In re Soppick
| Decision Date | 28 August 2014 |
| Docket Number | Bankruptcy No. 13–16045. |
| Citation | 516 B.R. 733 |
| Parties | In re Joseph G. SOPPICK, Janet A. Soppick, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Roger V. Ashodian, Havertown, PA, for Debtors.
Three contested matters are presently before me, and they are related. The Borough of West Conshohocken (Borough), which holds an allowed secured claim against the debtors, seeks dismissal of their chapter 13 case. The Borough also seeks relief from the automatic stay to execute upon its state court judgment against these debtors. The debtors not only oppose any relief sought by the Borough, they seek relief from the bankruptcy stay to prosecute a state court appeal from the Borough's judgment against them, albeit with the stay remaining in place against the Borough.
Evidentiary hearings have been held over four days, posthearing memorandum have been submitted, and these contested matters are ripe for determination. As will be discussed, these motions are just the latest disputes between these parties since they began in 1996.
The following facts were proven at trial and will be set forth in narrative form.
The Borough's secured claim arises from a judgment entered against the debtors in the Montgomery County Court of Common Pleas, dated March 18, 2013, and in the amount of $130,500.00. See ex. M–3. The seeds for this judgment were planted in June 1996, when the debtors filed a permit application with the Borough to construct an attached garage on their property located on Moir Avenue in West Conshohocken Borough, Pennsylvania. See Soppick v. Zoning Hearing Board of the Borough of West Conshohocken, 2008 WL 9405108, at *1 (Pa.Cmwlth. Feb. 19, 2008).
Although the debtors' initial permit request was denied, an amended permit request was granted. In June 1996, the debtors received permission from the Borough to construct a one-story, detached, 950 square-foot garage, with a breezeway connecting the garage to their residence. They were directed to complete this construction by the end of 1997. Id., at *1.
In April 1999, the debtors' property was inspected by a zoning officer who found that the debtors were then constructing a 1173 square-foot, two-story, attached garage, and not the structure that had been authorized in 1996. Upon observing the nonconforming nature of the building, the zoning officer then issued a cease and desist order with the possibility of fines as a sanction. Id., at *1. Thereafter, over the years the debtors, without success, challenged this cease and desist order, the initial $7,038.50 fine, see ex. M–27, as well as the subsequent $300 per day fine issued on June 19, 2007, in the Borough Council, the Borough's Zoning Hearing Board, in the Pennsylvania Court of Common Pleas, in Pennsylvania's Commonwealth Court, in Pennsylvania's Supreme Court, in the District Court for the Eastern District of Pennsylvania, and in the Third Circuit Court of Appeals. See 2004 WL 739945 (E.D.Pa. Mar. 8, 2004) ; 118 Fed.Appx. 631 (3d Cir.2004) ; 902 A.2d 1025 (Pa.Cmwlth.2006) ; 590 Pa. 671, 912 A.2d 840 (2006) ; 943 A.2d 1028 (Pa.Cmwlth.2008) ; 2008 WL 9405108 (Pa.Cmwlth. Feb. 19, 2008) ; see also exs. M–4 (state court opinion dated May 2, 2013); M–27 (with attachments).1
In the latest state court ruling against the debtors, the Montgomery County Court of Common Pleas concluded in March 2013 that the debtors had accrued 435 days of fines, at $300 per day, before they cured the aforementioned zoning violation. Based upon Pennsylvania's Municipalities Planning Code, specifically 53 P.S. § 10617.2(a), the state court entered judgment in favor of the Borough on March 18, 2013. Exs. M–3, M–4. The debtors then filed another appeal to the Commonwealth Court on April 5, 2013, which appeal is still pending. See ex. M–2; M–31.
As the debtors had not requested a stay pending appeal of this monetary judgment, nor posted a supersedeas bond, the Borough began execution proceedings and scheduled a sheriff sale of the debtors' Moir Avenue realty for July 31, 2013. Ex. M–5. To prevent that sale from occurring, the debtors filed the above-captioned chapter 13 bankruptcy petition on July 9, 2013. N.T., June 25, 2014, at 9:442 ; see exs. M–6, M–9. That filing stayed both the Borough's scheduled execution sale as well as the debtors' Commonwealth Court appeal from the judgment. See 11 U.S.C. § 362(a) ; see also, e.g., Taylor v. Slick, 178 F.3d 698 (3d Cir.1999) ; Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448–49 (3d Cir.1982).
At the time of their bankruptcy filing, the debtors disclosed that their combined monthly income was only $1,088, with monthly expenses of $1,627.95. See ex. M–8 (including Bankruptcy Schedules I & J, filed August 8, 2013). This income was derived from Mr. Soppick's work as a self-employed mechanic and Mrs. Soppick's workers' compensation payments. Id. The debtors also disclosed, inter alia, that they had a personal injury lawsuit pending in state court, of “unknown” value. Id. (Bankruptcy Schedule B, # 21, filed on August 8, 2013).
