In re Jackson

• Decision Date: 04 August 2016
• Docket Number: No. 15–8037,15–8037
• Citation: 554 B.R. 156
• Parties: In re: Byron G. Jackson, Debtor.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

554 B.R. 156

In re: Byron G. Jackson, Debtor.

No. 15–8037

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Decided and Filed: August 4, 2016

ON BRIEF: Erika R. Finley, Joseph E. DiBaggio, KAMAN & CUSIMANO, Cleveland, Ohio, for Appellant. Byron G. Jackson, Shaker Heights, Ohio, pro se.

Before: DELK, HUMPHREY and OPPERMAN, Bankruptcy Appellate Panel Judges.

OPINION

GUY R. HUMPHREY, Bankruptcy Appellate Panel Judge.

This appeal concerns whether the bankruptcy court abused its discretion in determining that a condominium association violated a debtor's Chapter 7 discharge in re-scheduling a sheriff's sale in a pre-petition foreclosure action upon issuance of the discharge and closing of the case and in assessing fees associated with the re-scheduling of the foreclosure sale. For the reasons that follow, the panel finds that the court abused its discretion in sanctioning the association for violating the debtor's discharge.

STATEMENT OF ISSUES

The issues on appeal are whether the bankruptcy court abused its discretion in determining a condominium association violated the chapter 7 discharge order entered in an individual debtor's case through the scheduling of a sheriff's sale to complete a pre-petition foreclosure, awarding monetary sanctions against the condominium association, and enjoining the condominium association from re-scheduling the sheriff's sale.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the Panel, and neither party has timely elected to have these appeals heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A bankruptcy court's final order may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citation and quotation marks omitted). An order sanctioning a party and imposing a sum certain amount in damages is a final order.See Church Joint Venture, L.P. v. Blasingame (In re Blasingame), 525 B.R. 675, 678 (6th Cir. BAP 2015).

A bankruptcy court's decision to sanction is reviewed for an abuse of discretion. Badovick v. Greenspan (In re Greenspan), 464 B.R. 61, 2011 WL 310703, at *1 (6th Cir. BAP Feb. 2, 2011) (table) (citing B–Line, LLC v. Wingerter (In re Wingerter), 594 F.3d 931, 936 (6th Cir.2010) ). See also Mayor and City Coun ci l of Baltimore v. W. Va. (In re Eagle Picher Indus., Inc.), 285 F.3d 522, 527 (6th Cir.2002) (equitable determinations subject to an abuse of discretion standard) (citations omitted). “An abuse of discretion is defined as a ‘definite and firm conviction that the [court below] committed a clear error of judgment.’ ” Id. at 529 (internal citation omitted). The particular factual findings of the bankruptcy court are reviewed for “clear error.” Behlke v. Eisen (In re Behlke), 358 F.3d 429, 433 (6th Cir.2004) (citations omitted). Sanctions premised “upon an erroneous view of the law or an erroneous assessment of the evidence are necessarily an abuse of discretion.” In re Royal Manor Mgmt. Inc., 525 B.R. 338, 346 (6th Cir. BAP 2015) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 2461, 110 L.Ed.2d 359 (1990) ).

FACTS

On June 19, 2014 the debtor Byron Jackson (“Jackson”) filed, pro se, a petition for relief under Chapter 7 of the Bankruptcy Code. On July 9, 2014 mortgagee Bank of America (“BOA”), moved for relief from stay and for abandonment of real property located at 16100 Van Aken Boulevard # 402, Shaker Heights, Ohio (the “Condominium”). The Condominium was listed on Jackson's petition as his residence. In addition to seeking relief from the stay, BOA sought in rem relief for two years under 11 U.S.C. § 362(d)(4)(B), alleging a substantial arrearage on the mortgage loan and also noting prior bankruptcy filings, either by Jackson or one of his parents, that included the Condominium as scheduled property. Jackson's objection to the motion was overruled and the relief was granted through an order entered on August 19, 2014. However, BOA and Jackson entered into a loan modification agreement relating to the Condominium and the court approved it.¹

The Carlton House Condominium Unit Owners Association of Cuyahoga County (“Carlton House”) filed a similar motion to the BOA motion, seeking relief from the stay, abandonment, and in rem relief. The significant difference was it sought a permanent in rem order. At the hearing, Carlton House stated it was seeking in rem relief because of the multiple bankruptcy filings related to the Condominium. The bankruptcy court stated that the post-petition amounts were current “and the issue seems to be the desire to move forward with the foreclosure for the outstanding [pre-petition] approximately $5,900 is what I'm going to take into consideration....” September 9, 2014 Hr'g Tr. 8:20–23, ECF No. 121. After a hearing, the bankruptcy court denied Carlton House's motion for a permanent in rem order for lack of cause. The language of the court's order suggests that the court found the two year in rem bar sufficient: “[t]he Court previously entered a two year in rem sanction with respect to the same property....” Order, Dec. 9, 2014, ECF No. 84.

