 7
Time: 2:30 p.m.
ORDER REGARDING OBJECTION TO EUGENE TUMBARELLO AND SHAMROCK PAINTING, INC. PROOF OF CLAIM #1-2
In this Order, all references to "ECF No." are to the numbers assigned to the documents filed in the above-captioned case as they appear on the docket maintained by the clerk of the court. All references to "Section" are to the provisions of the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All references to "FRBP" are to provisions of the Federal Rules of Bankruptcy Procedure. All references to "NRCP" are to provisions of the Nevada Rules of Civil Procedure. All references to "FRE" are to the Federal Rules of Evidence.
Mike K. Nakagava United States Bankruptcy Judge
On June 7, 2023, the court heard the Objection to Eugene Tumbarello and Shamrock Painting, Inc. Proof of Claim #1-2 ("Claim Objection") brought by the above-captioned debtor. The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.
BACKGROUND
Elizabeth Ann Ramsey ("Ramsey") filed a voluntary Chapter 7 petition on January 19, 2021. (ECF No. 1). The case was assigned for administration to Chapter 7 panel trustee Lenard E. Schwartzer ("Trustee"). Ramsey filed her schedules of assets and liabilities ("Schedules") and statement of financial affairs on February 2, 2021. (ECF No. 23). On her property Schedule "A/B," she listed as her residence an interest in real property located at 1201 Westlund Drive, Las Vegas, Nevada 89102 ("Residence"). On her exemption Schedule "C," Ramsey claimed a homestead in the Residence under Nevada law. Prior to the commencement of the Chapter 7 proceeding, however, her claim to a Nevada homestead had been disallowed in a civil action commenced by creditors Eugene Tumbarello and Shamrock Painting, Inc. (collectively, "Tumbarello") in the Eighth Judicial District Court, Clark County, Nevada ("State Court"). In connection with that civil litigation ("State Action"), the State Court also entered a joint and several judgment ("State Judgment") in favor of Tumbarello and against Ramsey and her co-defendant, Gregg Chambers. The amount of the State Judgment was $221,735.99 and was recorded as a lien against the Residence as well as an adjacent parcel of real property located at 1207 Westlund Drive ("1207 Westlund Property").
The court takes judicial notice under FRE 201 of the balance of the materials of public record in the State Action. See U.S. v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980); Conde v. Open Door Mktg., LLC, 223 F.Supp.3d 949, 970 n.9 (N.D. Cal. 2017); Gree v. Williams, 2012 WL 3962458, at *1 n.1 (D. Nev. Sept. 7, 2012); Bank of Am., N.A. v. CD-04, Inc. (In re Owner Mgmt. Serv., LLC Trustee Corps.), 530 B.R. 711, 717 (Bankr. C.D. Cal. 2015).
In the State Action, the State Court rejected the claim to a Nevada homestead exemption due to fraud by defendants Ramsey and Chambers in the acquisition of the properties.
On April 13, 2021, an order was entered granting a Chapter 7 discharge. (ECF No. 59).
On June 21, 2021, an order was entered sustaining Tumbarello's objection to Ramsey's claim to a Nevada homestead exemption in the Residence ("Homestead Objection Order"). (ECF No. 63). The order was not appealed.
Absent an available homestead or other exemption, Ramsey apparently would have no grounds on which to seek avoidance of Tumbarello's judicial lien, if any, under Section 522(f)(1).
On August 3, 2022, a disposition was reached in Adversary Proceeding No. 21-01039-mkn, whereby Tumbarello sought a determination that the State Judgment against Ramsey was nondischargeable under Sections 523(a)(2, 4 and 6) ("Tumbarello Adversary Proceeding"). A memorandum decision after trial ("Memorandum Decision") and a separate judgment ("Adversary Judgment") (AECF Nos. 57 and 58) were entered in favor of Ramsey on all claims,thereby permitting a discharge of her personal liability for the amount of the State Judgment.
The court concluded that Tumbarello had failed to prove by a preponderance of the evidence a claim against Ramsey for actual fraud within the meaning of Section 523(a)(2)(A). See Memorandum Decision at 10:5 to 22:19.
Ramsey's discharge of the amount of the State Judgment only bars Tumbarello from seeking to collect the debt as a personal liability. See 11 U.S.C. §524(a)(2). As discussed at note 4, supra, because Ramsey does not have a homestead exemption under Nevada law, she also cannot seek under Section 522(f)(1) to avoid the judicial lien against the Residence created by the State Judgment.
On August 17, 2022, the Trustee filed and served a notice that assets are available for distribution and setting a deadline of November 15, 2022, for creditors to file proofs of claim. (ECF No. 70).
