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In re Hardy

United States District Court, District of Columbia

December 2, 2016


          For the Debtor: Latricia Lee Hardy, Pro Se

          For All Credit Considered Mortgage, Incorporated: Michael Ostroff, Cynthia Niklas


          Emmet G. Sullivan United States District Judge

         Currently pending before the court is appellant LaTricia L. Hardy's motion for an emergency temporary restraining order, which, based on the substance of the motion and the relief requested, the Court construes as a motion to stay two bankruptcy court orders pending appeal of those orders in this Court. See Mot. for an Emergency TRO (“Appellant's Mot.”), ECF No. 10. Upon consideration of the motion, the responses thereto, the applicable law, and the entire record, Ms. Hardy's motion for a stay pending appeal is DENIED.

         I. Background

On May 31, 2016, Ms. Hardy filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Columbia. Appellee ACC Mortgage's Mem. in Opp. to Appellant's Mot. for Emergency TRO (“ACC's Opp.”), ECF No. 11 at 2; Chapter 7 Trustee's Opp. to Debtor's Mot. for TRO (“Trustee's Opp.”), ECF No. 13 at 1; Trustee's Appellate Appendix (“AA”), ECF No. 12-1 at 21-22. On June 14, 2016, the Chapter 13 Trustee moved to dismiss with prejudice. ACC's Opp. at 2. On June 17, 2016, Ms. Hardy filed a motion to convert the case to Chapter 11. Id.; AA at 23-24. On June 24, 2016, All Credit Considered Mortgage, Inc. (“ACC”), a creditor holding a mortgage claim on Ms. Hardy's co-owned commercial property located at 1414-1416 Pennsylvania Avenue, Southeast, Washington, D.C. 20003, in turn filed a motion to dismiss with prejudice or, in the alternative, to convert the case to Chapter 7 and opposed Ms. Hardy's motion to convert to Chapter 11. ACC's Opp. at 2; AA at 25-42. The bankruptcy court held a hearing on the Chapter 13 Trustee's motion to dismiss and Ms. Hardy's motion to convert to Chapter 11 on July 15, 2016, and on July 25, 2016, that court issued an order converting the case from Chapter 13 to Chapter 7. ACC's Opp. at 2-3; Trustee's Opp. at 1; AA at 123-25.[1] On August 30, 2016, Ms. Hardy filed a “motion requesting termination of conversion to Chapter 7 liquidation.” ACC's Opp. at 3; AA at 149-50. The bankruptcy court issued an order denying that motion on September 15, 2016. ACC's Opp. at 3; AA at 156. Ms. Hardy noticed her appeal of that order in this Court on September 22, 2016. Notice of Appeal and Statement of Election, ECF No. 1, Civil Action No. 16-1970.[2]

         Meanwhile on August 17, 2016, the Chapter 7 Trustee, Bryan S. Ross, filed a motion for an order approving the turnover of real property--namely, Ms. Hardy's co-owned commercial property on Pennsylvania Avenue. ACC's Opp. at 3; AA at 126-31. Ms. Hardy did not file any opposition to this motion, Trustee's Opp. at 1, though she contends that she failed to do so because she did not receive notice of the Trustee's turnover motion. Appellant's Mot. at 1; Appellant's Merits Br., ECF No. 9 at 16-17. The bankruptcy court granted the turnover motion on September 9, 2016. Appellant's Mot. at 1; Trustee's Opp. at 1; AA at 151-52. Ms. Hardy noticed her appeal of that order in this Court on September 22, 2016. Notice of Appeal and Statement of Election, ECF No. 1.

         On September 19, 2016, the bankruptcy court issued an “order clarifying that no stay of the court's turnover order is in place pending disposition of the motion for a stay” of the turnover order that Ms. Hardy had filed in that court on September 16, 2016. AA at 157. Ms. Hardy noticed an appeal of that clarifying order along with her two other appeals in this Court on September 22, 2016. Notice of Appeal and Statement of Election, ECF No. 1, Civil Action No. 16-1969. The bankruptcy court subsequently denied Ms. Hardy's motion for a stay of the turnover order on September 27, 2016, ACC's Opp. at 3, and on October 1, 2016 denied an additional motion she had filed that sought to stay the turnover order, the order denying “termination” of conversion, and the clarifying order. Trustee's Opp. at 2.

         On November 21, 2016, Ms. Hardy filed in this Court a motion for an emergency temporary restraining order, which, as indicated above, is best construed as a motion for a stay of the bankruptcy court's order denying her motion to “terminate” the conversion from Chapter 13 to Chapter 7 and that court's order granting the Chapter 7 Trustee's turnover motion pending appeal of those orders in this Court. See Appellant's Mot. at 3.

