Seaport Capital Partners, LLC v. Speer (In re Speer)

• Citation: 618 B.R. 380
• Decision Date: 12 June 2020
• Docket Number: Case No.: 14-21007 (AMN)
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — District of Connecticut
• Parties: IN RE: Sheri SPEER, Debtor Seaport Capital Partners, LLC, Movant v. Sheri Speer, Respondent

618 B.R. 380

IN RE: Sheri SPEER, Debtor

Seaport Capital Partners, LLC, Movant

v.Sheri Speer, Respondent

Case No.: 14-21007 (AMN)

United States Bankruptcy Court, D. Connecticut, New Haven Division.

Signed June 12, 2020

Donna R. Skaats, Esq., 210 West Town Street, 2nd Floor, Norwich, CT 06360, Counsel for Movant, Seaport Capital Partners, LLC

Sheri Speer, 151 Talman Street, Norwich, CT 06360, Respondent/Debtor Proceeding Pro Se

Re: ECF No. 1121

MEMORANDUM OF DECISION AND ORDER DENYING MOTION FOR CONTEMPT

Ann M. Nevins, United States Bankruptcy Judge District of Connecticut

I. INTRODUCTION

Before the court is a motion filed by a secured creditor, Seaport Capital Partners, LLC ("Seaport") seeking to hold the Chapter 7 debtor, Sheri Speer ("Debtor"), in contempt for violating an Order¹ prohibiting her use of cash collateral ("Contempt Motion"). ECF No. 1121. Specifically, Seaport requests a sanction requiring the Debtor to pay $26,600.00 – an amount allegedly equal to rent received from April 2015 through August 2016 plus a security deposit including last month's rent for property located at 12 Rogers Avenue, Norwich, Connecticut ("Roger Avenue Property"). ECF No. 1158. After consideration of the docket of this case and the parties' evidentiary submissions and arguments, I find Seaport failed to meet its burden to show it is entitled to sanctions by clear and convincing evidence pursuant to 11 U.S.C. § 105(a).

II. PROCEDURAL HISTORY

The court assumes the parties' familiarity with the long and complicated history of this Chapter 7 case and provides only a brief summary of the events relevant to consideration of the Contempt Motion.

On May 20, 2014, creditors, Michael Teiger, M.D., SLS Heating, LLC, and Clipper Realty Trust commenced this bankruptcy case by filing an involuntary Chapter 7 petition (the "Involuntary Petition") against the Debtor. The court (Dabrowski, J.) granted Seaport's motion to join the Chapter 7 case a co-petitioning creditor, but excluded it from prosecuting the Involuntary Petition. ECF No. 219, p. 5. After several hearings regarding the Involuntary Petition, the court (Dabrowski, J.) entered an Order for Relief on November 11, 2014. ECF Nos. 219, 220.²

Slightly less than two months later, on January 5, 2015, the court (Dabrowski, J.) granted the Debtor's motion seeking conversion of her involuntary Chapter 7 case to a case under Chapter 11. ECF Nos. 297, 306. During the Chapter 11 phase of this case, on March 3, 2015, Seaport moved for an order prohibiting the Debtor from using of any of its cash collateral³ – in the form of rents received – from tenants of the Rogers Avenue Property.⁴ ECF No. 447. After a hearing, the court (Dabrowski, J.) granted Seaport's request and prohibited the Debtor's use of cash collateral relating to the Rogers Avenue Property – entering the Cash Prohibition Order – on March 27, 2015. ECF No. 479.

Around the same time in March of 2015, Seaport filed a motion seeking to reconvert the case to a Chapter 7 case, asserting the Debtor's unauthorized use of cash collateral as one basis for conversion. ECF No. 457. Over the Debtor's objection requesting dismissal, the court reconverted her case to Chapter 7 on April 24, 2015, and Thomas Boscarino was appointed as Chapter 7 Trustee ("Trustee"). ECF No. 515.⁵

A month after the conversion to Chapter 7, on May 29, 2015, Seaport initiated adversary proceeding Case No. 15-2031 challenging the Debtor's right to a discharge pursuant to 11 U.S.C. §§ 727(a)(2)(A), 727(a)(2)(B), 727(a)(4), and 727(a)(5). That adversary proceeding was resolved by a final, non-appealable order that deprived the Debtor of her bankruptcy discharge. See , Case No. 15-2031, ECF No. 641.

Seaport & Chapter 7 Trustee Negotiations

Shortly after being appointed in 2015, the Trustee filed a notice proposing to abandon the bankruptcy estate's interest in twenty-nine (29) properties – including the Rogers Avenue Property – pursuant to 11 U.S.C. § 554(a). ECF No. 529. Seaport objected asserting the Trustee should refrain from abandoning certain properties because certain creditors were interested in purchasing the bankruptcy estate's interest in those properties. ECF No. 577. Seaport unabashedly acknowledged it wanted to acquire the estate's interest in order to eliminate the Debtor's interest and cut off her ability to participate – and delay – certain state court foreclosure proceedings. ECF No. 577.⁶ After negotiations between Seaport and the Trustee, Seaport withdrew its objection to abandonment of certain properties, and on July 24, 2015, the Trustee abandoned sixteen (16) properties, which, as relevant here, did not include the Rogers Avenue Property.⁷ ECF Nos. 660, 662, 663.⁸

