McDermott v. Junk (In re Junk)

533 B.R. 639
CourtUnited States Bankruptcy Court, S.D. Ohio
DecidedJuly 15, 2015
DocketCase No. 13-55139; Adv. Pro. No. 15-2064
StatusPublished
Cited by5 cases

This text of 533 B.R. 639 (McDermott v. Junk (In re Junk)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McDermott v. Junk (In re Junk), 533 B.R. 639 (Ohio 2015).

Opinion

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS’ JOINT MOTION FOR STAY OF PROCEEDINGS AND EXTENSION OF TIME TO ANSWER THE COMPLAINT

John E. Hoffman, Jr., United States Bankruptcy Judge

This adversary proceeding is before the Court on the Motion for Stay of Proceedings and Extension of Time to Answer the Complaint and accompanying memorandum in support filed by Daniel L. Junk and Christine H. Junk (“Motion”) (Adv. Doc. 5).1 For the reasons explained below, the Court denies the Motion.

On June 27, 2013 (“Petition Date”), the Junks filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The Junks then commenced an adversary proceeding in which they contested the right of CitiMortgage, Inc. (“CitiMort-gage”) to enforce a $1.2 million note (“Note”) and a mortgage (“Mortgage”) on real property in South Carolina (“Oldfield property”) securing the Note. CitiMort-gage requested that the Court grant it relief from the automatic stay so that state [641]*641court foreclosure litigation relating to the Note and the Mortgage that was pending on the Petition Date could continue as to the Oldfield property only, not as to the Junks personally. CitiMortgage also asked that the Court abstain from hearing the adversary proceeding. The Court granted CitiMortgage relief from stay to permit it to pursue a foreclosure judgment and abstained from hearing the adversary proceeding to the extent it relates to issues to be decided by the South Carolina state courts, including issues bearing on the enforceability of the Note and the Mortgage. See Junk v. CitiMortgage, Inc. (In re Junk), 512 B.R. 584 (Bankr.S.D.Ohio 2014) (“Stay Relief and Abstention Order”). The Junks filed a timely notice of appeal of the Stay Relief and Abstention Order and elected to have the appeal heard by the United States District Court for the Southern District of Ohio (“District Court”).

CitiMortgage filed a motion to dismiss or convert the Junks’ Chapter 11 case to Chapter 7 (“CitiMortgage Motion”) (Doc. 75), and the Court, on its own motion, issued a show cause order directing the Junks to appear and show cause why a Chapter 11 trustee should not be appointed or their case should not be converted to Chapter 7 (“Show Cause Order”) (Doc. 122). The Show Cause Order provided the requisite notice that the Court would consider whether to dismiss the case, convert it to Chapter 7 or order the appointment of a Chapter 11 trustee.

Following a hearing on the CitiMortgage Motion and the Show Cause Order (“Hearing”), the Court entered an order on January 13, 2015 converting the Junks’ Chapter 11 case to Chapter 7 (“Conversion Order”) (Doc. 136). The Court also issued a Corrected and Modified Bench Ruling on (A) Order Directing Daniel Junk and Christine Junk to Appear and Show Cause Why a Chapter 11 Trustee Should Not be Appointed or Their Case Should Not Be Converted to Chapter 7 and (B) CitiMortgage, Ine.’s Motion to Dismiss or Convert (“Corrected Ruling”) (Doc. 148). The Court found that, not only had continuing losses resulted in a diminution of the estate, there was no reasonable likelihood of rehabilitation, Corrected Ruling at 5-6; that the Junks failed to make property insurance payments with respect to the Oldfield property, id. at 6, to pay postpetition real estate taxes, id. at 7, and to make required payments of quarterly fees to the United States Trustee (“UST”), id; that the Junks sold property of the estate and obtained postpetition loans without obtaining the requisite Court approval, id. at 8-9; and that the Junks exhibited a lack of candor to the Court. Id. at 9. In addition, the Court found that the Junks’ monthly operating reports contained a number of material misrepresentations regarding property insurance and real estate taxes and that the reports improperly characterized as gross income from salary and wages tens of thousands of dollars they had received as gifts or loans, or from the sale of property of the estate. See id. at 10-12. The Junks appealed the Conversion Order to the District Court.

On February 25, 2015, the UST commenced this adversary proceeding by filing a complaint (“Complaint”) against the Junks under § 727(a)(4)(A) of the Bankruptcy Code (which provides for the denial of a bankruptcy discharge if “the debtor knowingly and fraudulently, in or in connection with the case ... made a false oath or account”) and served the Complaint and a summons on the Junks that same day. Under Rule 7012 of the Federal Rules of Bankruptcy Procedure (“Bankruptcy Rule(s)”), the deadline for the Junks to answer the complaint was March 27, 2015 (30 days after the issuance of the summons). Fed. R. Bankr.P. 7012(a). Before the March 27 deadline expired, the UST [642]*642and the Junks agreed to extend the deadline to April 26, 2015. Adv. Doc. 4. The April 26 deadline, however, came and went without the Junks taking any action to extend it. They did not answer the Complaint by April 26, nor did they file or serve “a motion permitted under [Bankruptcy Rule 7012]” by that date. Fed. R. Bankr.P. 7012(a). Instead, on April 27, 2015 — after their time to answer the Complaint had expired — the Junks filed and served the Motion.2

By the Motion, the Junks request a stay of this adversary proceeding and an extension of their time to answer the Complaint until 30 days after the District Court decides the appeal of the Conversion Order.3 In seeking an extension of their - time to answer the Complaint, the Junks rely on Bankruptcy Rule 9006, under which a request for an enlargement of the time to answer or respond to a complaint made “after the expiration of the specified period” may be granted only “where the failure to act was the result of excusable neglect.” Fed. R. Bankr.P. 9006(b)(1). The Junks filed the Motion after their time to answer the Complaint had already expired, yet they make no attempt in the Motion to explain how their failure to act in a timely manner was the result of excusable neglect. The request for an enlargement of the time to answer the Complaint must therefore be denied.

The Junks also request a stay of the adversary proceeding pursuant to Bankruptcy Rules 8007(a)(1)(D) and 8007(e). Under Bankruptcy Rule 8007(a)(1)(D), “[o]rdinarily, a party must move first in the bankruptcy court for ... the suspension or continuation of proceedings in a case or other relief permitted by subdivision (e).” And Bankruptcy Rule 8007(e)(1) permits a bankruptcy court to “suspend or order the continuation of other proceedings in the case.” When analyzing requests to suspend proceedings under Bankruptcy Rule 8007(e)(1), bankruptcy courts “consider four factors that are traditionally considered in determining whether to grant a preliminary injunction.” In re Mich. Produce Haulers, Inc., No. 14-03188, 2015 WL 1275387, at *2 (Bankr. W.D.Mich. Mar. 19, 2015). Those factors are:

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Cite This Page — Counsel Stack

Bluebook (online)
533 B.R. 639, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mcdermott-v-junk-in-re-junk-ohsb-2015.