On August 23, 2022, the Trustee filed an application to employ a real estate broker to market the Residence ("Broker Application"). (ECF No. 73).
On August 26, 2022, an order was entered granting the Broker Application. (ECF No. 76).
On August 26, 2022, Ramsey filed a motion to convert her Chapter 7 liquidation proceeding to a Chapter 13 debt adjustment proceeding ("Conversion Motion"). (ECF No. 77).
On September 23, 2022, an order was entered denying the Conversion Motion after objections were raised by the Trustee and Tumbarello. (ECF No. 93).
On November 14, 2022, Tumbarello filed a secured proof of claim in the amount of $226,252.34 ("POC 1-2"). Attached to the proof of claim as Exhibits 1 through 8 are copies of the outstanding State Judgment and related State Court documents recorded against the Residence, in addition to an itemization of the post-judgment and post-collection amounts remaining set forth in Exhibit 9.
On February 3, 2023, Ramsey filed a Motion to Abandon Real Property Located at 1201 Westlund Drive, Las Vegas, NV 89102 From the Estate and to Stay any Marketing or Sale of This Property ("Abandonment Motion") to prevent the Trustee from further efforts to sell the Residence. (ECF No. 98).
On February 6, 2023, the Trustee filed a Motion for Turnover of Real Property ("Turnover Motion"). (ECF No. 102).
On February 7 and 8, 2023, separate orders were entered shortening time so that both the Abandonment Motion and the Turnover Motion could be heard on an expedited basis on February 15, 2023. (ECF Nos. 105 and 106).
On February 24, 2023, an order was entered denying the Abandonment Motion. (ECF No. 120).
On February 24, 2023, an order was entered granting the Turnover Motion ("Turnover Order"). (ECF No. 122).
On March 8, 2023, a Trustee's Report to Court and Request for Order for Turnover of Property was filed. (ECF No. 126).
On March 30, 2023, a supplemental order was entered on the Turnover Motion ("Supplemental Turnover Order"). (ECF No. 127). That order requires Ramsey to deliver possession of the Residence to the Trustee no later than June 13, 2023, at 5:00 p.m. and to allow the Trustee reasonable access to the Residence to permit inspection and marketing by the Trustee's agents or employees. To allow Ramsey to seek an appellate stay, the Supplemental Turnover Order also denied any request of the bankruptcy court to stay the provisions of the order.
Under FRBP 8002(a)(1), a notice of appeal must be filed within 14 days after entry of a judgment, order, or decree.
On April 20, 2023, the Trustee filed a Motion to Sell Real Property, Pay Commission and Normal Closing Costs (1201 Westlund Drive, Las Vegas, NV 8910) ("Sale Motion"). (ECF No. 130). The Sale Motion sought permission to sell the Residence to Tumbarello for the purchase price of $450,000 and to close the sale by June 15, 2023.
On May 5, 2023, Ramsey filed the instant Claim Objection and noticed it to be heard on June 7, 2023. (ECF Nos. 135 and 136). Attached to the Claim Objection are two exhibits: (A) a copy of POC 1-2; and (B) a copy of a Grant, Bargain, Sale Deed recorded October 27, 2022 ("October 2022 Grant Deed"), from Tumbarello in favor of BNB Holdings L.L.C., transferring the 1207 Westlund Property for a purchase price of $355,000.
There is no apparent dispute that Tumbarello obtained title to the 1207 Westlund Property on August 1, 2019, by enforcing the State Judgment through an execution sale and that Ramsey did not regain title by redeeming the property. See Homestead Objection Order at 4:16-22. There also is no apparent dispute that Tumbarello previously obtained title to the Residence on August 1, 2019, by also enforcing the State Judgment through an execution sale, but that Ramsey regained title to the Residence on or about July 18, 2020, by redemption. Id. at 4:16-24.
Other than the two exhibits attached to the Claim Objection, there are no affidavits, declarations, or other materials offered by Ramsey as evidence in connection with this matter.
On May 8, 2023, Ramsey filed an opposition to the Sale Motion. (ECF No. 139). On May 11, 2023, the Trustee filed a reply in support of the Sale Motion. (ECF No. 140).
On May 22, 2023, the Trustee filed a supplemental reply in support of the Sale Motion. (ECF No. 143).
On May 23, 2023, Tumbarello filed an opposition to the Claim Objection ("Tumbarello Opposition"). (ECF No. 145). Attached to the opposition is a copy of an order of the State Court dated November 6, 2022, denying Ramsey's motion under NRCP 60(b)(5) for relief from the prior State Judgment and related orders ("State NRCP 60(b) Order"). That order reflects that Ramsey sought relief from the State Judgment based on the bankruptcy court's subsequent entry of the Adversary Judgment. The State Court concluded, however, that the latter bankruptcy judgment did not warrant relief from the monetary award or the denial of the homestead claim reflected by the prior State Judgment and related orders.