On August 28, 2015, the Trustee moved for approval of a settlement with Seaport that compromised the bankruptcy estate's interest in the Debtor's claims against, among others, Seaport. ECF No. 725. Specifically, the Trustee proposed dismissing the Debtor's claim pending in an adversary proceeding against Seaport and its managing member, Steven Tavares, and stipulating to judgment in favor of Seaport and against the Debtor as to her counterclaims asserted in nine (9) superior court cases. See , ECF No. 725, P. 8; Adv. Proc. No. 15-2003. As part of the settlement, the Trustee agreed to quit claim the Rogers Avenue Property to Seaport. ECF No. 725, P. 7. In exchange, Seaport agreed to pay the bankruptcy estate $20,000, to bear the cost of all taxes and fees incurred as a result of the title transfer, and to cap its claim for administrative expenses. ECF No. 725. On November 10, 2015, the court granted the motion to compromise (the "Seaport Compromise"). ECF No. 851.

In her customary fashion, the Debtor moved for reconsideration of the Seaport Compromise, which the court denied. ECF Nos. 858, 1198. She then sought – through multiple filings and amendments – reconsideration of the denial of the motion to reconsider. See , ECF Nos. 1246, 1265, 1271, 1287, 1397, 1402, 1412, 1417. All in all, the last Order denying the Debtor's several motions to reconsider the Seaport Compromise entered on July 28, 2017. ECF No. 1417.

Motion for Order to Show Cause & Sanctions

Shortly after the court approved the Seaport Compromise, on December 12, 2016, Seaport filed the instant Contempt Motion seeking an order directing the Debtor to show cause why sanctions should not be assessed against her for allegedly collecting rents in contravention of the Cash Prohibition Order. ECF No. 1121. Even though the case had been converted to Chapter 7, Seaport sought enforcement of the Cash Prohibition Order which entered during the Chapter 11 phase of the case. The Debtor objected asserting no rents had been collected or used since the entry of the Order. ECF No. 1135. An evidentiary hearing to determine if there was a sufficient basis to order the Debtor to show cause was held on January 17, 2017 (the "Initial Evidentiary Hearing").⁹ ECF No. 1159.

During the Initial Evidentiary Hearing, Seaport presented evidence in the form of testimony by Cordelia Feliciano (the "Tenant"). The Tenant testified she resided at the Rogers Avenue Property paying a monthly rent of $1,400.00 to the Debtor or to a Mr. Carlos Rivera on the Debtor's behalf during the time period of May 2015 through August 2016. ECF No. 1159 at 00:40:24 – 00:40:29; 00:42:36 – 00:43:00; 00:45:00 – 00:46:50. The Tenant further testified she signed a lease in April 2014 and paid the Debtor a total amount of $4,200 for first and last month's rent and a security deposit ($1,400.00 each). ECF No. 1159 at 00:40:57 – 00:41:19; 00:45:00 – 00:46:50. Despite testimony that she paid rent every month of 2015 and until August 2016, the Tenant admitted she was late some months and had no records reflecting any payments. ECF No. 1159 at 00:45:30 – 00:46:30, 00:46:30 – 00:46:45; 00:48:25 – 00:48:30. The Debtor failed to present evidence during the Initial Evidentiary Hearing.

Following the Initial Evidentiary Hearing, Seaport filed a statement summarizing the Tenant's testimony and indicating the rent paid to the Debtor from April 2015 through August 2016 totaled $23,800.00. ECF No. 1158.

Two days later, on January 19, 2017, Attorney Vincent Fazzone, counsel appearing on behalf of the Debtor,¹⁰ contended the scope of her defense would be she never collected any rent and all the money went to the Chapter 7 Trustee. Attorney Fazzone indicated he would present evidence from the Debtor's accountant and the Debtor. However, the Debtor refused to testify except by affidavit due to an unspecified medical condition. The court directed Attorney Fazzone to provide medical records substantiating the Debtor's inability to testify in person and to file a motion to seal any medical records by March 15, 2017. ECF No. 1160.

Shortly thereafter, on January 24, 2017, the court issued a Scheduling Order and Order directing the Debtor to show cause (the "Show Cause Order") why she should not be held in contempt for violating the Cash Prohibition Order, and providing her with an opportunity to pursue her stated defenses. ECF No. 1164. The Show Cause Order scheduled an evidentiary hearing for April 6, 2017 (the "Show Cause Order Hearing"), set a discovery deadline of March 15, 2017 and a deadline of March 15, 2017 for any motion seeking a determination of the Debtor's unavailability due a medical condition. ECF No. 1164.

A little over a week later, on February 6, 2017, Attorney Fazzone filed his first motion to withdraw as counsel for the Debtor, which was denied for procedural deficiencies. See , ECF Nos. 1167, 1170. His second motion to withdraw was superseded by a third amended motion, which the court ultimately granted on April 21, 2017. See , ECF Nos. 1184, 1242, 1259.

The Show Cause Order Hearing did not proceed on April 6, 2017. The court extended the discovery deadline to May 4, 2017¹¹ and continued the hearing to May 16, 2017.¹² The Show Cause Order Hearing was further continued to June 13, 2017 upon...