Butko v. Ciccozzi (In re Butko)
| Decision Date | 10 February 2021 |
| Docket Number | Case No. 20-21255-GLT |
| Parties | In re: RICHARD P. BUTKO AND LORRAINE E. BUTKO, Debtors. RICHARD P. BUTKO AND LORRAINE E. BUTKO, Movants, v. RONALD A. CICCOZZI, Respondent. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania |
Related to Dkt. Nos. 77 and 85
Max C. Feldman, Esq.
Law Offices of Max C. Feldman
Coraopolis, PA
Christian M. Rieger, Esq.
The Law Office of Christian M. Rieger
Pittsburgh, PA
Attorney for Mr. Ciccozzi
MEMORANDUM OPINIONOne month ago, the Court issued a 77-page Memorandum Opinion1 declining to reconsider its July 1, 2020 order granting Ronald A. Ciccozzi relief from the automatic stay to pursue his rights to a residential property in Monaca, Pennsylvania following a default by Richard P. and Lorraine E. Butko ("Debtors") under an installment land contract.2 The Debtorshave since filed an appeal of the Stay Relief Order3 (though not the recent order denying reconsideration4), while Mr. Ciccozzi has scheduled an eviction to take place before the end of the month. Pursuant to Federal Rule of Bankruptcy Procedure ("Bankruptcy Rule") 8007(a)(1), the Debtors now seek a stay of that eviction pending their appeal to the United States District Court for the Western District of Pennsylvania.5 Mr. Ciccozzi opposes the imposition of a stay.6 For the reasons set forth below, the Court will deny the Motion.
In Butko III, the Court set forth the long and tortured history of this dispute in excruciating detail.7 That recitation is incorporated herein by reference. For convenience, the Court offers only a brief overview.8
The dispute between the Debtors and Mr. Ciccozzi arises from their unsuccessful efforts to purchase the Monaca property ("Property") from him and his now deceased wife.9 The original 2009 transaction was structured as an installment land contract, but was replaced by a lease with an option to purchase by a date certain after the Debtors defaulted.10 Another payment default in 2016 prompted the Debtors to file their first bankruptcy case in hopes thatthey could cure the default and complete the sale through a chapter 13 plan.11 By this point, Mr. Ciccozzi no longer wished to sell the Property and opposed their plan.12
The parties were seemingly able to break the impasse through a mediated settlement ("Settlement Agreement") that gave the Debtors one last chance to complete the sale.13 In broad strokes, the Settlement Agreement required them to promptly pay or walk away.14 The Debtors agreed that if they were unable to cure a payment default within ten days, their rights to the Property would terminate, Mr. Ciccozzi would be entitled to stay relief, and they would voluntarily leave within 30 days.15 If they failed to do so, the Settlement Agreement provided that the Court would enter a judgment for possession in favor of Mr. Ciccozzi.16 Though concerned about the default procedures, the Court ultimately approved the Settlement Agreement at the Debtors' insistence.17
Shortly thereafter, the Debtors defaulted.18 But to everyone's surprise, they demanded Mr. Ciccozzi provide them with an "Act 6" notice,19 extending their cure rights indefinitely until he purportedly complied with his statutory obligations because the Settlement Agreement serendipitously happened to fit the definition of an installment land contract subject to Act 6.20 Mr. Ciccozzi was outraged, and briefly moved to vacate the Settlement Agreementbefore settling on its strict enforcement.21 When it became clear that a consensual resolution was not achievable, the Court issued a Memorandum Opinion dated April 9, 2018 ("Butko I").22 The Court held that the Debtors were judicially estopped from asserting Act 6 to rewrite the Settlement Agreement, but that Mr. Ciccozzi had waived the defaults by retaining the untimely payments.23 Neither party appealed Butko I.24
Five months later, the Debtors defaulted yet again.25 This time, they could only muster a flimsy procedural technicality in opposition to Mr. Ciccozzi's request for stay relief.26 After stay relief entered, however, the Debtors moved for reconsideration alleging that Butko I's judicial estoppel ruling was non-binding dicta and should be disregarded.27 After a hearing, the Court denied reconsideration, emphasizing its view that Butko I made clear its intent to hold the parties to the Settlement Agreement strictly as written and not as modified by Act 6.28 Mr. Ciccozzi then requested the Court enter a judgment for possession, which it did (the "Judgment") after the parties submitted briefs concurring that it had jurisdiction to do so.29 The Debtors did not appeal any of these rulings, and their chapter 13 case was later dismissed due to payment defaults under their confirmed plan.30
