Gamez v. Lopez (In re Lopez)

1

In re HUMBERTO LOPEZ, Debtor,

JOSE GAMEZ, Appellant, v. HUMBERTO LOPEZ, Appellee.

No. CV 22-2379 (GRB)

United States District Court, E.D. New York

March 9, 2023

MEMORANDUM & ORDER

GARY R. BROWN, UNITED STATES DISTRICT JUDGE:

Pending before the Court is an appeal by Jose Gamez (“Gamez” or “appellant”) from an Order dated April 18, 2022 of the Honorable Alan S. Trust United States Bankruptcy Judge, denying the motion of appellant to reopen the Chapter 7 proceeding of debtor Humberto Lopez (“Lopez” or “appellee”) in order to administer certain real property and to issue a stay of all state court proceedings pertaining to the property. At issue in the appeal is whether, under 11 U.S.C. § 350(b), the Bankruptcy Court erred by finding that cause did not exist to reopen where the appellee's bankruptcy case had been closed for nearly sixteen years, reopening the case would not result in the administration of any asset for the benefit of the creditors of the estate, and the real property at issue has been the subject of litigation in the New York state courts for over a decade. For the reasons that follow, the Court affirms the Bankruptcy Court's decision in all respects and dismisses the appeal.

BACKGROUND

The following facts and procedural history are derived from the bankruptcy record on appeal.

On July 18, 2005, Milton Markowitz and Rene Markowitz deeded real property located at 99 Jerusalem Avenue, Levittown, New York (the “subject property”) to Gamez. Docket Entry (“DE”) 2 at 139-40.

On August 26, 2005, Lopez filed a voluntary petition under Chapter 7 of the Bankruptcy Code, along with his bankruptcy schedules and statement of financial affairs. DE 2-1 at 1. In Schedule A, entitled “Real Property,” Lopez did not list any real property owned by him. DE 2 at 40. In Schedule F, entitled “Creditors Holding Unsecured Nonpriorty Claims,” Lopez listed several creditors. Id. at 49-50. Appellant was not included as a creditor. Id. Kenneth Silverman was appointed trustee of the bankruptcy estate. DE 1-4 at 1-2. On October 11, 2005, the Trustee reported that the estate had no non-exempt property to distribute, certified under Fed.R.Bankr.P. 5009 that the estate had been fully administered and requested a discharge. Id. By Order dated January 25, 2006, United States Bankruptcy Judge Melanie L. Cyganowski granted Lopez a discharge under Chapter 7 and closed the case. DE 2-1 at 2.

Thereafter on November 1, 2006, Gamez deeded the subject property to “Jose Gamez and Humberto Lopez, both residing at 99 Jerusalem Avenue, Levittown, New York, as Tenants in Common each with 50% Interest.” DE 2 at 128-30. In 2010, Lopez commenced a partition action against Gamez in New York State Supreme Court, Nassau County, which was resolved by a settlement agreement (“settlement agreement”) that was placed on the record on April 16, 2015. Id at 7-10. On August 22, 2017, Lopez filed an Order to Show Cause motion in New York State Supreme Court, Nassau County seeking inter alia additional terms and provisions to be added to the settlement agreement. Id. at 7-10. The motion was denied by Order dated November 21, 2017. Id. On July 29, 2020, Gamez commenced an action in New York State Supreme Court, Nassau County seeking enforcement of the provisions of the settlement agreement. Id. at 11. In that action, Gamez filed a summary judgment motion, which was denied by Order dated March 12, 2021. Id. at 11-12. Gamez appealed the Order dated March 12, 2021 to the New York State Supreme Court, Appellate Division, Second Judicial Department (“Second Department”), which remains pending. Id. at 12. The Second Department denied a stay of discovery during the pendency of the appeal. Id.

On December 23, 2021, Gamez filed a motion in the United States Bankruptcy Court for the Eastern District of New York to reopen the closed Chapter 7 bankruptcy case of Lopez. In addition, Gamez moved for a stay of all state court proceedings and for the appointment of a Chapter 7 trustee to administer the subject property. At a proceeding on January 25, 2022, the Bankruptcy Court adjourned the hearing on this matter to March 8, 2022 and directed that the former Chapter 7 trustee be given until March 1, 2022 to file notice with the Court as to whether he would administer the purported, undisclosed asset of the estate were the case to be reopened.^[1]Id. The Trustee did not file a notice. Id.

A hearing on the motion to reopen was conducted on March 8, 2022. The Bankruptcy Court found no cause to reopen the case and denied appellant's motion, advising that an order consistent with the bench ruling would follow. In doing so, the Bankruptcy Court stated:

You all have been litigating this for 7 years in the state court. Without a Chapter 7 trustee interest[ed] in administering the asset, there is no purpose served during all that litigation here. So, I am going to deny the motion to reopen. There is no cause under [Section] 350 to reopen this. This can continue in the state court and those will go wherever they go.

