IN RE: ROBERT L. WOODARD
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE NITZA I QUINONES ALEJANDRO ON 10/11/16. 10/11/16 ENTERED AND COPIES MAILED TO PRO SE TRUSTEE, EMAILED.(rf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ROBERT L. WOODARD
CITY OF PHILADELPHIA
NITZA I. QUIÑONES ALEJANDRO, J.
OCTOBER 11, 2016
Before this Court is an appeal filed by Appellant Robert L. Woodard, (“Appellant” or
“Debtor”) pursuant to 28 U.S.C. §158(a), contesting the final judgment Order dated June 18,
2015, entered in favor of Defendant/Appellee City of Philadelphia, (“Appellee” or “City”), by
the Honorable Judge Eric L. Frank, United States Bankruptcy Court for the Eastern District of
Pennsylvania. The issues in this appeal have been fully briefed, and the matter is ripe for
For the reasons set forth herein, Appellant’s appeal is denied, and the judgment of the
Bankruptcy Court is affirmed.1
In light of the factual and procedural history of this matter, outlined infra, it appears that the time
for Debtor to challenge either the City’s receipt and retention of the sale proceeds at issue or the validity
of the underlying liens/judgments has long passed. The liens at issue were satisfied by the proceeds of the
Debtor-requested and Bankruptcy Court-approved sale of the Property (defined later) on October 21,
2005. Though Debtor claims to have been unaware of the existence of the liens at issue during the initial
period of his bankruptcy proceedings, he cannot reasonably argue a continued ignorance of them once the
sale of the Property and the disbursement of the proceeds of the sale occurred. Debtor readily admits he
was provided a settlement sheet which disclosed all of the now challenged liens, at or about the time of
the closing. Yet, at no time in the nearly eight years between the sale of the Property and the filing of the
motion to reopen his bankruptcy case did Debtor assert any challenge to the validity of these paid off
liens. Debtor never filed any such claim, and the time for doing so would appear long passed.
PROCEDURAL AND FACTUAL BACKGROUND2
On March 20, 2001, Debtor filed a voluntary Chapter 13 bankruptcy petition. At the
time, Debtor owned several properties located in the City of Philadelphia, including one at 1015
South 18th Street, Philadelphia, Pennsylvania, 19146 (the “Property”). Four proofs of claim were
filed in Debtor’s bankruptcy case. Of these, one claim was disallowed and another was stricken,
as docketed in error. As to the other two proofs of claim, one was filed by First Union National
Bank (“First Union”) and the other by the City. Both proofs of claim were for delinquent real
estate taxes on the multiple properties then owned by Debtor.
Specifically, First Union, as Trustee for certain bondholders, filed a secured proof of
claim in the amount of $41,159.73. After Debtor objected to this claim, the Bankruptcy Court
entered an Agreed Order allowing First Union’s secured claim in the reduced amount of
$27,802.84. The Agreed Order delineated the allowed amount of First Union’s secured claim
with respect to each of Debtor’s properties. With respect to the Property, the claim amount
allowed was in the amount of $4,204.20. On July 9, 2001, the City filed a secured claim in the
amount of $5,764.62. For reasons unclear, the claim amount allowed was $1,134.86.3
On April 29, 2003, the Bankruptcy Court confirmed Debtor’s Amended Chapter 13 Plan
(the “Confirmed Plan”). The Confirmed Plan required Debtor to make monthly payments to the
Chapter 13 Trustee in the amount of $250.00 per month for nearly the entire duration of the plan.
It also provided that the Property would be sold by Debtor and that the proceeds would be
applied “towards the Class Two claims,” to satisfy the secured claims for real estate taxes, and
These facts, which are mostly undisputed, are taken from the Bankruptcy Court opinion and the
Stipulation of Facts submitted jointly by the parties to the Bankruptcy Court. To the extent any fact is
disputed, such dispute is noted.
The Confirmed Plan refers to these Class Two Claims as “[t]he secured claims for real estate
taxes and water and sewer liens held by First Union National Bank and the City of Philadelphia.”
water and sewer liens. Besides the debts owed to First Union, the Confirmed Plan did not
provide for any other secured claims other than the “real estate taxes and water and sewer liens”
owed to the City.
