North Central Pennsylvania Regional Planning & Development Commission v. Eckert (In re Watson)

555 B.R. 466
CourtUnited States Bankruptcy Court, M.D. Pennsylvania
DecidedAugust 19, 2016
DocketBANKRUPTCY NO.: 4-13-bk-00304-JJT; ADVERSARY NO.: 4-13-ap-00203-JJT
StatusPublished

This text of 555 B.R. 466 (North Central Pennsylvania Regional Planning & Development Commission v. Eckert (In re Watson)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
North Central Pennsylvania Regional Planning & Development Commission v. Eckert (In re Watson), 555 B.R. 466 (Pa. 2016).

Opinion

OPINION

John J. Thomas, Bankruptcy Judge

This matter comes before me under an unusual fact pattern that I will briefly set forth. Most facts are not in dispute.

The Debtors, Timothy and Susan Watson, (hereinafter “Debtors”), own a parcel of property in Potter County, Pennsylvania. In 2009, judgment liens against the real estate were filed by the Plaintiff, North Central Pennsylvania Regional Planning and Development Commission, (hereinafter “Plaintiff”). On or about March 27, 2012, the Debtors entered into a 20 year lease and easement agreement with the Defendant, Jerome Eckert, (hereinafter “Defendant”). Plaintiff Ex. 12. Defendant operated a quarry nearby and planned to erect a pole bam1 on the prem[468]*468ises for use in his quarry operation. As security for Defendant’s investment in the building, the Debtors gave Defendant a mortgage to protect his interest. Plaintiff Ex. 11. Defendant erected the pole barn. On January 22, 2013, the Debtors filed a Chapter 18 bankruptcy. Plaintiff filed for relief to execute on the property. Prior to execution, however, Defendant, without seeking relief from the automatic stay, removed the pole barn and related items from the property. On August 14, 2013, Plaintiff filed this Complaint under 11 U.S.C. § 362(k) alleging that the automatic stay was violated by Defendant resulting in damages to Plaintiffs collateral.

The Debtors have not participated in this litigation and eventually had their Chapter 13 plan confirmed on August 13, 2015. The plan appears to strip Plaintiff from its lien on 367 Cherryspring Road, Coudersport, Pennsylvania, while surrendering to Plaintiff, 365 Cherryspring Road. The plan neither assumes nor rejects Defendant’s lease.

Plaintiff argues that the referenced documents, together with Plaintiffs Exhibits 13 “Agreement” and 14 “Memorandum of Real Estate Lease and Easement Agreement,” were actually a conditional sale and, alternatively, if those documents are deemed a lease, the pole barn was erected before the lease was put in place.

There are three significant issues that are critical in these proceedings.

First, does the Plaintiff, a creditor, have standing to litigate stay violations?

Second, is a removal of a pole barn constructed by a tenant on property of the Debtors, a violation of the stay?

Third, if such a violation did occur, what damage, if any, was the result?

The issue of standing of the Plaintiff, a creditor of the Debtors, to pursue damages for a violation of the stay by another creditor, has already been addressed by my Opinion denying a Motion to Dismiss the Complaint. In re Watson, 505 B.R. 634 (Bankr.M.D.Pa.2014). I held that Plaintiff did, indeed, have standing.

This brings us to the issue of whether the automatic stay was violated by the removal of the pole barn. It was this issue which was tried on August 18, 2015. The trial was bifurcated so that if liability was found, I would schedule a trial on damages at a later time. Doc. #67.

There is no dispute that Defendant erected this building on property leased from the Debtors for use in conjunction with a quarry Defendant owned on adjacent lands. In order to protect his interest in this ■ structure, Defendant entered into four separate documents with the Debtors: a 20 year lease, an agreement, a memorandum recorded in Potter County records, and a mortgage, also recorded. As suggested by Plaintiff, there is evidence that the erection of the structure was substantially completed prior to the execution of the written documents. That evidence is in the form of a bill for labor dated March 2, 2012, (Plaintiff Ex. 33A), and a rent check that included rent for both February and March of 2012, (Plaintiff Ex. 15). There was every indication that such construction occurred pursuant to an oral agreement. Nevertheless, the gist of those documents subsequently entered into represent the clear understanding that, as between Debtors and Defendant, the pole barn represented personal property and not a fixture on the land. The question that must be answered is whether that building’s re[469]*469moval during the bankruptcy by the tenant without securing relief from the automatic stay constituted a violation of the automatic stay provisions of § 362.

The parties have stipulated and agreed that Defendant caused the removal of the building on or about August 1, 2013. Doc. # 72 at ¶ 7. The Real Estate Lease and Easement Agreement was dated March 27, 2012, and provided for a 20 year term. Plaintiff Ex.12. The lease provided that upon termination of the lease, Defendant would be permitted to remove the building. The Memorandum of Real Estate Lease and Easement Agreement permits removal of the pole barn at any time. Plaintiff Ex. 14.

Based on this record, the lease was still in place when the bankruptcy was filed in 2013 and remained in place, subject to rejection or assumption, until confirmation when it was deemed rejected. 11 U.S.C. § 365(d)(2). Until it was rejected, the lease constituted property of the estate. In re Biggs, 271 Fed.Appx. 286, 288 (3rd Cir.2008) (unpublished opinion). The pivotal question in this litigation is whether the bankruptcy estate had an interest in the pble barn. In simple terms, if this was personalty owned by the tenant, Defendant, then there is no violation due to its removal by the tenant. On the other hand, if this was a fixture attached to the real estate, then it likely would have been property of the estate, and its removal without securing court permission would have been a violation of § 362. My analysis of whether this pole bam is realty or personalty requires a review of Pennsylvania law since property interests are determined under state law. Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979).

In Clayton v. Lienhard, 312 Pa. 433, 436-37, 167 A. 321, 322 (1933), the Pennsylvania Supreme Court set forth these relevant principles:

Chattels used in connection with real estate are of three classes: First, those which are manifestly furniture, as distinguished from improvements, and not peculiarly fitted to the property with which they are used; these always remain personalty. ... Second, those which are so annexed to the property that they cannot be removed without material injury to the real estate or to themselves; these are realty, even in the face of an expressed intention that they should be considered personalty-to them the ancient maxim ‘Quicquid plantatur solo, solo cedit’ [whatever is affixed to the soil belongs to the soil] applies in full force. ... Third, those which, although physically connected with the real estate, are so affixed as to be removable without destroying or materially injuring the chattels themselves, or the property to which they are annexed; these become part of the realty or remain personalty, depending upon the intention of the parties at the time of the annexation; in this class fall such chattels as boilers and machinery affixed for the use of an owner or tenant but readily removable. (Citations omitted)

I find that as between the Debtors and Defendant, the parties considered this pole barn personalty.

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Related

Butner v. United States
440 U.S. 48 (Supreme Court, 1979)
First National Bank v. Reese
51 A.2d 806 (Judicial Discipline of Pennsylvania, 1947)
Clayton v. Lienhard
167 A. 321 (Supreme Court of Pennsylvania, 1933)
Berry v. Heinel Motors, Inc.
56 A.2d 374 (Superior Court of Pennsylvania, 1947)
In re Biggs
271 F. App'x 286 (Third Circuit, 2008)

Cite This Page — Counsel Stack

Bluebook (online)
555 B.R. 466, Counsel Stack Legal Research, https://law.counselstack.com/opinion/north-central-pennsylvania-regional-planning-development-commission-v-pamb-2016.