In re Moore

• Citation: 290 B.R. 851
• Decision Date: 25 March 2003
• Docket Number: No. 01-04010-TBB-13.,No. 01-04380-TBB-13.,01-04380-TBB-13.,01-04010-TBB-13.
• Parties: In the Matter of Erica Denise MOORE, Debtor. In the Matter of Maxine M. Daniels, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama

290 B.R. 851

In the Matter of Erica Denise MOORE, Debtor In the Matter of Maxine M. Daniels, Debtor.

No. 01-04380-TBB-13.

No. 01-04010-TBB-13.

United States Bankruptcy Court, N.D. Alabama, Southern Division.

March 25, 2003.

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Kenneth Lay, Legal Services of Metro Birmingham, Inc., Birmingham, AL, for Debtors.

Bobby J. Hornsby, Law Offices of Bobby J. Hornsby and Associates, Birmingham, AL, for Farrington Apartments.

MEMORANDUM OPINION

THOMAS B. BENNETT, Bankruptcy Judge.

I. The Universe

Modification of the automatic stay of § 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a), with respect to two residential leases of real property, and each's assumability under § 365 of the Bankruptcy Code, 11 U.S.C. § 365, are subsets of the universe of facts and legal challenges raised in different Chapter 13 cases. One of the Chapter 13 cases involving one of the leases is that of Erica Denise Moore (hereinafter sometimes "Moore"). The other is that of Maxine M. Daniels (hereinafter sometimes "Daniels"). Also at issue is which of differing interpretations is proper, one which is federalistic in approach or another which is centralistic, for ascertaining whether a lease of residential real property ended under state law pre-bankruptcy is property of the estate under §§ 541(a) & 1306(a) of the Bankruptcy Code, 11 U.S.C. §§ 541(a) & 1306(a), which may be assumed under § 365(a) & (d) of the Bankruptcy Code, 11 U.S.C. § 365(a) & (d). The federalistic methodology looks to state law to ascertain what interests in property exist at the time of the commencement of a bankruptcy case. Then, whether property of the estate exists or not under 11 U.S.C. §§ 541(a) & 1306(a) is governed by these Bankruptcy Code sections. In contrast to this method of locating the existence of property of the estate, the centralistic approach utilizes (i) variations of a statutory maxim, expressio unius est exclusio alterius, and a linguistic interpretative device, the plain meaning rule, coupled with (ii) interpretation of one or more of two non-property of the estate subsections of the Bankruptcy Code, 11 U.S.C. §§ 362(d)(10) & 365(c)(3), and one property of the estate excluding subpart of the Bankruptcy Code, 11 U.S.C. § 541(b)(2), and (iii) an analogy to a generalized rule for when a mortgagor loses the right to cure a default to conclude that a residential lease of real property terminated under state law before one's bankruptcy case is filed is property of the estate in a consumer-debtor's bankruptcy case. Essentially, the centralistic view for how one finds the existence of a residential lease of real property within 11 U.S.C. §§ 541(a) & 1306(a) is use of the Bankruptcy Code to modify in some cases the state law based determination of what property interests one possessed at the point when a bankruptcy case is started.

In both the Daniels and Moore cases, the pivotal legal issue is the existence or not of a residential lease of real property. What is not before this Court in either the Daniels or Moore matters is their continued entitlement to participate in the government rent subsidy program utilized to pay each's rent to a non-governmental entity, Farrington Apartments.

II. The Landscape

Under the provisions of Title 24 of the Code of Federal Regulations, 24 C.F.R. §§ 880 — 891 (2001), the United States Department of Housing and Urban Development (hereinafter sometimes "HUD") pays subsidies, referred to as rent assistance, to landlords for qualified low income tenants who otherwise could not pay the full amount of the rent for a residential property.¹ In each of the cases before this Court, a privately owned apartment is the rented residential property. Under HUD's regulations, the landlord of such privately owned properties is required to determine the income of the rent assisted tenant. It is the income level, among other factors, which is used to determine the portion of the rent to be paid by the tenant and the part subsidized by the United States. Farrington Apartments, the landlord in both cases, has just this type of subsidized rental arrangement with HUD regarding two of its tenants, Daniels and Moore.

One source for a landlord participating in HUD's assisted rent program, indeed the primary one in many cases, for obtaining income information regarding a tenant is from the tenant. It is the reliability of the source — rather, the lack thereof — which is a major, contributing cause of the landlord-tenant disputes involving Farrington Apartments, Daniels, and Moore.

