In re Flood, Bankruptcy No. 94-20245.

Decision Date07 June 1999
Docket NumberBankruptcy No. 94-20245.
PartiesIn re Glenn M. FLOOD d/b/a Glenn Flood Properties and Glenn Flood Publishing, Debtor.
CourtU.S. Bankruptcy Court — Western District of New York

Douglas J. Lustig, Saperston & Day, P.C., Rochester, New York, for debtor.

Charles A. LoFaso, Municipal Attorney, Rochester, New York, for City of Rochester.


JOHN C. NINFO, II, Bankruptcy Judge.

On February 11, 1994, Glenn M. Flood (the "Debtor") filed a petition initiating a Chapter 7 case. On the schedules and statements required to be filed by Section 521 and Rule 1007, the Debtor indicated that: (1) he was the fee simple owner of eleven rental properties located in the City of Rochester, New York, including a four-family rental property at 34-36 Copeland Street ("Copeland Street"); (2) Copeland Street had a current fair market value of $50,000.00, but it was subject to a first mortgage of $96,000.00 in favor of Shawmut Mortgage Company ("Shawmut"), a second mortgage of $20,000.00 in favor of PFS Investments, and a third mortgage in favor of Chase Manhattan Bank; (3) the City of Rochester had claims against him for undetermined amounts because of "multiple delinquent real estate taxes, assessments, etc. against all properties"; (4) for the previous twelve years he had been employed as a software technician at Eastman Kodak Company; (5) as set forth on his Chapter 7 Individual Debtor's Statement of Intention (the "Statement of Intention"), he intended to surrender Copeland Street to the mortgage holders; and (6) he had done business as Glenn Flood Properties.

On February 22, 1994, the Bankruptcy Court Clerk's Office mailed a Notice of the commencement of the Debtor's Chapter 7 case to all of the scheduled creditors, which included the City of Rochester.1 On March 23, 1994, the Debtor's Trustee filed a report of no distribution (the "No Asset Report"), which indicated that the Debtor's estate had been fully administered because there were no non-exempt assets that the Trustee had elected to administer. Before an Order of Discharge (the "Discharge Order") was entered on April 17, 1994 and the Debtor's Chapter 7 case was closed on June 24, 1994, orders were entered which granted mortgagors relief from the automatic stay in connection with several properties other than Copeland Street.

On February 4, 1999, the Debtor filed a motion (the "Contempt Motion") which requested an order finding the City of Rochester in contempt for having violated the automatic stay provided for by Section 362 and awarding damages to the Debtor for the City's violation of the stay. The Contempt Motion alleged that: (1) the Debtor had scheduled Copeland Street as an asset and listed the City of Rochester as a creditor in connection with the property; (2) the Debtor had set forth on his Statement of Intention that he was not going to retain Copeland Street; (3) when he filed his petition, the Debtor believed that Shawmut would eventually foreclose its first mortgage on Copeland Street and transfer title to the property to a party other than the Debtor; (4) the Discharge Order was entered in the Debtor's no asset case on April 17, 1994; (5) in October 1998, the City of Rochester commenced a special proceeding (the "Special Proceeding") in the New York State Supreme Court against the Debtor to recover the $14,325.15 in demolition costs which it had incurred in 1996 to demolish the two and one-half story wood frame structure constructed on Copeland Street, which had been determined to be dangerous and unsafe at a hearing conducted on May 12, 1994 (the "Demolition Hearing") and after a notice had been sent to the Debtor on May 25, 1994, and received by him on June 3, 1994, requiring him to either rehabilitate Copeland Street or demolish it; (6) in October 1993, prior to the filing of the Debtor's petition, the City had internally issued a building inspection report which indicated that the Demolition Hearing would be held and that the hearing might result in the demolition of Copeland Street if the Debtor failed to produce a bona fide rehabilitation plan at the time of the Hearing; (7) between the Demolition Hearing and June 1997, when the demolition costs were first demanded from him, the Debtor had received no notice of the imminent or actual demolition, and he believed that either the City of Rochester had taken title to Copeland Street for unpaid real estate taxes or Shawmut had foreclosed on the property and title had been transferred from him; and (8) any obligation which the Debtor might have to the City of Rochester to pay the demolition costs incurred by it in connection with Copeland Street was an obligation and debt that existed and was properly scheduled at the time of the filing of his petition, and, therefore, was discharged pursuant to Section 727.

