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In re Hardy

United States District Court, District of Columbia

September 11, 2018

IN RE LATRICIA L. HARDY, DEBTOR.
v.
BRYAN S. ROSS, and ALL CREDIT CONSIDERED MORTGAGE, INC., Appellees. LATRICIA L. HARDY, Appellant,

          MEMORANDUM OPINION

          Emmet G. Sullivan United States District Judge.

         On May 31, 2016, Ms. LaTricia Hardy filed a pro se, voluntary bankruptcy petition in the United States Bankruptcy Court for the District of Columbia (“Bankruptcy Court”). After two years of litigation, Ms. Hardy appeals six of the Bankrupty Court's orders. Proceeding pro se, Ms. Hardy appeals the following: (1) the order granting the Trustee's motion to “turnover” her commercial real estate property, see ECF No. 1 (Civ. No. 16-1968); (2) the order “clarifying” that the Bankruptcy Court's turnover order was not stayed, see ECF No. 1 (Civ. No. 16-1969); (3) the order denying Ms. Hardy's request to “terminat[e] [] conversion to Chapter 7, ” see ECF No. 1 (Civ. No. 16-1970); (4) the order holding Ms. Hardy in contempt and denying her motion to dismiss the Chapter 7 Trustee's claims, see ECF No. 1 (Civ. No. 17-1017); (5) the order granting All Credit Considered Mortgage, Inc.'s (“ACC”) motion for summary judgment, see ECF No. 1 (Civ. No. 17-1316); and (6) the order granting the Chapter 7 Trustee's motion to approve a compromise with ACC, see ECF No. 1 (Civ. No. 18-434).[1] Also pending are the Chapter 7 Trustee's two motions to dismiss: (1) motion to dismiss as equitably moot Ms. Hardy's appeal as to the turnover order, see ECF No. 18 (Civ. No. 16-1968); and (2) motion to dismiss as time-barred Ms. Hardy's appeal of the compromise order, see ECF No. 21 (Civ. No. 16-1968).

         The Court has considered all of the appeals and motions, the responses and replies thereto, the voluminous record, and the applicable law, and hereby AFFIRMS the Bankruptcy Court's six orders, GRANTS the Chapter 7 Trustee's motion to dismiss as equitably moot, and DENIES the Chapter 7 Trustee's motion to dismiss as time-barred.

         I. Background

         On May 31, 2016, Ms. Hardy filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code. See A.R., ECF No. 29-1 at 5(Civ. No. 16-1698).[2] Ms. Hardy and her mother, Patricia White, owned a commercial real estate property located at 1414-1416 Pennsylvania Avenue in Southeast, District of Columbia. See A.R., ECF No. 27 at 5 (Civ. No. 16-1968). After the Chapter 13 Trustee moved to dismiss the case, Ms. Hardy filed a motion to convert her case to Chapter 11. A.R., ECF No. 12-1 at 26-27 (Civ. No. 16-1968). On June 24, 2016, ACC-a creditor with a purported lien on the property-filed a motion to dismiss with prejudice or, in the alternative, to convert the case from Chapter 11 to Chapter 7. Id. at 28-45. On July 25, 2016, following a hearing, the Bankruptcy Court converted Ms. Hardy's Chapter 13 case to Chapter 7 and appointed Bryan Ross as the Chapter 7 Trustee (“the Trustee”). See Docket, ECF No. 29-1 at 10 (Civ. No. 16-1968). On August 30, 2016, Ms. Hardy filed a “motion requesting termination of conversion to Chapter 7 liquidation.” A.R., ECF No. 12-1 at 152 (Civ. No. 16-1968). The Bankruptcy Court denied the motion. Id. at 159. On September 22, 2016, Ms. Hardy noticed her appeal of that order in this Court. ECF No. 1 (Civ. No. 16-1970).

         On August 17, 2016, the Trustee filed a motion for an order approving the turnover of Ms. Hardy's co-owned commercial real estate property. A.R., ECF No. 12-1 at 129-134 (Civ. No. 16-1968). The Bankruptcy Court granted the turnover motion on September 9, 2016, ordering Ms. Hardy to “immediately turnover” her property and authorizing the Trustee to “take possession and control.” Id. at 154-55. On September 22, 2016, Ms. Hardy noticed her appeal of that order in this Court. ECF No. 1 (Civ. No. 16-1968).

