UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA

Transcription

1 Document Page 1 of 12 UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Paul Hansmeier, BKY No Debtor. Randall L. Seaver, Trustee, Plaintiff, REPLY BRIEF OF DEFENDANT PADRAIGIN BROWNE IN SUPPORT OF HER MOTION FOR SUMMARY JUDGMENT v. Paul Hansmeier and Padraigin Browne, Defendants. ADV No TO: PLAINTIFF RANDALL L. SEAVER, TRUSTEE, BY HIS ATTORNEY, MATTHEW D. SWANSON OF FULLER, SEAVER, SWANSON & KELSCH, P.A., PORTLAND AVENUE SOUTH, SUITE 132, BURNSVILLE, MINNESOTA Defendant Padraigin Browne ( Browne ) respectfully submits this Reply Brief in support of her motion for summary judgment. PRELIMINARY STATEMENT Axiomatically, when a party moves for summary judgment, and submits evidence in support thereof, the responding party must submit counter-evidence that creates a genuine issue of material fact. Otherwise, entry of judgment is warranted. There is only one appraisal before the Court: Browne s. The Trustee has failed to submit any rebuttal

2 Document Page 2 of 12 evidence regarding the value of Browne s condominium. There is thus no genuine issue of material fact in this case. Summary judgment in Browne s favor is warranted. However, even if the Trustee had submitted counter-evidence, this case is nevertheless capable of resolution as a matter of law. The Trustee s theory of recovery involves an equitable reduction of Browne and the debtor s homestead exemption. The Supreme Court s decision in Law v. Siegel blocks the Trustee s request for such a reduction. Without this reduction, a proper application of the law reveals the estate has no interest in the funds that the Trustee has possessed for over half of a year even at a $1.2 million valuation of Browne and the debtor s condominium. 1 Thus, there are no genuine issues of material fact preventing entry of judgment in Browne s favor. ARGUMENT I. Summary Judgment In Browne s Favor Is Warranted Because The Trustee s Proposed Division Of The Sale Proceeds Is Associated With An Error Of Law. The Trustee s proposed division of the sale proceeds is associated with an error of law. The proposed division relies on an impermissible equitable reduction of Browne and the debtor s homestead exemption. When this error of law is corrected, then it becomes 1 The Trustee lists seven issues he asserts are relevant to the allocation of the proceeds. Trustee s Memorandum, at 4. However, the Trustee has applied only one issue to either his response to Browne s motion for summary judgment or in bringing his own motion for partial summary judgment. Whether or not the vendor contracts paid at closing, for example, were the sole obligation of Browne should not take six months to determine. Indeed, Browne does not contest that those contracts were her obligation, nor has she ever contested that position. Further, it appears that despite having six months to examine numerous issues irrelevant to the proper distribution of sale proceeds, the Trustee failed to look into the one issue that could possibly be relevant: the value of the condo at the time of debtor s Chapter 13 petition.

3 Document Page 3 of 12 clear that the estate has no continuing interest in the sale proceeds even at a $1.2 million valuation of Browne and the debtor s condominium. The Trustee s proposed division of the sale proceeds calls for an equitable reduction of Browne and debtor s homestead exemption. The Trustee offers no legallycognizable support for his proposed reduction of the homestead exemption. The Supreme Court s decision in Law v. Siegel makes clear that a homestead exemption may not be equitably reduced. 134 S. Ct (2014). When the Trustee s error of law is corrected, the table presented in the Trustee s opposition brief properly reads as follows: Debtor s Exempt Non-exempt Defendant s Exempt Non-Exempt Share Portion portion Share portion Portion 300, , , , , , Chowdhury (71,620.90) Judgment Commissions (36,327.50) (36,327.50) and Realtor Fees Contractor (14,591.83) Fees Deed Tax (2,040.00) ( ) HOA Dues (648.96) (648.95) and Letter Fee Electric Bill (75.00) (75.00) Escrow for (981.00) (981.00) Nicollet Mall Recording (74.00) (74.00) Fee BALANCE 195, , , ,060.32

4 Document Page 4 of 12 Trustee s Memorandum, at Thus, once corrected for its error of law, the Trustee s table makes clear that the debtor had no non-exempt equity in his homestead even at a $1.2 million condominium valuation. 2 II. The Trustee s Remaining Arguments Are Unavailing. The Trustee s remaining arguments are unavailing for the reasons set forth below. A. There Is No Genuine Issue Of Material Fact Regarding The Value Of Browne And The Debtor s Condominium; Any Valuation Issue Is Moot. The Trustee s first argument is that there is an issue of fact regarding the value of Browne and the debtor s condominium. This argument fails for two reasons. First, the Trustee has failed to create a genuine issue of material fact regarding the value of the condominium. Second, any valuation issue is a red herring, as even at the Trustee s desired valuation, debtor had no non-exempt equity in the condominium. 2 In the Trustee s motion for summary judgment, the Trustee attempts to assert that the estate should not have to pay for any of the closing costs associated with the closing of Browne and debtor s condominium. However, as acknowledged by the Trustee, the order authorizing the sale of the condominium including the necessary closing costs. Further, relevant case law supports the included payment of Debtor s portion of the closing costs (including commissions and realtor fees) to the non-exempt portion of Debtor s share of the proceeds. The Trustee s belief that those costs should be deducted from the joint homestead exemption is not supported by any citation to statute or case law. Moreover, the Trustee s issue 7 is directly contrary to the position he is taking in the avoidance action against Browne, as well his assertion that Browne used misappropriated estate funds to make mortgage payments. As the Trustee is aware, numerous mortgage payments were made from Browne s account, some of the money was obtained by Browne in the transfer the Trustee is attempting to avoid. If Browne paid nothing towards the condominium or used estate funds to make those mortgage payments, as the Trustee asserts in this action, then there was never a transfer to Browne which can form the basis of the Trustee s avoidance action.

