WENDY L. HAGENAU, Bankruptcy Judge.
Debtor Alfonza McKeever ("Mr. McKeever") filed a voluntary petition under Chapter 13 of the United States Bankruptcy Code on October 29, 2010. The case was converted to one under Chapter 11 on July 13, 2011. The Court appointed Plaintiff as Chapter 11 Trustee on February 6, 2013. The court subsequently converted the case to one under Chapter 7 on April 25, 2013. Plaintiff continued in her role as trustee following the conversion of the case.
Mr. McKeever owned certain business property located at 5361 Covington Highway, Decatur, Georgia ("Property"). Mr. McKeever purchased the Property in 1995 and used the property with his family to operate various car related businesses including McKeever Paint & Body ("MP&B") and Viaduct Group, LLC ("Viaduct"). Viaduct was operated by Mr. McKeever's uncle Robert Ellis ("Ellis) and his aunt, Delores Ellis, and Mr. McKeever stated in his Statement of Financial Affairs that he was an officer, director, self-employee or sole proprietor of Viaduct.
Since the Trustee was appointed on February 6, 2013, the Property has been encumbered by five liens:
Further, the Court has not approved any of the liens listed above or any loans to the Debtor. Defendants do not dispute that Ellis and all signatories to the Viaduct Lien were aware of Mr. McKeever's bankruptcy case at the time the above-listed liens were executed. The Trustee argues that these liens should be avoided as unauthorized post-petition transfers or considered void in violation of the automatic stay.
The Trustee filed the instant adversary proceeding on August 27, 2015 against Mr. McKeever, Ellis, MP&B, and Viaduct. The complaint sought, in part, to avoid the First Ellis Lien, the Ellis DSD, and the MP&B DSD liens pursuant to 11 U.S.C. § 549 and to determine that the same liens were void in violation of the stay pursuant to 11 U.S.C. § 362. In response, Defendants filed one answer on behalf of all Defendants.
Plaintiff filed a motion for partial summary judgment. The Court entered an Order on February 15, 2017 (Doc. No. 30) granting in part and denying in part the Trustee's Motion for Summary Judgment. The Court determined that the First Ellis Lien, the Ellis DSD, and the MP&B DSD were all void, but the Court denied Plaintiff's request to avoid the Second Ellis Lien pursuant to 11 U.S.C. § 105 and ordered Plaintiff to file an amended complaint to address the Second Ellis Lien.
The Trustee filed a Motion to Amend the Complaint, which the Court granted. Plaintiff filed the First Amended Complaint on April 11, 2017 (Doc. No. 43) ("First Amended Complaint"), to avoid the Second Ellis Lien pursuant to section 549 (Count Twelve) and declare the transfer of the lien void as a violation of the automatic stay pursuant to section 362 (Count Thirteen). Plaintiff sought leave to file a Second Amendment to the Complaint to add claims regarding the Viaduct Lien. The Court granted the motion to amend, and Plaintiff filed the Second Amended Complaint (Doc. No. 82) ("Second Amended Complaint") on January 12, 2018 to avoid the Viaduct Lien pursuant to section 549 (Count Fourteen) and declare the transfer of the lien void as a violation of the automatic stay pursuant to section 362 (Count Fifteen).
On February 15, 2019, Plaintiff filed the Motion seeking judgment as a matter of law on Counts Twelve through Fifteen (Doc. No. 129). Debtor filed an objection and sought additional time to respond to the Motion. The Court gave the Debtor 45 days to respond to the Motion. He filed his response to the Motion on April 15, 2019 (Doc. No. 136).
For the reasons stated below, the Court finds that summary judgment is warranted.
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law".
Once this burden is met, the nonmoving party cannot merely rely on allegations or denials in its own pleadings. Fed. R. Civ. P. 56(e). Rather, the nonmoving party must present specific facts to demonstrate there is a genuine dispute over material facts.
