Vélez v. Pinto-Lugo, BAP NO. PR 18-064
| Decision Date | 29 July 2020 |
| Docket Number | Bankruptcy Case No. 18-05312-ESL,BAP NO. PR 18-064 |
| Parties | Ivonne ÁLVAREZ VÉLEZ, Debtor. Ada M. Conde-Vidal, Appellant, v. René Pinto-Lugo and Myrna López-González, Appellees. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, First Circuit |
Ada M. Conde, Esq., Pro Se, on brief for Appellant.
Eduardo J. Mayoral, Esq., on brief for Appellees.
Before Bailey, Hoffman, and Finkle, United States Bankruptcy Appellate Panel Judges.
Ada M. Conde-Vidal ("Conde"), the debtor's non-filing spouse, appeals from that portion of the bankruptcy court's December 18, 2018 order (the "Order") determining that the co-debtor stay of § 1301(a) was not applicable because the debts at issue were not consumer debts.1 Conde's sole argument on appeal is that the bankruptcy court violated her due process rights by determining the applicability of the co-debtor stay under § 1301(a) at a hearing on a motion for relief from the automatic stay under § 362(d), without conducting a separate evidentiary hearing regarding the co-debtor stay.
For the reasons set forth below, we AFFIRM .
Conde is married to the debtor, Ivonne Álvarez Vélez (the "Debtor"), and they reside in a condominium in Miramar, Puerto Rico (the "Property"). René Pinto-Lugo and Myrna López-González (the "Pintos") live in the condominium directly below the Debtor and Conde's unit.
In December 2017, the Pintos filed in the local court a petition for injunctive relief and damages against the Debtor, Conde, and their conjugal partnership, alleging that their possession of numerous animals caused excessive noise which interfered with the Pintos' use and enjoyment of their property (the "Local Court Injunction Action").
The next month, the Debtor and Conde filed a Notice of Removal, thereby removing the Local Court Injunction Action to the U.S. District Court for the District of Puerto Rico (the "Removed Case"). At the same time, the Debtor and Conde also filed a complaint in the district court against various defendants, including the Pintos, seeking a declaratory judgment and injunctive relief for alleged discrimination in violation of the Fair Housing Amendments Act (the "FHAA Case").
On August 16, 2018, the district court issued an Opinion and Order in the Removed Case concluding that it lacked subject matter jurisdiction and remanding the Removed Case back to the local court. In the order, the district court found that the Debtor and Conde had removed the Local Court Injunction Action for the sole purpose of delaying the Local Court Injunction Action, that they had displayed "obstinate conduct," and that they had engaged in "dilatory tactics." On the same date, the district court issued an Opinion and Order dismissing the complaint in the FHAA Case for lack of prosecution and lack of subject matter jurisdiction. In that order, the district court similarly found that the Debtor and Conde had filed the "meritless" FHAA Case for the sole purpose of delaying the Local Court Injunction Action, and that they had displayed "obstinate conduct."
In both cases, the district court ordered the Debtor and Conde to reimburse the Pintos' attorney's fees and costs, and directed the Pintos to submit an accounting. The district court retained jurisdiction in both matters "for the sole purpose of determining the amount of fees and costs to be awarded."
On August 31, 2018, the Pintos submitted accountings of their attorney's fees and costs in both the Removed Case and the FHAA Case as directed by the district court. However, before the district court could enter final judgments quantifying the amount of attorney's fees and costs to be paid to the Pintos in those cases, the Debtor filed her bankruptcy petition, thereby staying further proceedings in the district court.2
The Debtor filed a voluntary chapter 13 petition in September 2018. Conde did not file jointly.
The Pintos filed two proofs of claim in the Debtor's bankruptcy case. In Claim No. 10, they asserted an unsecured claim in the amount of $34,647.37, relating to the awards of attorney's fees in the FHAA and Removed Cases. In Claim No. 11, the Pintos asserted a $50,000 unsecured claim relating to the Local Court Injunction Action. No objections to the Pintos' claims were filed. These claims—one relating to the attorney's fees and costs awarded (but not yet quantified) by the district court in the FHAA and Removed Cases, and the other arising from the Pintos' unadjudicated request for damages in the Local Court Injunction Action—are the underlying debts in this appeal (collectively, the "debts").
