Wilson v. Arbors of Cent. Park Icg, LLC (In re Wilson)

• Citation: 610 B.R. 255
• Decision Date: 02 December 2019
• Docket Number: Adversary No. 19-04006,Case No. 18-40107-ELM-13
• Parties: IN RE: James Henry WILSON and Sharonda Nicole Wilson, Debtors. James Henry Wilson and Sharonda Nicole Wilson, Plaintiffs, v. Arbors of Central Park ICG, LLC, Defendant.
• Court: United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas

610 B.R. 255

IN RE: James Henry WILSON and Sharonda Nicole Wilson, Debtors.James Henry Wilson and Sharonda Nicole Wilson, Plaintiffs,

v.Arbors of Central Park ICG, LLC, Defendant.

Case No. 18-40107-ELM-13

Adversary No. 19-04006

United States Bankruptcy Court, N.D. Texas, Fort Worth Division.

Signed December 2, 2019

Christopher Marvin Lee, Lee Law Firm, PLLC, Hurst, TX, for Plaintiffs.

James N. Floyd, The Floyd Firm, Fort Worth, TX, Roberto L. Rodriguez, Higier, Allen & Lautin P.C., Dallas, TX, for Defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW ^*

Edward L. Morris, United States Bankruptcy Judge

On July 19, 2019, the above-captioned adversary proceeding came on for trial before the Court. Plaintiffs James Henry Wilson and Sharonda Nicole Wilson (the "Wilsons "), chapter 13 debtors in Case No. 18-40107 (the "Bankruptcy Case "), allege that Defendant Arbors of Central Park ICG, LLC ("Arbors ") (a) committed an abuse of process by obtaining the Court's entry of an order on Arbors' motion for relief from the automatic stay¹ of the Bankruptcy Code² that conflicted with the Court's previous oral ruling on the motion, and by also failing to "comply with or seek relief from the automatic stay," and (b) violated the automatic stay when it commenced and prosecuted an eviction action against the Wilsons. The Wilsons request relief in the form of a declaration finding that Arbors' actions were in violation of the stay and in contempt of court, and that the eviction judgment obtained by Arbors is void;³ an award of compensatory and punitive damages and sanctions against Arbors for its alleged abuse of process, stay violation and contempt;⁴ an award of attorneys' fees and costs against Arbors;⁵ and injunctive relief to compel Arbors to comply with the Bankruptcy Code in connection with any further pursuit of its rights and claims against the Wilsons.⁶ Arbors denies that it took any improper or unlawful action, denies that the Wilsons are entitled to any relief, and asserts a counterclaim against the Wilsons for the recovery of attorneys' fees and costs on account of the Wilsons' alleged frivolous action in bringing this adversary proceeding.⁷

Having considered the Wilsons' Complaint, Arbors' Answer and Counterclaim, the Wilsons' Reply to Counterclaim,⁸ the parties' stipulated facts,⁹ the parties' respective pretrial submissions,¹⁰ the evidence introduced at trial, and the arguments of counsel, the Court now issues its Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52, as made applicable to this proceeding pursuant to Federal Rule of Bankruptcy Procedure 7052.¹¹

JURISDICTION

The Court has jurisdiction of this adversary proceeding pursuant to 28 U.S.C. §§ 1334 and 157 and the Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc (Miscellaneous Rule No. 33) of the United States District Court for the Northern District of Texas. Venue of the proceeding in the Northern District of Texas is proper under 28 U.S.C. § 1409. The proceeding constitutes a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A) and (O). Pursuant to 28 U.S.C. § 157(b)(1) the Court has the statutory authority to enter a final judgment in this proceeding and based upon the nature of the causes of action at issue there are no Stern -based Constitutional limitations¹² to the Court doing so.

FINDINGS OF FACT

A. The Wilsons' Apartment Lease with Arbors

1. Arbors is the owner of an apartment complex located at 2809 Parkview Lane in Bedford, Texas. In 2016, the Wilsons entered into an agreement with Arbors for the lease of Apartment 3125 at the complex (the "Apartment ").¹³

2. On or about September 27, 2017, the Wilsons renewed their lease of the Apartment by entering into a new lease agreement with Arbors (the "2017 Lease ").¹⁴ The 2017 Lease provided for a new definitive lease term of November 14, 2017 through November 9, 2018, with automatic renewal on a month-to-month basis thereafter until the time of the Wilsons' or Arbors' provision of at least 60 days' written notice of termination.¹⁵

3. Pursuant to the 2017 Lease, the Wilsons were obligated to make monthly rent payments of $1,142 by the first of each month. No grace period for such payment was provided and the lease expressly stated that the failure to pay rent by the first of the month would constitute a material breach of the lease.¹⁶ In the event of non-payment, the lease also imposed a late fee of $75.00 for the failure to pay by the second day of the month, plus additional late fees of $10.00 per day thereafter, up to a maximum of $150.00 per month, until paid in full.¹⁷ In addition to rent, the 2017 Lease also provided for the assessment/allocation of various fees and charges, including a monthly billing fee, a monthly pest control fee, a monthly trash/valet trash service fee, and monthly water and sewer charges (collectively, "additional lease charges ").¹⁸

B. The Prepetition Default, Bankruptcy Filing and Further Lease Renewal

4. Shortly after execution of the 2017 Lease, the Wilsons began to regularly fall behind in the timely payment of rent. Thus, on or about December 22, 2017, after the Wilsons had failed to pay their December 2017 rent on time, Arbors filed a sworn complaint in Texas state court for the eviction of the Wilsons from the Apartment and for the recovery of December 2017 rent. A hearing was scheduled in the action for January 10, 2018.

