In Re: William & Shirley Ranki v. ( 2011 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 11a0606n.06
No. 09-1087
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Aug 23, 2011
In re: WILLIAM A. RANKIN; )
SHIRLEY A. RANKIN, ) LEONARD GREEN, Clerk
)
Debtors )
) ON APPEAL FROM THE
_______________________________ ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
) DISTRICT OF MICHIGAN
WILLIAM A. RANKIN, )
SHIRLEY A. RANKIN, )
)
Appellants, )
)
v. )
)
BRIAN LAVAN AND ASSOCIATES, P.C.; )
COMMONWEALTH LAND TITLE INSURANCE )
COMPANY, a foreign corporation; JOEL R. DAULT; )
PROGRESSIVE TITLE INSURANCE AGENCY )
COMPANY, a Michigan Corporation; PAUL WOOD, )
deceased; KARLA VOLKE-WOOD, )
)
Appellees )
)
COLLENE K. CORCORAN, )
)
Trustee – Appellee )
)
)
__________________________________________ )
Before: SUTTON and STRANCH, Circuit Judges; WELLS, District Judge.*
*
The Honorable Lesley Wells, United States District Judge for the Northern District of Ohio,
sitting by designation.
No. 09-1087
In re Rankin
WELLS, District Judge: In their pro se petition, Appellants William and Shirley Rankin,
husband and wife, seek to vacate the bankruptcy court’s several decisions involving the Rankins’
legal efforts to remedy perceived harms visited upon them in a residential real estate purchase gone
awry. The Rankins, first, challenge the bankruptcy court’s summary judgment of their multiple
state-law claims against entities involved in the sale of the private residence, including defendants
Joel Dault, Progressive Title Insurance Agency, Inc., and Commonwealth Land Title Insurance
(hereinafter “the Title Defendants”). (Nos. 06-14084 & 06-14910). The Rankins also seek to
unwind the bankruptcy court’s decision to allow the Chapter 7 Trustee, defendant Collene Corcoran
(“Trustee”), to compromise a claim arising from another state-court suit initiated by the Rankins
against the owners of the residential property, defendants Paul Wood, deceased, and Karla Volka-
Wood (“the Woods”). (No. 06-14179). Finally, the Rankins seek to avoid the bankruptcy court’s
award of sanctions against them for a series of filings directed at a number of entities, individuals
and organizations. (No. 06-13726). The district court consolidated these four matters into a single
bankruptcy appeal and affirmed.
For the reasons set forth below, we affirm the bankruptcy court’s determinations as to the
Trustee’s compromise claim and the award of sanctions. We also affirm the dismissal of the
Rankins’ claims against the Title Defendants, but do so on jurisdictional grounds.
I. BACKGROUND
These matters arise from the Rankins’ failed efforts to purchase a private residence, located
on Charring Cross Circle in Whitmore Lake, Michigan (“Charring Cross property”), in which they
lived as vendees under a land contract with the Woods. In 1999, the Rankins fell behind on their
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land contract payments and the Woods secured a judgment of possession against the Rankins
requiring payment of arrears to reinstate the land contract. The Rankins failed to timely pay the
arrearage and the Woods were awarded possession of the Charring Cross property.
The Rankins sought to retain possession of the home and negotiated with the Woods for an
outright purchase. The Rankins maintain that an agreement was reached and they arranged for a
mortgage. According to the testimony of Paul Wood, the agreed upon purchase price for the home
was $285,000, plus payment of past due sums under the land contract.
Shortly after reaching the agreement, the Woods were notified by the Rankins’ mortgage
broker, Federal Mortgage, that the Rankins had arranged for financing in order to complete the
purchase. On 1 February 2002, defendant Progressive Title received a request from Federal
Mortgage to provide a mortgage title insurance commitment for a refinance transaction for the
property. The title commitment was prepared solely for Federal Mortgage. Federal Mortgage
directed Progressive Title to perform escrow closing services for the transaction, and issued closing
instructions shortly thereafter. Progressive Title prepared the closing documents, including a land
contract pay-off statement and settlement statement pursuant to the instructions it received from
Federal Mortgage.