Jackson received his Chapter 7 discharge on December 9, 2014 and the case was closed. Almost immediately thereafter Carlton House filed a praecipe in the state court foreclosure action to schedule a sheriff's sale on the Condominium. This was the final step in a foreclosure action commenced in the Cuyahoga County Court of Common Pleas in January 2008 by Countrywide Home Loans, BOA's predecessor. Carlton House and Countrywide previously obtained a decree of foreclosure in July of 2009.² Carlton House Condo. Unit Owners Ass'n of Cuyahoga County's Response in Opposition to Debtor's Motion to Reopen Bankruptcy Case at 16–20, Jan. 27, 2015, ECF No. 97. The judgment stated that “upon issuance of a Praecipe for Order of Sale by Plaintiff's attorney and/or Defendant Carlton House's attorney, the Clerk of Court must issue an order of Sale to the Sheriff commanding him to ... sell the premises as upon execution and according to law, free and clear of the interest of all parties to this action.” Id. at 19.

On January 21, 2015 Jackson moved to re-open his bankruptcy case for two reasons. The first was to avoid Carlton House's liens pursuant to 11 U.S.C. § 522(f)(1)(A). The court rejected this reason at the hearing on the motion to re-open, recognizing that Carlton House's liens were statutory under Ohio law, not judicial, and therefore could not be avoided pursuant to that section of the Bankruptcy Code.³ The second asserted reason was that Carlton House was attempting to collect discharged debts. Jackson wanted the bankruptcy court to “vacate and or stay the Sheriff Sale set for February 9, 2015” on the Condominium. Motion to Reopen Case No. 14–13977 Under 11 U.S.C. § 350(b) and to Vacate/Stay Sheriff Sale Set for February 9, 2015 and Request to Expedite Emergency Hearing at 2, Jan. 21, 2015, ECF No. 93.

At a January 28, 2015 hearing the bankruptcy court expressed its concern that Carlton House's continuation of the foreclosure lacked a legitimate purpose because Carlton House was unlikely to receive funds from a sheriff's sale. Counsel for Carlton House told the bankruptcy court:

[s]o the Board of Directors, they have an obligation, a duty, to stop the bleed, to get a new homeowner into this property who is going to have the intent to pay fees. Whereas, the current owner, as evidenced by the total delinquency, has not expressed that desire or intent to resolve this matter with the Association. Therefore, it is the only judicial remedy at this point in time.

Jan. 28, 2015 Hr'g Tr. 9:10–17, ECF No. 122. The court responded that:

Okay. But—and, again, the last statement that you made about expressing an intent to resolve this makes it seem[ ] like the point of this foreclosure is to get the payment part of it resolved, because there actually isn't the possibility for payment in this foreclosure. That's what I'm concerned with.

Id. at 9:18–24. The court acknowledged that the state court previously granted a decree of foreclosure and Carlton House was not required to show any equity under state law but nevertheless was concerned that “the purpose [is] to really force payment as opposed to foreclose and obtain in rem relief[.]” Id. at 10:19–20. The court entered an order re-opening the case to determine whether the foreclosure was a disguised in personam action against Jackson, in contempt of the discharge order.

The contempt hearing was scheduled on an expedited basis.⁴ Carlton House appeared at the hearing through counsel and sought admission of one exhibit, a statement of fees owed. Carlton House did not have a witness to authenticate the document and the bankruptcy court determined that, without admissible evidence, Carlton House was “in violation of the show cause order.” Feb. 6, 2015 Hr'g Tr. 4:2, ECF No. 123. Further, the court ordered that “[t]he sale that is scheduled for Monday [February 9, 2015] is ordered to be stopped, and we will have a further hearingon whether additional sanctions are appropriate.” Id. at 4:3–5. The bankruptcy court further stated it was “perplexed” why “the condo association didn't just recertify the post-petition, post-discharge liens and proceed in a new [foreclosure] action and thereby making this not even an issue, as opposed to moving forward under questionable circumstances and then not showing up.” Id. at 4:24–5:5. The hearing was continued to March 3, 2015.

The contempt hearing proceeded on March 3rd. Transactions relating to the ownership of the Condominium from June 2007, when Jackson acquired it, were reviewed. Exhibit...