         On September 19, 2016, the Bankruptcy Court also issued an order “clarifying that no stay of the Court's turnover order is in place pending disposition of the motion for a stay” that Ms. Hardy had filed. A.R., ECF No. 12-1 at 160 (Civ. No. 16-1968); see also A.R., ECF No. 29-1 at 14 (Civ. No. 16-1968). In so doing, the Bankruptcy Court emphasized that “the turnover order has not been stayed by the filing of a motion to stay” and that Ms. Hardy “remains obligated to comply with it.” A.R., ECF No. 12-1 at 160 (Civ. No. 16-1968)(emphasis in original). The Bankruptcy Court subsequently denied Ms. Hardy's motion for a stay of the turnover order. See A.R., ECF No. 29-1 at 16 (Civ. No. 16-1968). On September 22, 2016, Ms. Hardy noticed an appeal in this Court of the clarifying order, but not the denial of her motion to stay. ECF No. 1, (Civ. No. 16-1969).

         On November 21, 2016, Ms. Hardy filed a motion for an emergency temporary restraining order in this Court, which the Court construed as a motion to stay the Bankruptcy Court's orders denying her motion to “terminate” the conversion from Chapter 13 to Chapter 7 and granting the Trustee's turnover motion pending appeal. See TRO Mot., ECF No. 10 (Civ. No. 16-1968); Mem. Op., ECF No. 17 at 2 (Civ. No. 16-1968). The Court denied Ms. Hardy's motion on December 29, 2016. See Order, ECF No. 16 (Civ. No. 16-1968). In so doing, the Court allowed the Chapter 7 bankruptcy case to proceed.

         The Trustee-having been authorized to sell the property[3]- filed a motion to sell. However, Ms. Hardy purportedly refused to comply with the turnover order and vacate the premises. Therefore, on April 28, 2017, the Trustee filed a motion to show cause why Ms. Hardy should not be held in contempt. See A.R., ECF No. 29-1 at 115-21 (Civ. No. 16-1968). The Trustee alleged that Ms. Hardy rented the property to at least two tenants and refused to leave, in violation of the turnover order. Id. at 117-20. On May 25, 2017, after a hearing, the Bankruptcy Court granted the Trustee's motion and held Ms. Hardy in contempt. A.R., ECF No. 29-2 at 5-11 (Civ. No. 16-1968). Finding that Ms. Hardy failed to comply with its turnover order, the Bankruptcy Court directed her to produce all leases and lessees' contact information and immediately cease leasing the property. Id. at 10. It also voided any leases and authorized the Trustee or the United States Marshal to evict any tenants and occupants. Id. at 11. On May 26, 2017, Ms. Hardy noticed an appeal of that order in this Court. ECF No. 1, (Civ. No. 17-1017).

         A few days later, the Bankruptcy Court approved and ratified the sale of the property over Ms. Hardy's opposition. A.R., ECF No. 29-2 at 18-26 (Civ. No. 16-1968). The Bankruptcy Court ordered the Trustee to pay the liens attached to the property, including ACC's claims. Id. at 22. It also ordered the Trustee to pay Ms. White her one-half share in the remaining property. Id. The sale was finalized on July 5, 2017, when the Trustee executed the deed. A.R., ECF No. 29-3 at 20-24 (Civ. No. 16-1968).

         Meanwhile, Ms. Hardy had been litigating the validity of ACC's lien in the Superior Court for the District of Columbia. See ACC v. Hardy, 2014 CA 4580; A.R., ECF No. 12-1 at 58-65 (Civ. No. 16-1968). In September 2015, Superior Court Judge Stuart Nash entered summary judgment in ACC's favor, finding that it had a valid, enforceable claim to Ms. Hardy's property. Id. at 60.[4]

         Similarly, on April 10, 2017, Ms. Hardy objected to the validity of ACC's lien in Bankruptcy Court. A.R., ECF No. 4 at 4-9 (Civ. No. 17-1316). In response, ACC filed a motion for summary judgment, seeking to establish that it had a valid lien. A.R., ECF No. 29-3 at 25-26 (Civ. No. 16-1968). Ms. Hardy opposed that motion and filed a cross-motion for summary judgment. See Id. at 37-40. On June 17, 2017, the Bankruptcy Court granted ACC's motion for summary judgment, finding that its lien was indeed valid. Id. at 50-69. On June 30, 2017, Ms. Hardy noticed an appeal of that summary judgment order in this Court. See ECF No. 1 (Civ. No. 17-1316).