Undaunted, the Debtors filed suit against Mr. Ciccozzi in the Court of Common Pleas of Beaver County ("State Court") seeking a declaratory judgment that he was required to provide them an Act 6 notice.31 Contrary to their assertions, the State Court ultimately found that Butko I's judicial estoppel ruling was not dicta and, as a result, the relief requested was barred by res judicata.32 The Debtors did not appeal the dismissal of the State Court action.33 Instead, they commenced the present chapter 13 case.34
In response to the new bankruptcy filing, Mr. Ciccozzi once again moved for stay relief.35 The Debtors opposed, arguing that their possessory interest in the Property was entitled to protection while they cured their default under the Settlement Agreement through a chapter 13 plan.36 Relying on In re Grove,37 they asserted that vendees under an installment land contract (like themselves) retain an interest in the property until it is sold.38 The Debtors did not offer any other arguments in support at that time, nor did they address the legal effect of Butko I or the Judgment.39 Meanwhile, they filed a plan that contemplated a sale of the Property by May 31, 2021 as a means to pay off Mr. Ciccozzi and all other creditors.40
On July 1, 2020, the Court entered the Stay Relief Order accompanied by Butko II.41 The Court was unpersuaded by In re Grove because the passage relied upon by the Debtorswas dicta and did not address the fact that installment land contracts can be enforced through judicial proceedings rather than sheriff's sales.42 Instead, Butko II adopted the "by analogy" approach articulated by In re Rowe,43 holding that the reference to a sheriff's sale in the cure provision of Act 6 should be interpreted to encompass a judgment terminating a vendee's rights under an installment land contract.44 Accordingly, the Court found that the finality of the Judgment meant their "equitable interest in the property ha[d] long since terminated, leaving them with no right to cure their default under state or federal law."45
The Debtors timely moved for reconsideration, arguing that Butko II was clearly erroneous because: (1) the Judgment was void as the Court was deprived of subject matter jurisdiction by Mr. Ciccozzi's failure to provide an Act 6 notice; and (2) the Judgment was a "confessed judgment" and not a final order until "conformed" under Act 6.46 They also repeated their prior claim that Butko I's judicial estoppel ruling was non-binding dicta.47 Perceiving the motion as "a brazen collateral attack on Butko I," the Court detailed its concerns and ordered both the Debtors and their counsel, Attorney Max C. Feldman, to show cause why the Court should not deny it and impose sanctions on them under Bankruptcy Rule 9011(b).48 The Debtors filed a written response, to which Attorney Feldman orally joined.49
On January 8, 2021, the Court issued Butko III, finding that: (1) reconsideration of Butko II () was unwarranted; (2) the Debtors and AttorneyFeldman violated Bankruptcy Rule 9011(b) by advancing arguments not warranted by fact or law and for an improper purpose; and (3) sanctions were unnecessary because the violative conduct was unlikely to repeat.50 Given the gravity of the circumstances, the Court's approach was exhaustive, considering every argument that could be gleaned from the motion for reconsideration, response to the order to show cause, and oral argument.51 In the end, most of the arguments raised by the Debtors were foreclosed by Butko I or unsupported by the facts.
Less than two weeks later, the Debtors appealed the Stay Relief Order.52 On February 1, 2021, nearly a month after Butko III, they filed the present Motion seeking a stay pending their appeal and a hearing on an expedited basis.53 The sudden need for expediency was apparently triggered by the Beaver County sheriff's office having scheduled an eviction for February 23, 2021.54 Mr. Ciccozzi filed a response in opposition to a stay, asserting that the Debtors are unlikely to prevail on appeal for essentially the reasons stated in Butko III.55
The Court initially scheduled the Motion for hearing on February 5, 2021, but continued it to February 9, 2021 at the Debtors' request.56 Counsel for both parties appeared at the continued hearing and presented oral arguments. At its conclusion, the Court denied theMotion and indicated that it would memorialize its findings in a memorandum to accompany the order.
This Court has authority to exercise jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. §§ 157(a), 1334, and the Order of Reference entered by the United States District Court for the Western District of Pennsylvania on October 16, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Moreover, Bankruptcy Rule 8007(a)(1) requires that a request for stay pending appeal be made in the bankruptcy court in the first instance.57
To determine whether to grant a stay pending appeal, a court must balance the following four factors based on a consideration of their relative weight:
(1) whether the stay applicant has made...
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