In November 2018, the bankruptcy court confirmed the Debtor's chapter 13 plan in which she proposed to pay the trustee a total of $19,080.00 over 60 months. She indicated she would make regular payments directly to her secured creditors with any arrears to be paid through the plan. Nonpriority unsecured claimants (such as the Pintos) would only receive distributions if there were any "funds remaining after disbursements ha[d] been made to all other creditors provided for in th[e] plan."
On November 15, 2018, the Pintos filed a motion (the "362 Motion") seeking relief from the automatic stay under § 362(d) to allow them to: (1) obtain final determinations in the FHAA and Removed Cases as to the amount of attorney's fees and costs owed by Conde and the Debtor; and (2) continue proceedings in the Local Court Injunction Action. A few days later, the bankruptcy court issued a summons for the 362 Motion directed to the Debtor, indicating that her response was due within 14 days of service and, if she timely filed a response, there would be a hearing on December 18, 2018.
The Pintos also filed a motion (the "Co-Debtor Stay Motion") requesting a determination that the co-debtor stay of § 1301 was inapplicable as to Conde because the debts owed to the Pintos were not consumer debts. Alternatively, the Pintos sought relief from the co-debtor stay under § 1301(c)(2), arguing that the Plan did not provide for full payment of their claims. The bankruptcy court issued summonses for the Co-Debtor Stay Motion directed to both the Debtor and Conde, indicating that responses were due within 21 days of service and warning that if they failed to timely answer, the court would enter an order granting the motion. Unlike the summons for the 362 Motion, the summons for the Co-Debtor Stay Motion did not indicate a hearing date if responses were filed.
The Debtor opposed both motions. As to the Co-Debtor Stay Motion, the Debtor argued that relief from the co-debtor stay should not be granted during the life of her chapter 13 plan because Conde contributed to her living expenses and her plan and, therefore, collection of any debt from Conde would adversely impact the Debtor and her estate. The Debtor did not address the Pintos' primary argument that § 1301(a) was inapplicable because the debts at issue were not consumer debts, except to say, in a footnote:
"It is clear that [the Pintos'] claim is not a business claim. Consumer debt is defined at [ ] § 101(8). The term includes legal fees incurred for a non-business purpose . Patti v. Fred Ehrlich[, PC], 304 B.R. 182 (E.D. Pa. 2003) ().
Nor did she address the Pintos' argument that they were entitled to relief from the co-debtor stay under § 1301(c)(2) because the Plan did not propose to pay their claims in full.
Conde filed, pro se, a "motion" joining the Debtor's opposition and acknowledging that she received service of the Co-Debtor Stay Motion and the summons.
In their oppositions to the Co-Debtor Stay Motion, neither the Debtor nor Conde requested an evidentiary hearing as to that motion.
The bankruptcy court conducted a hearing on the 362 Motion on December 18, 2018. The Debtor and the Pintos, through their respective counsel, were present at the hearing; Conde was not.
During the hearing, the bankruptcy court queried whether the co-debtor stay of § 1301 was "applicable to the facts of this case and to the nature of the debt[s.]" The Debtor responded that § 1301(a) applied because the debts were not business debts. The Pintos countered that the subject debts—relating to sanctions for frivolous lawsuits and an unadjudicated request for injunctive relief and damages—were not consumer debts and, therefore, the co-debtor stay did not apply.
After hearing the parties' positions regarding the co-debtor stay, the court ruled:
[A]s to the nature of the pending actions—that is, seeking injunctive relief regarding the noise in the apartment building, and the award of damages as a result of the dismissal—those are not the consumer debts that are envisioned in Section 1301, so I find and conclude that the ... co-debtor stay provisions in [§] 1301 are not applicable to the non[-]filing spouse.
The bankruptcy court memorialized its ruling in the Order, which provided in its entirety:
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