DE 3-1 at 4.

In an Order dated April 18, 2022, Judge Trust denied the motion to reopen the bankruptcy action, stating:

Here, there is no suggestion that reopening the case is proper to afford relief to the Debtor (who opposes the Motion) or for any other cause. Most notably, reopening the case would not result in the administration of any asset for the benefit of the creditors of the estate.

Id. at 280.

Gamez now appeals.

DISCUSSION

A. Standard of Review

District Courts have appellate jurisdiction over “final judgments, orders, and decrees” of a bankruptcy court pursuant to 28 U.S.C. § 158(a)(1). See 28 U.S.C. § 158(a)(1). A district court may “affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree,” or it may remand with instructions for further proceedings. Fed.R.Bankr.P. 8013. On appeal, a district court reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See In re Hyman, 502 F.3d 61, 65 (2d Cir. 2007); see also Odums, III v. Wells Fargo, N.A., No. CV 20-1100 (AMD), 2021 WL 918323, at *2 (E.D.N.Y. Mar. 10, 2021) (“On appeal, a district court reviews the legal conclusions of a bankruptcy court “de novo, and its factual findings for clear error.”) (internal quotation marks and citations omitted).

“A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” District Lodge 26, Int'l Ass 'n of Machinists & Aeorspace Workers, AFL-CIO v. United Techs. Corp., 610 F.3d 44, 51 (2d Cir. 2010) (internal quotation marks and citations omitted). The clearly erroneous standard requires “strong deference” to “findings of fact based on credibility assessments of witnesses [the court] has heard testify.” In re Boyce, 328 Fed.Appx. 711, 716 (2d Cir. 2009) (internal quotation marks and citations omitted). Moreover, “[a]n appellate court cannot substitute its interpretation of the evidence for that of the trial court simply because the reviewing court might give the facts another construction [and] resolve the ambiguities differently.” In re Pisculli, 426 B.R. 52, 68 (E.D.N.Y. 2010), aff'd, 408 Fed.Appx. 477 (2d Cir. 2011) (alterations in original).

Finally, a Court reviews the Bankruptcy Court's discretionary matters for abuse of discretion. See Boyce v. Citibank, N.A., No. 15-CV-07408 (JFB), 2017 WL 87066, at *4 (E.D.N.Y. Jan. 10, 2017) (collecting cases), aff'd 710 Fed.Appx. 44 (2d Cir. 2018). In particular, “[a] bankruptcy judge's decision to grant or deny a motion to reopen . . . shall not be disturbed absent an abuse of discretion.” In re Channer, 833 Fed.Appx. 502, 504-05 (2d Cir. 2020) (quoting In re Smith, 645 F.3d 186, 189 (2d Cir. 2011)). “A bankruptcy court abuses its discretion only if it reaches a decision that (i) rests on an error of law or clearly erroneous factual findings or (ii) cannot be located within the range of permissible decisions.” Boyce, 2017 WL 87066, at *4 (internal quotation marks and citations omitted); see E.E.O.C. v. Karen Kim, Inc., 698 F.3d 92, 99-100 (2d Cir. 2012).

B. Appeal from the April 18, 2022 Order Denying the Motion to Reopen

In his appeal, Gamez challenges the Bankruptcy Court's Order, dated April 18, 2022, denying his motion to reopen the closed Chapter 7 case pursuant to 11 U.S.C. § 350(b). See DE 5 at 1-2. Gamez contends that (i) the Bankruptcy Court should have ordered the reopening of the closed Chapter 7 case to permit the Chapter 7 trustee to administer Lopez's undisclosed asset, to wit, the 50% interest in the subject property; and (ii) the bankruptcy automatic stay should have been reimposed pending the Chapter 7 trustee's administration of the undisclosed asset of Lopez. Id. at 2. For the reasons that follow, the Court finds that the Bankruptcy Court did not abuse its discretion in denying the motion to reopen the bankruptcy case.

A bankruptcy case that has been closed may be reopened “to administer assets, to accord relief to the debtor or for other cause.” 11 U.S.C. § 350(b). “The Bankruptcy Code does not specify what constitutes ‘other cause' to reopen a closed case; thus, the determination of whether a case should be reopened for other cause is committed to the ‘broad discretion' of the bankruptcy court.” In re Navillus Tile, Inc., 634 B.R. 847, 858 (Bankr. S.D.N.Y. 2021) (quoting In re Emmerling, 223 B.R. 860, 864 (B.A. P.2d Cir. 1997); see In re Chalasani, 92 F.3d 1300, 1307 (2d Cir. 1996) (finding that the decision to reopen invokes the bankruptcy court's equitable powers, “which is dependent upon the facts and circumstances of each case”). In exercising its discretion, the court “ought to...