On June 6, 2005, Debtor signed an Agreement of Sale to sell the Property for
$100,000.00; a sale price that exceeded the amount of the secured claims filed by First Union
and the City attributable to the Property. On June 8, 2005, Debtor filed a renewed motion for
permission to sell real estate and revise proofs of claim relating to the property. In the motion,
Debtor sought permission to sell the Property “free and clear of all liens,” a motion consistent
with the agreement of sale, attached to the motion, which required that the Property “be
conveyed free and clear of all liens, encumbrances, and easements. . . .”
The Bankruptcy Court granted Debtor’s motion, and approved the sale by Order dated
July 19, 2005 (the “Sale Order”). The Sale Order provided, inter alia, that:
the Debtor is granted permission to sell [the Property] . . . free and
clear of all liens, pursuant to the terms of the Agreement of Sale. . .
with the proceeds to be distributed to all taxes and other
unavoidable liens of taxing authorities against the Property, and
any additional settlement costs chargeable to the Debtor, with any
remainder payable to the trustee. The proceeds of the sale shall be
retained by the trustee into an account to be paid to filed and
allowed claims and his commissions, and the balances shall be
paid to the Debtor.
(Bankruptcy Record (“B.R.”) Ex. 10, Stipulation of Facts at ¶13 and attached Ex. B). The Sale
Order also required the title clerk to provide the Chapter 13 Trustee with a copy of the
Settlement Sheet, and for the Trustee to “promptly notify the title company of his approval or
objections to the sums to be disbursed.” (Id.).
Settlement on the sale of the Property occurred on October 21, 2005. A copy of the
settlement statement (“Settlement Statement”) prepared by the title company was not provided to
Debtor or to the City until the day of the settlement. The Settlement Statement provided for
payment of the unpaid real estate taxes owed to the City on the Property for years 1997-2004 in
the amount of $3,118.36, and for the payment of the following charges:
Payoff Judgment No. 89-02-00316 to the City
Payoff CE-04-07-73-0059 to the City
Payoff Lien #99070310/965053079/92040338/96053081 to the City
Payoff CE-94-08-32-05160 to the City
Payoff Judgment No. 030303159 to School District of Philadelphia
Payoff Judgment No. 941003166 to School District of Philadelphia
(Id., Stipulation of Facts at ¶14 and attached Ex. C).
On October 25, 2005, the City received seven (7) checks (the “Settlement Checks”) from
the title company in the aggregate amount of $40,756.79; a sum allocated by the City as follows:
Real Estate Taxes for 1015 S. 18th St., Philadelphia, PA4
Common Pleas Judgment 89-05-00318
Municipal Court Judgment CE-04-07-73-0059
L&I Liens: 99070310/965053079/92040338/96053081
Municipal Court Judgment CE-94-08-32-06160
Fines and Fees
Use and Occupancy Taxes
(Id., Stipulation of Facts at ¶¶16-17, at attached as Ex. D).
Thereafter, Debtor successfully completed the Confirmed Plan and received a Chapter 13
discharge on April 19, 2006. The bankruptcy case was closed on April 27, 2006.
Debtor does not dispute the propriety of the application of the first check in the amount of
$3,118.36 toward real estate taxes owed on the Property.
On August 23, 2013, nearly seven-and-a-half years after the bankruptcy case was closed,
and almost eight years after the settlement closing on the Property, Debtor moved to reopen his
bankruptcy case, contending that the City had violated the automatic stay provisions and the
Confirmed Plan, when it collected and retained sums from the sale proceeds that were in excess
of the City’s filed proof of claim. The Bankruptcy Court granted the motion to reopen, and on
October 3, 2013, Debtor filed an adversary complaint against the City of Philadelphia, Appellee.
On November 11, 2013, Debtor filed an amended complaint in which he asserted two claims: to
wit; a violation of the Confirmed Plan (Count One); and a violation of the automatic stay (Count
Two). The City filed its answer on December 30, 2013. On June 23, 2014, the Bankruptcy
Court held a bench trial. After suspending the matter for settlement discussions and after the
parties submitted post-trial briefs, the Bankruptcy Court issued its decision by Memorandum
dated June 18, 2015, and entered judgment in favor of the City.