         Once the Bankruptcy Court found that ACC had a valid lien, a dispute arose over the amount that ACC was owed from the turnover sale. See A.R., ECF No. 29-4 at 6-11 (Civ. No. 16-1968). In order to avoid further litigation, the Trustee and ACC proposed a settlement agreement whereby ACC would accept a “short” payment-less than the amount it was allegedly owed-and, in exchange, the Trustee would release ACC of all claims against it. See Id. at 9 ¶¶ 19-20. On October 23, 2017, the Bankruptcy Court approved the Trustee's proposed compromise, despite Ms. Hardy's objections. Id. at 51-56. In so doing, the Bankruptcy Court authorized the Trustee to pay ACC and Ms. White the amounts both were owed under the agreement. Id. at 54-55. On November 6, 2017, Ms. Hardy noticed an appeal of that approval order in this Court. See ECF No. 1 (Civ. No. 18-434).

         All of Ms. Hardy's appeals are now ripe for review.

         II. Standard of Review

         The Court has jurisdiction over Ms. Hardy's appeals pursuant to 28 U.S.C. § 158, which provides that: “(a) The district courts of the United States shall have jurisdiction to hear appeals (1) from final judgments, orders, and decrees . . . of bankruptcy judges.”

         As an appellate court, this Court reviews legal questions and conclusions de novo and reviews findings of fact under a clearly erroneous standard. See In re Chreky, 450 B.R. 247, 251-52 (D.D.C. 2011); see also In re WPG, Inc., 282 B.R. 66, 68 (D.D.C. 2002) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)). “A finding [of fact] is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” In re Johnson, 236 B.R. 510, 518 (D.D.C. 1999)(quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). As the Seventh Circuit vividly described, “[t]o be clearly erroneous, a decision must . . . strike us as wrong with the force of a five week old, unrefrigerated dead fish.” Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir. 1988). Finally, the Court reviews a bankruptcy court's evidentiary rulings under the abuse of discretion standard. See Haarhuis v. Kunnan Enter., Ltd., 177 F.3d 1007, 1015 (D.C. Cir. 1999). “[A]n abuse of discretion occurs when the [bankruptcy] court relies on clearly erroneous findings of fact, fails to consider a relevant factor, or applies the wrong legal standard.” Pigford v. Johanns, 416 F.3d 12, 23 (D.C. Cir. 2005). The party seeking to reverse the bankruptcy court's ruling bears the burden of proof and may not prevail by showing “simply that another conclusion could have been reached.” In re Johnson, 236 B.R. at 518 (quotations omitted).

         III. Analysis

         Ms. Hardy appeals six of the Bankruptcy Court's orders. The Trustee filed two motions to dismiss at least three of those appeals. The Court addresses each in turn.

         A. The Bankruptcy Court's Turnover Order is Affirmed

         Ms. Hardy argues that the Bankruptcy Court erred when it granted the Trustee's motion for a turnover order. See Appellant's Br., ECF No. 9 (Civ. No. 16-1968). She contends that a turnover order is only appropriate when there is no legitimate dispute over what is owed to the debtor. See Id. at 19. Therefore, she argues that the turnover order was not appropriate because she disputes the validity of ACC's purported deed of trust lien. See Id. at 10-12, 19. The Trustee responds by arguing that the Bankruptcy Court correctly ordered the turnover because the amount owed to Ms. Hardy is not in dispute. Appellee's Br., ECF No. 12 at 10-12, 21-28 (Civ. No. 16-1968).

         In addition, the Trustee argues that Ms. Hardy's appeal is equitably moot now that the property at issue has been sold to a third party. Appellee's Mot., ECF No. 18 ¶ 8 (Civ. No. 16-1968); see also Appellee's Br., ECF No. 21 at 12-14 (Civ. No. 17-1017). Ms. Hardy contends that her appeal should not be dismissed as moot because the illegality of the bankruptcy proceeding would affect the distribution of the proceeds from the sale of the property. Appellant's Opp'n, ECF No. 20 (Civ. No. 16-1968).