On 11 February 2002, the Rankins met to sign the necessary documents in order to complete
the purchase of the home, including a settlement statement, and a disclaimer acknowledging that
Progressive Title was hired to conduct the closing and issue title insurance to the lender and owed
no obligation to the Rankins. Defendant Joel Dault represented Progressive Title at this meeting.
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The next day, Federal Mortgage instructed Progressive Title to amend the settlement
statement to add $10,000 to be paid to P.C. Law Center as a fee payable by the Rankins related to
the closing. This change required the Rankins to come up with an additional $10,000 “out of
pocket” to pay at closing.
On 13 February 2002, the Woods signed a Warranty Deed and delivered it to Progressive
Title on the express condition that Progressive hold the deed in escrow until: (1) the written purchase
and closing documents, including an agreed upon closing statement were fully executed, and (2) the
full amounts due the Woods were available. After signing the deed, the Woods refused to sign the
amended pay-off statement as it showed payment to them of less than the agreed upon amount.
On 14 February 2002, $286,000 was wired by the mortgagee to Progressive Title to hold in
escrow for disbursement upon consummation of the transaction. On the same day, Federal Mortgage
informed Mr. Wood that the Rankins did not have enough money to complete the transaction, and
wished to lower the purchase price in order to be able to close the sale.
Later on 14 February 2002, Federal Mortgage offered the Woods a second mortgage on
another piece of property owned by the Rankins to secure a deferred payment to the Woods of the
closing shortfall. The Woods refused the offer. On 20 February 2002, the Woods confirmed with
Progressive Title their intent not to close the sale of the house.
A series of legal filings followed. On 21 February 2002, the Rankins filed their Chapter 7
Bankruptcy Petition. On 4 January 2004, acting pro se, the Rankins filed a complaint in Oakland
County Circuit Court against the Title Defendants. The complaint averred multiple claims, including
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breach of fiduciary duty, “breach of closing,” credit defamation, breach of contract and guaranty,
fraud as to Joel Dault, “pierce the corporate veil,” and mental distress.
The Trustee removed to the bankruptcy court the Rankins’ suit against the Title Defendants.
The Title Defendants moved for the dismissal of the case pursuant to FRCP 12(b)(6) and Bankruptcy
Rule 7012, and for an award of summary judgment pursuant to FRCP 56(c) and Bankruptcy Rule
7056. The Rankins did not respond to either motion, nor did the Trustee. Instead, the Rankins filed
an amended complaint, an answer to the Affidavit of Joel Dault that the Court construed as a
response to the Title Defendants’ motion for summary judgment, and a response to the Title
Defendants’ motion to dismiss relying on their answer to the Affidavit of Joel Dault.
The bankruptcy court treated the Rankins’ amended complaint as properly filed for the
purposes of its opinion. In addition, the bankruptcy court proceeded to determine the matter on the
merits as presented. The bankruptcy court did so while noting that, because the events giving rise
to the complaint occurred prior to the Bankruptcy filing on 21 February 2002, the proceedings
became part of the bankruptcy estate property but were, instead, being pursued by the Rankins
individually. The bankruptcy court, further, noted that the Trustee had removed the matter from state
court but had taken little or no part in the proceedings following that action. Nevertheless, the
Trustee had not formally abandoned the matter. The bankruptcy court awarded the Title Defendants
summary judgment.
Again appearing pro se, the Rankins filed a state court action against the Woods to quiet title
in the Charring Cross property and to recover damages. The Rankins did not disclose any interest
in the Charring Cross property in their bankruptcy petition. Trustee Collene Corcoran learned of the
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In re Rankin
quiet title suit and agreed to accept the Woods’ offer of $10,000 to settle the Rankins’ claims. The
Trustee filed a motion with the bankruptcy court seeking approval of this proposed settlement, which
the bankruptcy court granted. However, the district court reversed the ruling on appeal and
remanded for further proceedings because the record was silent as to some of the factors the
bankruptcy court should have considered in determining whether to approve the Trustee’s proposed
settlement.
