AgChoice Farm Credit, ACA v. Glenn (In re Glenn)

470 B.R. 731

In re Albert L. GLENN and Janet A. Glenn, Debtors.AgChoice Farm Credit, ACA, Plaintiff

v.Albert L. Glenn and Janet A. Glenn, Defendants.

Bankruptcy No. 1:11–bk–02164MDF.

Adversary No. 1:11–ap–00324MDF.

United States Bankruptcy Court, M.D. Pennsylvania.

March 20, 2012.

Steven J. Adams, Stevens and Lee, PC, Reading, PA, for Plaintiff.

Albert L. Glenn, Dillsburg, PA, pro se.

Janet A. Glenn, Dillsburg, PA, pro se.

OPINION

MARY D. FRANCE, Chief Judge.

Before me is the motion of AgChoice Farm Credit, ACA (“AgChoice”) for partial summary judgment on its complaint against Albert and Janet Glenn (“Debtors”). AgChoice is a creditor holding a claim secured by an interest in Debtors' former residence. In its complaint, AgChoice alleges that after it commenced foreclosure proceedings, Debtors willfully and maliciously removed fixtures from the residence, converted them to their own use, and damaged the premises in the process. For the reasons set forth below, AgChoice's partial motion for summary judgment will be denied.

The complaint consists of four counts, but AgChoice has since abandoned the claims for denial of Debtors' discharge and for declaratory relief.¹ In the first of two remaining counts, AgChoice avers that Debtors inflicted willful and malicious damage to AgChoice's collateral, therefore, the underlying debt should be excepted from discharge under 11 U.S.C. § 523(a)(6). In the second count (Count III), AgChoice avers that Debtors' actions constitute conversion under state law.

I. Factual Findings

On November 23, 2005, May 2, 2006, and October 18, 2006, Debtors obtained personal loans from AgChoice in the principal amounts of $160,000, $280,000, and $100,000, respectively. In exchange for these loans, Debtors executed three promissory notes (hereinafter “the Notes”) and three mortgages (hereinafter “the Mortgages”). The property subject to the Mortgages was Debtors' home, a dwelling consisting of approximately 6600 square feet of living space located on a fourteen-acre parcel of real estate near Dillsburg, York County, Pennsylvania (hereinafter “the Property”). After making the loans to Debtors, AgChoice loaned $550,000 to Grogle Development Company, LLC (“Grogle”), in which Debtor Albert Glenn (“Albert”) held a 50% interest. Debtors guaranteed the Grogle loan and executed a fourth mortgage on the Property to secure the guaranty.

The parties agree that the descriptions of the collateral covered by the Mortgages are identical. Paragraph 2 of each mortgage specified that the lien granted included “all hereditaments and appurtenances [t]hereunto belonging, ... and all improvements thereon and all fixtures and accessories now or [t]hereafter annexed and attached [t]hereto.” At paragraph 10, Debtors agreed to maintain the Property in good repair and not to commit waste.

On or about August 31, 2010, AgChoice notified Debtors that they were in default under the terms of the Notes. On or about September 2, 2010, AgChoice issued pre-foreclosure notices to Debtors as required by Pennsylvania law. In response, Debtors notified AgChoice that they intended to sell the Property, and soon thereafter, they listed the Property for sale through a realtor at a price of $689,900. Debtors' sales literature described the Property, built in 2007, as including three separate living quarters with seven bedrooms, five full baths and two kitchens. Other advertised features included geothermal heating and cooling, two fireplaces with wood burning stoves, ceiling fans, garage door openers, and smoke detectors. Photographs of the Property used in the sales literature displayed large kitchens with custom-built cabinetry, rooms with raised-panel doors and moldings, and bathrooms with attached fixtures, vanities and counter tops. Generally, the photographs showed a well-appointed home in good repair.

In January 2011, AgChoice entered judgment in the amount of $457,123.54 against Debtors on the guaranty of the Grogle loan. In March, AgChoice obtained a judgment in the aggregate amount of $541,561.54 on the Notes. Responding to the entry of these judgments, Debtors filed the instant bankruptcy petition on March 29, 2011. On schedule A of their petition, Debtors stated that the Property was worth $689,900, the same value Debtors gave when they listed the Property for sale. After they vacated the Property and filed bankruptcy, Debtors reduced the asking price for the Property from $689,900 to $465,000.

