In re Gutierrez

633 B.R. 768

IN RE: Luis Daniel GUTIERREZ and Viola S. Gutierrez, Debtors.

CASE NO: 20-10079

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

Signed October 8, 2021

Cindy Boudloche, Corpus Christi, TX, Trustee, Pro Se.

Marcos D. Oliva, Oliva Law, McAllen, TX, for Debtors.

MEMORANDUM OPINION

Eduardo Rodriguez, United States Bankruptcy Judge

The term "surrender" is not defined in the Bankruptcy Code, which begs the question, how does a debtor in bankruptcy surrender personal property to a creditor that the debtor no longer possesses? Does surrender require actual delivery of the property? The Estate of Billy R. Algoe's primary objection is that debtors’ proposed plan fraudulently states that business equipment was surrendered but never physically delivered to the Estate of Billy R. Algoe.¹ Separately, the Estate of Billy R. Algoe has alleged misconduct by the Chapter 13 trustee and is seeking her removal. The Estate of Billy R. Algoe also seeks sanctions against debtors’ counsel.

The Court conducted several evidentiary hearings beginning on June 10, 2021 and concluding on August 12, 2021. At the conclusion of the hearings, the Court took all matters under advisement. For the reasons stated herein, the "Objection of the Estate of Billy Algoe to Strike Proposed Chapter 13 Uniform Plan Dated March 5, 2021² and Objection to Valuation of Collateral and Objection to Confirmation of Chapter 13 Uniform Plan Based on Misconduct of Chapter 13 Trustee Cindy Boudloche and Requesting Chapter 13 Trustee's Removal from Cause and Replacement with an Unbiased Interested Trustee Due to Breach of Fiduciary Duty of Chapter 13 Trustee in Failing To Perserve [Sic] Bankruptcy Assets for Legitimate Bankruptcy Creditors"³ filed by the Estate of Billy Algoe on June 24, 2021: (a) as it pertains to the Chapter 13 Uniform Plan and Motion for Valuation of Collateral dated March 5, 2021⁴ is moot; (b) as it pertains to the request for the removal of Cindy Boudloche as chapter 13 trustee, the Court finds no cause to grant such relief pursuant to 11 U.S.C. § 324. Accordingly, such request is denied. The Estate of Billy Algoe's objection to confirmation⁵ of Luis and Viola Gutierrez Chapter 13 plan of reorganization dated July 23, 2021⁶ is overruled. The "Motion to Dismiss 6th Amended Uniform Plan and Motion for Valuation of Collateral Dated July 23, 2021, ECF No. 243, and Motion for Sanctions"⁷ filed by the Estate of Billy Algoe on July 27, 2021 is denied. The Chapter 13 Uniform Plan and Motion for Valuation of Collateral dated July 23, 2021⁸ filed by Luis Daniel Gutierrez and Viola S. Gutierrez is confirmed. A separate order shall be entered simultaneously herewith.

I. BACKGROUND

This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052, incorporating Federal Rules of Civil Procedure 52 and 9014. To the extent that any finding of fact constitutes a conclusion of law, it is adopted as such. To the extent that any conclusion of law constitutes a finding of fact, it is adopted as such. This Court made certain oral findings and conclusions on the record. This Memorandum Opinion supplements those findings and conclusions. If there is an inconsistency, this Memorandum Opinion controls.

1. Luis Gutierrez ("Debtor ") operated South Shore Automotive on commercial property ("Property ") leased from the late Billy R. Algoe.⁹

2. On December 10, 2018, Billy R. Algoe constructively evicted Debtor from the Property by changing the locks.¹⁰

3. On February 27, 2020, Debtor and Viola Gutierrez ("Co-Debtor " and together with Luis Gutierrez, "Debtors ") filed their initial petition under chapter 13 of title 11 of the Code along with their Chapter 13 Uniform Plan and Motion for Valuation of Collateral.¹¹

4. Debtors are of modest income, making just below the median income for a household of two in Texas.¹²

5. The applicable commitment period in this chapter 13 proceeding is 3 years.¹³

6. On May 4, 2020, Lone Star National Bank ("Lone Star ") filed a motion for relief from stay ("Motion for Relief ") seeking possession and foreclosure of collateral by private sale pertaining to a Note and Security Agreement ("Note ") executed by Debtor pre-petition, having a balance of $59,690.92.¹⁴ The Note was the subject of a state court lawsuit initiated by Lone Star in Cause No. 2019-DCL-02944 in the 445th Judicial District Court of Cameron County, Texas ("State Court Lawsuit "), where Lone Star obtained a partial summary judgment ruling granting it a security interest in all collateral listed in the Note and a superior lien against the collateral, superior to that of the landlord Billy R. Algoe.¹⁵

7. On May 12, 2020, the Estate of Billy R. Algoe ("Algoe ") filed a secured proof of claim ("Claim ") in the amount of $53,340.¹⁶ The Claim is purportedly secured by a pre-petition judgment in an eviction case 2019-EFD-0043 in the Justice of the Peace Court, Precinct 1, Place 1, Cameron County, Texas ("Eviction Judgment ").¹⁷

8. On May 14, 2020, the Court held a hearing on confirmation of Debtors’ February 27, 2020 Plan. Plan confirmation was continued to June 5, 2020.¹⁸

