Phoenician Mediterranean Villa, LLC v. Swope

• Decision Date: 27 July 2016
• Docket Number: CIVIL ACTION NO. 3:15-268
• Citation: 554 B.R. 747
• Parties: Phoenician Mediterranean Villa, LLC, Appellant, v. Lisa M. Swope, James Focht, and J & S Properties, LLC, Appellees.
• Court: U.S. District Court — Western District of Pennsylvania

554 B.R. 747

Phoenician Mediterranean Villa, LLC, Appellant

v.Lisa M. Swope, James Focht, and J & S Properties, LLC, Appellees.

CIVIL ACTION NO. 3:15-268

United States District Court, W.D. Pennsylvania.

Filed July 27, 2016

Mary Bower Sheats, Frank, Gale, Bails, Murcko & Pocrass, P.C., Pittsburgh, PA, for Appellant.

Lisa M. Swope, Neugebauer & Swope, P.C., Ebensburg, PA, pro se.

Gary Francis Seitz, Gellert Scali Busenkell & Brown LLC, Philadelphia, PA, for Appellees.

James Focht, Altoona, PA, pro se.

MEMORANDUM OPINION AND ORDER

KIM R. GIBSON

, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

This matter comes before the Court on Appellant's Notice of Appeal of the Bankruptcy Court's October 5, 2015, memorandum opinion (ECF No. 1-3) and order (ECF No. 1-2) granting a motion to dismiss the complaint against Trustee Lisa M. Swope individually. Appellant appealed the Bankruptcy Court's decision on October 15, 2015, (ECF No. 1), and filed a brief and an appendix in support of its appeal on December 27, 2015, (ECF Nos. 4, 5, 6). Trustee Swope filed her brief in opposition to Appellant's appeal on January 26, 2016, (ECF No. 8). Trustee Swope filed an amicus brief on February 2, 2016, (ECF No. 13), to which Appellant replied on February 9, 2016, (ECF No. 14). For the reasons set forth below, this Court will deny Appellant's appeal and will affirm the Bankruptcy Court's decision granting the motion to dismiss the complaint against Trustee Swope.

II. JURISDICTION

This Court has jurisdiction to hear appeals from the Bankruptcy Court pursuant to 28 U.S.C. § 158(a)

, which provides:

The district courts of the United States shall have jurisdiction to hear appeals (1) from final judgments, orders, and decrees ... of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving.

28 U.S.C. § 158(a)

. The appeal in this case is taken from the decision rendered by the Bankruptcy Court of the Western District of Pennsylvania. This Court therefore has jurisdiction to hear the appeal from the Bankruptcy Court's decision. See

In re Michael , 699 F.3d 305, 308 n. 2 (3d Cir.2012) (“[A] district court sits as an appellate court to review a bankruptcy court.”); see also

In re Professional Management , 285 F.3d 268 (3d Cir.2002) (a district court's jurisdiction is proper as to an appeal of the final order of the bankruptcy court under 28 U.S.C. § 158(a) ).

III. BACKGROUND

A. Factual Background

The Court adopts the facts as set forth in the Bankruptcy Court's October 5, 2015, memorandum opinion. (See ECF No. 1-3.) After J & S Properties, LLC filed a Chapter 7 bankruptcy petition on July 10, 2013, Trustee Swope was appointed as the Chapter 7 Trustee. (Id. at 2.) From July 10, 2013, through at least January 15, 2014, Appellant was in possession of its leasehold located at 1302-08 Logan Boulevard, Altoona, Pennsylvania (“the Estate Property”). (Id. at 2–3.) Through a court order dated November 5, 2013, Trustee Swope rejected the lease agreement because she desired to sell the Estate Property. (Id. at 3.) Until the order was issued, Appellant refused to cooperate with the Trustee Swope's attempts to place a “for sale” sign to market the sale of the Estate Property to the general public. (Id. )

Through its principal, Husam Obeid, Appellant indicated that it was interested in purchasing the Estate Property at a price that Trustee Swope believed was below its market value. (Id. ) Appellant also wished to remove items of personal property from the leasehold. (Id. ) Trustee Swope objected because the Bankruptcy Court had not yet made findings regarding the ownership of the assets. (Id. at 4.)

At a January 24, 2014, hearing regarding Appellant's request for injunctive relief, Trustee Swope testified that Mr. Focht had informed her that the restaurant was shut down and that he was concerned about the heat at the premises. (Id. ) Mr. Focht also notified Trustee Swope that insurance had been cancelled at the premises. (Id. ) Trustee Swope met with Mr. Obeid, Mr. Obeid's counsel, and a contractor invited by Mr. Focht at the premises on January 3, 2014, so that the Estate Property could be adequately preserved during a forecasted artic blast. (Id. ) Trustee Swope testified that Mr. Obeid did not dispute that he was considering closing his business, buying the building, or purchasing other property to house his restaurant. (Id. ) Although the Bankruptcy Court had not yet reached a decision regarding the ownership of the assets, Mr. Obeid was adamant that all of the property inside the premises belonged to him. (Id. at 4–5.)