The Bankruptcy Court Opinion
In its memorandum opinion, the Bankruptcy Court made several findings. First, it found
no issue as to the checks in the amounts of $498.00 and $54.00 because “those payments were
attributable to the School District of Philadelphia who is not a party to this proceeding.” (B.R.
Ex. 16, Bankruptcy Memorandum Opinion at 6). It also found that Debtor had not met his
burden to properly contest the validity of the underlying liens and judgments paid off as part of
the Settlement Checks. (Id. at 7, n. 7). With regard to Debtor’s contention that the City’s receipt
and retention of the checks constituted a violation of the automatic stay, the Bankruptcy Court
I conclude that, although the Sale Order did not expressly grant relief from the
automatic stay to permit the City to collect its secured claims that were not
included in its proof of claim, the Sale Order effectively operated as an order
granting limited relief from the automatic stay. 11 U.S.C. §362(d). There is
simply no other way to look at it. I cannot interpret the Sale Order as authorizing
the payment of specified claims secured by liens and then hold the recipient of
those payments in contempt for violation of the automatic stay. That would be
absurd. The Sale Order implicitly and necessarily modified the automatic stay.
Thus, the City’s acceptance of the settlement proceeds on account of its
unavoidable liens, authorized by the Sale Order, was proper.
(Id. at 9). Finally, the Bankruptcy Court rejected Debtor’s argument that the City’s acceptance
of the settlement checks violated the terms of Debtor’s confirmed bankruptcy plan, and
concluded that “if a lien is not addressed and treated in some fashion during the course of a
bankruptcy case – either by being provided for in a reorganization plan, avoided pursuant to a
Code avoidance power, disallowed in whole or part – it passes through the bankruptcy case
unaffected.” (Id. at 10).
This Court has appellate jurisdiction over this matter pursuant to 28 U.S.C. §158(a)(1).
Where a district court reviews a decision of the bankruptcy court on questions of fact, the court
applies a clearly erroneous standard of review. See Pennhurst State Sch. & Hosp. v. Halderman,
465 U.S. 89 (1984). Under this clearly erroneous standard of review, the bankruptcy court’s
findings of fact must stand unless “the court is left with the definite and firm conviction that a
mistake has been committed.” Brager v. Blum, 49 B.R. 626, 629 (E.D. Pa. 1985). However,
“the ‘clearly erroneous standard’ does not apply to questions of law. Thus, where the appellate
question presented is solely one of law, no presumption of correctness applies. The bankruptcy
judge’s legal conclusions may not be approved without [the district court’s] independent
determination of the legal questions.” In re Gilchrist Co., 410 F. Supp. 1070, 1074 (E.D. Pa.
1976) (citations omitted); see also Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98,
101-03 (3d Cir. 1981). Therefore, a bankruptcy court’s conclusions of law are subject to plenary
review. See Will v. Michigan Dept. of State Police, 491 U.S. 58 (1989); Kimmelman v. Port
Authority, 344 F.3d 311, 316 (3d Cir. 2003). Here, Debtor’s appeal is primarily based on the
Bankruptcy Court’s conclusions of law and, therefore, his arguments are subject to plenary
In this appeal, Debtor essentially argues that the Bankruptcy Court erred in concluding
that: the Sale Order granted limited relief from the automatic stay; the payment of the liens from
the sale proceeds did not violate the Confirmed Plan; the failure of the City to file a proof of
claim for the liens that appeared in the title search and were identified in the Settlement Sheet at
the time of closing did not bar the City from receiving and retaining payments from the sale
proceeds sufficient to extinguish the liens; one of the liens paid was for a post-petition judgment;
and the argument regarding the School District lacked merit. Each of these arguments is
Debtor’s Claim for Violation of the Automatic Stay
In the amended complaint, Debtor asserted a claim for violation of the Bankruptcy
Code’s automatic stay provisions. In denying this claim, the Bankruptcy Court held that its
issuance of the Sale Order, on Debtor’s motion for such an order, effectively modified the
automatic stay to allow for the sale of the Property “free and clear of all liens,” thus, permitting
the City’s receipt and retention of sale proceeds to pay off all recorded liens. This Court agrees.
