Keys v. 701 Mariposa Project, LLC

Citation:
BAP No. CC-13-1329-KuBlPa; In re 701 Mariposa Project, LLC, -- B.R. -- (9th BAP 2014)
Tag(s):
Ruling:
The 9th Circuit BAP reversed and remanded the bankruptcy court's decisions wherein the BAP held that even though the Debtor's service of process was defective it did not violation the creditor's due process rights; however, the bankruptcy court's rule was void based on the the lack of the bankruptcy court's personal jurisdiction over the creditor that had not filed a claim, participated in the bankruptcy case, or otherwise engaged in conduct that could be construed as consent.
Procedural context:
Sherrie Keys, the former tenant and creditors of the Debtor ("Creditor") appealed to 9th Circuit BAP in regards to the bankruptcy court's decision to deny the Creditor's motion to set aside the bankruptcy court's prior ruling denying the Creditor's "claim" for failure to file a response to the Debtor's objection to the "claim."
Facts:
Prior to the middle of 2011, Creditor asserted that she made regular monthly payments to People in Progress ("PIP"). PIP was the property manager for a multi-unit parcel of real property then owned by 709 S. Mariposa, Inc. PIP was in turn obligation to pay the rents received to 709 S. Mariposa, Inc.; however, around May 2011 PIP informed the tenants that it was discontinuing its affordable housing program and the occupants would need to leave. The Debtor acquired the property at a non-judicial foreclosure some time in July 2011. The Debtor hired Pearson Management ("Pearson") as the new property manager. In addition to numerous problems with the building itself, Pearson attempted to evict the creditor. Pearson was eventually successful in September 2012. Creditor filed a civil suit against the Debtor in U.S. District Court. The Debtor initially filed Chapter 11 in August 2011; however, it was dismissed. The Debtor filed its second Chapter 11 in the same month. The primary asset of the Debtor is the parcel of real property. The bankruptcy court set a claims bar date of June 10, 2012. the Creditor was not listed on the Debtor's schedule of creditors, and no amendments were made to the schedules upon the Creditor commencing the case in U.S. District Court. Instead, the Debtor files a proof of claim on behalf of the Creditor and filed a notice of bankruptcy filing in the U.S. District Court matter. Later, the Debtor filed an objection to the Creditor's proof of claim, which was served on the Creditor. The Creditor did not respond to the objection; therefore, the bankruptcy court entered an order disallowing the Creditor's claim. Approximately 4 months later the Creditor filed a motion to set aside the bankruptcy court's ruling sustaining the objection to the Creditor's claim and the Creditor appealed.
Judge(s):
Hon. Kurtz; Hon. Blumenstiel (sitting by designation); and Hon. Pappas.

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