5 Document Page 5 of 12 First, the Trustee has failed to submit an appraisal (or any factual assertion) countering Browne s appraisal. To survive summary judgment, a non-moving party must meet evidence with evidence. 3 Johnson v. Wheeling Machine Products, 779 F. 3d 514, 517 (8th Cir. 2015). The Trustee s opposition brief does not do so. The only appraisal before the Court is Browne s appraisal. That appraisal lists the value of Browne s condominium as of the date of debtor s filing as no more than $1.1 million. The Trustee s failure to present counter-evidence warrants entry of summary judgment in Browne s favor. See Johnson, 779 F. 3d at 517 (8th Cir. 2015). However, even if the Court were to accept the Trustee s desired $1.2 million valuation, as set forth above in Section I, supra, debtor would nonetheless lack any nonexempt equity in his condominium. Thus, the valuation issue is a red herring under the circumstances present in this case. 4 B. The Trustee s 348(f)(2) Argument Conflicts With The Plain Language Of The Bankruptcy Code. The Trustee s second argument is that Browne s condominium should be valued at $1.2 million based on debtor s so-called bad faith filing. The Trustee s position finds no support in the law. The plain language of 348(f)(2) limits its application to voluntary conversions by the debtor. The Trustee expressly concedes that the Bankruptcy Code, does not specifically address this situation. Trustee s Memorandum, at 14. Yet, the 3 The Trustee complains that he did not have enough time to obtain his own appraisal of Browne and debtor s condominium. However, the Trustee has had more than six months to obtain such an appraisal. The Trustee s failure to do either in the preceding six months should not be result in even further delay prejudicing Browne. 4 Also, contrary to the Trustee s representation to this Court, Browne was not represented by Barbara May at Browne s October 28, 2016 Rule 2004 examination. See the Declaration of David M. Burns Ex. 1.

6 Document Page 6 of 12 Trustee asks the Court, as a matter of equity, to essentially rewrite the law to benefit the estate. The Trustee s request is beyond the scope of the Court s authority. See In re Bobinski, 517 B.R. 900, 904 (Bankr. Ct. N.D. Ind. 2014) (The common theme in the Supreme Court's bankruptcy jurisprudence over the past two decades is that courts must apply the plain meaning of the Code unless its literal application would produce a result demonstrably at odds with the intent of Congress). C. The Trustee s Reference To The Prejudgment Attachment Motion Is Not Relevant To This Case. The Trustee s reference to his prejudgment attachment motion is not relevant to this case. The Trustee s prejudgment attachment motion relates to a separate adversary proceeding in which the Trustee amended his complaint and motion after Browne filed a motion to dismiss. The Trustee cannot avoid entry of judgment in this case based on his filings in another case. 5 D. The Trustee s Discussion Of The Chowdhury Lien Conflicts Directly With Minnesota Law. The Trustee s discussion of the Chowdhury lien conflicts directly with Minnesota law. According to the Trustee, it is unfair for Browne to not be held liable for debtor s debts. Trustee Memorandum, at 16. Minnesota law is crystal clear on this point: a wife is not liable for her husband s debts; a judgment against one joint tenant does not impair 5 The Trustee asserts his belief he will succeed on his prejudgment attachment motion. However, as will be discussed in Browne s response to the amended motion for prejudgment attachment, and was discussed in her motion for a hearing on the preliminary attachment of these funds, the Trustee has not and cannot meet his burden for obtaining an order for pre-judgment attachment.

