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In re Spence

United States Court of Appeals, Eighth Circuit

August 4, 2016

In re: Becky Ann Spence Debtor
v.
Lewis Rauch; Carol L. Rauch; Gail L. Fredrick Defendants Norman E. Rouse Plaintiff- Appellant Sunset Cove Condominium Owners Association, Inc. Defendant-Appellee D.S.C.N., Inc. Raugh Capital, LLC Defendant

          Submitted: July 28, 2016

         Appeal from United States Bankruptcy Court for the Western District of Missouri - Springfield

          Before KRESSEL, SALADINO and NAIL, Bankruptcy Judges.

          SALADINO, Bankruptcy Judge.

         The Chapter 7 trustee appeals from the bankruptcy court's[1] judgment and order in favor of Sunset Cove Condominium Owners Association, Inc. ("Sunset Cove") on issues of turnover and preference. We have jurisdiction of this appeal from entry of the bankruptcy court's final order pursuant to 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

         Factual and Procedural Background

         In 1996, the debtor purchased a boat slip on Table Rock Lake, near her condominium unit in Sunset Cove, Missouri. She later fell into arrears on her condominium homeowners' assessments, and Sunset Cove obtained a judgment against her on July 23, 2012, in the amount of $36, 262.25, plus interest, for the unpaid assessments. Subsequently, Sunset Cove filed with the Stone County Circuit Court an "Execution/Garnishment/Sequestration Application and Order" requesting a "general execution" for "other personal property levy." The Instructions for Service on the execution application stated, "Levy on boat slip #16 at Dock #4 located at Sunset Cove Condominiums, bearing Corps of Engineers permit #7904." That same date, on the same form as the execution application, the Circuit Court of Stone County issued a Writ of Execution directing the county sheriff to execute the writ.

         On September 4, 2012, a Stone County deputy sheriff posted a copy of the execution application and order on a pole bearing slip number 16 on the boat dock near the boat slip. On the second page of the document, the deputy sheriff filled out the portion certifying that he had posted it at the location and that the boat slip was "currently empty." The boat slip was sold at a sheriff's sale on October 23, 2012, for $51, 500.00. The amount of the sale proceeds exceeded the amount of the judgment debt owed to Sunset Cove. The sale proceeds were held in trust and not distributed pending the outcome of competing claims to the funds.

         On January 6, 2013, the debtor filed a Chapter 11 bankruptcy petition. On May 9, 2014, the case was converted to Chapter 7, and Norman Rouse was appointed as the Chapter 7 trustee. Thereafter, he filed an adversary proceeding to determine which party was entitled to the proceeds from the sale of the boat slip. After a trial on the matter, the bankruptcy court ruled, inter alia, in a memorandum opinion, order, and judgment filed on January 26, 2016, that the execution and sale were valid, any failure to give proper notice of levy or sale caused no prejudice to the debtor or the bankruptcy estate, the sale was not a preference, and Sunset Cove was entitled to recover the amount of its judgment from the proceeds, with the balance going to the bankruptcy estate.

         The Chapter 7 trustee timely filed his notice of appeal and asserted the following two assignments of error:

         1. The bankruptcy court erred when it determined that the sheriff's act of posting the execution application to the boat slip constituted a "notice of levy" required by Mo. R. Civ. P. 76.06(c).

         2. The bankruptcy court erred when it determined that the sheriff's act in posting the execution application to the boat slip created a lien on the boat slip pursuant to Mo. R. Civ. P. 76.07.

         The matter before us is whether the sheriff's posting of the execution application and order was sufficient as a notice of levy under Missouri law. According to the trustee, if the levy did not comply with Missouri law and did not create a perfected judgment lien on the boat slip in favor of Sunset Cove, then the proceeds purportedly payable to Sunset Cove could be avoided as a preference because the sale and payment occurred within 90 days prior to the filing of the bankruptcy petition.

         Standard of Review

         The facts of the case are undisputed. On appeal, conclusions of law are given de novo review. Venture Bank v. Lapides, 800 F.3d 442, 443 (8th Cir. 2015). Statutory interpretation is a legal question that we review de novo. Hardy v. Fink, 787 F.3d 1189, 1192 (8th Cir. 2015). In performing a de novo review, the court must independently determine whether the bankruptcy court reached the correct legal conclusion on the basis of the facts ...


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