Ashton v. May (In re May)

661 B.R. 40

Ashley MAY, Debtor.

Ann L. Ashton, Plaintiff, v. Ashley May, Defendant.

Bky. No. 22-10430 (PMM)

Adv. No. 23-0016 (PMM)

United States Bankruptcy Court, E.D. Pennsylvania

Signed June 14, 2024

David G. McNitt, David G. Mcnitt, Esq. P.C., Malvern, PA, for Plaintiff,

Joseph P. Kerrigan, Joseph P. Kerrigan Atty at Law, Philadelphia, PA, for Defendant Ashley May.

Robert W. Seitzer, Karalis PC, Philadelphia, PA, for Defendant Christine C. Shubert.

OPINION

PATRICIA M. MAYER, UNITED STATES BANKRUPTCY JUDGE.

I. INTRODUCTION

This Adversary Proceeding presents a familiar scenario: a bankruptcy debtor's failure to pay a creditor (in this case, her landlord) swelled into a contentious dispute concerning more than the amount of debt. The Debtor owes the Plaintiff $41,500.00 in unpaid rent. The landlord creditor, Ann Ashton, sued the Debtor and her husband, Andrew Brenner (now deceased), for payment of rent and related relief in state court and has followed the Debtor to Bankruptcy Court in an ongoing effort to collect.

The collection effort has been robust. After suing the Debtor in state court, the Plaintiff filed a Complaint in this Court stating sixteen (16) causes of action, ranging from an accusation of bankruptcy fraud to many allegations that the Debtor should not receive a bankruptcy discharge and that the debt to the Plaintiff should not be discharged. Pretrial proceedings in this matter have been equally vexatious, characterized by numerous motions, objections, and delays. The culmination of the proceeding is the pending cross-motions for summary judgment.¹

The wide-ranging Complaint lacks both form² and substance. The pre-trial proceedings and discovery process failed to shed any light; the Plaintiff, even at this late stage, offers no support for the myriad causes of action. As analyzed below, the Debtor's Motion for Summary Judgment will serve to dispose of this matter entirely in her favor. While summary judgment will be granted to the Debtor with regard to the seven (7) causes of action in which the Plaintiff seeks to deny discharge, two (2) causes of action will be dismissed for lack of jurisdiction, two (2) counts will be dismissed for lack of standing, and five (5) counts will be dismissed as moot. Accordingly, the Plaintiff's Motion for Partial Summary Judgment will be denied.

II. FACTUAL BACKGROUND

The following facts are taken from the Complaint and pleadings and are not in dispute. The Plaintiff owns property located at 1935 Horseshoe Trail in Chester Springs, PA (the "Property"). The Debtor and her husband, Andrew Brenner, rented the Property from Ashton for a three (3) year period. See attachment to Proof of Claim no. 10 (the "Lease"). In applying for the Lease, the Debtor represented that she and Mr. Brenner were employed by a company they owned, E-Built LLC ("E-Built") and had a combined annual income of approximately $180,000.00. Complaint, ¶25.³ Mr. Brenner solely owned a landscaping company called Design Build Maintain ("DBM"). Complaint, ¶124. DBM ceased operations in 2019. Complaint, ¶124.

The term of the Lease was January 15, 2020, through January 31, 2023. The rent was $3,500.00 per month for the first year and increased to $3,605.00 per month for year two and $3,713.00 for year three. The Lease specified that the Property was to be used for "residential purposes only." Complaint ¶30.

In June 2020, the Debtor and her husband began to use the Property for commercial and agricultural purposes. Complaint ¶41. Meanwhile, the Debtor and Mr. Brenner maintained that the Property was not habitable due to a faulty sewage system. See E.g. Complaint and Answer, ¶65. The resulting dispute between the parties caused the Debtor and her husband to place their rent in a separate account in Wells Fargo (the "Escrow Account"). Complaint and Answer, ¶¶74; 162. The couple used $4,752.00 of the Escrow Account to make repairs on the Property. Complaint, ¶184.

The Debtor's husband, Andrew Brenner, died on June 20, 2022.

Following the stay relief granted to the Plaintiff (and described below) on July 17, 2022, the Debtor vacated the Property and moved to Prizer Road in Kimberton, PA (the "Prizer Property"). Complaint and Amended Answer, ¶¶149; 159. About two (2) weeks later, on July 30, 2022, a barn fire (the "Barn Fire") at the Prizer Property destroyed a substantial amount of the Debtor's belongings. Complaint, ¶161. The Debtor received $45,000.00 from an insurance policy covering the property lost in the fire. Doc. #19 at 4, 8 (the "Insurance Proceeds").