In response to the remand, the bankruptcy court held an evidentiary hearing. The order
following the hearing granted the Trustee’s motion to compromise the claims asserted in the
Rankins’ state court suit against the Woods for the sum of $10,000, as well as a corresponding
opinion setting forth the grounds for the ruling. In finding that the Rankins were unlikely to prevail
in their quiet title suit against the Woods, the bankruptcy court noted that the Court had
contemporaneously granted summary judgment in favor of the Title Defendants and that, in certain
material ways, that case was a trial on the merits of the Woods lawsuit as well. On appeal the
Rankins challenge the decision to compromise their claim.
Finally, the bankruptcy court subjected the Rankins to sanctions as a result of their filings.
On 15 March 2006, the bankruptcy court issued an Injunctive Order prohibiting the Rankins from
causing any further filings in this matter without the Court’s approval. The filings did not cease and,
on 31 July 2006, after hearing oral argument and reviewing briefs in the matter, the bankruptcy court
awarded sanctions against the Rankins, pursuant to FRCP 11, as adopted by Bankruptcy Rule 9011.
The bankruptcy court found the Rankins jointly and severally liable for the following sanctions:
(a) Reasonable costs and attorney fees of $1,000 to the Woods.
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(b) Reasonable costs and attorney fees of $1,000 to Robert Detwieler, former attorney to the
Woods.
(c) Reasonable costs and fees in the amount of $2,000 to Commonwealth Land Title and
Transaction Title.
(d) Reasonable costs and fees of $2,000 to Plunkett and Cooney, P.C.
(e) Reasonable costs and fees of $1,083.21 to Joel Dault and Progressive title.
(f) Reasonable costs and attorney fees of $2,226.00 to the Attorney Grievance Commission.
The Rankins appeal the bankruptcy court’s sanctions ruling.
II. LAW & ANALYSIS
A. STANDARD OF REVIEW
We review the bankruptcy court's findings of fact for clear error, Kennedy v. Mustaine (In
re Kennedy), 249 F.3d 576, 579 (6th Cir. 2001), and its conclusions of law de novo. WesBanco
Bank Barnesville v. Rafoth (In re Baker & Getty Fin. Servs. Inc.), 106 F.3d 1255, 1259 (6th Cir.
1997).
B. ANALYSIS
The Rankins challenge the bankruptcy court’s decision to grant the Title Defendants’ motion
for summary judgment on the Rankins’ state-law claims. The gravamen of their challenge is that
the Title Defendants are subject to liability for their role in the Rankins’ failed attempt to purchase
the Woods’ Charring Cross property. The bankruptcy court determined that the Rankins had failed,
as a matter of law, to state any viable theory of recovery against the Title Defendants arising from
the Rankins’ effort to purchase the property.
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1. Standing Against the Title Defendants
The Rankins must have standing to bring their state-law claims against the Title Defendants
for injuries alleged as the result of the failed purchase of the Charring Cross property. That action
accrued prior to the Rankins’ filed bankruptcy petition on 21 February 2002.
The trustee in bankruptcy acts as representative of the estate. It is the trustee who “has
capacity to sue and be sued.” 11 U.S.C. § 323(b). “It is well settled that the right to pursue causes
of action formerly belonging to the debtor – a form of property ‘under the Bankruptcy Code’ – vests
in the trustee for the benefit of the estate.” Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th
Cir. 1988), cert denied 489 U.S. 1079 (1989) (quoting Jefferson v. Miss. Gulf Coast YMCA, 73 B.R.
179, 181-82 (S.D. Miss. 1986)). The debtor has no standing to pursue such causes of action. In re
Van Dresser Corp., 128 F.3d 945, 947 (6th Cir. 1997) (Debtor’s appointed trustee has the exclusive
right to assert the debtor’s claim).
In this instance, the causes of action against the Title Defendants accrued in the early days
of 2002, prior to the Rankins’ bankruptcy filing. The Rankins’ contingent interest is fully alienable
under Ohio law and may be attached by creditors. Moore v. Foresman, 172 Ohio St. 559, 179 N.E.