Apparently, no one advised the State Court that Ramsey had received her Chapter 7 discharge on April 13, 2021. The State Court correctly surmised, however, that a discharge of personal liability in bankruptcy does not extinguish a debt, see RS Air, LLC v. NetJets Aviation, Inc. (In re RS Air, LLC), 2023 WL 3774652, at *6 (B.A.P. 9th Cir. June 2, 2023), citing Blixseth v. Credit Suisse, 961 F.3d 1074, 1082 (9th Cir. 2020), and that liens otherwise survive a bankruptcy discharge. See Mitchell v. Select Portfolio Servicing, Inc. (In re Mitchell), 2023 WL 2770917, at *1 (9th Cir. Apr. 4, 2023).
On May 26, 2023, an order was entered conditionally granting the Sale Motion ("Sale Order"). (ECF No. 146). The Sale Motion was granted on the condition that the Trustee could close the proposed sale to Tumbarello or other purchaser no earlier than June 30, 2023, and that the Trustee must file a report of any sale with the court.
DISCUSSION
POC 1-2 is signed under penalty of perjury and constitutes prima facie evidence of the validity and amount of Tumbarello's claim. See Fed.R.Bankr. P. 3001(f). An objecting party must overcome the presumption of validity by presenting sufficient evidence of probative force equal to the allegations of the proof of claim. See Burke v. Reno-Sparks Indian Colony (In re Affordable Patios & Sunrooms), 2022 WL 1115413, at *3 (B.A.P. 9th Cir. Apr. 22, 2022); Reger v. Essex Bank (In re Landes), 626 B.R. 531, 545 (Bankr. E.D. Cal. 2021).
Ramsey suggests that the Adversary Judgment determined that she has no debt to Tumbarello. See Claim Objection at 3:6 to 4:4. She also argues because of that alleged determination, there is no debt that would support a valid lien against the Residence. Id. at 4:14-19. Finally, Ramsey maintains that Tumbarello made a profit on the sale of the 1207 Westlund Property that should be credited to offset the amount evidenced by POC 1-2. Id. at 4:21-26. In support of her Claim Objection, Ramsey has offered only a copy of POC 1-2 and a copy of the October 2022 Grant Deed.
The court, having considered the written and oral arguments of counsel as well as the lengthy history of these proceedings, concludes that the Claim Objection must be overruled.
Even if this court takes judicial notice of the only two documents offered in support of the Claim Objection, neither constitute evidence sufficient to contradict the matters set forth in the proof of claim. The Adversary Judgment only determined whether Tumbarello had met the burden of proving actual fraud under Section 523(a)(2)(A) and did not extinguish the debt established by the State Judgment. The judicial lien against the Residence created by recordation of the State Judgment survived the Chapter 7 discharge and was never avoided by Ramsey. And even if the October 2022 Grant Deed establishes that Tumbarello sold the 1207 Westlund Property for $355,000, there is no evidence establishing the expenses incurred by Tumbarello after he acquired the same property in August 2019. In other words, there is no evidentiary basis to conclude that Tumbarello actually profited from the sale of the 1207 Westlund Property or recovered funds in excess of the amount evidenced by POC 1-2.
Ramsey apparently attempted to convince the State Court that the Adversary Judgment warrants vacating the amounts awarded by the State Judgment and vacating the order denying Ramsey's homestead in the Residence. See State NRCP 60(b) Order at 3:1-10. The State Court was not persuaded and denied Ramsey's request for relief. The State Judgment remains in effect.
NRCP 60(b)(5) allows a Nevada judgment to be set aside, inter alia, when "the judgment has been satisfied, released or discharged…" See State NRCP 60(b) Order at 2:2-5. When Ramsey sought relief from the State Court, she could have informed the judge that the 1207 Westlund Property had been sold for more than the amount of the State Judgment and asserted the same offset argument she raises in her Claim Objection. Perhaps Ramsey could have offered additional evidence demonstrating that Tumbarello actually made an excessive profit on the sale of the property, i.e., that the amount of the judgment has been satisfied. Ramsey apparently did not do so.
Under these circumstances, Ramsey has failed to overcome the prima facie evidence of the validity and amount of POC 1-2.
IT IS THEREFORE ORDERED that the Objection to Eugene Tumbarello and Shamrock Painting, Inc. Proof of Claim #1-2, brought by Elizabeth Ann Ramsey, Docket No. 135, be, and the same hereby is, OVERRULED.