         II. Analysis

         “A motion for a stay pending appeal in a bankruptcy case is reviewed under the same standard employed in evaluating a request for a preliminary injunction.” In re Spenlinhauer, No. 15-14223, 2016 WL 526200, at *1 (D. Mass. Feb. 9, 2016). Accordingly, to be entitled to a stay, Ms. Hardy must show: (1) that she has a strong likelihood of success on the merits; (2) that she will suffer irreparable injury if injunctive relief is denied; (3) that other interested parties will not suffer substantial harm if injunctive relief is granted; and (4) that the public interest favors the granting of injunctive relief, or at least, that the granting of injunctive relief is not adverse to the public interest. Wolensky Ltd. P'ship v. 2000 Pennsylvania Ave, N.W., Inc., No. 91-2348, 1991 WL 229898, at *1 (D.D.C. Oct. 21, 1991).[3] “A district court must balance the strengths of the requesting party's arguments in each of the four required areas.” Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006) (internal quotation marks omitted). Here, that balance tips against granting Ms. Hardy's motion for a stay.

         A. Likelihood of Success on the Merits

         Ms. Hardy has not demonstrated a strong likelihood of success on the merits of her appeal.

         1. Appeal of Order Denying Motion Requesting Termination of Conversion to Chapter 7

         Ms. Hardy has not appealed the order converting the case from Chapter 13 to Chapter 7; instead, as the Trustee points out, Br. of Appellee Bryan Ross (“Trustee's Merits Br.”), ECF No. 12 at 6, she has appealed the order denying her motion requesting “termination” of the conversion to Chapter 7. Notice of Appeal and Statement of Election, ECF No. 1, Civil Action No. 16-1970. Thus she is effectively appealing an order denying a motion for reconsideration. Federal Rule of Bankruptcy Procedure noticed an appeal of the bankruptcy court order clarifying that the turnover order was not stayed pending that court's 9024 contemplates motions for reconsideration and applies Federal Rule of Civil Procedure 60 to such motions in the bankruptcy realm. Fed.R.Bankr.P. 9024.[4] On appeal, an order denying a motion for reconsideration is reviewed for abuse of discretion. In re Hahn, No. 12-13247, 2012 WL 5908703, at *1 (E.D. Mich. Nov. 26, 2012). The bankruptcy court can be said to have abused its discretion if it “did not apply the correct legal standard or misapprehended the underlying substantive law” or if its ruling was not “within the scope of permissible alternatives in light of the relevant factors and the reasons given to support it.” Smalls v. United States, 471 F.3d 186, 191 (D.C. Cir. 2006). The bankruptcy court did not abuse its discretion in denying Ms. Hardy's motion for reconsideration of its order converting the case to Chapter 7.

         Ms. Hardy's primary argument as to why the bankruptcy court erred in denying her “termination” motion is that she is involved in litigation in the District of Columbia courts with creditor ACC concerning whether ACC's mortgage as to her co-owned Pennsylvania Avenue property is valid and enforceable, and, accordingly, given that ACC's claim is disputed based on that litigation, ACC lacked the standing required to move for dismissal or, in the alternative, conversion to Chapter 7 in the bankruptcy court. See Appellant's Mot. at 2-3; Appellant's Merits Br. at 5, 9-12, 16-19. This argument likely fails at the starting gate because it challenges the merits of the underlying order--the conversion order--rather than the order from which appeal was taken--the order denying the motion for reconsideration. See In re Schueller, 124 B.R. 98, 100 (D. Colo. 1991) (explaining that district court review of an appeal from a denial of a motion for reconsideration is “limited to considering whether the bankruptcy court abused its discretion in denying the motion [for reconsideration], not whether the court erred as a matter of law in granting the [underlying] motion in the first place”).