2d 349, 353 (1962). As such, a contingent interest is an interest in property that becomes property
of the estate under 11 U.S.C. § 541(a)(1) when a bankruptcy petition is filed. Thus, the Rankins’
Trustee alone has the capacity to sue on the instant action involving the Title Defendants, as that suit
is a putative asset of the estate. Under § 541(a)(1), the bankruptcy estate is comprised of “all legal
or equitable interests of the debtor in property as of the commencement of the case, and . . . the
‘interests of the debtor in property’ include ‘causes of action.’” Bauer v. Commerce Union Bank,
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859 F.2d at 440-41. Under § 554, the trustee may abandon any property of the estate that is
burdensome to the estate or that is of inconsequential value and benefit to the estate, but only after
notice and a hearing.
The Rankins did not disclose any interest in the Charring Cross property in the schedule
accompanying their bankruptcy petition, and did not disclose any potential claim against the Woods
regarding the property. For the Rankins to claim ownership standing through abandonment they
must have formally scheduled the property. See Stein v. United Artists Corp., 691 F.2d 885, 891
(9th Cir. 1982) (“When the bankrupt fails to list an asset, he [or she] cannot claim abandonment
because the trustee has had no opportunity to pursue the claim.”).
Prior to addressing the merits of the Rankins’ claims against the Title Defendants, the
bankruptcy court acknowledged that:
on its face it would appear this proceeding is or was at the date of the bankruptcy
case filing arguably a cause of action belonging to the debtors which became
bankruptcy estate property. It is however being pursued by the debtors individually.
An argument can be made that the debtors have no standing and that it is a cause of
action with respect to which only the trustee may pursue or abandon (in which case
Debtors would not be able to pursue it) or otherwise deal with. Aside from the
removal the trustee has taken little or no part in these proceedings and does not
appear to have formally abandoned it. Given that for whatever reasons the standing
issue appears not to have been raised or seriously pursued, the Court is proceeding
to decide the matter on its presented merits.
(8 September 2006 Bankruptcy Opinion, p. 6 n. 3).
As a putative asset, the Rankins’ suit against the Title Defendants was not part of their
bankruptcy schedule and, therefore, remains part of the bankruptcy estate. The trustee did not
formally abandon the asset through notice and hearing and, as such, the Rankins do not have
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standing to pursue the claims comprising the asset by right of ownership. Accordingly, the
bankruptcy estate was the real party in interest at the time the Rankins filed their suit against the Title
Defendants. Upon this premise, we affirm the bankruptcy court’s disposition of the Rankins’ claims
against the Title Defendants, but do so on the basis of lack of subject-matter jurisdiction.1
2. No Error in Approving the Trustee’s Compromise Claim.
The Rankins maintain the bankruptcy court erred in granting its approval of the Trustee’s
proposal to settle their quiet title suit against the Woods.
The bankruptcy court has significant discretion to approve such a proposed settlement by
virtue of Bankruptcy Rule 9019(a), which directs that “[o]n motion by the trustee and after notice
and a hearing, the court may approve a compromise or settlement.” As enunciated in Protective
Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414
(1968), the bankruptcy court is under an affirmative duty to reach a “fair and equitable” settlement:
There can be no informed and independent judgment as to whether a proposed
compromise is fair and equitable until the bankruptcy judge has apprised himself [or
herself] of all facts necessary for an intelligent and objective opinion of the
probabilities of ultimate success should the claim be litigated. Further, the judge
should form an educated estimate of the complexity, expense, and likely duration of
such litigation, the possible difficulties of collecting on any judgment which might
be obtained, and all other factors relevant to a full and fair assessment of the wisdom
of the proposed compromise. Basic to this process in every instance, of course, is the
need to compare the terms of the compromise with the likely rewards of litigation.
Id. at 424–25.
1
Alternatively, even if the Rankins had standing to bring suit against the Title Defendants,
the bankruptcy court properly dismissed their claims under the decisions laid down in Koppers Co.
v. Garling & Langlois, 594 F.2d 1094, 1098 (6th Cir. 1979), and Mickam v. Joseph Louis Palace
Trust, 849 F. Supp. 516, 522 (E.D. Mich. 1994).