As stated, by motion, Debtor requested the Bankruptcy Court’s permission to sell the
Property, “free and clear of all liens,” pursuant to the terms of the Sale Agreement. (B.R. Ex. 10,
Stipulation of Facts at ¶12, and attached Ex. A, Debtor’s Motion to Sell Real Estate). The
Bankruptcy Court granted Debtor’s motion by Order dated July 19, 2005 (the “Sale Order”),
which expressly provided:
it is hereby ORDERED that the Debtor is granted permission to
sell a certain parcel of real estate, namely a vacant lot located at
1015 South 18th Street, Philadelphia, PA, 19146 (“the Lot”), to
Christopher Ming and/or Associates for $100,000, free and clear of
all liens, pursuant to the terms of the Agreement of Sale attached to
the Motion as Exhibit “A,” with the proceeds to be distributed to
all taxes and other unavoidable liens of taxing authorities against
the Property, and any additional settlement costs chargeable to the
Debtor, with any remainder payable to the trustee. The proceeds
of the sale shall be retained by the trustee into an account to be
paid to filed and allowed claims and his commissions, and the
balance shall be paid to the Debtor. The title clerk shall fax a
completed HUD-1 or settlement sheet from the closing directly to
the trustee immediately upon the close of the settlement, and the
trustee shall promptly notify the title company of his approval or
objections to the sums to be disbursed. Upon trustee approval, the
title clerk shall fax a copy of the disbursement check to the trustee,
and shall immediately transmit the actual disbursement check to
the trustee by overnight courier.
It is further ORDERED that, after the Lot is sold and taxes on the
Lot are paid, the amounts in the proofs of claim against the Lot
filed by Wachovia Bank, N.A. (“Wachovia”) in the amount of
$4204.20, per Exhibit “B” to the Motion, and the City of
Philadelphia in the amount of $1134.86, per Exhibit “C” to the
Motion, shall be deleted from those respective proofs of claim.
(Id., Stipulation of Facts at ¶13, and attached Ex. B).
By its plain and ordinary meaning, the Sale Order authorized the sale of the Property
“free and clear of all liens,” as was expressly requested by Debtor in his motion, and as required
by the agreement of sale. (Id.). Moreover, the Sale Order expressly provided, in part, that the
Sale Proceeds were to be “distributed to all taxes and other unavoidable liens of taxing
authorities against the Property.” Neither Debtor nor the Trustee objected to the provisions of
the Sale Order. To the contrary, Debtor went forward with the authorized sale of the Property,
on the terms included in the Sale Order. At the settlement closing held on October 21, 2005,
Debtor received a copy of the Settlement Statement from the title company which listed all of the
liens Debtor now challenges. The amount of each of those liens was listed in the column
entitled, “Paid From Seller’s Funds at Settlement.” Again, Debtor did not object to any of the
liens or the fact that these liens would be paid from the Sale Proceeds. Four days later, the title
company delivered the Settlement Checks to the City.
All of the payments received by the City were on account of unavoided liens held by the
City, in its taxing authority. As such, these payments were expressly authorized by the Sale
Order. As stated by the Bankruptcy Court, under these circumstances, it would be absurd to hold
the City in contempt for violating the automatic stay when it merely received and retained the
now challenged payments in satisfaction of its recorded liens, a payment clearly authorized by
the Bankruptcy Court’s Sale Order. More so, when the Sale Order, which was entered upon
Debtor’s motion, effectively modified the automatic stay to allow for the sale of the Property to a
buyer, “free and clear of all liens,” for an amount in excess of the filed proofs of claim and other
liens against the Property. Thus, the City’s receipt and acceptance of payment of its unavoided
liens from the settlement proceeds was proper and did not violate the automatic stay provisions.
Debtor’s Challenge to the 2004 Judgment
Though not addressed in the Bankruptcy Court’s written memorandum decision, Debtor
argues that the recorded Municipal Court Judgment CE-04-07-73-005 (the “2004 Judgment”)
was itself a violation of the automatic stay. It appears from the sparse record presented before
the Bankruptcy Court,5 and the discussion by counsel and the Bankruptcy Court, that the 2004
Judgment was a “code-enforcement judgment that [the City] entered post petition.” (B.R. Ex.