Plaintiff seeks summary judgment on Counts Twelve and Fourteen seeking to avoid the Second Ellis Lien and the Viaduct Lien as unauthorized post-petition transfers. Section 549 provides in relevant part:
Put another way, section 549 permits the trustee to avoid a post-petition transfer of estate property if the transfer was made without court authorization and is not otherwise permitted by the Bankruptcy Code. The trustee's ability to avoid such transfers is limited by certain exceptions, though. Section 549(c) states that "the trustee may not avoid a transfer of an interest in real property to a good faith purchaser without knowledge of the commencement of the case and for present fair equivalent value . . . ." 11 U.S.C. § 549(c). The rights of a trustee under section 549 are further limited by section 546, which provides in pertinent part:
It is undisputed that the transfers in question occurred after the commencement of Mr. McKeever's bankruptcy case. A review of the docket in both Debtor's bankruptcy case and this adversary proceeding shows that the Court never authorized the filing of the Second Ellis Lien or the Viaduct Lien. Additionally, the liens are not authorized by the Bankruptcy Code. After the appointment of the Trustee on February 6, 2013, Mr. McKeever was no longer a debtor-in-possession and could not transfer any interest in his property or incur debt. As the Court has previously explained, the trustee is the legal representative of the bankruptcy estate. Once she was appointed, only the Trustee could transfer estate property or incur debt on behalf of the estate.
Additionally, a mechanic's lien will not be perfected unless the claimant follows all of the requirements set forth in O.C.G.A. § 44-13-361.1; if any of these requirements are not met, the lien cannot be effective or enforceable.
Moreover, the transferees, Ellis and Viaduct, cannot be considered good faith purchasers under section 549(c) since they had knowledge of the case. The Court previously found that Ellis and all those who were responsible for the operation of Viaduct (Joe Anne McKeever, the registered agent and CEO of Viaduct, Ellis, Dolores Ellis, and the Debtor) had knowledge of the bankruptcy case. (Doc. No. 30.) Accordingly, neither Ellis nor Viaduct can be considered good faith transferees. No other exception to liability applies. Therefore, the Second Ellis Lien and the Viaduct Lien are both avoidable as unauthorized post-petition transfers under 11 U.S.C. § 549 and summary judgment on Counts Twelve and Fourteen is warranted in favor of Plaintiff.
Plaintiff also seeks summary judgment on Counts Thirteen and Fifteen, which allege the Second Ellis Lien and the Viaduct Lien are void in violation of the automatic stay. The filing of a bankruptcy petition operates as a stay of "any act to create, perfect, or enforce any lien against property of the estate." 11 U.S.C. § 362(a)(4). The purpose of the automatic stay is to provide the debtor with the ability "to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy." H.R Rep. 595, 95th Cong., 1st Sess., at 340-41 (1977), reprinted in 1978 U.S.C.C.A.N. 5693, 6296-97. The stay also serves to "protect[ ] the debtor from its pre-petition creditors by stopping all collection efforts, all harassment, and all foreclosure actions" while also "protect[ing] all creditors by ensuring that the estate will be preserved against attempts by other creditors to gain an unfair advantage with respect to the payment of claims."
It is undisputed that the transfers in question occurred after Mr. McKeever filed his bankruptcy petition while the automatic stay was in effect. Mr. McKeever has suggested, though, that an exception to the automatic stay applies because the Bankruptcy Code does not stay efforts to perfect a lien under applicable state law. 11 U.S.C. § 362(b)(3). To the extent the Second Ellis Lien and the Viaduct Lien relate to work done after February 6, 2013,
To the extent the Second Ellis Lien and Viaduct Lien relate to work allegedly done to the Property before February 6, 2013, an exception to the automatic stay does not apply because the liens were not properly recorded. To perfect a mechanic's lien, a claimant must follow all of the requirements set forth in O.C.G.A. § 44-14-361.1, including the condition that the claimant file the mechanic's lien within 90 days of completion of the work. O.C.G.A. § 44-14-361.1(a)(2). The Viaduct Lien includes a summary of investments detailing supposed labor, services, equipment, and materials related to the Property from February 2007 through November 2009 totaling $250,000. The Viaduct Lien was not recorded within 90 days of completing the work; rather, the Viaduct Lien was recorded on June 1, 2017, nearly eight years after the work was allegedly completed. While the Second Ellis Lien fails to attach documentation to indicate when the work that is the basis for the claim occurred, the lien is substantially similar to the Ellis Lien which was for improvements that began in 2008 and continued through August 2013. As the Court has explained, the Trustee took control of the Property when she was appointed on February 6, 2013, more than 90 days before the Second Ellis Lien was filed. As a result, the mechanic's liens were not timely filed and would not be enforceable under Georgia law.
Accordingly, the Second Ellis Lien and the Viaduct Lien were not properly perfected and enforceable. No exception to the automatic stay applies. The Second Ellis Lien and Viaduct Lien are therefore void in violation of the automatic stay, and summary judgment is warranted for Plaintiff on Counts Thirteen and Fifteen.
