Shrewsbury Street Dev. Cos. v. Arcuri (In re Krowel)

631 B.R. 356

Tracy L. KROWEL, Debtor.

Shrewsbury Street Development Companies, Inc., Appellant,

v.Santo Arcuri, Joseph H. Baldiga, Chapter 7 Trustee, and Tracy L. Krowel, Appellees.

BAP NO. MW 20-020

Bankruptcy Case No. 11-43854-CJP

United States Bankruptcy Appellate Panel of the First Circuit.

Signed September 10, 2021

David Baker, Esq., on brief for Appellant.

Philip F. Coppinger, Esq., on brief for Appellee, Santo Arcuri.

No briefs submitted for Appellees, Joseph H. Baldiga, Chapter 7 Trustee, and Tracy L. Krowel.

Before Lamoutte, Cabán, and Fagone, United States Bankruptcy Appellate Panel Judges.

Fagone, U.S. Bankruptcy Appellate Panel Judge.

Shrewsbury Street Development Companies, Inc. ("SSDC") appeals from three bankruptcy court orders: (1) an order denying SSDC's request, under § 350(b), for an order reopening the chapter 7 bankruptcy case of Tracy L. Krowel (the "Debtor" or "Krowel"); (2) an order denying a request to vacate a prior order granting relief from the automatic stay in favor of Santo Arcuri ("Arcuri"); and (3) an order denying a motion to reconsider those two orders.¹ For the reasons discussed below, we DISMISS this appeal due to SSDC's lack of appellate standing.

FACTS

The underlying facts and procedural history of this appeal are, for the most part, set forth in our prior opinion entered on this date in a related appeal, Blackstone Investment Partners, LLC v. Arcuri (In re Krowel), BAP No. MW 20-019, 631 B.R. 277 (B.A.P. 1st Cir. Sept. 10, 2021).² Accordingly, we incorporate by reference the facts set forth in that opinion. Although the facts and issues presented in the two appeals overlap to a significant degree, they are not identical. As a result, we resume our analysis by providing some additional details regarding the specific orders that are challenged in this appeal. As noted below, we adopt the reasoning of the prior opinion in full.

I. The Orders Denying SSDC's Motion to Reopen and the Motion to Vacate Stay Relief

In a bench ruling delivered in April 2018, the bankruptcy court denied SSDC's motion to reopen the Debtor's case (the "Motion to Reopen") and its motion to vacate stay relief, nunc pro tunc, to November 18, 2011 (the "Motion to Vacate"), reasoning:

In a Chapter 7 case in 2011, a proof of claim was filed. It was a no-asset case. The case was fully administered and ... in the interim, SSDC dissolved and was reconstituted. It was originally controlled by Fiorillo.

There are issues with ... the passage of time, you've got the issue of the housing court entering orders that held that Arcuri was the owner by virtue of a judicial sale which may relate to that attachment. So I'm going to deny both the motions. I won't reopen the case. I don't see any cause for doing that, particularly with this passage of time.

And I won't vacate the bankruptcy court's order from 2011 on the motion granting relief from stay with the knowledge that ... whatever findings the bankruptcy court ... made at that time, ... that's a Grella type standard .... Just a summary review and a grant of relief from stay based on the ... demonstration of a colorable claim, as opposed to a final determination of whether there was a lien or not.

The court added that, under the Rooker-Feldman doctrine, it lacked jurisdiction to determine whether the Debtor had an interest in the property, as that issue had been resolved by a final state court determination. Separate orders entered the next day (the " Section 350 Order" and the " Rule 60 Order," respectively), denying the motions for the reasons articulated on the record.

II. SSDC's Motion for Reconsideration

SSDC sought reconsideration of both the Section 350 Order and the Rule 60 Order. In May 2020, the court entered an order denying SSDC's motion for reconsideration (the " Rule 59 Order"). Finding "no basis to disturb" either order, the court nonetheless "supplement[ed] and clarifie[d]" its rulings. To begin with, the court specified that it was treating the reconsideration motion as one under Rule 59(e) (made applicable by Bankruptcy Rule 9023 ) because the motion was filed within 14 days of the challenged orders. The court further indicated it was relying on the standard established for such motions set forth in Nieves Guzmán v. Wiscovitch Rentas (In re Nieves Guzmán), 567 B.R. 854, 863 (B.A.P. 1st Cir. 2017). With respect to the Section 350 Order, the court supplemented its finding that SSDC failed to establish cause with an added conclusion that SSDC lacked standing, stating:

Although the Court did not explicitly address SSDC's standing to seek to reopen the case on the record at the Hearing, the Court supplements its Order on the Motion to Reopen to find that SSDC's request fails due to its lack of standing – in addition to its failure to demonstrate adequate cause.

