City of Phila. v. Minor (In re Minor)
| Decision Date | 30 March 2016 |
| Docket Number | CIVIL ACTION NO. 15–3562,BANKRUPTCY NO. 13–19278 |
| Citation | 579 B.R. 333 |
| Parties | IN RE: Michael G. MINOR. The City of Philadelphia et al., Appellants, v. Michael G. Minor, Appellee. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
579 B.R. 333
IN RE: Michael G. MINOR.
The City of Philadelphia et al., Appellants,
v.
Michael G. Minor, Appellee.
CIVIL ACTION NO. 15–3562
BANKRUPTCY NO. 13–19278
United States District Court, E.D. Pennsylvania.
Signed March 30, 2016
Jeremiah Vandermark, Pamela Elchert Thurmond, James C. Vandermark, City of Philadelphia Law Dept., Thomas S. McNamara, Indik & McNamara, Philadelphia, PA, for Appellants.
Irwin Lee Trauss, Philadelphia Legal Services, Jane P. Nylund, Philadelphia Legal Assistance, Philadelphia, PA, for Appellee.
MEMORANDUM OPINION
RUFE, District Judge.
Debtor Michael Minor filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. The City of Philadelphia and Good Bet Trading, LLC jointly appeal the Bankruptcy Court's Order confirming Debtor's Third Amended Chapter 13 Plan. After considering the briefs and the record on appeal, the Court will affirm the Bankruptcy Court's order for the following reasons.
I. FACTUAL AND PROCEDURAL HISTORY
Debtor is an elderly veteran who, along with his siblings, inherited his mother's home when she passed away in 2005. Debtor and his siblings fell behind on their real estate taxes and in January 2012, the City filed a petition in state court under the Municipal Claims and Tax Lien Act (the MCTLA),1 seeking to hold a sheriff's sale of Debtor's home (the Property) to collect the unpaid real estate taxes. Under § 7283 of the MCTLA, a city that is owed real estate taxes may petition the court to grant a rule to show cause "why a decree should not be made that the property be sold," and after proper service to parties in interest and a hearing the court, where appropriate, shall "order and decree that the property be sold at a subsequent sheriff's sale, clear of all claims, liens, mortgages, ground rents, charges and estates, to the highest bidder at such sale."2 Under the MCTLA, the owner of a property sold at a sheriff's sale may redeem the property within nine months from the acknowledgment of the sheriff's deed if the owner pays the bid amount, as well as other expenses paid by the purchaser, including the taxes and municipal claims, plus ten percent interest.3 In June 2012, the state court entered a decree directing the Sheriff of Philadelphia County to sell Debtor's property and on November 12, 2012, Debtor's home was sold to Good Bet Trading for $12,500. Good Bet paid the taxes that were owed on the Property at the time of the sale. The Sheriff acknowledged the deed on February 15, 2013.
On October 25, 2013, within nine months of acknowledgment of the deed, Debtor
filed a voluntary Chapter 13 bankruptcy petition in the Bankruptcy Court for the Eastern District of Pennsylvania.4 Debtor's petition designated Good Bet as a creditor.5 On November 5, 2013, Debtor filed a proposed bankruptcy plan, which listed Good Bet as having a secured claim for the total unpaid balance due on any interest Good Bet may have in the Property and proposed to pay the claim in sixty monthly installments of $266, for a total of $15,960.6 The plan proposed that after entry of an order of discharge, the title to Debtor's interest in the Property shall revest in Debtor free and clear of all claims of all creditors provided for by the plan.7
Good Bet filed an objection to the plan which contended that it was not a creditor of Debtor and that the plan was proposed in bad faith.8 Debtor then filed a proof of claim on behalf of Good Bet in the amount of $13,667.88 secured by an interest in the Property9 pursuant to Federal Rule of Bankruptcy Procedure 3004.10 Shortly thereafter, Debtor also filed his First Amended Plan.11
Good Bet did not object to the proof of claim, but both the City and Good Bet filed objections to the amended plan. The City raised four objections to confirmation of the proposed plan:12 (1) the plan does not require Debtor to pay the 2013 real estate taxes owed on the Property, which became due after the Property was sold; (2) Debtor failed to file a motion to redeem the Property; (3) Good Bet does not have a secured claim and the plan violates state law by allowing Debtor to pay the redemption amount in installments instead of in a lump sum; and (4) Debtor's plan was not proposed in good faith. Good Bet joined the City's objection, and raised an additional objection that the plan was not feasible.13