11, Bankr. Tr. 157). During closing arguments, the Bankruptcy Court inquired whether any type
The sparsity of the record is largely, if not solely, attributable to the fact that Debtor brought this
case nearly eight years after the Sale and the closing of his bankruptcy case. City witnesses testified that
as part of their routine document retention policies, much of the underlying documentation for these liens
and judgments was purged.
of exception to the automatic stay existed for code-enforcement judgments, (Id. at 162), and
framed the issue as follows:
Based on the pleadings it seems to me that there are two
bankruptcy issues before me. The first is also relatively – involves
an amount of money that is relatively small. And that is whether
any of these payments violated the automatic stay. The only link
that I can see in this to the automatic stay is the code-enforcement
judgment that was entered in 2004 that resulted in the payment of
I don’t know the answer to the question, whether it violated the
stay. It seems to me there’s a question of police power. And, as
Mr. Scholl pointed out, there might be an issue as to who really has
the burden of proof at this point on this. I’m not sure. And, on the
one hand, you know, typically you’d say that if something happens
after the automatic stay, it sure looks like it violates the stay. On
the other hand, the mere fact that it’s – it’s code enforcement starts
to make it seem like it’s potentially police power, so don’t have the
answer to that, but that seems to me to be the second issue.
If it violated the stay, the entry of the judgment, then I would be
prepared to follow the logic of that, which would be to say that the
1,079 was paid in violation the – of the sale order, but I’m not sure
of the outcome by that. And, as I said, it’s a relatively small
amount of money here.
(Id. at 167). Unfortunately, the issue was never addressed by the parties or resolved by the
Bankruptcy Court. The City argues here, however, that the entry of the 2004 Judgment did not
violate any of the restrictions of the automatic stay provision. This Court agrees.
Although Debtor does not assert in his amended complaint a specific claim for a violation
of the automatic stay premised on the 2004 Judgment, he alleges that the City’s actions, in
general, violated 11 U.S.C. §362(a)(1-6).6 (See Amend. Comp. at ¶32). However, none of these
subsections of §362 apply to the 2004 Judgment.
Nowhere does Debtor cite or refer in any way to subsections (7) or (8) of §362(a). Therefore,
these subsections are not addressed herein.
Section 362(a) of the Bankruptcy Code (the automatic stay provision) describes specific
actions that are precluded or “stayed” by the filing of a bankruptcy petition. 11 U.S.C. §362(a).
Subsections (1), (2), (5) and (6) of §362(a) prohibit actions with regard to claims or judgments
against the debtor that either arose or were obtained “before the commencement of the case.” See
§362(a)(1), (2), (5) and (6) (emphasis added). Here, there is no evidence that the 2004 Judgment
was for a claim that arose before commencement of the bankruptcy case. To the contrary, by the
assigned number of this judgment (CE-04-07-73-0059), it appears this claim arose after
commencement of Debtor’s bankruptcy case, i.e., sometime in 2004. As such, these subsections
of the automatic stay provision do not apply.
Subsections (3) and (4) of §362(a) are limited to acts taken against “property of the
estate.” See §362(a)(3) and (4). Implicit in these provisions is the principle that the automatic
stay only apples to actions against “property of the estate,” and not to actions against property of
the debtor. See In re Wei-Fung Chang, 438 B.R. 77, 79-80 (Bankr. M.D. Pa. 2010). Further,
§362(c)(1) provides that the automatic stay of an act against “property of the estate” continues
until such property is no longer property of the estate. 11 U.S.C. §362(c)(1). In addition,
§1327(b) provides that “the confirmation of a plan vests all of the property of the estate in the
debtor.” 11 U.S.C. §1327(b). Hence, pursuant to 11 U.S.C. §1327(b) of the Bankruptcy Code,
the Property revested in Debtor after confirmation and, thus, was not “property of the estate” at
the time of either the entry of the 2004 Judgment or the Sale of the Property. Indeed, the
Confirmed Plan provides as much: “the property of the estate shall revest in the Debtor upon
confirmation and that the Debtor shall have the sole right to use and possess said property.”
