KAREN S. JENNEMANN, Bankruptcy Judge.
This case came before the Court for trial on October 31, 2018 and November 2, 2018, to consider the Chapter 7 Trustee's Motion to Sell Real Property Free and Clear of Liens,
1. The property that is the subject of these proceedings is 147 Thresher Road, Candia, New Hampshire 03034 (the "Property").
2. Bruce A. Migell
3. Alice Migell is the Debtor's mother and Bruce's widow.
4. Dorothy M. Jacobsen was the Debtor's aunt, Bruce's sister.
5. Kai Sun is the Debtor's non-filing spouse.
6. On August 25, 1959, Bruce A. Migell and Dorothy M. Jacobsen purchased the Property.
7. The Property was transferred into the Mariposa Trust, dated January 14, 1994 ("Mariposa Trust"), and the Property was the only asset of the Mariposa Trust. The Mariposa Trust was recorded on August 9, 1994, in the Registry of Deeds for Rockingham County, New Hampshire (Book 3065, Page 2524).
8. During his life, Bruce acquired properties in New Hampshire, Massachusetts, and Florida. Bruce devised an estate plan that provided his personal property would be devised to Alice upon his death with the rest and residue of his estate, including the real properties, to pass into the Bruce A. Migell Family Revocable Trust to support Alice.
9. On December 9, 2005, Bruce executed an Appointment of Successor Trustee for the Mariposa Trust, which was also signed by Debtor, in which Bruce appointed the Debtor as successor trustee of the Mariposa Trust and affirmed that Bruce was the sole remaining beneficiary of the Mariposa Trust.
10. Bruce died on January 21, 2006, a few days after he appointed his son, the Debtor, successor trustee for the Mariposa Trust, and Alice and Bruce were married when Bruce died.
11. The Court finds Bruce owned 100% of the beneficial interest in the Mariposa Trust at the time of his death. Bruce's interest in the Mariposa Trust, and therefore his interest in the Property, was an asset of his probate estate when he died.
12. Robert O'Regan, a Masschusetts lawyer, has acted as the court appointed Conservator and Guardian for Alice since 2008. Mr. O'Regan became Alice's permanent guardian in 2010.
13. Alice suffers from many physical and mental health issues that have left her incapacitated and requires 24-hour medical care.
14. After his appointment as Conservator and Guardian, Mr. O'Regan discovered that certain assets Bruce acquired during his lifetime were transferred by the Debtor and Kai Sun out of Bruce's estate prior to his death.
15. Mr. O'Regan testified he instituted lawsuits in Massachusetts on behalf of Alice against the Debtor and Kai Sun to recover the assets that the Debtor and Kai Sun transferred from Bruce and Alice.
16. On January 10, 2013, the Probate and Family Court for Middlesex County, Massachusetts (the "Probate Court") entered a judgment for damages against Debtor and Kai Sun and a permanent injunction prohibiting the Debtor and Kai Sun from conveying any real property or bank accounts held in their names until the judgment is satisfied.
17. On March 4, 2013, the Probate Court entered its Relevant Procedural History, Findings of Fact, Conclusions of Law, and Rationale in support of its Judgment.
18. After trials in other related equity lawsuits, on June 1, 2015, the Probate Court entered its Reinstated Judgment and its Reinstated Findings of Fact, Conclusions of Law, and Rationale in favor of Mr. O'Regan and against the Debtor and Kai Sun.
19. The Probate Court found the Debtor intentionally interfered with Alice's interests in her marital estate by diverting Bruce's properties outside of his Probate Estate. The Probate Court noted that "[b]ut for [Debtor's] fraud and undue influence on [Bruce], [Alice] would have received the benefit of the subject properties."
20. The Reinstated Judgment required the Debtor and Kai Sun to return multiple properties, and the proceeds from the sales of certain properties, to Mr. O'Regan for Alice's benefit.
21. Mr. O'Regan obtained multiple other judgments and awards against the Debtor for damages and attorneys' fees and costs, including attorneys' fees and costs incurred because of the Debtor's many unsuccessful and dilatory appeals of the Probate Court's rulings.
22. Mr. O'Regan testified that litigation with the Debtor is time consuming and expensive because of Debtor's abusive litigation tactics.
23. The Probate Court described litigation involving the Debtor and Kai Sun:
24. Mr. O'Regan filed Proof of Claim No. 8-3 on behalf of Alice in this Chapter 7 case. The Addendum attached to Proof of Claim No. 8-3 identifies the amounts owed to Alice by the Debtor, given the awards and judgments entered against the Debtor in Alice's favor.
25. Alice's Proof of Claim represents approximately 87% of the unsecured claims in the Debtor's case.
26. On June 17, 2015, the Probate Court appointed W. Sanford Durland, III, Esq., as personal representative of Bruce's probate estate.