A. Daniels's Premises

On June 21, 2001, Maxine M. Daniels filed her bankruptcy petition under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 1301 et seq. Ms. Daniels has been a recipient of housing assistance under Section 8 of Title 24 of the Code of Federal Regulations, 24 C.F.R. § 882 (2001). She leased an apartment from Farrington Apartments for an initial period of one year commencing on August 1, 1997, and ending August 1, 1998. Unless terminated, the lease is automatically extended for successive terms of one year.

Based on what Maxine Daniels reported her income to be, the United States paid one hundred percent (100%) of her rent plus additional monies in the form of a monthly utility allowance. After commencement of her tenancy, Farrington Apartments discovered that Ms. Daniels had not accurately reported her income. It was greater than she disclosed.

Under the terms of the lease, Farrington Apartments is permitted to increase the portion of the rent paid by Ms. Daniels should her income increase or be greater than disclosed. The portion she could be required to pay is up to the full amount of the HUD approved market rate of rent. Despite her obligation to timely disclose the true amount of her income, Ms. Daniels did not. For the time during which she was not entitled to the amount of the subsidy received, Farrington Apartments recalculated the rent to be paid by Ms. Daniels and notified her that she owed rent retroactively for the period from March 1, 1999, through February, 2001, ("Retroactive Rent") based on newly discovered information which revealed the correct amount of her income for this period.

The Retroactive Rent was not paid. As a result, on April 3, 2001, Ms. Daniels received written notification that both the lease with Farrington Apartments and her tenancy rights thereunder were terminated for failure to pay the Retroactive Rent. The notice sets forth that the lease and the tenancy terminate ten days from its receipt and that the termination was based on her default in payment of rent. Although it does not specify that it is Retroactive Rent, this fact was known to Daniels and so was the fact that her not having previously paid any rent meant that the notice could only refer to the Retroactive Rent.² The notice also contains information required under the terms of the lease and HUD's regulations including her right to request and meet with representatives of Farrington Apartments before the effective date of the ending of the lease. So long as done according to the terms of the lease, which incorporates compliance with state law and HUD regulations, the ending of her lease and tenancy rights thereunder was effective on April 13, 2001. The Daniels-Farrington Apartments lease does not by any contract provision allow its reinstatement after termination by payment of accrued, unpaid rent.

Because Ms. Daniels remained in the apartment, Farrington Apartments filed an unlawful detainer action against her in the Circuit Court of Jefferson County, Alabama. After the date of termination of the lease and Ms. Daniels's tenancy and before entry of a final judgment in the unlawful detainer action, Ms. Daniels filed her Chapter 13 case. What she seeks and believes she can do through the bankruptcy process is forestall — indeed preclude — the effective termination of her lease, the loss of her asserted tenancy rights, and the ending of her presence in the apartment. She has also sought to assume the lease under § 365(a) & (d) of the Bankruptcy Code, 11 U.S.C. § 365(a) & (d). Farrington Apartments' rejoinder to this is its motion requesting relief from the automatic stay under § 362(d) of the Bankruptcy Code, 11 U.S.C. § 362(d), to enable it to go forward with the unlawful detainer suit in which it seeks her removal from the apartment by judicial process. Its stay modification motion is predicated on the assertion that the lease, Ms. Daniels's tenancy and her possessory rights arising under the lease — which are to be distinguished from her mere presence in and on the premises³ — were ended before her bankruptcy filing.

B. Moore's Premises

On July 5, 2001, Ms. Daniels's daughter, Erica Denise Moore, started her bankruptcy case under the provisions of Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 1301 et seq. Ms. Moore leased an apartment from Farrington Apartments employing the identical form of lease as that in the Daniels — Farrington Apartments transaction. The initial term of the lease was from March 1, 1997, to March 1, 1998. Unless terminated, the lease is automatically extended for successive terms of one year.

Just like her mother, Ms. Daniels received housing assistance through HUD's program under section 8 of Title 24 of the Code of Federal Regulations, 24 C.F.R. § 882 (2001). Based on her reported income, the United States paid all the rent for Ms. Moore's apartment and also paid her a monthly utility allowance. Identical to what Ms. Daniels had done, Farrington Apartments discovered that Ms. Moore had not reported the full amount of her income for portions of the time she received government rental assistance. Therefore and pursuant to the provisions of the lease, Farrington Apartments exercised its right to increase Ms. Moore's rent for the periods during which Ms. Moore inaccurately reported her income. The outcome was that Ms. Moore was required to pay Retroactive Rent for the...