         “Under the bankruptcy code, the sale of property to a good faith purchaser cannot be overturned on appeal unless that sale was stayed pending appeal.” In re Hope 7 Monroe St. Ltd. P'ship, 743 F.3d 867, 872 (D.C. Cir. 2014) (citing 11 U.S.C. § 363(m)). As articulated in Advantage Health Plan, Inc. v. Potter, “the doctrine of equitable mootness provides that a bankruptcy appeal may ‘be dismissed as moot when, [although not constitutionally moot and although] effective relief could conceivably be fashioned, implementation of that relief would be inequitable.'” 391 B.R. 521, 542 (D.D.C. 2008) (quoting In re Metromedia Fiber Network, Inc., 416 F.3d 136, 143 (2d Cir. 2005); citing In re AOV Indus., Inc., 792 F.2d 1140, 1147-48 (D.C. Cir. 1986)). The Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) has “dismissed as moot appeals where the operation of § 363(m) has left us unable to fashion a remedy to address appellants' asserted injury.” In re Hope 7 Monroe St., 743 F.3d at 872 (citing Allen v. Wells Fargo Bank Minn., No. 03-7152, 2004 WL 2538492 (D.C. Cir. Nov. 9, 2004); Hicks v. Pearlstein (In re Magwood), 785 F.2d 1077, 1080-81 (D.C. Cir. 1986)).

         The sale of Ms. Hardy's property was not stayed pending appeal. Indeed, this Court denied Ms. Hardy's emergency motion for a stay of the turnover order. See Order, ECF No. 16 (Civ. No. 16-1968); see also Mem. Op., ECF No. 17 (Civ. No. 16-1968). Further, the property was sold to a third party and the sale was finalized when the Trustee executed the deed on July 5, 2017. A.R., ECF No. 29-3 at 20-24 (Civ. No. 16-1968). Thus, the bankruptcy plan and turnover sale were “substantially implemented, ” precluding effective remedy. In re AOV Indus., Inc., 792 F.2d at 1147 (finding the appeal moot because the bankruptcy had been “substantially implemented, ” including stock sold, settlements completed, and payments made to creditors).

         Ms. Hardy appears to argue that the doctrine of equitable mootness does not prevent the Court from reversing the order approving the distribution of funds. See Appellant's Opp'n, ECF No. 20 at 2 (Civ. No. 16-1968); Appellant's Reply, ECF No. 22 at 6-7 (Civ. No. 17-1017). She is correct. See In re Hope 7 Monroe St., 743 F.3d at 873 (“Section 363 does not grant to a claimant that has received a distribution the same protections it gives to a good faith purchaser of the estate's property. The policy underlying § 363(m) ensures the bankruptcy estate obtains maximum value through its sale of property by providing a bona fide purchaser assurances of finality.”). However, by appealing the Bankruptcy Court's orders granting the turnover sale and not staying the turnover, Ms. Hardy is not appealing her distribution of funds, if any. See Notices of Appeal, ECF No. 1 (Civ. No. 16-1968); ECF No. 1 (Civ. No. 16-1969). Instead, Ms. Hardy appeals the Bankruptcy Court's decision to allow her property to be sold. In so appealing, she requests that the Court “reopen the sale of [her] real property.” In re Hope 7 Monroe St., 743 F.3d at 873. As a matter of law, the Court may not do so. See id.

         Moreover, even if Ms. Hardy's appeals regarding the turnover order were not moot, the Bankruptcy Court did not err in granting the Trustee's turnover motion. As a preliminary matter, Ms. Hardy did not file an opposition to the Trustee's turnover motion in the Bankruptcy Court, despite receiving “notice of an opportunity to object to turnover” on August 17, 2016. See A.R., ECF No. 29-1 at 12-14 (Civ. No. 16-1968)(no opposition filed between August 17, 2016 motion and September 9, 2016 approval). The notice sent to Ms. Hardy explained that the Trustee filed a motion for turnover of real property and warned that failure to respond within twenty-one days may result in the Bankruptcy Court “deem[ing] any opposition waived, treat[ing] the motion as conceded, and issu[ing] an order granting the relief without further notice of hearing.” Bankr. No. 16-280, ECF No. 64. By not asserting any arguments in opposition to the turnover motion below, Ms. Hardy 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.”).

         Had Ms. Hardy not waived her arguments, her appeal nonetheless would have been unsuccessful. The turnover provision of the ...


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