         In any event, Ms. Hardy's argument is unavailing. First, Chapter 13 specifies that “on request of a party in interest or the United States trustee . . . the court may convert a case under [Chapter 13] to a case under [C]hapter 7 . . . or may dismiss a case under [Chapter 13], whichever is in the best interests of creditors and the estate, for cause . . . .” 11 U.S.C. § 1307(c). Here, the Chapter 13 Trustee filed a motion to dismiss, separate and apart from creditor ACC's motion to dismiss or, in the alternative, to convert to Chapter 7. ACC's Opp. at 2. Based on just the Chapter 13 Trustee's motion to dismiss, the bankruptcy court was statutorily mandated to consider conversion to Chapter 7 because section 1307(c) requires a two-part analysis: (1) a determination of “cause” justifying dismissal or conversion and then, if there is “cause, ” (2) a decision between dismissal or conversion based not on which of those two options the moving party requests, but rather based on “the best interests of creditors and the estate.” In re Jensen, 425 B.R. 105, 109 (Bankr. S.D.N.Y. 2010) (“The Court may convert the case rather than dismiss it if conversion ‘is in the best interests of creditors and the estate.'”) (quoting 11 U.S.C. § 1307(c)); see In re Ontiveros, No. 12-12457, 2014 WL 347726, at *4 (Bankr. D.N.M. Jan. 31, 2014) (finding “cause” to support conversion or dismissal and then making decision between conversion or dismissal based on “the best interests of creditors and the estate” even when the moving parties had only requested dismissal). The bankruptcy court in this case explicitly acknowledged the need to assess “the best interests of creditors and the estate.” See July 15, 2016 Hrg. Tr. (“Hrg. Tr.”) at 61:13-16. Its subsequent determination that conversion rather than dismissal was in “the best interests of creditors and the estate” acknowledged and considered ACC's recommendation in favor of conversion, id. at 65:22-66:1, but did not depend on or require that recommendation. See Id. at 67:14-23. Thus ACC's standing to move to dismiss or, in the alternative, convert to Chapter 7 under section 1307(c) is not a basis for concluding that the bankruptcy court erred in converting the case to Chapter 7 and eventually denying Ms. Hardy's motion to “terminate” conversion; the bankruptcy court could have properly taken those same actions even if ACC had never filed its motion.

         Second, even if the bankruptcy court's decision to convert to Chapter 7 (and its subsequent refusal not to “terminate” that conversion) required a party to seek conversion--not just dismissal--via a motion, ACC is a “party in interest” that has standing to file that motion. See 11 U.S.C. § 1307(c). A “party in interest” is any party “who has an actual pecuniary interest in the case” or “who has a practical stake in the outcome of a case, ” or “who will be impacted in any significant way in the case.” In re Sobczak, 369 B.R. 512, 518 (B.A.P. 9th Cir. 2007). As a party holding a mortgage claim on Ms. Hardy's Pennsylvania Avenue property, ACC is a “party in interest” no matter what doctrinal formulation is used: It has “an actual pecuniary interest” and a “practical stake” in the outcome of the case, and it would be “impacted” in a “significant way” by decisions made in the case. See In re Reynolds, 455 B.R. 312, 319 (D. Mass. 2011) (finding that a bank “had standing to move to convert the case as a ‘party in interest' under 11 U.S.C. § 1307(c), regardless of whether it held secured or unsecured debt”); In re Muscatello, No. 06-11143, 2006 WL 3437469, at *3 (N.D.N.Y. Nov. 29, 2006) (“A creditor is a ‘party in interest, ' and as such is an appropriate party to bring a motion to dismiss or convert under § 1307(c).”)

         ACC's status as a “party in interest” is not diminished because Ms. Hardy has disputed its claim. Although “party in interest” is not defined in Chapter 13, courts rely on the definition of “party in interest” provided in Chapter 11 when construing Chapter 13's “party in interest” language. See, e.g., In re Armstrong, 303 B.R. 213, 219 (B.A.P. 10th Cir. 2004) (“[d]rawing guidance from § 1109(b)”). A Chapter 11 “party in interest” includes “a creditor, ” 11 U.S.C. § 1109(b), and “a creditor” is statutorily defined as an “entity that has a claim against the debtor, ” id. § 101(10)(A) (emphasis added), and a “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Id. § 101(5)(A) (emphasis added). Thus, as would be the case in the Chapter 11 context, see, e.g., In re Abijoe Realty Corp., 943 F.2d 121, 125 (1st Cir. 1991), in the Chapter 13 context ACC is a “party in interest” even as a creditor whose claim is disputed.[5]

         Ms. Hardy also argues that the bankruptcy court erred in converting her case and subsequently denying her motion to “terminate” that conversion because it did not consider her motion to convert to Chapter 11, Appellant's Merits Br. at 8; did not consider her argument, based on the ongoing litigation in the District of Columbia courts, concerning ACC's standing to file a motion under section 1307(c) such that she was denied due process, Appellant's Merits Br. at 8, 12, 18; Mot. to Take Judicial Notice, ECF No. 14 at 1-3; and did not base its conversion determination on sufficient evidence, amounting to another violation of due process. See generally Mot. to Take Judicial Notice. These arguments are without merit. The bankruptcy court considered and rejected Ms. Hardy's motion to convert to Chapter 11. Hrg. Tr. at 64:22-65:13, 66:24-25. It also heard testimony concerning the litigation in the District of Columbia courts involving Ms. Hardy and ACC, id. at 30:18-22, 31:17-21, 38:17-40:15, and its conclusion that conversion to Chapter 7 was warranted was based on its reasoned assessment of what was in the best interests of creditors and the estate, id. at 67:14-23, and that determination, as explained above, would have been proper regardless of ACC's motion to dismiss or convert. See Id. at 69:9-10 (“We're here for a hearing, it's the trustee's motion to dismiss.”). And the court grounded its decision to convert to Chapter 7 on the evidence that had been presented to it and thoroughly explained its legal conclusions. Id. at 63:18-68:16.