Debtor’s plan was confirmed on April 29, 2003. At that time, the Property had revested in the
Debtor. As such, subsections (3) and (4) of §362(a) also do not apply. Cf., In re Clouse, 446
B.R. 690, 703 (Bankr. E.D. Pa. 2010) (holding that after plan confirmation, all pre-petition
property of the estate vests back in the debtor under §1327(b)); In re Wei-Fung Chang, 438 B.R.
at 85 (holding that a creditor’s filing of a mechanic’s lien against property that revested in the
debtor after confirmation of plan did not violate automatic stay). In light of this analysis,
Debtor’s reliance on a violation of §362(a)(1-6) is misplaced.
Debtor’s Claim for Violation of the Confirmed Plan
Debtor next argues that the City’s retention of the disputed payments following the sale
of the Property violated the Confirmed Plan. Specifically, Debtor argues that because the City
filed a proof of claim that omitted the claims for the underlying liens at issue, and did not file any
separate proofs of claim for these liens, the City’s receipts from the Sale Proceeds should have
been limited to the amount of the allowed proof of claim attributable to the Property and
provided for in the Confirmed Plan, and nothing more. Again, Debtor’s argument is premised on
the fact that the City’s proof of claim did not include the liens and judgments against the
Property listed on the settlement sheet and subsequently extinguished by the Sale Proceeds. For
the reasons articulated by the Bankruptcy Judge, Debtor’s argument lacks merit.
As the Bankruptcy Court noted, it is well-established that the holder of a secured claim
need not file a proof of claim, but may, instead, elect to have its lien(s) pass through a
bankruptcy case unaffected. See e.g., In re Mansaray-Ruffin, 530 F.3d 230, 235-36 (3d Cir.
2008); Lellock v. Prudential Ins. Co. of America, 811 F.2d 186, 188 (3d Cir. 1987) (holding that
“although an underlying debt is discharged in bankruptcy, the lien created before bankruptcy
against property to secure that debt survives.”); In re Hill, 286 B.R. 612, 615 (Bankr. E.D. Pa.
2002) (“[A] secured creditor in a Chapter 13 case is not required to file a proof of claim may
choose to ignore the bankruptcy proceeding and look to its lien for satisfaction of the debt.”);
Coffin v. Malvern Fed. Sav. Bank, 189 B.R. 323, 326-27 (E.D. Pa. 1995); In re Vandy, Inc., 189
B.R. 342, 349 (Bankr. E.D. Pa. 1995); Esposito v. Title Ins. Co. of PA (In re Fernwood Markets),
76 B.R. 501, 503 (Bankr. E.D. Pa. 1987).7 A lienholder’s failure to file a proof of claim “has no
legal significance” and “does not result in the loss of its lien.” In re Mansaray-Ruffin, 530 F.3d
at 236 n. 4. The Third Circuit Court of Appeals described this pass-through rule as follows:
[T]he general rule [is] that liens pass through bankruptcy
A bankruptcy discharge extinguishes only in
personam claims against the debtor(s), but generally has no effect
on an in rem claim against the debtor’s property. For a debtor to
extinguish or modify a lien during the bankruptcy process, some
affirmative step must be taken toward that end. Unless the debtor
takes appropriate affirmative action to avoid a security interest in
property of the estate, that property will remain subject to the
security interest following confirmation.
In re Mansaray-Ruffin, 530 F.3d at 235 (quoting Cen-Pen Corp. v. Hanson, 58 F.3d 89, 92 (4th
As stated, the City filed an allowed proof of claim for certain unpaid real estate taxes, and
water and sewer liens held by the City. The City, however, did not include in its proof of claim,
or file separate proofs of claim for the liens/judgments that are the subject of this litigation. As
such, under the law described above, these liens/judgments on the Property passed through
Debtor’s bankruptcy proceedings unaffected.
