In re Stewart

499 B.R. 557, 2013 WL 5592899, 2013 Bankr. LEXIS 4293
CourtUnited States Bankruptcy Court, E.D. Michigan
DecidedSeptember 20, 2013
DocketNo. 10-41342-wsd
StatusPublished
Cited by11 cases

This text of 499 B.R. 557 (In re Stewart) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Stewart, 499 B.R. 557, 2013 WL 5592899, 2013 Bankr. LEXIS 4293 (Mich. 2013).

Opinion

OPINION REGARDING DEBTOR’S MOTIONS TO HOLD BALDWIN SUMMIT ET AL. IN VIOLATION OF AUTOMATIC STAY AND COMPEL RELEASE OF PROPERTY

WALTER SHAPERO, Bankruptcy Judge.

The Debtor Michelle Stewart filed for Chapter 7 Bankruptcy protection on January 18, 2010. She had operated a pizza establishment and several pieces of restaurant equipment were left in her vacated commercial lease space (“the premises”) and are currently in the control of Royal Management, LLC, Marcus Evangelista, and Baldwin Summit, LLC (collectively “the Creditors”). Debtor filed a Motion to Compel Release of Debtor’s Property and a Motion to Hold Creditors in Violation of 11 U.S.C. §§ 362(a)(3), (a)(6), and (a)(7), and 11 U.S.C. § 727, essentially alleging that Creditors converted and failed to return her equipment. Following an eviden-tiary hearing, the parties submitted post-trial briefs outlining the issues. The Court finds the Creditors liable for converting the property and for violating the automatic stay with respect to some of Debtor’s equipment.

Background

In March 2005, the Debtor signed a five year lease (the “Orion Lease”) with Orion Village Crossing, LLC (“Orion Village”) for commercial space within the Orion Village Shopping Center at 3647 Baldwin Road, Orion, Michigan. She used this space to operate Paesano’s Pizza, a carryout pizza restaurant, and acquired several pieces of commercial restaurant equipment and related items (“the Equipment”) which are the subject of this dispute. While the exact commencement date after March 2005 of the five year lease term is not clear (given what appears to have been certain work required to be completed by the landlord before that term officially started), what is clear is that the five year term had not expired as of January, 18, 2010 when this bankruptcy case was filed.

Paesano’s Pizzeria had operating net losses from 2007-2009. By 2009, Debtor was several months delinquent on her lease payments to Orion Village. In December 2009, Orion Village initiated an action against Debtor, seeking possession of the premises and $14,543 in back rent. While the date of such is in dispute, at some point during late 2009 or early 2010, Debtor ceased operating Paesano’s Pizza. Thereafter she returned to the premises several times to clean and collect smaller items, but did not have the means to move [562]*562or store the larger Equipment. The landlord claimed ownership of this Equipment. On January 5, 2010, the state court entered a stipulated order under which Debt- or “voluntarily agree[d] not to remove any equipment, fixtures or other items from the subject property pending the resolution of this lawsuit” effectively preserving the status quo. (Stipulated Order for Adjournment, Ex. 13, at 1). Upon later learning of the Debtor’s bankruptcy, the state court ordered an administrative closing of the case pursuant to the bankruptcy stay. (Order for Administrative Closing, Ex. 14, at 1). The resolution of the ownership or of entitlement to this Equipment thereafter became a matter before this Court.

Debtor listed the remaining Orion Lease as an Unexpired Lease on her Bankruptcy Schedule G. On schedule B, she claimed assets worth $9,370, consisting of “Pizzeria Equipment, oven, scales grater, sign, fryer, tables, shelving, racks screens, pans, mixer exhaust fan, hood, sink, cooler, phones, POS system, [and] flour bin.” On April 23, 2010, the trustee filed an asset report intending to abandon the property pursuant to 11 U.S.C. § 554(c), and later filed his final report on December 3, 2010 concluding that there were no assets to distribute. As noted, this Equipment remains on the premises and is the subject of this dispute.

While the state court ejectment action against Debtor was ongoing, Orion Village defaulted on its loan from Fifth Third Bank, which held a mortgage on the Orion Village Shopping Center. Fifth Third foreclosed and Agree Realty was appointed receiver. On February 10, 2010, Agree Realty took control of the premises and states that it found the unit in a “filthy and contaminated” condition. (Cohon Aff., Ex. 4, at 1). As receiver for the property, it cleaned and sanitized the unit. Meanwhile, Fifth Third sold its interest in the Orion Shopping Center to Baldwin Summit, LLC, the closing on which occurred on April 1, 2010. As the statutory right of redemption period had not yet expired, Agree Realty continued to manage the Orion shopping center until the right of redemption expired in July 2010.

Upon expiration of the redemption period, Baldwin Summit LLC took effective control over the Orion shopping center and appointed Royal Management LLC to manage it. Dr. Stella Evangelista and Jose Evangelista are the sole managing members of both Baldwin Summit LLC and Royal Management LLC. Dr. Evan-gelista’s son, Marcus Evangelista (“Mr. Evangelista”), is the general counsel and resident agent for both entities. Mr. Evangelista has been representing himself and both indicated Evangelista entities during the pendency of this case.

In June 2010, Debtor’s counsel, Raymond Mashni contacted Mr. Evangelista regarding the Equipment. Mashni informed Mr. Evangelista of Debtor’s bankruptcy filing and claimed the Equipment was property of the Debtor and she wanted access to the premises to remove it. Mr. Evangelista, relying on opinion of outside counsel, took the position that Baldwin Summit’s purchase of the Orion Shopping Center included all personal property and fixtures within the leased premises. This position was apparently based upon a clause in the Orion Lease (“the Abandonment Clause”) which provides for the transfer of title to the landlord of all personal property and fixtures remaining in the premises at the end of the tenant’s lease term.

Creditors argue that when Debtor allegedly vacated the premises in 2009, she abandoned the Equipment and it thereby became property of Orion Village. These rights transferred to Fifth Third Bank via the foreclosure and were ultimately sold to [563]*563Baldwin Summit LLG as part of the April 1, 2010 shopping center sale transaction. Debtor claims that she never abandoned the premises. Rather, she states that for a period of time she operated Paesano’s on a reduced basis as a cash business and continued to do so and only fully stopped operating and physically vacated the premises in January 2010. She also argues she was barred from returning to collect her property by the status quo order in the state court. Debtor thus argues that the Creditors, by refusing to return her Equipment, converted it and violated the automatic stay.

On November 18, 2010, Debtor filed a Motion to Compel the release of her Equipment. Five days later on November 23, 2010, Debtor filed a Supplementary Motion to Hold Royal Management, LLC, Baldwin Summit, LLC, Marcus Evangelis-ta, and Orion Village Crossing, LLC1 in violation of 11 U.S.C. §§ 362(a)(3), (6), and (7) and 11 U.S.C. § 727. Creditors filed a Motion for Summary Judgment in response.

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Cite This Page — Counsel Stack

Bluebook (online)
499 B.R. 557, 2013 WL 5592899, 2013 Bankr. LEXIS 4293, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-stewart-mieb-2013.