         To the extent that Ms. Hardy's “termination” motion could be construed as a motion to dismiss her Chapter 7 case under 11 U.S.C. § 707, the bankruptcy court's denial of that motion was not improper because Ms. Hardy did not make a showing of cause and did not demonstrate why a dismissal was justified. See Terry v. Sparrow, 328 B.R. 450, 455 (M.D. N.C. 2005).

         Accordingly, Ms. Hardy does not have a strong likelihood of success on the merits of her appeal of the order denying her motion to “terminate” the conversion to Chapter 7.

         2. Appeal of Order Granting Turnover Motion

         Ms. Hardy has also not demonstrated a strong likelihood of success on the merits of her appeal of the order granting the motion for turnover of her property on Pennsylvania Avenue. As a preliminary matter, Ms. Hardy filed no opposition to the Trustee's turnover motion in the bankruptcy court. She alleges that she did not receive notice of the turnover motion, Appellant's Mot. at 1; Appellant's Merits Br. at 16-17, but the bankruptcy court's docket shows a Notice of Motion and Opportunity to Object that was filed on August 17, 2016. Bankr. No. 16-280, ECF No. 64. That Notice states that “Bryan S. Ross, Chapter 7 Trustee for the bankruptcy estate of LaTricia L. Hardy. [sic] has filed an [sic] Motion for Turnover of Real Property/1414-1416 Pennsylvania Ave., S.E., Washington, D.C.” and explains that if a written response is not filed within 21 days “the Court may deem any opposition waived, treat the motion as conceded, and issue an order granting the relief without further notice of hearing.” Id. at 1. That Notice was mailed to Ms. Hardy. Id. at 2. By not asserting any arguments in opposition to the turnover motion below, Ms. Hardy has waived the arguments she musters on appeal. Cf. District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084 (D.C. Cir. 1984) (“It is well settled that issues and legal theories not asserted at the District Court level ordinarily will not be heard on appeal.”).

         Even if Ms. Hardy had not waived her arguments in opposition to the turnover motion, she still would not likely be successful on the merits of her appeal. The turnover provision of the Bankruptcy Code states in relevant part:

an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title . . . shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.

11 U.S.C. § 542(a). “The first requirement of Code § 542(a) is that the property be property of the estate.” In re Weiss-Wolf, Inc., 60 B.R. 969, 975 (Bankr. S.D.N.Y. 1986). And “[p]roperty of the estate is defined by 11 U.S.C. § 541(a)(1) as ‘all legal [or] equitable interests of the debtor in property as of the commencement of the case.'” In re Pyatt, 486 F.3d 423, 427 (8th Cir. 2007). “This definition of estate property is intentionally broad and will reach to bring within the estate every conceivable interest that the debtor may have in property . . ..” In re Coomer, 375 B.R. 800, 804 (Bankr.N.D.Ohio 2007). Under this definition, Ms. Hardy's ownership stake in the Pennsylvania Avenue commercial property appears to be “property of the estate.” The other elements of a section 542(a) turnover action also appear to be satisfied. Ms. Hardy had “possession, custody, or control” of the Pennsylvania Avenue property during her bankruptcy case, see Shapiro v. Henson, 739 F.3d 1198, 1204 (9th Cir. 2014), and the trustee may “use, sell, or lease” that property. See 11 U.S.C. § 542(a).

         Ms. Hardy argues that turnover was improper because there is an ongoing dispute between her and ACC regarding the validity and enforceability of the mortgage encumbering the Pennsylvania Avenue property. She argues that that ongoing litigation constitutes a dispute as to the property that was the subject of the turnover action, making turnover impermissible. Appellant's Merits Br. at 10, 19 (citing 11 U.S.C. § 542(b)). But as the Chapter 7 Trustee points out, Trustee's Merits Br. at 18, a turnover proceeding is impermissible when “the amounts owed to the Debtor are contested.” In re N. Parent, Inc., 221 B.R. 609, 626 (Bankr. D. Mass. 1998) (emphasis added); see In re National Jockey Club, 451 B.R. 825, 830 (Bankr. N.D.Ill. 2011) (“There is a difference between property potentially owed to a debtor and property owned by the debtor.”) (emphasis in original); In re Olympia Holding Corp., 221 B.R. 995, 998 (Bankr. M.D. Fla. 1998) (“The turnover provision provided by § 542 applies to tangible property and money due to the debtor without dispute which are fully matured and payable on demand.”). Although there appears to be a dispute about what debt Ms. Hardy owes to ACC, there is not a dispute about amounts or property owed to Ms. Hardy. And although turnover is impermissible as to assets “whose title is in dispute, ” United States v. Inslaw, Inc., 932 F.2d 1467, 1472 (D.C. Cir. 1991), Ms. Hardy does not explain how the dispute between her and ACC in the District of Columbia courts puts title to the Pennsylvania Avenue property in dispute.[6] Accordingly, it does not appear that the bankruptcy court erred in ordering the turnover of her Pennsylvania Avenue property.

