In re Potter
| Decision Date | 30 September 2021 |
| Docket Number | 11-40237 JNP (JNP) |
| Parties | In re: MARGUERITE POTTER, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
The issues before the Court arise from litigation pending before the United States District Court for the District of New Jersey. The District Court referred the matter to this Court for consideration of whether it is appropriate to retroactively annul the automatic stay in Marguerite Potter's ("Debtor") Chapter 13 Bankruptcy.[1] After this Court sua sponte reopened this bankruptcy case, the Cumberland County Prosecutor's Office and Sherriff s Department (collectively "Cumberland County") filed a motion and joinder respectively, seeking relief from the automatic stay (the "Stay Motion"). Following that, the parties filed several other motions all related to reopening of this case and the Stay Motion. For the reasons set forth below, this Court will grant all the relief sought by Cumberland County and deny all relief sought by Debtor and her son, Kevin Potter (collectively, the "Potters").
For a full recitation of the factual background, see the District Court Opinion and the District Court Order. Dkt. No. 22. The factual findings of the District Court Opinion and its references to factual and legal conclusions of the United States Bankruptcy Court for the Middle District of Florida ("Florida Bankruptcy Court") are incorporated here. The Florida Bankruptcy Court's factual findings apply to this case under the doctrine of collateral estoppel.
Debtor repeatedly stated the doctrines of full faith and credit, res judicata, collateral estoppel, and equitable estoppel apply to prevent this Court from re-opening her bankruptcy case but made no substantive argument why these doctrines apply. In any event, Debtor's reliance on these doctrines is misplaced. Such doctrines are utilized to prevent relitigating claims or issues, and to respect final judgments. Here, to the extent any of these doctrines apply, they would strengthen Cumberland County's position because all relevant decisions in the Florida Bankruptcy Court went against the Potters.
In 2009, Mr. Potter filed for Chapter 7 Bankruptcy relief in the Florida Bankruptcy Court. Among the issues before the Florida Bankruptcy Court was ownership of real property located at 13104 West Buckschutem Road, Millville, New Jersey (the "Property"). Mr. Potter claimed he had no assets and the Property was deeded to Delmarva Enterprises; a business entity owned by Debtor. District Court Opinion at 3. The Florida Bankruptcy Court determined that Mr. Potter transferred the Property to Delmarva Enterprises shortly before filing his petition. Id. Shortly after that decision, the Florida Bankruptcy Court avoided the transfer and placed title to the Property within Mr. Potter's bankruptcy estate to be administered by the Chapter 7 trustee in Mr. Potter's case. Altaian v. Potter, Adv. No. 09-ap-00244 (Bankr. M.D. Fla.) Dkt. No. 32.[2] On My 11, 2011, the Florida Bankruptcy Court entered an order directing the Potters to vacate the Property. Upon the Potters violating that order, the Chapter 7 trustee in Mr. Potter's bankruptcy case filed an ejectment action in the Superior Court of New Jersey. The day before the scheduled eviction Debtor filed her Chapter 13 petition in this Court on October 19, 2011 (the "Petition Date"). The next day the Potters were evicted from the Property. Debtor's bankruptcy case was dismissed without discharge on November 23, 2011, for failure to file a complete petition.
Six years later, Debtor filed the District Court Case claiming, among other things, Cumberland County violated the automatic stay because the Property was part of her bankruptcy estate. The District Court initially concluded it lacked subject matter jurisdiction because bankruptcy courts have exclusive jurisdiction to hear willful violation of stay actions. The District Court denied the Potters' motion to compel the District Court to transfer the matter to this Court, On appeal, the Third Circuit vacated the District Court's orders. The Third Circuit reasoned the Potters' claim that Cumberland County violated the stay by seizing the Property is foreclosed by the Florida Bankruptcy Court's order, but Debtor may have a claim against Cumberland County for violating the stay based upon the seizure of Debtor's personal property.
On remand, the parties engaged in motion practice before the District Court, including a motion by Cumberland County to retroactively annul the automatic stay. Part of the District Court's decision was to refer Cumberland County's motion for stay relief to this Court. See District Court Opinion at 22-23 (citing 28 U.S.C. § 157(a)), District Court Order. The District Court also found Mr. Potter lacked standing. Id. at 13 n.4.
