Onyeabor v. Centennial Pointe Owners Ass'n & Lebr Assocs., LLC (In re Onyeabor)

• Decision Date: 06 March 2013
• Docket Number: Bankruptcy No. 11–24746.,BAP No. UT–11–117.
• Parties: In re Miriam ONYEABOR, Debtor. Miriam Onyeabor, Appellant, v. Centennial Pointe Owners Association and Lebr Associates, LLC, Appellees.
• Court: Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit

487 B.R. 599

In re Miriam ONYEABOR, Debtor.Miriam Onyeabor, Appellant,

v.Centennial Pointe Owners Association and Lebr Associates, LLC, Appellees.

BAP No. UT–11–117.

Bankruptcy No. 11–24746.

United States Bankruptcy Appellate Panel

of the Tenth Circuit.

March 6, 2013.

OPINION TEXT STARTS HEREAppeal from the United States Bankruptcy Court for the District of Utah.

Before MICHAEL, ROMERO, and TALLMAN¹, Bankruptcy Judges.

OPINION ^*

ROMERO, Bankruptcy Judge.

Debtor Miriam Onyeabor appeals the Bankruptcy Court's order converting her Chapter 13 case to a Chapter 7 pursuant to 11 U.S.C. § 1307(c)² and the order denying reconsideration of that order. Debtor contends the Bankruptcy Court erred in converting her case to a Chapter 7 when it (1) mooted her objection based on a single creditor's standing to file a proof of claim filed jointly with another creditor, and (2) concluded her Chapter 13 petition and plan had not been filed in good faith. After careful review of the record and arguments in this matter, we AFFIRM both orders.³

I. Facts

Centennial Pointe Park is a commercial planned unit development consisting of seven adjacent lots located in Salt Lake City, Utah.⁴ On April 19, 2000, Centennial Pointe Park's developer, Centennial Pointe, LLC, recorded a Declaration of Covenants, Conditions and Restrictions (the “CC & Rs”) with the applicable county registrar.⁵ The CC & Rs require each lot owner to pay a pro-rata share of common area expenses as assessed by Centennial Pointe's Property Owner's Association (the “POA”) and permit the POA to lien property for unpaid assessments.⁶ In August of 2000, Centennial Pointe, LLC unilaterally amended the CC & Rs to clarify and refine certain definitions contained in them which were unclear and recorded them with the applicable county registrar on August 24, 2000 (the “Restated CC & Rs”).⁷

Centennial Pointe, LLC sold: Lot 1 to Debtor on April 24, 2000 ⁸; Lots 4, 5, 6 and 7 to Paul Bezdjian, a nonparty, in August or September, 2000; Lot 2 to Debtor on September 28, 2000; and Lot 3 to LEBR Associates, LLC (“LEBR”) on November 24, 2000.⁹ Bezdjian sold Lots 4, 5, 6 and 7 to LEBR in 2003. ¹⁰

Debtor ceased paying the POA's assessments against her lots in October 2002. ¹¹ In 2004, the POA and LEBR ¹² (collectively “Appellees”) filed suit against Debtor in state court for unpaid POA assessments incurred during the past two years (the “First State Action”).¹³ Debtor countersued, seeking (1) a declaration that she owned her commercial property free and clear of the CC & Rs and (2) damages against Bruce Raile, an officer of LEBR and the POA's Trustee, for, inter alia, fraud, assault, trespass, and intentional infliction of emotional distress.¹⁴ The parties filed cross-motions for summary judgment. The state court granted judgment in favor of the POA only, and awarded it damages, interest to date, attorney's fees, and costs totaling $95,213.70, plus interest at the judgment rate of 6.99% from and after the date of entry (the “Judgment”).¹⁵ The state court held, inter alia, that:

(1) The Restated CC & Rs are valid and encumber the entire Centennial Pointe Development, including Lots 1 and 2 owned by Debtor.¹⁶

(2) Debtor had actual notice of the Restated CC & Rs by virtue of the fact that she received title work, followed by a policy of title insurance for Lot 2 that expressly disclosed that Lot 2 was encumbered by the Restated CC & Rs. ¹⁷

(3) Debtor had record notice of the Restated CC & Rs as the Special Warranty Deed from Centennial Pointe to Debtor for Lot 2 expressly states that Centennial Pointe's conveyance to her was subject to any restrictions of record.¹⁸

(4) Debtor, through her conduct and participation in the POA, has ratified the Restated CC & Rs.¹⁹

(5) Centennial Pointe, LLC had the authority to amend the CC & Rs. The Restated CC & Rs were validly adopted according to the procedures set forth in the CC & Rs, and the Restated CC & Rs are consistent with the general plan and scheme of Centennial Pointe as reflected in the CC & Rs.²⁰

(6) Both sets of CC & Rs provided for an owners' association empowered to levy assessments for maintenance of Centennial Pointe's common areas and to lien property for unpaid assessments.²¹

(7) Debtor failed and refused to pay her pro rata share of Centennial Pointe's common expenses. Debtor ceased paying her Centennial Pointe assessments in October 2002.²²

(8) The POA is entitled to its attorney's fees incurred in prosecuting this action and defending against Debtor's counterclaims and third-party claims. ²³