27. Mr. Durland testified he has attempted to liquidate the assets of Bruce's probate estate to benefit Alice.
28. On November 16, 2016, Mr. Durland, in his capacity as personal representative of Bruce's probate estate, appointed himself as the successor trustee of the Mariposa Trust.
29. Mr. Durland's appointment as successor trustee of the Mariposa Trust was proper, because at the time of his death, Bruce was the sole beneficiary of the Mariposa Trust.
30. Mr. Durland testified he "stepped into the shoes" of Bruce as the personal representative of Bruce's estate and acted as the sole beneficiary of the Mariposa Trust, allowing him to appoint himself a successor trustee.
31. Mr. Durland testified he continues to serve as trustee of the Mariposa Trust.
32. On November 17, 2016, Mr. Durland provided notice of his appointment as successor trustee to the Mariposa Trust to the Debtor.
33. On May 5, 2017, the Debtor filed a sworn Removal of Successor Trustee that the Debtor purported to remove Mr. Durland as the successor trustee of the Mariposa Trust.
34. In the sworn Removal of Successor Trustee, the Debtor reaffirmed that "[p]rior to his death on January 21, 2006, Bruce A. Migell was the sole remaining beneficiary of the Mariposa Trust and appointed me as Trustee." Debtor also stated that "[p]rior to his death and subsequent to appointment as successor Trustee, Bruce A. Migell transferred all of his beneficial interest to me" and that "[a]s a result, Bruce A. Migell had no beneficial interest in the [Mariposa] Trust upon his death."
35. The testimony showed the Debtor's filing of the Removal of the Successor Trustee prevented Mr. O'Regan and Mr. Durland from selling the Property without first suing the Debtor in Massachusetts and/or New Hampshire to invalidate the Debtor's Removal of Successor Trustee and to obtain a judgment confirming that the Property should vest with Bruce's Probate Estate for Alice's benefit.
36. To avoid incurring the attorneys' fees and costs to file a lawsuit to take care of the Removal of Successor Trustee, Mr. Durland and Mr. O'Regan testified they contacted the Chapter 7 Trustee to explore whether the Chapter 7 Trustee would liquidate the Property for Alice's benefit.
37. The Chapter 7 Trustee testified he agreed to accept a quit claim deed for the Property and seek to sell the Property.
38. Mr. Durland and Mr. O'Regan testified that each believed it was in Alice's best interests for the Trustee to liquidate the Property in the Debtor's bankruptcy case. Mr. O'Regan acknowledged that he understood the proceeds of the sale of the Property would be paid to the Debtor's bankruptcy estate. Mr. O'Regan understood the proceeds would be available to pay administrative costs of the Debtor's estate, the Trustee's commission, and the other unsecured creditors.
39. Mr. Durland and Mr. O'Regan testified that despite those costs, the benefit of a timely distribution from the bankruptcy estate outweighed the costs of litigating with the Debtor in state court, given his history of relying on protracted, abusive litigation tactics to avoid the judicial rulings.
40. Mr. Durland's and Mr. O'Regan's testimony is bolstered by the findings of the Probate Court that described litigating with the Debtor and Kai Sun as "obstructionist" due to their "flagrantly ignoring discovery requests, flagrantly disobeying countless court orders, and commencing bad faith litigation."
41. On January 11, 2018, the Probate Court granted Mr. Durland authority to transfer the Property to the Chapter 7 Trustee.
42. On June 19, 2018, Mr. Durland executed and delivered to the Chapter 7 Trustee a quit claim deed to the Property.
43. The Chapter 7 Trustee testified he accepted the deed and recorded the deed in the Public Records of Rockingham County, New Hampshire on July 5, 2018.
44. The Court finds title to the Property is now vested with the Chapter 7 Trustee.
45. On July 31, 2018, this Court entered its Order Approving the Chapter 7 Trustee's Application to Employ/Retain William Paul Henderson, and Laura Batista as Realtors to market the Property on behalf the Chapter 7 Trustee.
46. The Chapter 7 Trustee listed the Property initially for sale at $335,000. The Trustee testified there was significant interest in the Property, and the Trustee received eight offers from multiple parties.
47. The Trustee testified Ronald Severino, a neighboring land owner, submitted the highest offer to purchase the Property for $430,000 in cash with no contingencies. The Trustee accepted Mr. Severino's offer.
48. On August 22, 2018, the Chapter 7 Trustee and Mr. Severino signed a Purchase and Sales Agreement for Mr. Severino to purchase the Property for $430,000. The closing date was set for October 19, 2018.
49. The Trustee then sought court approval of the sale of the Property to Mr. Severino,
50. The Trustee also sought to reject any unexpired leases and executory contracts on the Property so the Trustee could transfer the Property with clear title,
51. Debtor has filed two voluntary Chapter 11 proceedings in this Court.
52. Debtor's first Chapter 11 case was filed on December 22, 2014, and dismissed on July 27, 2015 (the "First Case").
53. This case was then filed on December 22, 2015 (the "Second Case").
54. Debtor under penalty of perjury swore he owned the Property and listed it in both of his bankruptcy cases:
55. On August 19, 2016, the Court converted the Second Case to Chapter 7.
56. After the case was converted to Chapter 7 and a trustee was appointed, the Debtor then attempted to revise his schedules to remove any claim of ownership to the Property.
