United States District Court, E.D. Pennsylvania
WILLIAM DITTER, Jr., District Judge.
The present case comes before me on cross-motions for summary judgment. The plaintiff, CGL, LLC, alleges that the defendant, William Schwab, Esquire, the Chapter 7 Trustee of real property in Lancaster County, sold property in violation of a plot-plan restriction without affording CGL due process.
I. FACTUAL AND PROCEDURAL BACKGROUND
Prior to 2007, Vistacare Group, LLC, owned a parcel ofreal estate in East Cocalico Township, upon which it operated Parkside Manor Retirement Community. Parkside contained 45 lots. Lots 1-44 were zoned and subdivided for occupation by individual mobile home residences. On Lot 45, Vistacare had maintained an assisted-living facility. All 45 lots were subject to restrictions established in a land development plan for Parkside which East Cocalico Township had approved and accepted for recording in 1984. Restriction No. 1 provided as follows:
Fee title to the lots shown on this plan will not be transferred to the parties having residences constructed upon the said lots, but the title will remain in the Developer, his heirs and assigns.
On May 7, 2007, Vistacare sought relief in the United States Bankruptcy Court for the Middle District of Pennsylvania and Schwab was appointed as Chapter 7 Trustee to manage the bankruptcy estate. On July 24, 2008, in an effort to liquidate Vistacare's assets, Schwab filed a motion in the Bankruptcy Court seeking permission to sell Parkside either as one parcel or as two separate parcels. Def's Br., Exh. A. Schwab's motion stated that the sale of Parkside as two separate parcels would remain contingent upon approval by the Township of the modification of Restriction No. 1 to allow Lot 45 and Lots 1-44 to be separated. Id. On August 21, 2008, the Bankruptcy Court approved the sale of Parkside "free and clear of all liens and encumbrances" by means of a public auction. Def's Br., Exh. B.
Schwab arranged a public auction for the sale of Lots 1-44 and Lot 45 for September 27, 2008; however, in light of the Resident Defendants' objections to the sale of Lots 1-44, Schwab offered only Lot 45 at the public auction. See Schwab Dep. 68-69, Feb. 5, 2013. Grant Wise, who is the sole member of CGL, successfully purchased Lot 45 for $177, 500 at auction. On November 12, 2008, Mark Yoder, Esquire, who is CGL's counsel, emailed Thomas Goodman, Esquire, the Township's attorney, requesting confirmation that Restriction No. 1 did not apply to Lot 45. See Resident Deft.' Br., Exh. F. Goodman responded that the Township would not adversary actIOns agamsnne md1v1dua1s res1dmg on Lots I-44 seekmg a aetermmauon or consider the conveyance of Lot 45 a violation of Restriction No. 1. See id. To gain further confirmation, Schwab filed a motion with the Bankruptcy Court to approve the sale of Lot 45 to CGL as free from Restriction No. 1. The Bankruptcy Court granted Schwab's motion on March 10, 2009. See Def's Br., Exh. D. The sale of Lot 45 to CGL closed on May 7, 2009. See Def's Br. at 7.
During the finalization of the Lot 45 sale, Schwab, Goodman, and Aaron Marines, Esquire, counsel for the Resident Defendants, entered into significant discussions about the sale of Lots 1-44 to the Resident Defendants. See Resident Deft.' Br., Exh. H. The Board of Supervisors for the Township noted at their March 4, 2009 meeting that after appropriate action by Goodman, they would be able to lift Restriction No. 1 from Lots 1-44. See id., Exh. 0. On August 5, 2009, the Township approved the removal of all the restrictions, including Restriction No. 1, by means of a document titled "Declaration." See id. Thereafter, the Township would not be responsible for maintenance of the roads and water and sewer system; instead, a homeowner's association would be established to handle infrastructure issues. See Resident Defs.' Br., Exh. X. On August 7, 2009, Schwab emailed CGL with a draft of the unsigned Declaration and CGL acknowledged receipt of the Declaration by contacting a Township representative with questions about the document. See id., Exh. Sand Exh. T.
In furtherance of the plan to sell Lots 1-44 to the Resident Defendants, Schwab filed adversary actions against the individuals residing on Lots 1-44 seeking a determination of whether the homes located on the lots were mobile homes that belonged to their owners or were permanent structures that belonged to the bankruptcy estate. Once the Township approved the removal of Restriction No. 1 by means of the Declaration, the Bankruptcy Court granted an order allowing Schwab to settle the adversary actions with the Resident Defendants by permitting them all to purchase their individual lots for $37, 000 each. See Deft.' Br., Exh. G. On October 8, 2009, Schwab filed Notices of Settlement in the Bankruptcy Court which declared that Lots 1-44 would be sold to the Resident Defendants, "free and clear of all liens and encumbrances, " and these notices were docketed and sent to a list ofrecipients including Yoder, as CGL's counsel. See, e.g., In re Vistacare, 5:07-bk-51116 (M.D. Pa. Bankr. 2007) (Dkt. 213).
On November 23, 2009, Schwab filed a motion for court approval of the sale of the common areas and remaining lots in Parkside to the Parkside Homeowner's Association. Def's Br., Exh. H. The Bankruptcy Court granted the motion on September 17, 2010, approving the sale of the common areas and remaining plots. Id., Exh. I. On December 14, 2009, Schwab and representatives of the Township signed the Declaration, thereby making it effective. See Resident Deft.' Br., Exh. X. The Declaration was recorded on January 6, 2010, and the sales of Lot 1-44 were finalized thereafter. See id.; see Def's Mot. ¶¶ 22-23.
A party seeking to sue a court-appointed bankruptcy receiver must first obtain leave of the appointing court. See Barton v. Barbour, 104 U.S. 126, 128 (1881). Accordingly, on July 30, 2010, CGL filed a Motion for Leave with the Bankruptcy Court of the Middle District of Pennsylvania to file suit against Schwab in the Lancaster County Court of Common Pleas. On October 22, 2010, the Bankruptcy Court granted CGL's motion to sue Schwab-a decision later affirmed by the Middle District of Pennsylvania and the Third Circuit. Jn re Vistacare Group, LLC, 2011WL2111997, at *3 (M.D. Pa. May 26, 2011) (stating that a party proposing to sue a trustee must make out a prima facie case against the trustee, showing that its claim is "not without foundation"); In re Vistacare Group, LLC, 678 F.3d 218, 235 (3d. Cir. 2012) (noting that the "not without foundation" standard involves a greater degree of flexibility than the Rule 12(b)(6) motion to dismiss standard).
On June 24, 2011, CGL filed suit under 42 U.S.C. § 1983 against Schwab in the Lancaster County Court of Common Pleas alleging that Schwab violated its due process rights under the Fifth Amendment. On July 20, 2011, Schwab filed a petition for removal on the basis that he was a federal officer of the Bankruptcy Court and the case was removed to the Eastern District of Pennsylvania. The case is now before me, and cross-motions for summary judgment having been filed and fully briefed, the matter is ripe for determination.
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter oflaw." Fed.R.Civ.P. 56(a). A factual dispute is "material" only if it might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). For an issue to be "genuine, " a reasonable fact-finder must be able to return a verdict in favor of the non-moving party. A party moving for summary judgment always bears the initial burden of informing the Court of the basis for its motion and identifying those ...