(9) The POA is entitled to judgment in the amount of $18,749.87 for past due and owing assessments and $5,081.14 accrued as interest, calculated at the rate of 18% per annum.²⁴

(10) The POA is awarded its reasonable attorney's fees in the amount of $68,294.50 and its costs in the amount of $3,088.19, for a combined total of attorney's fees and costs in the amount of $71, 382.69.²⁵

(11) Debtor's claims for intentional infliction of emotional distress, fraud, trespass, and assault are dismissed with prejudice.²⁶

Debtor appealed the Judgment. The Utah Court of Appeals affirmed the Judgment. The Utah Supreme Court denied Debtor's writ for certiorari of the Utah Court of Appeals' decision. Likewise, the United States Supreme Court denied Debtor's petition for writ of certiorari and her motion for rehearing on the denial of certiorari.

In September 2010, the state court presiding over the First State Action entered a judgment in favor of the POA for an additional $7,916.11 (the “Additional Judgment”).²⁷ The Additional Judgment was for attorney's fees incurred by Appellees to remove a lien Debtor wrongfully filed on LEBR's property.²⁸

In October 2010, Appellees commenced an action to foreclose upon liens that accrued for assessments incurred post-Judgment (the “Second State Action”). ²⁹ Debtor filed a motion to dismiss and argued, inter alia, that this second action was duplicative of the First State Action and again challenged the Restated CC & Rs' validity and Appellees' standing to sue for POA assessments.³⁰ The state court denied Debtor's motion to dismiss. ³¹

In March 2011, the state court denied Debtor's motion to stay execution of the Judgment.³² Debtor then filed a Chapter 13 petition on April 5, 2011 (the “Petition”). She filed a Chapter 13 plan on April 21, 2011 (the “Plan”), proposing to pay $445 per month to the Chapter 13 Trustee for 60 months until the completion of the Plan and unspecified monthly payments directly to the following creditors: America First Credit Union, HSBC/MS, and Jason Nielson. ³³ The Plan contained no mention of the Judgments or debts owed for prepetition property taxes.

The Plan drew a number of objections, including one each from the standing Chapter 13 Trustee and Appellees. The Chapter 13 Trustee complained about missing information, procedural violations, and improper deductions. ³⁴ Specifically, the Chapter 13 Trustee alleged Debtor failed to provide him, inter alia, with: (1) profit and loss statements for all self-employment income earned during the sixty days prior to the petition date, (2) a business questionnaire for a business operated during the sixty days prior to the petition date, (3) the profit and loss statements used to calculate the Current Monthly Income on Form 22C; and (4) a breakdown of all rental income received for each separate property and all expenses associated with the property. Appellees objected to the Plan, stating: (1) the Petition and Plan were not filed in good faith; (2) the Plan did not provide for payment of Appellees' secured claim; (3) the Plan failed to provide that Appellees would retain their lien against Debtor's property; and (4) the Plan was not feasible as Debtor could not make the payments due under the Plan.³⁵

Appellees jointly ³⁶ filed a proof of claim on May 4, 2011 (“POC # 7”), asserting a secured claim of $385,097.07.³⁷ Debtor objected to POC # 7, contesting the amount of the claim and its secured status, and challenging LEBR's standing to assert the claim.³⁸ She complained that since obtaining the Judgment and Additional Judgment in the total amount of $124,351.23, LEBR has liened and attempted to execute on all of her properties, without regard to the value of its claim. She points out that LEBR's claim inexplicably rose from $110,402.68 as of January 2010, to $230,461.92 as of September 2010.³⁹

In August 2011, Appellees filed a motion to dismiss or, in the alternative, to convert Debtor's bankruptcy case to a case under Chapter 7 for cause under § 1307(c) (the “Motion to Convert”) ⁴⁰ and a motion for relief from stay (the “RFS Motion”).⁴¹ On October 6, 2011, the Bankruptcy Court held a hearing to consider three matters: (1) the Motion to Convert, (2) the RFS Motion, and (3) Debtor's Objection to POC # 7. Debtor attended the hearing with her counsel Lou Harris. While trying to ascertain what exhibits were admissible without foundation, the Bankruptcy Court admonished Debtor's counsel:

Mr. Harris, the Court is not going to indulge conferences between you and your client during the hearing. It disrupts the procedures, it disrupts the ECRO proceeding, and that's not how court is conducted. Attorneys converse with the Court. They don't go back to the table and get information from their clients.⁴²

The Bankruptcy Court also instructed the parties that the evidentiary focus should be on whether the Petition and Plan had been filed in good faith. Mr. Harris then advised the court that Debtor wished to proceed pro se and he had been relieved of his responsibilities as her attorney.⁴³ The Bankruptcy Court excused Mr. Harris, and Debtor proceeded pro se. Debtor cross-examined Appellees' witness and presented exhibits for admission. After the completion of testimony, the Bankruptcy Court granted Appellees' motion to convert (the “Conversion Order”) and mooted Debtor's objection to POC # 7.⁴⁴

Shortly thereafter, Debtor filed a motion to alter or amend the Conversion Order.⁴⁵...