On February 11, 1999, the City of Rochester, in response to the Contempt Motion, filed the affidavit of one of its attorneys. The affidavit alleged that: (1) Copeland Street was demolished in April 1996 after the Debtor, who was still the record owner of the property, had failed to abate the existing and continuing public health and safety violations under the City of Rochester Municipal Code; and (2) the debt which the City of Rochester was attempting to recover in the Special Proceeding was not a pre-petition debt but was a debt which only accrued approximately two years after the Debtor had received his discharge.

On the return date of the Contempt Motion, the Court heard oral argument, reserved decision on the Motion, and allowed the parties the opportunity to file further written submissions.

On April 28, 1999, the attorneys for the Debtor filed a letter submission which asserted that: (1) the City of Rochester received proper and timely notice of the Debtor's Chapter 7 bankruptcy case; (2) the City of Rochester Municipal Code violations which ultimately resulted in the City of Rochester demolishing the structure at Copeland Street existed at the time the Debtor filed his bankruptcy petition; (3) the City of Rochester had a claim against the Debtor at the time of the filing of his petition for the costs the City would eventually have to incur to demolish the structure at Copeland Street, because, under Section 101(5), the City had a right to the payment of such amounts even though that right was contingent and the amounts were unliquidated; and (4) the debt due to the City of Rochester from the Debtor, as the result of his liability on this contingent unliquidated pre-petition claim, was properly scheduled and was discharged by the Discharge Order.

On April 30, 1999, the City of Rochester filed a letter submission by one of its municipal attorneys which asserted that: (1) On October 12, 1993, prior to the filing of the Debtor's petition, a City of Rochester property conservation inspector noted that the structure at Copeland Street was vacant, which resulted in a January 1994 inspection that indicated the existence of Municipal Code violations and made a recommendation that a structural inspection be conducted to determine whether the property was unsafe or dangerous; (2) the recommended structural inspection took place post-petition on February 17, 1994, which was also prior to the time the City of Rochester received notice that the Debtor had filed a Chapter 7 case;2 (3) as a result of the structural inspection, the Commissioner of Community Development determined that the structure at Copeland Street was unsafe or dangerous; (4) once the Commissioner of Community Development had determined that the structure was unsafe or dangerous, an April 19, 1994 Notice of Hearing, issued after the entry of the Discharge Order, was mailed via certified mail to the Debtor on April 20, 1994, but not claimed by him; (5) on June 3, 1994, the Debtor signed a receipt for a copy of the Findings of the hearing officer at the May 12, 1994 Demolition Hearing (the "Findings") which had been mailed to him on May 25, 1994; (6) the Findings advised the Debtor that: (a) the structure at Copeland Street represented a hazard to public health and safety due to its unoccupied and neglected condition; and (b) if the structure were not repaired or demolished, as provided in the Findings, the City of Rochester would proceed to demolish the structure and could bill him for the cost of demolition; and (7) the City of Rochester did not have a pre-petition claim against the Debtor for the cost of demolition because any right to recover that cost from the Debtor did not accrue until at the earliest when the City had complied with Section 47a-16 of the Rochester City Code ("Section 47") by: (a) having the Demolition Hearing to determine that the structure at Copeland Street was unsafe or dangerous; and (b) notifying the Debtor, as the record owner, that unless he repaired the structure or demolished it, the City had the right to demolish it and recover the cost of demolition.

I. The Automatic Stay Provided by Section 362

The Contempt Motion requested that the Court enter an order finding the City of Rochester in violation of the automatic stay provided for by Section 362 and for damages, presumably pursuant to Section 362(h) when there has been a wilful violation of the automatic stay. The relevant provisions of Section 362 for the purposes of the Contempt Motion are Sections 362(a)(1), (3) and (6), which provide as follows:

§ 362(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of —
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the

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