57. In response to a subpoena issued by the Chapter 7 Trustee, the Debtor produced a Land Lease Agreement ("Lease"), dated August 1, 2010. The Landlord is identified as "Andrew Migell, Trustee, Mariposa Trust," and the Tenant is identified as Leo B. Lhu ("Tenant").
58. Debtor testified that the Lease was the only outstanding lease on the Property.
59. Promptly upon receiving a copy of the Lease, the Chapter 7 Trustee mailed the Tenant a copy of the Trustee's Motion to Sell, Motion to Reject Leases, and the Trial Order at the notice address provided for the Tenant in the Lease. Trustee filed a Certificate of Service with the Court.
60. The Trustee testified the documents mailed to the Tenant at the notice address identified in the Lease were not returned to the Trustee by the postal service. The Court finds the Tenant received actual and timely notice of these contested matters.
61. Despite receiving notice of these proceedings, the Tenant served no response and filed no objection to the Trustee's Motion to Reject Leases.
62. The Trustee testified that he has not assumed the Lease, and there is no evidence to the contrary.
63. Debtor did not identify the Tenant or the Lease on Schedule G in the Debtor's bankruptcy filings and only grudgingly provided a copy of the Lease to the Chapter 7 Trustee.
64. The Court concludes Bruce was the sole beneficiary of the Mariposa Trust at the time of his death, which was acknowledged in sworn statements by both Bruce and the Debtor. As the sole beneficiary of the Mariposa Trust at the time of his death, Bruce's interest in the Mariposa Trust (namely, the Property), became assets of Bruce's probate estate.
65. Mr. Durland was entitled to administer and liquidate Bruce's probate estate.
66. After the Debtor received notice that Mr. Durland intended to liquidate the Property for Alice's benefit, the Debtor recorded his self-authored Removal of Successor Trustee in the Public Records of Rockingham County, New Hampshire.
67. The Court finds that no court authorized the Debtor to record the Removal of Successor Trustee and it was recorded to cloud title to the Property and to prevent Mr. Durland for liquidating the Property for Alice's benefit.
68. Debtor maintains that Bruce transferred all beneficial interest in the Mariposa Trust, including the Property, to the Debtor prior to Bruce's death.
69. Debtor relies only upon his self-authored Removal of Successor Trustee to support his claim that Bruce transferred all beneficial interest of the Mariposa Trust to Debtor upon Bruce's death.
70. Debtor provided no evidence to support his position, and the Court notes that the Debtor's bankruptcy schedules and documents contradict that claim.
71. The Court finds Debtor's claim to be wholly without merit and unsupported by any evidence in the record.
72. The Court finds that the testimony provided by the Debtor incredible.
73. The Court rejects the Debtor's testimony and argument and gives his testimony no weight.
74. Given the conflicting claims to the title to the Property created by the Debtor and the unauthorized Removal of Successor Trustee, Mr. Durland and Mr. O'Regan determined that the most cost-effective and expeditious way for Mr. Durland to administer the Property for Alice's benefit was for Bruce's probate estate to transfer the probate estate's claim to the Property to the Chapter 7 Trustee and let the Chapter 7 Trustee liquidate the Property through Debtor's bankruptcy estate.
75. The Court finds Mr. Durland's and Mr. O'Regan's testimony extremely credible and that both have acted in the best interests of Alice.
76. The Probate Court authorized the transfer of title to the Chapter 7 Trustee, and title to the Property is now vested with the Chapter 7 Trustee.
77. Even though Mr. Durland and Mr. O'Regan dispute that Bruce transferred any interest in the Mariposa Trust or the Property to the Debtor prior to his death, the outcome of this case would be the same even if the interest had been transferred.
78. The Court finds that under the scenarios below the Chapter 7 Trustee may liquidate the Property:
79. The Court finds Ronald Severino is a good-faith purchaser of the Property under 11 U.S.C. § 363(m).
80. There are two independent bases for the Court to deem the Lease rejected:
81. The Court must then determine what right to possession, if any, the Tenant has to the Property under § 365(h).
82. The Chapter 7 Trustee provided the Tenant with adequate notice of these proceedings by mailing a copy of the Chapter 7 Trustee's Motion to Reject Leases to the Tenant at the notice address identified in the Lease.
83. Tenant failed to object to the Motion to Reject Leases and failed to appear in these proceedings.
84. The Court finds the Tenant received adequate notice of these proceedings and due process, and the Tenant has waived any claim to a possessory right to the Property. Any right to possession of the Property by the Tenant is terminated immediately.
85. A separate order consistent with this Findings of Fact and Conclusions of Law will be entered simultaneously.
ORDERED.