         Ms. Hardy also argues that the bankruptcy court lacked jurisdiction to order turnover because her dispute with ACC gave rise to a “non-core” proceeding or, alternatively, because Stern v. Marshall, 564 U.S. 462 (2011) has called into question the jurisdiction of a bankruptcy court even as to those proceedings designated as “core” under 28 U.S.C. § 157(b)(2). See Appellant's Merits Br. at 20. But the first jurisdictional argument is unlikely to succeed because, given that Ms. Hardy has not explained how her dispute with ACC puts title to the Pennsylvania Avenue property in dispute, the turnover proceeding was a “core, ” as opposed to a “non-core, ” proceeding. See In re Soundview Elite Ltd., No. 14-3179, 2014 WL 2998529, at *3 (S.D.N.Y. July 3, 2014) (explaining that when “the turnover statute is used to recover assets with disputed title when the estate's claim of ownership is legitimately debatable, ” such an action can only be understood as a “non-core rather than core proceeding[]”) (internal quotation marks omitted). And the second jurisdictional argument is likely to fail because “the reported post-Stern decisions have overwhelmingly held that bankruptcy judges can constitutionally enter final judgments in turnover actions.” In re Pali Holdings, Inc., 488 B.R. 841, 850 (Bankr. S.D.N.Y. 2013).

         Accordingly, Ms. Hardy does not have a strong likelihood of success on the merits of her appeal of the bankruptcy court's turnover order.

         B. Irreparable Injury

         Ms. Hardy identifies “the loss of her commercial property” as “significant and ongoing” and “irreparable injury.” Appellant's Mot. at 2-3. ACC and the Chapter 7 Trustee counter that Ms. Hardy will not be harmed “by the orderly liquidation of property as required under the Bankruptcy Code.” Trustee's Opp. at 3; ACC's Opp. at 6. Although the Court is sympathetic to Ms. Hardy's desire to retain her commercial property, she has not explained the nature of her injury aside from calling it “significant, ” “ongoing, ” and “irreparable.” Appellant's Mot. at 2-3. These conclusory labels do not demonstrate irreparable injury. See Brown v. District of Columbia, 888 F.Supp.2d 28, 31 (D.D.C. 2012) (explaining that in the analogous preliminary injunction context “[t]he movant . . . carries the burden of persuasion”). While being evicted from a home might amount to irreparable injury, see Edwards v. Habib, 366 F.2d 628, 630 (D.C. Cir. 1965) (Skelly Wright, J., concurring) (“Certainly being evicted into the street is irreparable damage.”), Ms. Hardy has not explained how turnover of commercial property amounts to a similarly irreparable injury.

         C. Substantial Harm to Other Parties

         Ms. Hardy has also failed to demonstrate that other interested parties will not suffer substantial harm if injunctive relief is granted. She asserts that any injury to the Chapter 7 Trustee is outweighed by the injury she will suffer as a result of a stay not being granted. Appellant's Mot. at 3. But issuing a stay and delaying turnover potentially “harms creditors who are entitled to payment.” Trustee's Opp. at 4. Thus this factor also weighs against staying the bankruptcy court's orders pending appeal.

         D. The Public Interest

         Ms. Hardy asserts that the “public interest favors a [s]tay” because she suggests that “fundamental constitutional rights” were not upheld in the bankruptcy court and because “bankruptcy issues” were not “carefully considered.” See Appellant's Mot. at 3. But Ms. Hardy's constitutional rights appear to have been adequately safeguarded in the bankruptcy court, see supra Part II.A.1 (discussing Ms. Hardy's due process allegations), and the issues of bankruptcy law were carefully considered. Ms. Hardy thus has not shown that the public interest in this case favors a stay pending appeal.

         III. Conclusion

         Because Ms. Hardy has not carried her burden of showing that “all four factors, taken together, weigh in favor” of a stay, see Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1292 (D.C. Cir. 2009), the Court DENIES her motion for a stay. An appropriate Order accompanies this Memorandum Opinion.

         SO ORDERED.


         THE COURT: Call the next case, please.

         DEPUTY CLERK: The next case on the calendar is 16-280, Latricia Hardy.

         The matter before the Court are motion to dismiss case with prejudice filed by Cynthia Niklas, and a motion to convert case to Chapter 11 filed by Latricia Hardy.

         Will the parties please come forward and state your name for appearance.

         MS. HARDY: Latricia Hardy, debtor.