7 Document Page 7 of 12 another joint tenant s interest. Gibson v. Trs. Of Minn. State Basic Bldg. Trades Fringe Benefits Funds, 703 N.W.2d 864, (Minn. App. 2005) ( [A] judgment lien can only attach to the interest of the debtor. ). It bears mentioning that the Chowdhury lien was fully satisfied at closing. Satisfaction of the lien has reduced the outstanding claims in this case, allowing for a greater recovery for debtor s other creditors. Thus, even if principles of equity could override bright-line Minnesota law, it is unclear what equitable basis the Trustee could plausibly assert. CONCLUSION For the reasons set forth above, there is no genuine issue of material fact. Whether or not the proper valuation of the condominium for determination of the allocation of proceeds is $1.1 million or $1.2 million is immaterial because in either instance the estate has no remaining interest in the proceeds from the sale for the reasons set forth above. As a matter of law Browne and debtor are entitled to the entire homestead exemption of $390,000, the remainder of which should be released forthwith. DAVE BURNS LAW OFFICE, LLC Dated: May 16, 2016 By:_ /e/ David M. Burns David M. Burns # Grain Exchange North 301 Fourth Avenue South Minneapolis, MN (612) dave@daveburnslaw.com Attorney for Padraigin Browne

8 Document Page 8 of 12 UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Paul Hansmeier, BKY No Debtor. Randall L. Seaver, Trustee, Plaintiff, v. ADV No Padraigin Browne, Defendant. UNSWORN CERTIFICATE OF SERVICE I, David M. Burns, declare under penalty of perjury, that on May 16, 2016, I filed: 1. Defendant Padraigin Browne s REPLY BRIEF OF DEFENDANT PADRAIGIN BROWNE IN SUPPORT OF HER MOTION FOR SUMMARY JUDGMENT AND THE DECLARATION OF DAVID M. BURNS. with the Clerk of Bankruptcy Court through ECF and that ECF will send an e-notice of electronic filing to all filing users of this case via the court s CM/ECF server. I further declare that I caused copy of the foregoing documents to be mailed by first class mail to the entities and individuals listed below: Paul Hansmeier 3749 Sunbury Cove Woodbury, MN Executed on: May 16, 2016 Signed:/e/ David M. Burns David M. Burns, #337869

9 Document Page 9 of 12 Dave Burns Law Office, LLC 475 Grain Exchange North 301 Fourth Avenue South Minneapolis, MN (612) dave@daveburnslaw.com Attorney for Padraigin Browne

10 Document Page 10 of 12 UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA In re: Paul Hansmeier, BKY No Debtor. Randall L. Seaver, Trustee, Plaintiff, v. ADV No Paul Hansmeier and Padraigin Browne, Defendants. DECLARATION OF DAVID M. BURNS I, David M. Burns, declare under penalty of perjury, that: 1. I am an attorney licensed to practice law in the State of Minnesota and represent Defendant Padraigin Browne in this bankruptcy proceeding. 2. Attached to this declaration is a true and correct copy of the following document: Exhibit 1: Page one of the transcript of the Rule 2004 Examination of Padraigin Browne taken on October 28, 2015.

11 Document Page 11 of 12 Executed on: May 16, 2016 Signed:/e/ David M. Burns David M. Burns, # Dave Burns Law Office, LLC 475 Grain Exchange North 301 Fourth Avenue South Minneapolis, MN (612) Attorney for Defendant Padraigin Browne

12 Document Padraigin Page Browne 12 of 12 10/28/2015 Page: 1 Page 1 Page 3 1 UNITED STATES BANKRUPTCY COURT 1 On Behalf of the Debtor: 2 DISTRICT OF MINNESOTA BARBARA J. MAY, ESQ. 4 In re: Chapter 13 4 Attorney at Law 5 Case No (KHS) Snelling Avenue North 6 Paul Robert Hansmeier, Suite 102 Roseville, Minnesota Debtor barbarajmay@hotmail.com 13 DEPOSITION OF PADRAIGIN BROWNE 13 ALSO PRESENT: Paul Robert Hansmeier 14 Taken October 28, Commencing at 9:35 a.m NOTE: The original transcript will be delivered to REPORTED BY: KELLEY E. ZILLES, RPR 23 Edward P. Sheu, Esq., as the taking party of the 24 deposition Page 2 Page 4 1 Deposition of PADRAIGIN BROWNE, taken on the 28th 1 INDEX 2 day of October 2015, commencing at 9:35 a.m., at the law 3 firm of Best & Flanagan, LLP, 60 South Sixth Street, 4 Suite 2700, Minneapolis, Minnesota, before Kelley E. 5 Zilles, Registered Professional Reporter and a Notary 6 Public of and for the State of Minnesota WITNESS: PADRAIGIN BROWNE 5 6 PAGE 7 ********** EXAMINATION BY MR. SHEU APPEARANCES On Behalf of the Judgment Creditors: EDWARD P. SHEU, ESQ. 13 BROWNE EXHIBITS MARKED AND REFERRED TO: 14 Best & Flanagan, LLP South Sixth Street, Suite Exhibit 1 Notice of Issuance of Subpoenas For 16 Minneapolis, Minnesota Rule 2004 Examinations esheu@bestlaw.com 18 Exhibit 2 Form 8879 IRS e-file Signature On Behalf of the Creditor Alan Cooper: Exhibit 3 Authorization U.S. Individual Income Tax 22 PAUL GODFREAD, ESQ. 22 Return Godfread Law Firm Exhibit U.S. Individual Income Tax 25 paul@godfreadlaw.com 25 Return Paradigm Reporting & Captioning # EXHIBIT 1