During this time, Trustee Swope did not have a key to the premises. (Id. at 5.) In addition, Mr. Focht and Mr. Obeid did not trust each other. (Id. ) Because Mr. Obeid was concerned that Mr. Focht would take his property, he requested that Mr. Focht not have access to the premises. (Id. ) Mr. Focht had taken action to make business operations difficult for Appellant. (Id. ) For example, Mr. Focht, who owned a neighboring building and adjacent parking lot, placed concrete barriers in the adjacent parking lot. (Id. ) Trustee Swope felt that she needed to protect the bankruptcy estate's largest asset but was in the middle of Mr. Focht and Mr. Obeid's dispute. (Id. )

At the January 3, 2014, meeting, Mr. Obeid provided Trustee Swope with a key to the premises, and the contractor suggested that the temperature be set at sixty degrees Fahrenheit to prevent the pipes from freezing. (Id. ) Despite the contractor's suggestion, Mr. Obeid set the thermostat at some temperature less than sixty degrees Fahrenheit. (Id. at 6.) By January 13, 2014, the Estate Property was flooded when the pipes burst. (Id. ) After the flood, Mr. Obeid contacted a disaster restoration company, ServiceMaster. (Id. ) ServiceMaster refused to remediate the premises because there were problems with insurance coverage, the relationship between the parties was acrimonious, and no one agreed to provide the company with a lien on the Estate Property for coverage of any unpaid fees. (Id. )

Trustee Swope requested that the parties meet at the premises on January 15, 2014, to assess the situation and to determine the status of insurance. (Id. ) Mr. Obeid and his counsel did not appear at the meeting. (Id. ) Through his counsel, Mr. Obeid requested that the meeting be rescheduled and stated that he did not want Mr. Focht on the premises because he believed that Mr. Focht would take his property. (Id. ) Trustee Swope declined Mr. Obeid's request to reschedule the meeting and attempted to inspect the premises. (Id. at 7.) However, Trustee Swope was unable to access the premises because an interior door was locked, and Mr. Obeid had not provided her with a key to this additional door. (Id. ) Mr. Focht had the locks changed and provided Trustee Swope with the key. (Id. )

Trustee Swope maintained control of the premises and only provided parties-in-interest with supervised access to the property while it was being remediated and while disputes regarding the ownership of personal property were resolved. (Id. ) Because the locks were changed and Trustee Swope possessed the sole key, Appellant has claimed that it was wrongfully evicted from its leasehold. (Id. at 2, 7.) On April 7, 2015, Trustee Swope filed a motion to dismiss the complaint against her, seeking to have the complaint dismissed on the grounds of quasi-judicial immunity. (Id. at 8.) The Bankruptcy Court took judicial notice of the evidentiary record made at several hearings before it and permitted the parties to file supplemental briefs and affidavits. (Id. )

B. The Bankruptcy Court's Decision

The Bankruptcy Court first clarified that the Barton

doctrine, established by the Supreme Court in Barton v. Barbour , 104 U.S. 126, 128, 26 L.Ed. 672 (1881), and 28 U.S.C. § 959(a) were inapplicable. (Id. at 10.) After summarizing the Barton doctrine and 28 U.S.C. § 959(a), the Bankruptcy Court found that Appellant had incorrectly characterized Trustee Swope's activities as carrying on business connected with the bankruptcy estate. (Id. at 11–13.) Specifically, the Bankruptcy Court explained that 28 U.S.C. § 959(a) is inapplicable when a bankruptcy trustee acts in his or her official capacity and conducts no business connected with the property other than to perform administrative tasks related to the consolidation, preservation, and liquidation of assets in the debtor's estate. (Id. at 13–14.) The Bankruptcy Court found that Trustee Swope was not conducting any business connected with the property. (Id. at 14.) After noting that the Barton doctrine presents jurisdictional questions and requires courts to determine where, not whether, a trustee may be sued, the Bankruptcy Court reiterated its previous holding that the Barton doctrine is inapplicable to this matter because Appellant was not seeking approval to proceed in another forum. (Id. at 14–16.)

In analyzing whether Appellant's claims of wrongful eviction were subject to the doctrine of qualified immunity, the Bankruptcy Court explained that, pursuant to Antoine v. Byers & Anderson , 508 U.S. 429, 113 S.Ct. 2167, 124 L.Ed.2d 391 (1993)

, it must: (1) examine the immunity historically accorded to the relevant official at common law and the interests behind it; and (2) determine whether the official's judgments involve the exercise of a discretionary judgment and are therefore “ ‘functionally comparable’ ” to those of judges. (Id. at 20 (quoting Antoine , 508 U.S. at 436, 113 S.Ct. 2167 ).) Relying upon Curry v. Castillo , 297 F.3d 940 (9th Cir.2002), the Bankruptcy Court provided an overview of the application of the first prong, stating that bankruptcy trustees are entrusted with administrative and adjudicatory functions and that immunity is warranted to the extent that a trustee performs the functions of a...