An evidentiary hearing on the proposed plan was scheduled for November 3, 2014. Five days before the scheduled hearing, Debtor filed a Second Amended Plan, which again listed Good Bet as having a secured claim on the Property, and proposed to pay the claim in monthly installments.14 At the hearing, the Bankruptcy Court determined that the Second Amended Plan made only two minor amendments which did not affect the City or Good Bet's rights and that it was therefore appropriate to move forward with the hearing.15 Good Bet did not appear at the hearing, and did not contact the Court before or after the hearing to explain its absence. The Bankruptcy Court therefore dismissed Good Bet's objections for lack of prosecution.16
The Bankruptcy Court sua sponte raised the issue of the City's standing at
the hearing, and heard arguments from Debtor and the City on this issue, as well as evidence and argument on plan confirmation and the City's objections. At the close of the hearing, the Bankruptcy Court closed the record, and entered a briefing schedule for the City and Debtor.17 The parties filed briefs as scheduled, and Good Bet filed a statement joining the City's brief.18
In January 2015, Debtor filed a Third Amended Plan (Plan), which again listed Good Bet as holding a secured claim on the Property, and proposed to pay the claim in monthly installments.19 The Bankruptcy Court held a hearing on the Third Amended Plan on April 9, 2015, which the City, the Debtor, and the trustee attended. Good Bet again did not appear. Because the Plan made only minor changes, and the parties stated that the issues before the court remained the same and no further evidence needed to be presented, the court stated that it would issue its ruling and scheduled a final hearing in May for tracking purposes.20 The final hearing was held on May 21, 2015. Good Bet, the Debtor, and the City all appeared. After informing the parties that the court's decision would be issued shortly, the hearing was adjourned.21
On June 9, 2015, the Bankruptcy Court entered an Order confirming the Plan. It first held that the City lacked standing to object to the Plan and that Good Bet failed to prosecute its objections.22 It then determined that Debtor's Plan complied with the requirements of § 1325 of the Bankruptcy Code, and confirmed the Plan, finding that, in the absence of any objections, Bankruptcy Courts are required to confirm a Chapter 13 plan where the criteria enumerated in § 1325 are satisfied.23
The City and Good Bet jointly appealed the Bankruptcy Court's Order to this Court. Appellants contend that the Bankruptcy Court erred in (1) holding that the City lacked standing to object to the Plan; (2) dismissing Good Bet's objections for lack of prosecution; and (3) confirming the Plan because it was not proposed in good faith, allows Debtor to redeem the Property without complying with the requirements of the MCTLA, and allows Debtor to redeem the Property without filing a motion to redeem in bankruptcy court under Federal Bankruptcy Rule of Procedure
6008 or filing a petition to redeem pursuant to the MCTLA.
II. STANDARD OF REVIEW
District courts "review the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof."24 "A factual finding is clearly erroneous if the district court is firmly convinced, based on all the evidence, that the bankruptcy court made a mistake," but the district court "may not engage in independent fact finding."25 This Court has jurisdiction to review the Bankruptcy Court's decision pursuant to 28 U.S.C. §§ 158(a)(1) and 1334.
III. DISCUSSION
A. The City's Standing on Appeal
Before evaluating the City's contentions, the Court must determine whether the City has standing on appeal. "Appellate standing in the bankruptcy context is more restrictive than Article III standing."26 "In conventional disputes, the class of potential plaintiffs is defined by the constitutional doctrine of standing. But in bankruptcy proceedings, which typically involve a myriad of parties...indirectly affected by every bankruptcy court order, the need to limit collateral appeals is particularly acute."27 As a result, a party appealing a bankruptcy order must establish that they are a "person aggrieved" by the order, that is, that the order diminishes the party's property, increases their burdens, or impairs their rights.28 "Person aggrieved is, of course, a term of art: almost by definition, all appellants may claim in some way to be aggrieved, else they would not bother to prosecute their appeals."29 Therefore, a party must not be merely "exposed to some potential harm...
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