III. PROCEDURAL HISTORY

On October 13, 2020 (pre-petition), Ashton received an eviction judgment and order for possession in Chester County State Court. Andrew Brenner and the Debtor were found liable for $1,718.88 in fees and costs. See attachment to Proof of Claim no. 10. This judgment was appealed on October 21, 2020, meaning that the Debtor was entitled to a trial de novo. See audio recording of Judge Frank's bench opinion, recording found at doc. #49 in the main case, at 8:29 (the "Audio File").⁴ The Defendants were required to pay all monthly rent in order to stay enforcement of the judgment for possession. Complaint, ¶86. The Debtor and Mr. Brenner failed to make all required rent payments. Complaint and Answer, ¶92. Plaintiff filed a Motion to Terminate Supersedeas on February 1, 2022. Complaint, ¶93. Prosecution of this Motion was initially stayed by the bankruptcy filing but was reinstated upon the granting of stay relief.

The Debtor filed for chapter 13 bankruptcy protection on February 22, 2022. The case was converted to chapter 7 on July 18, 2022. While the chapter 7 trustee initially determined that there were assets to administer, see doc. #105 in the main case, on December 13, 2023, the bankruptcy was changed to a "no asset" case. Doc. #127 in the main case.

The Debtor initially omitted certain information from her schedules, which were amended several times.⁵ Complaint and Amended Answer, ¶¶99-101. The Debtor's most recent schedule A/B shows the total value of the property that the Debtor owns is about $33,799.00 (including three (3) old cars).

Ashton filed—and later withdrew—a proof of claim in the amount of $49,326.00 for unpaid rent from June 2021 through February 2022. See Proof of Claim no. 10-1 and Objection thereto (doc. #60).

On April 22, 2022, Judge Frank granted Ashton's Motion for Relief, allowing the creditor to proceed with a state court possession action with regard to the Property, subject to certain conditions and terms. See doc. #48 in the main case. Judge Frank determined that the Debtor owed a total of $41,500.00 in rent to Ashton. Further, cause to lift the stay was found because, as Judge Frank detailed, cure of the amount owed and assumption of the Lease by the Debtor were "patently infeasible." Audio File at 25:37. Judge Frank ordered the Debtor to amend her schedules in order to provide complete and accurate information regarding property owned. Doc. #48 in the main case.

On February 28, 2023, the Plaintiff⁶ filed this Adversary Proceeding, purporting to state sixteen (16)⁷ cause of action. The stated allegations are:

• Bankruptcy Fraud (Count I)

• Wrongful Use of Bankruptcy Process pursuant to 18 U.S.C. §§ 151-152 (Count II)

• Denial of Discharge pursuant to 11 U.S.C. § 727(a)(2)(A), § 727(a)(2)(B), § 727(a)(3), § 727(a)(4)(A), § 727(a)(5)(A) (Counts 3-5 and 7-9; there is no Count VI)

• Declaratory judgment that the Escrow Account is not property of the estate (Count X, misnumbered as Count XI)⁸

• Declaratory judgment that the Casualty Insurance payments to Debtor are property of the estate (Count XI).

• Denial of discharge until Debtor complies with exempt property claims under § 522 (Count XII)

• Injunction prohibiting Debtor from destroying records of DBM (Count XIII)

• Injunction prohibiting Debtor from selling assets of DBM (Count XIV)

• Denial of discharge of debt pursuant to 11 U.S.C. § 523(a)(2)(A) (Count XV)

• Accounting of business transactions from 2019 through filing of petition (Count XV, repeated)

• Accounting of transactions with Fire and Casualty Insurance (Count XVI, repeated)

The Complaint initially named the chapter 7 trustee (Christine Shubert) as a Defendant. However, on August 21, 2023, a compromise was approved among the parties. Doc. #'s 19, 24 (collectively, the "Stipulation"). Pursuant to the Stipulation:

• The Trustee paid the amount in the Escrow Account to the Plaintiff;

• The Insurance Proceeds were abandoned by the Trustee to the Debtor; and

• The Adversary Proceeding was dismissed with prejudice with regard to the Trustee

Following this settlement, the remaining parties (Ashton and May) engaged in an extended discovery dispute.

At the end of February 2024, the parties filed cross-motions for summary judgment. The Plaintiff seeks partial summary judgment only with regard to Count XI. The Defendant's Motion, on the other hand, seeks summary judgment with regard to all counts of the Complaint.

IV. THE PARTIES' ARGUMENTS

The Defendant's Motion, styled as one for summary judgment, asserts that seven (7) of the causes of action⁹ are moot as having already been resolved or for which relief is not available. She also asserts that the Plaintiff lacks standing to bring two (2) criminal causes of action. Finally, the Defendant seeks summary judgment with regard to the seven (7) nondischargeability causes of action because the Plaintiff has offered "no support ... no specificity [and] no discovery" with regard to these allegations. Motion at 14.¹⁰

The Plaintiff's Motion seeks summary judgment only with regard to Count XI-asserting that the Insurance Proceeds are property of the estate which may be distributed to creditors.

V. SUMMARY JUDGMENT STANDARD

The standard regarding summary judgment is well known. Pursuant to Federal Rule of Civil Procedure 56(a), summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is...