Debtor has provided no law – and this Court has found none – to support his contention
that a secured creditor that holds numerous liens or judgments against a debtor’s property but
files a proof of claim for only some (but not all) of the liens/judgments is precluded from
recovering on the other liens/judgments from the sale proceeds resulting from the sale of the
Notably, in the Fernwood Markets matter, former Bankruptcy Judge David A. Scholl, Jr., who
represents Debtor in this matter, held that the failure of a secured creditor to file a timely proof of claim
did not prevent a lien from passing unaffected through the bankruptcy and attaching as a valid lien against
the proceeds from the sale of debtor’s realty. In Re Fernwood Markets, 76 B.R. at 503-04.
debtor’s encumbered property. Indeed, the well-settled law described above pertaining to the
passing through of liens not made part of a confirmed plan suggests otherwise. As Debtor’s
Confirmed Plan made no provision whatsoever for the City’s secured claims at issue, and Debtor
took no affirmative action to avoid them, the City’s associated liens and recorded judgments
passed through Debtor’s bankruptcy case unaffected. In light of the foregoing, this Court finds
that the Bankruptcy Court did not commit reversible error when it held that the City’s receipt and
retention of the challenged portions of the Sale Proceeds did not violate the terms of Debtor’s
Debtor’s Claims with Regard to the Checks Issued to the School District
Debtor also takes issue with the Bankruptcy Court’s conclusion that his claims with
respect to the two checks issued to the School District of Philadelphia lack merit because Debtor
did not include the School District as a party/defendant in this action. Debtor’s exception is
misplaced. There is no dispute that the School District of Philadelphia is a separate and distinct
entity from the City, and that the checks at issue were made payable to the School District of
Philadelphia. In this action, Debtor asserted all of his claims against the City and did not assert
any claims against, or name as a defendant, the School District of Pennsylvania. As such, the
Bankruptcy Court’s conclusion that Debtor has sued the wrong party for this particular claim is
Debtor’s Challenges to the Validity of the Underlying Liens
Debtor also contends that the Bankruptcy Court erred in concluding that Debtor had
failed to adequately substantiate any challenge to the validity of the underlying liens/judgments.
At oral argument, the Bankruptcy Court stated:
In my mind it’s very clear, to the extent that the debtor wishes to
raise any arguments about the invalidity of the liens that were of
record because the moneys were not actually owed at the time, that
in effect is a refund request rather than a claim that something
inappropriate happened tied to a provision of the Bankruptcy Code.
And I will not consider that today as part of this case. It was
simply not pled. Maybe that there would be a complete statute of
limitations defense to that anyway. But I’m not even going to
reach that issue, because I consider it to be outside the pleadings.
(B.R. Ex. 11, Trial Tr. at 166).
Based upon a review of the record, this Court finds no error with the Bankruptcy Court’s
findings and conclusions. First, nowhere in Debtor’s amended complaint does he set forth any
challenge to the validity of any of the underlying liens. Rather, Debtor merely alleges that the
City violated the Confirmed Plan and/or the automatic stay by accepting and retaining payments
from the Sale Proceeds that effectively paid off the liens. As such, a challenge to the validity of
the liens was not properly made a part of this proceeding and, thus, need not be addressed.
However, even if properly raised in Debtor’s amended complaint, the Bankruptcy Court’s
findings regarding the validity of the liens/judgments are sound. To support his challenge,
Debtor relies primarily on his own testimony: (1) that he regularly visited the City’s Municipal
Services Building to inquire as to any business and/or property taxes and was never advised of
any outstanding municipal claims; (2) that the City wrongfully damaged and then tore down one
of his properties; and (3) that he resolved any issues with unpaid business taxes by filing
amended tax returns. As found by the Bankruptcy Court, however, Debtor failed to adequately
and persuasively connect his testimonial description of events to the liens and/or judgments at
issue. Debtor’s testimony as to these issues was confusing and inconsistent, in particular that
directed to his purported filing of amended tax returns. Indeed, during his testimony, Debtor
readily admitted that he got his various taxes “mixed up a little bit sometimes.” In light of the
confusing testimony, the Bankruptcy Court’s rejection of Debtor’s challenge to the validity of
the liens/judgments was sound.
For the foregoing reasons, the Bankruptcy Court’s Order of June 18, 2015, which entered
judgment in favor of Defendant/Appellee the City of Philadelphia, is affirmed.
NITZA I. QUIÑONES ALEJANDRO, USDC J.
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