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The bankruptcy court carried out the appropriate Rule 9019 inquiry, making an independent
judgment on whether the Trustee’s proposed compromise was fair and equitable. In its opinion on
the matter, the bankruptcy court observed that the prospects for success in the Rankins’ suit against
the Woods were exceedingly slim, noting that the record did not show a meeting of the minds on the
sale price of the Charring Cross property. Further, the record indicated the Rankins were unable to
raise the funds to consummate the transaction at the agreed upon sale price. Further, the bankruptcy
court determined from the record that, even if the Trustee could have prevailed on the claims against
the Woods, the resulting benefit to the creditors – the real entities in interest – would have been
minimal at best. The cost of litigating, the likelihood of appeal, the Rankins’ litigious manner, the
risk of having to immediately resell the property from the estate if the Trustee prevailed, considered
together would not have produced the net gain to the bankruptcy estate offered by the Woods’
$10,000 settlement offer.
On the record presented, the bankruptcy court’s factual findings were not clearly erroneous
and the court clearly met the legal standard that it be sufficiently apprised of the relevant facts and
law to permit an informed judgment as to whether the Trustee’s proposed compromise was fair and
equitable.
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In re Rankin
3. No Abuse of Discretion in the Award of Sanctions.
The Rankins challenge the decision of the bankruptcy court to award a total of $9,309.21 in
sanctions to six entities for the Appellants’ alleged violations of Federal Rule of Bankruptcy
Procedure 9011.2
Bankruptcy court sanction awards are reviewed for an abuse of discretion. See Mapother &
Mapother, P.S.C. v. Cooper (In re Downs), 103 F.3d 472, 480 (6th Cir. 1996). To find for the
Rankins in their effort to defeat the sanctions awarded requires us to conclude that the bankruptcy
court relied upon clearly erroneous findings of fact, improperly applied the law, or used an erroneous
legal standard. Id. We reach no such conclusion.
The bankruptcy court imposed sanctions of reasonable attorney fees and costs against the
Rankins in an Order on 31 July 2006, pursuant to a sanctions hearing on 14 June 2006. The
sanctions hearing was in response to the Rankins’ filings with the bankruptcy court, against a number
of entities. In particular, the bankruptcy court focused upon the Rankins’ 9 January 2006 filing
which called for a grand jury investigation of six named entities “To Charge Defendants and Others
with Violation of Civil Rights Act and RICO,” and charged illegality, criminal conspiracy, perjury,
fraud, and racism.
Upon appeal to the Sixth Circuit, the Rankins repeat those allegations, without evidence and
with a marked absence of coherence. Nothing in the Rankins’ current filings reaches beyond the ad
hominem conclusory allegations which initially gave rise to the bankruptcy court’s initial imposition
2
The court denies the Rankins’ motion to expand the appeal citation to include those
individuals and entities awarded sanctions but not appearing as parties in the underlying suit.
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of sanctions. The Rankins’ litigious behavior, further, caused the bankruptcy court to file an
Injunctive Order Prohibiting Debtors from Filing any Further Pleadings on 15 March 2006. Finally,
the Rankins offer no argument that the amounts of the sanctions awarded by the bankruptcy court
were inappropriate under the standards set forth in Rule 9011(c)(2), which limits such awards to an
amount “sufficient to deter repetition of such conduct or comparable conduct by others similarly
situated.”
From the record on appeal, the bankruptcy court’s determination to award sanctions was not
an abuse of discretion. Further, the amounts awarded are not beyond what appear to be sufficient
to deter repetition of the Rankins’ sanctionable filings.
III. CONCLUSION
Upon review of the record, we dismiss the Rankins’ claims against the Title Defendants for
lack of standing. Further, we find the bankruptcy court exercised proper authority in reviewing the
Trustee’s decision to compromise the Rankins’ suit against the Woods, and the bankruptcy court did
not abuse its discretion in awarding sanctions against the Rankins. For the reasons set forth above,
we AFFIRM the bankruptcy court’s determinations regarding the Trustee and sanctions suits, and
AFFIRM, on different grounds, the dismissal of the Rankins’ suit against the Title Defendants.
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