5. On January 9, 2018, prior to the eviction hearing, the Wilsons filed their joint voluntary petition for relief under chapter 13 of the of the Bankruptcy Code, thereby initiating the Bankruptcy Case and causing the eviction action to be stayed pursuant to the Bankruptcy Code's automatic stay provisions.¹⁹

6. On January 25, 2018, the Wilsons filed their proposed chapter 13 plan in the Bankruptcy Case, wherein the Wilsons proposed to assume the 2017 Lease and cure the outstanding lease arrears.²⁰ By order entered on March 12, 2018, the plan was confirmed.²¹

7. Between February 2018 and September 2018, the Wilsons often failed to pay rent by the first of the month as required by the 2017 Lease, instead paying by the second or third of the month. During this time frame, Arbors elected to accept the payments (with applicable late fees) instead of declaring a default.

8. Prior to the end of the definitive lease term of the 2017 Lease, Arbors provided the Wilsons the opportunity to again renew their lease. Arbors notified the Wilsons of such opportunity in writing. According to Eileen Rigsby ("Rigsby "), the Property Manager of the apartment complex, the renewal notice also informed the Wilsons of Arbors' intent to charge a month-to-month rental rate of $1,399 after the end of the definitive lease term in the event of non-renewal.²²

9. Desiring to remain in the Apartment, the Wilsons went to the leasing office of the complex on September 13, 2018 to complete the lease renewal paperwork. At that time, Arbors offered a new lease (the "2018 Lease ")²³ having substantially identical provisions as the 2017 Lease except for a new definitive lease term of November 10, 2018 (the day after the end of the definitive lease term of the 2017 Lease) through November 5, 2019 and an increase in the monthly rental rate to $1,199 – the prorated portion of the first month's rent (i.e. for the period November 10, 2018 through November 30, 2018) to be due on November 10, 2018.²⁴ The Wilsons agreed to the new lease terms and Arbors documented the Wilsons' acceptance of the new 2018 Lease by obtaining their electronic signatures thereon at the September 13, 2018 meeting.²⁵ At this point the Wilsons reasonably believed that the 2018 Lease was effective and would govern the parties' leasing relationship from and after November 10, 2018. Moreover, Arbors provided a copy of the electronically signed 2018 Lease to the Wilsons for their records at the end of the meeting, further evidencing Arbors' mutual acceptance of the lease and promise to countersign it.

C. The Post-Petition Default and Lift Stay Proceedings

10. In October 2018, prior to commencement of the new lease term, the Wilsons again failed to pay rent by the first of the month. This time Arbors decided to take action and on October 3, 2018, filed a motion for relief from the automatic stay to pursue the eviction of the Wilsons from the Apartment (the "Lift Stay Motion ").²⁶ On the same day, the Wilsons attempted to make the October rent payment, but Arbors, having already filed the Lift Stay Motion, refused to accept the payment.

11. On October 24, 2018, the Court²⁷ held a hearing on the Lift Stay Motion (the "Lift Stay Hearing ") at which Arbors was represented by The Floyd Firm (the "Floyd Firm ") and the Wilsons were represented by the Lee Law Firm, PLLC (the "Lee Firm "). At the conclusion of the Lift Stay Hearing, the Court orally ruled that the Lift Stay Motion would be conditionally denied subject to the Wilsons' compliance with the following requirements: (a) the Wilsons' payment of the October 2018 rent plus late fee to Arbors by no later than October 25, 2018, (b) the Wilsons' payment of November 2018 rent to Arbors on or before November 2, 2018,²⁸ and (c) the Wilsons' payment of remaining rent when due, subject to one five business day opportunity to cure in the event of a default (the "Oral Ruling ").²⁹ The Court instructed the Floyd Firm to prepare a proposed order in conformity with the Oral Ruling, to circulate the proposed order to the Lee Firm for review and approval as to form, and to thereafter submit the mutually approved form of order to the Court for entry.³⁰

12. In conformity with the Court's direction, the Floyd Firm prepared the proposed order. In contravention of the Court's direction, however, the Floyd Firm submitted the proposed order to the Court without having first circulated it to the Lee Firm and obtained the Lee Firm's approval as to its form on behalf of the Wilsons. On November 8, 2018, the Court entered the proposed order,...