On August 8, 2013, the debtors filed a proposed chapter 13 plan that called for them to make 48 monthly payments of $200 through August 2017, for a total of $9,600, plus a lump sum payment in September 2017 “to pay off the remaining balance of the Chapter 13 payment.” Ex. M–9, at 1. This proposed plan stated that the debtors “will pay the entire allowed claim of the Boro [sic] of West Conshohocken, as ultimately determined by the Court through claim litigation, from payments to the Trustee.” Id., at 2. The source of that lump sum payment was not specified in this proposed plan, nor was the amount to be paid. Id.
The chapter 13 trustee, the Borough, Wells Fargo Bank and the Internal Revenue Service filed objections to the confirmation of this plan. Ex. M–7 (docket entries 40, 41, 48, 49); ex. M–10. After numerous postponements, a confirmation hearing was held on April 1, 2014, at which time confirmation of the August 2013 plan was denied. Ex. M–7 (docket entry # 53).3
After confirmation was denied in April 2014, the disputes in this court between the debtors and the Borough became numerous. The Borough sought an examination of the debtors under Bankruptcy Rule 2004, which the debtors opposed. Ex. M–7 (docket entries 50, 62). The debtors filed the instant motion for “limited” relief from the bankruptcy stay under section 362(d)(1), requesting that they be permitted to prosecute their appeal of the March 18, 2013 judgment in the state Commonwealth Court, albeit while the stay remained in place against the Borough in order to prevent that creditor from executing upon its judgment. The Borough opposed such relief. See ex. M7 (docket entries 57, 61). The Borough countered with its own lift-stay motion, now also pending, to which the debtors objected. Id. (docket entries 73, 96).
The Borough discovered that on May 22, 2014, the debtors filed a petition in the state Court of Common Pleas to stay the Borough's prepetition writ of execution “pending the completion of the bankruptcy, the completion of the personal injury action, and the appeal filed in this matter.” Ex. M–25. The “personal injury action” concerns a state court lawsuit brought by the debtors against Emergency One, Inc.4 The Borough orally moved to strike this state court petition as violative of the bankruptcy stay, which request was granted. See docket entry # 103.
The debtors also filed a motion to avoid the Borough's judicial lien under section 522(f), which was opposed by the Borough. Id. (docket entries 85, 97). In addition, the debtors filed an objection to the Borough's proof of claim, to which objection the Borough responded. Id. (docket entries 100, 132). The Borough also filed the instant motion to dismiss this chapter 13 case.
On May 12, 2014, the debtors filed amended bankruptcy schedules pursuant to Bankruptcy Rule 1009(a), disclosing that in March 2014, Mr. Soppick became employed and that Mrs. Soppick was receiving a monthly “contribution from daughter.” Ex. M–21 (Amended Bankruptcy Schedule I). The debtors averred that in May 2014, their monthly income was now $6,293.23, and their monthly expenses were $5,593.95. Id. (Amended Bankruptcy Schedules J).
At a hearing on this contested matter, however, Mrs. Soppick acknowledged that, prior to May 2013, she stopped receiving monthly workers compensation payments because she accepted a $34,000 lump sum award. N.T., June 24, 2014 at 4:23–4:28; see also ex. M–21, (Amended Statement of Financial Affairs, # 4). As Mr. and Mrs. Soppick have been separated at least since the date of their bankruptcy filing, see ex. M–11 (), with Mrs Soppick residing in the Moir Avenue property, she uses her lump sum award to pay her current monthly expenses (but not her mortgage payments, as they are to be paid by Mr. Soppick) and was unwilling to use that money to fund a chapter 13 plan. N.T., June 24, 2014 at 4:28. Thus, the debtors' actual current combined monthly income does not include the $1,509 of workers compensation funds erroneously listed on their May 2014 amended Schedule I. See ex. M–21. Furthermore, no evidence was offered regarding the amount of this lump sum award that remained unspent by Mrs. Soppick as of June 24, 2014, when she testified.
Hence, the debtors' combined monthly income, as reported on their amended schedule of income, but excluding any monthly workers compensation payment, is approximately $4,785, which is less than their combined monthly expenses. Mr. Soppick testified that his employment income is understated on his amended bankruptcy schedule, because he expects to be earning overtime pay—as much as $350.00 per week extra—although such overtime work is not guaranteed. See N.T., June 25, 2014, at 9:15; July 3, 2014, at 9:32. He also hopes to increase his self-employment income.
I note, however, that he disclosed self-employment...
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