In re Sanchez

545 B.R. 55, 2016 Bankr. LEXIS 323, 2016 WL 424809
CourtUnited States Bankruptcy Court, D. New Mexico
DecidedFebruary 3, 2016
DocketCase no. 15-11463 ts7
StatusPublished
Cited by1 cases

This text of 545 B.R. 55 (In re Sanchez) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. New Mexico primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Sanchez, 545 B.R. 55, 2016 Bankr. LEXIS 323, 2016 WL 424809 (N.M. 2016).

Opinion

MEMORANDUM OPINION

Honorable David T. Thuma, United States Bankruptcy Judge

Before the Court is Debtors’ motion to sanction North Central Solid Waste Authority (“NCSWA”) for violating the discharge injunction. Debtors allege NCSWA violated the injunction when it discontinued Debtors’ trash service, refused to reinstate it, and demanded that Debtors reaffirm the pre-petition debt. Although aware of the motion, NCSWA did not respond to it. For the reasons below, the Court finds NCSWA violated the discharge injunction and should be sanctioned.

[57]*57I. FACTS

Debtors live in San Juan Pueblo, a Native American pueblo in a rural part of northern New Mexico. Debtors filed this Chapter 7 bankruptcy case on June 1, 2015. They listed NCSWA as a general unsecured creditor with a claim of $880, representing several years of unpaid bills. NCSWA was given notice of the bankruptcy filing.

NCSWA provides trash service to Santa Juan Pueblo residents pursuant to a Joint Powers Agreement (the “Agreement”) among the County of Rio Arriba, the City of Española, the Santa Clara Pueblo, and the San Juan Pueblo. The Agreement was made under the authority of the Joint Powers Agreement Act, N.M.S.A.1978 § 11-1-1, et seq., and the Solid Waste Act, N.M.S.A.1978 § 74-9-1, et seq. (the “SW Act”). The Agreement provides that NCSWA is not a “waste authority” as defined in the Solid Waste Authority Act, N.M.S.A.1978 § 74-10-1, et. seq. (the “SW Authority Act”).

Prior to the bankruptcy filing, NCSWA provided Debtors with trash pick-up service. When Debtors signed up for the service, they paid a $150 deposit. NCSWA gave Debtors a trash bin. The monthly charge for the service was about $18.

As a joint venture of various local and tribal governmental units, NCSWA is a governmental unit, not a private enterprise. See § 101(26)1 (governmental unit includes, inter alia, a department, agency, or instrumentality of a state, municipality or other foreign or domestic government). Its function—curbside trash pick-up—is a utility service within the meaning of 11 U.S.C. § 366. See, e.g., In re Oaks, 2012 WL 5717940 (Bankr.N.D.Ill.2012) (treating trash pickup as a utility service); In re Spansion, Inc., 2010 WL 2905001 (Bankr.D.Del.2010) (same).

The Court entered its standard discharge order on September 8, 2015. The debt to NCSWA for unpaid prepetition trash service was discharged on that date.

On or about November 25, 2015, NCSWA removed the trash bin from Debtors’ property and discontinued service. Debtors filed a report with the Rio Arriba County Sheriff, reporting the trash bin as stolen.

On November 30, 2015, Mr. Sanchez visited NCSWA’s office to pay his bill. He paid $150 for services provided between the petition date and December 31, 2015. During that visit, NCSWA manager Gino Romero threatened to place a lien on the Debtors’ house unless they signed an agreement reaffirming the discharged debt. The agreement required Debtors to pay $78.54 a month for twelve months in addition to the regular monthly payment of $18. Mr. Sanchez signed the agreement. Despite this, NCSWA never restored service to the Debtors.

On December 11, 2015, Debtors reopened their bankruptcy case and filed the Motion. Debtors served the Motion, together with a notice of the 21-day deadline to object, on NCSWA by mailing them to: (1) Bernardino Chavarria, Chairman of the Board of Directors, North Central Solid Waste Authority, 1101 Industrial Park Rd., Española, NM 87532; (2) North Central Solid Waste Authority, Attn: Manager Gino Romero, 1101 Industrial Park Rd., Española, NM 87532; and (3) New Mexico Attorney General, Attn: Litigation Group, P.O. Drawer 1508, Santa Fe, NM 87504. Service was sufficient.

Five days after Debtors filed the Motion, they received a letter from NCSWA [58]*58stating their account had been closed “due to the bankruptcy.” The letter included a copy of the first page of the Motion and a check for $150, presumably a refund of the November 30, 2015 payment. NCSWA also directed Debtors to submit a new application and pay a $50 security deposit. NCSWA ordinarily requires a $25 deposit for new customers.

Debtors did not submit a new service application or pay a new deposit. NCSWA has not returned Debtors’ trash bin or picked up their trash since before November 25, 2015. Debtors have about 20 bags of trash in their back yard. They cannot remove the trash themselves because their truck needs a new transmission. Ms. Sanchez contacted two private trash removal services, but neither provided service to them.

There is no evidence that NCSWA’s pre-petition debt was or could be secured by a lien. The SW Authority Act gives “waste authorities” the right to impose liens for unpaid trash fees, but NCSWA is not a “waste authority.” Nothing in the Agreement, NCSWA’s bylaws, or the SW Act gives NCSWA the right to a lien. The bylaws simply provide that if NCSWA’s conditions are not met, service may be. discontinued.

NCSWA did not object or otherwise respond to the Motion. The deadline to object expired January 4, 2016. The Court held a hearing on the Motion on January 19, 2016. NCSWA did not appear.

Debtors incurred $3,800 in attorney fees filing the Motion and attending the January 19,2016 hearing.

II. DISCUSSION

A. Utility Companies and the Bankruptcy Code.

Unlike most service providers, public utility companies often hold monopoly or quasi-monopoly power. Utilities that provide gas, electricity, water, and sewer service, for example, typically are the only source of those essential services. Because their services are both needed and unavailable elsewhere, utilities can easily pressure debtors to pay their pre-petition debt or lose service.

One response to this situation was the addition of § 366 to the Bankruptcy Code, which prohibits utilities from discontinuing services in response to a bankruptcy filing while providing reasonable assurance that utilities will be paid for post-petition service.

Section 366 of the Bankruptcy Code recognizes the monopoly powers of most utilities who provide services such as electricity, water and gas. Unlike other creditors, who usually may decline to do business with the debtor after bankruptcy provided they do not violate some other provisions of the Code, a public utility is required to continue to provide service to the debtor after a bankruptcy case is commenced. Without section 366, a debtor might well be unable to obtain essential services.

3 Collier on Bankruptcy, ¶ 366.01 (16th ed.). Section 366 “strike[s] a balance between the general right of a creditor to refuse to do business with a debtor post-petition and the debtor’s need for utility service.” In re Martinez, 504 B.R. 722, 729 (Bankr.D.P.R.2014).

Refusing to provide utility service is not a per se violation of the Bankruptcy Code. For example, many cases have upheld a utility company’s right to discontinue service where there is evidence of equipment tampering or unauthorized use. See, e.g., In re Crome, 2008 WL 5645100, *3 (Bankr.N.D.Ill.2008) (collecting cases and holding that the electric company’s [59]

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545 B.R. 55, 2016 Bankr. LEXIS 323, 2016 WL 424809, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-sanchez-nmb-2016.