         MR. OSTROFF: Good morning, Your Honor. Michael Ostroff on behalf of All Credit Considered Mortgage, Incorporated. We're a secured creditor in this case.

         We've also filed an opposition to the motion to convert to Chapter 11, as well as a motion to dismiss with prejudice or convert.

         I note that's not on the docket today; however, debtor has filed an answer to that, to the extent Your Honor is willing to hear information related to that as well.


         MS. NIKLAS: This case is set only for confirmation hearing, although -- and motion to dismiss.

         THE COURT: I think that's only for a hearing on a motion to convert as well.

         Just a moment.

         This is on a motion to convert to 11.

         And trustees filed a motion.

         MS. NIKLAS: Yeah. My motion is to dismiss the case. The debtor filed a motion to convert to Chapter 11, and the creditor filed a motion to convert to Chapter 7.

         The problem here is that the -- there's been no 341 meeting. The debtor did not appear at the rescheduled meeting after -- at the original meeting of creditors on July 11.

         And her Schedules show that she is ineligible for Chapter 13 relief or any relief. She has scheduled income of zero, expenses of zero, and disposable of zero. She's made no plan payments, and I'm requesting that the case be dismissed.

         I have little information about the debtor, because she did not appear at the meeting of creditors this Monday.

         THE COURT: Mr. Ostroff.

         MR. OSTROFF: Good afternoon, Your Honor.

         Our firm and our client concur with the trustee's motion to dismiss, to the extent that there's a dismissal. And if there is a conversion, we'd like to see a conversion to Chapter 7, not Chapter 11.

         So trustees pointed, but the Schedules clearly indicate, or, as presented to the Court, indicate that there is absolutely no income, there is only one debt listed on the Schedules, and that's the ACC Mortgage. It's a mortgage claim on a property that the debtor did not disclose any interest in. She listed two properties on Schedule A/B Part 1; one on 15th Street -- and let me make sure it's Street, not Avenue -- 15th Street, Southeast; and one on Q Street, Southwest.

         The property in question is on Pennsylvania Avenue, is a commercial property and is subject to the mortgage. That property, however, is not disclosed anywhere on her Schedules, other than being the place of business for an LLC she listed.

         In addition to that, on information and belief, the debtor owns two or three additional properties in which her name is on title, which are not listed in the Schedules.

         It is hard to believe that debtor has no other creditors, but she was not at our meeting of creditors, she has listed no other creditors in her Schedules.

         I note she filed for installments of the filing fee. She did make that payment eventually. And then she did file the fee for a motion to convert; however, she's demonstrated no ability to sustain any plan of reorganization, whether or not under Chapter 13 or 11.

         I note that her Chapter 13 plan stated that it would pay all 1322(b)(5) claims in full, proposing over a $5, 000 a month payment, while maintaining direct payments to the mortgage -- well, direct payments to secure creditors.

         She has not made any payment to her secured creditor as of this date. Additionally, the debtor has not, to our motion -- which, again, was not listed as being here but there was no response filed -- the debtor did not address any of these concerns. The debtor did not address any of the income concerns, any of the lack of information in her Schedules pertaining to these other properties; the fact that there's a co-debtor involved in this bankruptcy. She did not address any of that. Instead, she focused on the viability on an underlying Superior Court case, which has already been decided in favor of ACC Mortgage and which she appealed; however, that's stayed pending this bankruptcy.

         She went to the heart of whether a motion to dismiss was cognizable. But all of her references refer to the D.C. Superior Court case, not this bankruptcy matter.

         Additionally, she argues that there's no bad faith, simply because she thought she could get relief in Chapter 13, and now her understanding is that she can --that Chapter 11 is for commercial businesses so she's allowed to do that.

         She made no reference to gross revenues, net revenues. No reference to how this business operates.

         As far as we know from the Statement of Financial Affairs, the only business she owns is a beauty parlor held in an LLC, but that's not the owner of the commercial property.

         So if she's contending that she owns the commercial property as well as the commercial business, she has multiple commercial ventures which are not disclosed and not discussed.

         I, as part of this proffer, think, on its face, debtor filing these Schedules and these statements under the penalty of perjury and not taking any action to amend these documents after our motion was filed and our opposition was filed, is clearly bad faith. She is not looking to re-organize this debt. She was looking to stay a foreclosure and sale of her property, which has already been litigated in the D.C. Superior Court.

         Unless Your Honor has any questions for me, I will reserve on questions for the debtor later.

THE COURT: Ms. Hardy, I'll hear from you.
MS. HARDY: Thank you.
Good morning, Judge.

         I agree that -- partly what he says, because when I filed the Chapter 13, I unknowingly knew exactly what to do and what to put on the papers. So that's why I came here to seek legal advice here at the Bankruptcy Court. And at that time, I had decided to do the Chapter 11, because 13 was under -- was putting it under the business, but the business didn't own anything. So he said I need to put it under my name personally and the property and file for Chapter 11 -- would be more sufficient for the commercial property.