9. On June 1, 2020, the Court entered an Agreed Order between Debtors and Lone Star granting the Motion for Relief.¹⁹

10. On June 5, 2020, the Court held a hearing on confirmation of Debtors’ February 27, 2020 Plan. The parties agreed to continue confirmation to July 9, 2020.²⁰

11. On June 8, 2020, Cindy Boudloche, the chapter 13 trustee ("Trustee "), filed a motion to dismiss Debtors’ bankruptcy case ("Trustee's Motion to Dismiss ").²¹

12. On July 9, 2020, the Court held a hearing on confirmation of Debtors’ February 27, 2020 Plan. Confirmation was denied. Dismissal was continued to August 6, 2020.²²

13. On August 6, 2020, the Court held a hearing on Trustee's Motion to Dismiss. The hearing was continued to September 10, 2020.²³

14. On August 12, 2020, Algoe filed a motion to declare the auction held by Lone Star null and void ("Motion to Declare Auction Void ").²⁴

15. On September 4, 2020, Lone Star filed a response to the Motion to Declare Auction Void.²⁵

16. On September 9, 2020, Debtors filed their first amended chapter 13 plan.²⁶

17. On September 10, 2020, Algoe filed its objection to confirmation of the September 9, 2020 Plan.²⁷ Dismissal was continued to October 8, 2020.²⁸

18. On October 1, 2020, Debtors filed a response to Algoe's September 10, 2020 objection.²⁹

19. On October 6, 2020, Debtors filed an objection to Algoe's Claim ("Claim Objection ").³⁰

20. On October 8, 2020, dismissal and confirmation were continued to November 12, 2020.³¹ Additionally, after a hearing, the Court denied the Motion to Declare Auction Void.³²

21. On November 11, 2020, the Court held a hearing. At that hearing, confirmation and dismissal were continued to December 10, 2020.³³

22. On December 10, 2020, confirmation and dismissal were continued to January 7, 2021.³⁴ Algoe also filed its answer to the Claim Objection.³⁵

23. On December 17, 2020, the Court held an evidentiary hearing and overruled Debtors’ Claim Objection based on lack of proper notice to Algoe.³⁶

24. On January 6, 2021, Debtors filed their second amended chapter 13 plan.³⁷

25. On March 3, 2021, Debtors filed their third amended chapter 13 plan.³⁸

26. On April 6, 2021, Debtors filed their fourth amended chapter 13 plan.³⁹

27. On April 22, 2021, the Chapter 13 Trustee recommended confirmation of Debtors’ April 6, 2021 Plan.⁴⁰

28. On April 25, 2021, Algoe filed a pleading self-styled as "Second Amended Objection of the Estate of Billy Algoe to Strike Debtor's [sic] Fourth Amended Plan of Reorganization Dated April 6, 2021 at ECF No. 191 filed by the Estate of Billy Algoe on April 25, 2021"("First Objection ").⁴¹

29. On June 24, 2021, Algoe filed a separate pleading self-styled as "Objection of the Estate of Billy Algoe to Strike Proposed Chapter 13 Uniform Plan Dated March 5, 2021 and Objection to Valuation of Collateral and Objection to Confirmation of Chapter 13 Uniform Plan Based on Misconduct of Chapter 13 Trustee Cindy Boudloche and Requesting Chapter 13 Trustee's Removal from [sic] Cause and Replacement with an Unbiased Interested Trustee Due to Breach of Fiduciary Duty of Chapter 13 Trustee in Failing to Preserve Bankruptcy Assets for Legitimate Bankruptcy Creditors" ("Second Objection ").⁴²

30. On June 30, 2021, the Trustee filed her response to the Second Objection.⁴³

31. On July 6, 2021, Algoe filed its reply to the Trustee's response.⁴⁴

32. On July 14, 2021, Lone Star filed its response to the Second Objection.⁴⁵

33. On July 23, 2021, the Trustee filed her "Chapter 13 Trustee's Brief of Facts and Authority in Support of Confirmation of the Plan and Dismissal of Pending Pleadings by the Estate of Billy R. Algoe to Remove the Trustee".⁴⁶ The same day, Debtors filed an amended plan, erroneously labeling the plan as the sixth amended plan ("July 23, 2021 Plan " or "Plan ").⁴⁷ Debtors also filed their brief in opposition to the Second Objection.⁴⁸

34. On July 26, 2021, the Trustee recommended confirmation of Debtors’ July 23, 2021 Plan.⁴⁹

35. On July 27, 2021, Algoe filed its "Motion to Dismiss 6th Amended Uniform Plan and Motion for Valuation of Collateral Dated July 23, ECF No. 243 and Motion for Sanctions" ("Motion to Dismiss ").⁵⁰

36. On July 29, 2021, Algoe filed its "Post Hearing Legal Memorandum of the Estate of Billy Algoe in Support [sic] Trustee's Removal and Clawback of $28,500 Auction in Proceed [sic] of Rhino Liner and GMC Truck" ("Post Hearing Brief ").⁵¹

37. On August 5, 2021, Algoe filed its "Objection of the Estate of Billy Algoe to Debtor's [sic] Sixth Amended Plan of Reorganization Dated July 23, 2021 at ECF No. 243" ("Third Objection ").⁵²

38. On August 10, 2021, Debtors filed their response to the Motion to Dismiss.⁵³

II. JURISDICTION, VENUE, AND CONSTITUTIONAL AUTHORITY

A. Jurisdiction and Venue

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334,...