On April 21, 2011, AgChoice obtained an Order granting it relief from the stay to pursue its state court remedies against the Property. Debtors had previously vacated the Property and did not contest the motion. When they left the Property, Debtors removed numerous items attached to the structure when it was valued at $689,900. These items include: two garage door openers; five thermostats; two wood stoves; approximately fifteen (15) kitchen cabinets; a kitchen island; the kitchen sink; kitchen counter tops; nine (9) ceiling lights and fixtures; sixteen (16) doors; numerous door knobs and handles; the door frames and trim of three door units; three commodes; four bathroom mirrors; two bathroom lights; and two bathroom vanity tops with sinks and faucets. Photographs of the premises taken after Debtors vacated the Property show large holes in the wall where items were removed and damage to the floors. One of the kitchens was stripped bare to the walls.

Debtor Janet Glenn (“Janet”) testified at deposition that she and her husband believed that the items they removed were personal property and, thus, were not subject to AgChoice's mortgages. The advice Debtors received that these items could be removed was not obtained from their bankruptcy counsel, but from their daughter-in-law, who is a real estate agent, and from other unidentified individuals. Janet also stated that they took the items because they “needed to use them in [their] new house” and explained that they were living with their son and his family in a house he was rehabilitating. (J. Glenn Dep. 14, Sept. 26, 2011). Janet admitted that when the residence was listed for sale they intended for the kitchen cabinets, counter tops, lighting fixtures, sinks, and toilets that they removed to be sold with the home, but insisted that they had planned to take the appliances. She also stated that they took the thermostats because “the house [they] were moving into was a repossessed home, and [they] needed to use some of those items.” (J. Glenn Dep. 18–19, Sept. 26, 2011.) Janet admitted that one of the kitchens had been stripped to the walls. When asked why they did not remove cabinets from the other kitchen in the Property, Janet responded: “We didn't need them.” (J. Glenn Dep. 19, Sept. 26, 2011.) She also explained that they took several of the door handles because they were a handicap-accessible spring type that they needed at their new house. After being advised by their attorney that they should not have removed certain items, Debtors obtained replacement doors, commodes, door handles and cabinets. The doors, commodes, and door hardware were placed in the garage on the Property for storage, and the cabinets were stored in an outside shed.

II. Procedural History

On July 1, 2011, AgChoice filed the instant adversary complaint. On August 10, 2011, Debtors filed a pro se answer to the complaint admitting that they had removed many of the items as alleged by AgChoice.² On November 22, 2011, AgChoice filed the motion for summary judgment that is now before me. Several exhibits were attached to the motion, including copies of the Mortgages and Notes, photographs of the interior of the Property taken both before and after Debtors removed numerous items of property attached to the interior of the dwelling, and transcripts of the depositions taken of both Debtors on September 26, 2011. On December 7, 2011, Debtors filed an answer to AgChoice's summary judgment motion. The matter is ready for decision.³

III. Discussion

In the motion before me, AgChoice seeks a determination that, based upon the exhibits and Debtors' testimony at deposition, it has established that its claim arose from a willful and malicious injury to its property interest inflicted by Debtors through the conversion of its collateral. Therefore, AgChoice argues, its claim should be excepted from discharge under 11 U.S.C. § 523(a)(6).⁴

A. Summary Judgment

A court may grant summary judgment when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material facts” such that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c) (as incorporated by Fed. R. Bankr.P. 7056). In deciding a motion for summary judgment, the court must view the record in the light most favorable to the non-moving party. Mabey Bridge & Shore, Inc. v. Schoch, 666 F.3d 862 (3d Cir.2012). “All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party....” Fisher v. Matthews, 792 F.Supp.2d 745, 770–771 (M.D.Pa.2011) (citing White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir.1988)). The inquiry on summary judgment is whether the parties' dispute is so one sided that one party must, as a matter of law, prevail over the other. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The party moving for summary judgment has the initial burden of establishing the basis for its motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has satisfied its burden, the non-movant must either present affirmative evidence supporting its version of the facts or refute the movant's contention that it is entitled to judgment as a matter of law. Anderson, 477 U.S. at 256–57, 106 S.Ct. 2505. However, “[a] party opposing ... summary judgment may not rest upon the mere allegations or denials...