         And I apologize to the Court and Ms. Niklas for any confusion that I may have occurred -- concurred.

THE COURT: Ms. Hardy, thank you very much.
MS. HARDY: Excuse me?
THE COURT: Thank you very much.
MS. HARDY: Okay.
THE COURT: Ms. Niklas, do you want to put on a case so we have an evidentiary record?
MS. NIKLAS: Yes. Thank you. I would like to call the debtor to the stand.
THE COURT: Miss, please.
DEPUTY CLERK: Please raise your right hand.
(Witness is placed under oath.)
DEPUTY CLERK: Please have a seat and state your name for me.
THE WITNESS: Latricia Hardy.
- - -


- - -

         BY MS. NIKLAS:

Q What is you address, please?
A 1006 15th Street, Southeast, Washington, D.C., 20003.
Q How long have you lived there?
A Over 20 years.
Q Have you lived there continuously for the last three years?
A Yes.
Q How many people live there with you?
A Three. Well, three altogether.
Q Three?
A Yeah.
Q And who are they?
A My granddaughter and my son.
Q How many -- two sons?
A One son.
Q So one son.
Are you married?
A I'm widowed.
Q Have you filed a bankruptcy case before?
A No.
Q Did you file your tax returns for 2015?
A Yes.
Q Federal and State?
A Yes.
Q Did you file timely or late?
A Timely.
Q What about 2014?
A Correct. Yes.
Q '13 and '12?
A Yes.
Q Have you turned over those tax returns to my office?
A No, I didn't.
Q Where do you work?
A Capitol Hill Beauty Salon.
Q Are you self-employed?
A Yes.
Q Do you earn any income from that job?
A Yes, I do.
Q Did you schedule that income on your Schedules?
A No, because currently I haven't been as -- not active right now.
But, no, I didn't. I didn't complete the whole form, no, I didn't.
Q Who filed your Schedules for you?
A I did by myself.
Q Who helped you in filing this case?
A I did.
Q Nobody helped you?
A No.
Q Where did you get the idea?
A Of what?
Q Of filing a Chapter 13?
A Just talking to some friends or whatever, and they said 13 would save the property.

         But after me researching -- because everything came sort of fast and I really had no time to do a diligent research. So after talking with the attorneys here, I see that I should have filed it Chapter 11. At that time, I asked to convert.

Q You talked to attorneys here?
A Yes.
Q And who did you talk to?
A At the bankruptcy, legal advice downstairs.
Q Did you report any income in 2015 on your taxes?
A On my taxes? Yes.
Q What was the income, your adjusted gross income?
A It was around 20-.
Q 20- --
A 20, 000.
Q Do you have any people working for you?
A I have space rented out.
Q Do you keep records of your income and your expenses?
A Yes.
Q Did you receive a refund in 2015?
A Yes.
Q And how much of a tax refund did you receive from IRS?
A I think it was 3 -- 3, 900.
Q And what about from D.C. Government?
A I can't say right off, but maybe 1, 800, something like that.
Q So 20, 000 is what you earned last year?
A Under the LLC. But I do have income coming from a couple other properties, yeah.
Q Okay. So let's start with your income from 20, 000. Your Schedules ask you to state what your income is from your business. That would be around 16- or 1, 700 a month; is that right?
A I get -- Q If that's your income?
A 16- or 1, 700 a month?
Q Okay.
A Yeah, something like that.
Q Did you handwrite your Schedules on Schedule I -- A Yes.
Q -- that says what your income is?
And you say "employed" or "not employed." Do you remember what you filed?
A I might have put zero, because at the time, I haven't been doing anything. I didn't know if you needed it right then or from prior.
Q So if you schedule -- you crossed off the box that says you're unemployed; is that true?
A I haven't been working, but I am -- I have the business, but it hasn't been active.
Q Do you have an occupation?
A No. I just run the business. I don't do hair myself.
THE COURT: How long has the business not been active?
THE WITNESS: It's just for a couple of months. It just -- it's sort of, you know, vacant, the building is vacant. I just have -- I do have an employee or two working there. Not employee, but a self-employee, who rents space there.
THE COURT: And who are they?
THE WITNESS: Who are that?
THE WITNESS: Ms. Sadies [phonetic], Ms. Gracias.
THE COURT: And how much does she pay you?
THE WITNESS: It's 250 a week.
THE COURT: $250 a week?

         BY MS. HARDY:

Q You filed this case on May 31?
A Yeah.
Q On May 31, was your business in operation?
A It was like what I just told the Judge, just one employee at that time.
Q One employee paying you rent only?
A Yeah.
Q At 250 a week?
A Yes.
Q Okay. There's a section on the Schedules --
THE COURT: You say she's an employee but you --
THE WITNESS: Well, not employee, a self-employed.
THE COURT: And she --
THE WITNESS: She pays rent.
THE COURT: -- she pays rent to you for the space?