Upon referral, this Court sua sponte re-opened Debtor's bankruptcy case solely to consider whether stay relief was appropriate. Cumberland County then filed the Stay Motion arguing Debtor filed for bankruptcy relief in bad faith in an effort to frustrate the Florida Bankruptcy Court's orders and to delay the lawful transfer of possession of the Property to the Trustee. Dkt, No. 25. Cumberland County requests this Court to not condone such abuse of the judicial system and therefore annul the stay. Id.
In response, the Potters filed an objection and cross-motion as self-represented respondents (the "Joint Objection"). Dkt. No. 21.[3] The Potters argue the District Court was without jurisdiction or authority to refer this matter to this Court, and it is Debtor's "absolute right" to petition for Chapter 13 relief and "retain" her automatic stay rights. The Potters argue this Court must uphold its final decree entered November 30, 2011, rescind its sua sponte re-opening of the case claiming it violated their due process rights, and remand the issue back to the District Court. They further argue that Debtor filed this bankruptcy petition in good faith, retroactively annulling the stay should be done only in extreme circumstances, and 28 U.S.C. § 157 may not be used to evade justice or compliance with preclusive effects of the doctrines of res judicata, collateral estoppel, full faith and credit, and equitable estoppel.
Cumberland County then filed a motion to strike the Joint Objection as it pertains to Mr. Potter (the "Motion to Strike") because he is not a party to this case and therefore lacks standing; the District Court previously dismissed his claims; and he is not an attorney able to represent Debtor. Dkt. No. 28.
Debtor and Mr. Potter later independently filed seemingly identical opposition briefs which oppose the re-opening of the bankruptcy case. Dkt. Nos. 31-32. On that same day, they also filed (again, seemingly identical) motions to vacate re-opening of the bankruptcy case and cross-motions to remand the case back to the District Court. Dkt. Nos. 33-34. The four motions merely rehash the arguments raised in the Joint Objection.
At a hearing on January 7, 2021 (the "Hearing"), this Court swore-in the Potters and notified them that any factual statements made would be considered testimony. The Potters each made many factual statements but both lacked credibility. It was evident throughout the Potters' pleadings and statements during the Hearing that they would say whatever they believed would be helpful in that instance, without regard to the truth of that statement.[4] Moreover, the arguments in their pleadings and at the hearing were largely frivolous. For instance, the Potters previously requested Judge Kugler refer the case to this Court and now oppose this Court considering stay relief and argue this Court lacks jurisdiction to hear the case.
There are numerous sub-issues related to whether this Court should retroactively annul the stay. However, it is important to note that the District Court Order referred only one issue to this Court - Cumberland County's motion to retroactively annul the automatic stay. Dkt. 22. For the reasons discussed below the Court will annul the stay, effective on the Petition Date.
Debtor argues this Court lacks jurisdiction over the case and the District Court did not have authority to refer the issue of retroactive annulment of the stay to this Court. However, 28 U.S.C. § 157(a) allows a district court to refer any or all proceedings related to a case under Title 11 to the bankruptcy court. See 28 U.S.C. § 157(a). The issue referred by the District Court directly relates to a bankruptcy case - whether the stay should be annulled. In fact, it is among the core proceedings specifically enumerated in section 157(b)(2) of the Judicial Code, which provides "core proceedings include . . . motions to terminate, annul, or modify the automatic stay." 28 U.S.C. § 157(b)(2)(G) (emphasis added). Moreover, prior to referral of the issues presently before the Court, this Court had jurisdiction over Debtor's bankruptcy case under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 23, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. Therefore, this Court has proper jurisdiction over this bankruptcy case and the issues presently before it. Venue is proper in this Court pursuant to 28 U.S.C. § 1408.
As a preliminary matter, the Court must address the Motion to Strike (which is effectively a motion to determine Mr. Potter lacks standing to assert a position or argue the issues presently before the Court). The Court reserved determining whether Mr. Potter has standing and allowed him to...
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