Heaney v. Lamento (In re Whiz Kids Development, LLC)

576 B.R. 731
CourtUnited States Bankruptcy Court, D. Massachusetts
DecidedNovember 17, 2017
DocketCase No. 15-13167-JNF; Adv. P. No. 16-1177
StatusPublished
Cited by5 cases

This text of 576 B.R. 731 (Heaney v. Lamento (In re Whiz Kids Development, LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heaney v. Lamento (In re Whiz Kids Development, LLC), 576 B.R. 731 (Mass. 2017).

Opinion

MEMORANDUM

Joan N. Feeney, United States Bankruptcy Judge

I. INTRODUCTION

The matter before the Court is the four-count Complaint (the “Complaint”) filed on October 18, 2016 by Peter A. Heaney (“Heaney”), who purchased the real property located at 2 Ionic Avenue, Worcester, Massachusetts (the “property”). Heaney purchased the property from the Chapter 11 debtor, Whiz Kids Development, LLC (‘Whiz Kids” or the “Debtor”), prior to conversion of the Debtor’s case to one under Chapter 7, which sale was approved by this Court. Through the Complaint, Heaney seeks damages, including attorney’s fees and injunctive relief against the defendant, Eugene 'M. Lamento (“Lamen-to”), for violation of the automatic stay pursuant to 11 U.S.C. § 362 (Count I) and this Court’s Order dated October 29, 2015 approving the sale of the property to Hea-ney free and clear of all interests pursuant to 11 U.S.C. § 363(f) (Count II). The Complaint also contains a count for Slander of Title (Count III) and Defamation (Count IV) based upon statements made by Lam-ento concerning Heaney and his interest in the property following the sale. The Court conducted a trial on Counts I and II of the Complaint on August 7, 2017, and the parties thereafter filed their post-trial briefs.

The Court has jurisdiction over the dispute set forth in Counts I and II of the Complaint pursuant to 28 U.S.C. § 1334(a) and (b) and the order of reference from the United States District Court for the District of Massachusetts, as discussed further below. Such counts are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(G) and (N). The Court does not have jurisdiction over Counts III and IV of the Complaint and dismisses such counts, as discussed in further detail below.

The Court now makes the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052, For the reasons set forth below, the Court finds that Heaney has sustained his burden of proving that Lamento willfully violated this Court’s order approving the sale of the property to Heaney, and that he is entitled to compensatory damages, including attorney’s fees for prosecuting this adversary proceeding, as well as injunctive relief under Count II of the Complaint. The Court finds, however, that Heaney has not established a violation of the automatic stay pursuant to 11 U.S.C. § 362 under Count I of the Complaint.

II. FACTS AND PROCEDURAL BACKGROUND1

A. The Property

On September 7, 2011, Whiz Kids acquired the property by deed recorded at the Worcester District Registry of Deeds. As discussed in further detail below, Whiz Kids failed to pay real estate taxes on the property, and the City of Worcester effected a tax taking of the property pursuant to Massachusetts law and later conveyed the taking to Lamento by a deed of the Treasurer and Collector of Taxes, dated June 10,2015 (the “Collector’s Deed”).2

B. The Debtor’s Bankruptcy Filing

Two months following the issuance of the Collector’s Deed to Lamento, on August 11, 2015, Whiz Kids filed a voluntary petition under Chapter 11 of the Bankruptcy Code. James E. Levin (“Levin”), the Manager of Whiz Kids, signed the petition. On the petition date, the Debtor filed its Schedules and Statement of Affairs. On Schedule A—Real Property, the Debtor listed the property as being owned in fee simple, with a value of $20,000, subject to secured claims in the amount of $610,000 and described the nature of its interest:

2 Ionic Avenue, Worcester, MA—the market value of the debtor’s property is difficult to determine. It is a derelict building that only has value as a tear-down to someone seeking to develop the block in which the property is situated, The property is assessed by the City of Worcester at $620,000.00. This figure is a fantasy. If a value had to be placed upon the debtor’s property is would be in the vicinity of $20,000.00.

On Schedule D—Creditors Holding Secured Claims, the Debtor identified the following, four entities as holders of secured claims on the property: 1) the City of Worcester as the holder of a lien in the amount of $350,000, presumably for real estate taxes, and as a holder of an “affordable housing restriction;” 2) the “Mass-DEP,” as the holder of a “super priority lien” in the amount of $180,000; 3) First American Realty, Inc., as a “purchaser of a municipal tax lien” in the amount of $51,000; and 4) Lamento, as a “purchaser of a municipal tax lien” in the amount of $31,000. Lamento was also listed on the matrix of creditors and was served by the Bankruptcy Noticing Center with the “Notice of Chapter 11 Bankruptcy Case, Meeting of Creditors, & Deadlines.”

One day after the petition date, on August 12, 2015, the Debtor filed a Motion to Allow Private Sale of Real Estate, through which it sought to sell the property to Heaney for $107,000, pursuant to 11 U.S.C. § 363(b) and (f) which authorize a trustee, and thus a debtor in possession, see 11 U.S.C. § 1107, to sell property of the estate, other than in the ordinary course of business, free and clear of interests of third parties after notice and a hearing. On August 14, 2015, pursuant to the Motion of the United States trustee, the Court dismissed the Debtor’s case due to its failure to provide evidence of liability insurance on the property. Six days later, on August 20, 2015, the Debtor filed a Motion for Reconsideration of the dismissal order and attached to the motion evidence of liability insurance for the property. The Court allowed to the motion in the absence of any objections on September 4, 2015 and reinstated the Chapter 11 case.

C. The Sale Motion

On September 16, 2015, the Debtor filed a Renewed Motion to Allow Private Sale of Real Estate, again seeking to sell the property ,to Heaney, d/b/a On-Site Carpentry for $107,000, pursuant to 11 U.S.C, § 363 (the “Sale Motion”). The Debtor stated its reason for the sale:

[T]he Debtor has gone as far as it can with the Property and it needs to be sold to someone or something that can develop it because the Debtor is no longer capable of doing so....
That in the months leading up to the filing of this Chapter 11, the Debtor has endeavored to arrange for the sale of the property, but the competing disparate interests have made that an exercise in futility.

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Bluebook (online)
576 B.R. 731, Counsel Stack Legal Research, https://law.counselstack.com/opinion/heaney-v-lamento-in-re-whiz-kids-development-llc-mab-2017.