SSDC does not have standing to seek to reopen the Debtor's Chapter 7 case because it is not a "party in interest" under Fed. R. Bankr. P. 5010....

SSDC, as the alleged owner of the Property, is not one of the enumerated parties set forth in § 1109(b), and SSDC has not shown that it is an "entity whose pecuniary interests might be directly and adversely affected" if the case is not reopened. See [ W. Auto Supply Co. v. Savage Arms, Inc. (In re Savage Indus., Inc.), 43 F.3d 714, 720 (1st Cir. 1994) ]. SSDC does not contend that it is one of the Debtor's creditors, and it was not listed as such on the Debtor's schedules. More importantly, SSDC does not seek to reopen this no asset case so that the Chapter 7 trustee may administer assets or to accord relief to the Debtor. Rather, it appears that SSDC's motivation in attempting to reopen Krowel's case is to obtain Court orders that may strategically benefit SSDC as it seeks a declaration of ownership of and possessory rights in the Property in state court proceedings challenging Arcuri's interest as determined pursuant to various state court orders[ ] ... [and] to gain perceived tactical advantage in litigation unrelated to this closed case and that would not benefit the estate.

... [R]egardless of whether Krowel's case is reopened, SSDC may seek to pursue its claims of ownership and challenges to Arcuri's interests in the Property in state court. Denial of the Motion to Reopen did not "directly and adversely affect" SSDC's pecuniary interests as to this dispute. ... Accordingly, SSDC lacks standing to seek to reopen the Debtor's case to "reconsider" a proof of claim in a no asset Chapter 7 case.

(footnote omitted). The court also rejected SSDC's argument that it had misapplied the Rooker-Feldman doctrine, explaining:

SSDC argues that Rooker-Feldman does not apply to it with respect to the Housing Court Order because SSDC was not a party to the proceeding, but the Court did not make a Rooker-Feldman determination regarding SSDC. At the Hearing, the Court assessed Rooker-Feldman with respect to the question of whether the Court is prevented from revisiting the Debtor's claim to the Property and, therefore, the relevance of SSDC's purported ownership interest in the Property ....

Finally, the court reiterated that there was no basis to disturb the Rule 60 Order, elaborating:

SSDC has not demonstrated that Arcuri failed to demonstrate a "colorable claim" that it possessed an interest in the Property at the time the motion was granted or that SSDC was aggrieved by the Stay Relief Order. SeeGrella v. Salem Five Cent Savs. Bank, 42 F.3d 26, 32 (1st Cir. 1994). In determining whether a creditor has a colorable claim and therefore standing to seek relief from the automatic stay, a bankruptcy court need not fully adjudicate the merits of the creditor's claims as "the hearing on a motion to lift the stay is not a proceeding for determining the merits of the underlying substantive claims, defenses, or counterclaims," but rather is a "summary proceeding." Id. "As a matter of law, the only issue properly and necessarily before a bankruptcy court during relief from stay proceedings is whether the movant creditor has a colorable claim; thus, a decision to lift the stay is not an adjudication of the validity or avoidability of the claim, but only a determination that the creditor's claim is sufficiently plausible to allow its prosecution elsewhere." Id. at 34.

The Court determined that Arcuri possessed a colorable claim sufficient for him to seek to enforce his claimed lien in accordance with applicable law. The Stay Relief Order contemplated that Arcuri would proceed with an action in state court to enforce his remedies. Again, SSDC now claims to be the owner of the property based on theories stemming from rulings of the state court after the case was closed, so its standing to oppose and the relevance of its objection to the Arcuri Stay Relief Motion requesting relief from the automatic stay are unclear. The Trustee did not oppose the motion. This Court made no determination regarding Arcuri's rights or remedies, other than that his claim was sufficiently plausible to warrant relief from the automatic stay to allow its prosecution under state law. Moreover, the automatic stay terminated by operation of law as to the Debtor when she received a discharge, see § 362(c)(2)(C), long before SSDC filed the Motion to Vacate. It is unclear how SSDC was aggrieved by the Stay Relief Order.

Since [SSDC] has not demonstrated a manifest error of law or newly discovered evidence that warrants reconsideration of the Orders, the request for reconsideration is denied.

This appeal followed.

DISCUSSION

I. SSDC Lacks Appellate Standing

The analysis of our jurisdiction essentially proceeds along the same lines as the jurisdictional analysis set forth in the prior opinion. While the appealed orders may be final, see Ritzen Grp., Inc. v. Jackson Masonry, LLC, ––– U.S. ––––, 140 S. Ct. 582, 587, 205 L.Ed.2d 419 (2020), this appeal suffers from other jurisdictional infirmities which preclude us from hearing it. Specifically, SSDC has not suffered the kind of concrete, pecuniary harm stemming from the appealed...