         BY MS. NIKLAS:

Q What does the person do, does she cut hair?
A Yes. She works on hair.
Q Does she have customers?
A Yes.
Q Does she pay you a percent of what she earns, in addition to the rent?
A No.
Q So there's no other fee that you get from this person except rent?
A That's all I get from her, yes.
Q And how long has she been paying you rent?
A Oh, for five-years-plus.
Q And so on Schedule I, it asked if you have rental income, and you put zero -- you put nothing. Is there a reason why you didn't report the rental income?
A Well, at the time -- okay. I do agree everything wasn't complete. I was hoping to maybe see someone to make sure of what all to put exactly. So that was my reasoning for not completing it fully. But not deceiving, but, you know, like I didn't know exactly what to do. So that's why I came in to see the bankruptcy attorney and have been seeing him since every two weeks.
Q Has this bankruptcy attorney suggested that you amend your schedules?
A Well, yes, after I convert.
Q After you convert?
A Yes.
Q In addition to the rental income of 250 from the business, do you receive income from any other source?
A Other properties.
I'm looking for income to come in for the salon, but I have prospered -- people coming in to rent.
Q When you filed your case on May 31, did you have -- already have income coming from any other source?
A Yes.
Q How much did you -- how much have you been receiving as of May 31?
A For -- it's another property that I get 1, 800 a month from.
Q 1, 800. And where is that property located?
A It's 90
Q Street.
Q 90 Q Street?
A Yes. Southwest.
Q Who lives there?
A My son.
Q How old is he?
A 22.
Q Does he have a job?
A 25. I'm sorry.
Q Does he have a job?
A Yes.
Q Where does he work?
A Well, he just changed jobs. I'm not sure what job it is. But his girlfriend's the one who the rent come from.
Q And is the rent current?
A Yes, it is.
Q So you receive 1, 800 from your son and girlfriend, in addition to the 250?
A Yes.
Q What other income do you receive?
A It's 500 from both condos.
Q From two condos?
A Yes.
THE COURT: And where are those located?
THE WITNESS: In Maryland.
THE COURT: What are the addresses?
THE WITNESS: 5211 Newton Street.

         BY MS. NIKLAS:

Q Can you repeat that?
A 5211 Newton Street, Bladensburg, Maryland, and 3107 Good Hope Avenue, Temple Hills, Maryland.
Q Is the -- how much is the rent from each one?
A 500.
Q Is it 500 each --
A Yes. Each.
Q -- or together?
So it's a thousand total?
A Total, yes.
Q Okay. What other rental income do you receive?
A That's it for right now, but I'm looking for more to come in.
Q Do you receive any disability or any part-time --
A I don't.
Q -- income or income from anybody else?
A No.
Q Does anybody owe you any money?
A No. Not exactly.
Q The property on 15th Street, when did you buy it?
A I've been there for over 20 years. I don't know. It was my husband's, him and I.
Q Are you the sole owner?
A Yes. I am now.
Q Is there a mortgage?
A Yes, it was a mortgage. Well, his father was taking care of that since he's deceased.
Q What are the monthly mortgage payments?
THE COURT: Let her finish the answer.
Your father?
THE WITNESS: His father was taking care of the mortgage.
THE COURT: Your deceased husband's father was taking care of it?
THE COURT: Is it still owing?
THE WITNESS: Yes, it is.
THE COURT: And is the father still taking care of it?
THE WITNESS: Well, he's deceased now also.
THE COURT: So who's taking care of the mortgage?
THE WITNESS: I don't know if it's paid off or if it's still a pending mortgage. I have to look into that.
THE COURT: Who's the mortgagee?
THE WITNESS: American Servicing Center.
THE COURT: Go ahead, Ms. Niklas.

         BY MS. NIKLAS:

Q You scheduled ACC Mortgage with a $303, 000 claim. Is that the mortgage company?
A That's the mortgage company, yes.
Q On 15th Street?
A No. On 1414 Pennsylvania Avenue, on the commercial property.
Q That's where the beauty shop is?
A Yes.
Q And what are the monthly payments to ACC Mortgage?
A He had down 2, 400.
Q A month?
A Yes.
Q How many months were you behind on May 31 when you filed the case?
A The total amount I guess what they have 303- total amount, because there hadn't been a payment because they took me to court right after the mortgage was consummated, because they didn't have a power of attorney. So the payments that I did send them, they sent back, and they proceeded with a court hearing to --
THE COURT: You say 303-. What does that mean, 303, 000?
THE WITNESS: Thousand. It was 276-, but I guess they adding interest in ever ...

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