PHILADELPHIA – A federal appeals court ruled to dismiss the case of a couple who believed a township should be sanctioned for allegedly violating federal bankruptcy code, an identical decision which had been reached from a lower court.

On April 26, U.S. Court of Appeals for the Third Circuit judges Thomas L. Ambro, Kent A. Jordan and Jane R. Roth ruled to affirm a dismissal of a case filed by Michael T. Billings and Kathleen Billings against Portnoff Law Associates, Ltd.

The Billingses failed to pay about $4,500 in sewer, trash, and hydrant fees to West Bradford Township. As a result, the Township obtained a default judgment against them on Nov. 11, 2013, which gave the Township a lien on their home. The same day, the Township filed for a writ of execution based on the lien and scheduled a sheriff’s sale for April 17, 2014.

Just before the scheduled sale, on April 11, 2014, the Billingses filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Under Section 362 of the Bankruptcy Code, the filing of that petition automatically stayed the foreclosure sale. At the time scheduled for the sale, the Township made an oral announcement postponing it, which is permitted by the Pennsylvania Rules of Civil Procedure.

Further, the Township filed five subsequent written motions with the Chester County Court of Common Pleas, all seeking to continue the sheriff’s sale. Each of those motions was granted and the date of sale was ultimately extended to Nov. 19, 2015. At no point did the Township request relief from the automatic stay issued by the Bankruptcy Court.

In that Court, the Township filed a proof of claim for approximately $9,500.00, including attorney fees, costs and interest. The Bankruptcy Court later approved a plan that would allow the Billingses to pay off their debt to the Township in full.

The Billingses later filed an adversary complaint against Portnoff Law Associates, the law firm representing the Township, arguing the repeated motions to continue the sheriff’s sale violated the automatic stay provision and were sanctionable under 11 U.S.C. Section 362(k)(1).2 – the Billingses also sought to certify a class action under Federal Rule of Bankruptcy Procedure 7023, to enjoin Portnoff from filing similar motions in other Chapter 13 proceedings.

In response, Portnoff filed a motion to dismiss, where it asserted the continuance motions it filed were consistent with this Court’s decision in Taylor v. Slick.

The Bankruptcy Court granted the motion to dismiss without granting the Billingses leave to amend, leading the Billingses to file a Notice of Appeal to the U.S. District Court for the Eastern District of Pennsylvania, which affirmed the Bankruptcy Court’s decision. The instant appeal to the Third Circuit followed.

Jordan explained the Billingses’ argument was predicated on their belief that “allowing a creditor to file repeated motions for a continuance will be unduly harmful to the debtor”, but the Third Circuit concurred with the Bankruptcy Court that multiple postponements are more detrimental to said debtors and they properly applied precedent in the instant case.

“If judicial continuances were unavailable, then creditors, and ultimately the debtor, would incur the cost of rescheduling the sale and providing notice. Accordingly, allowing a judicial motion for a continuance is fully compatible with the underlying aim of the automatic stay provision,” Jordan commented.

“First, the Billingses failed to plead that they either have been or will be required to pay for additional legal fees as a result of the continuance motions. While they point generally to attorneys’ fees and court costs that they have been required to pay to the Township under the payment schedule established in the Chapter 13 proceeding, they do not even allege that those costs were related to Portnoff’s work on the continuance motions, let alone provide a breakdown showing what portion of the costs were related to the continuance motions,” Jordan said.

“They likewise fail to ‘identify the precise source of authority (court rule or statute) for the additional legal fees they expect to incur as a result of the multiple continuance motions.’ Accordingly, any costs are purely speculative at this point. But the Billingses’ complaint is insufficient to survive a motion to dismiss and does not justify forcing Portnoff to incur the costs of discovery,” Jordan stated.

Jordan added even if the Court was to assume the Billingses would be “required to pay for the costs that the Township incurred in seeking a continuance, there would be no cause for concern.”

“Requiring a debtor to pay the incidental price of maintaining the status quo does not upset the status quo but helps to preserve it. Therefore the Township’s continuance motions were proper and the Billingses have no cause for complaint. Because we conclude that the Billingses’ claims were meritless as a matter of law, there is also no basis for class standing,” Jordan said.

The plaintiffs are represented by Mark A. Cronin in West Chester.

The defendant is represented by Martha B. Chovanes and Michael L. Temin of Fox Rothschild, in Philadelphia.

U.S. Court of Appeals for the Third Circuit case 16-3096

U.S. District Court for the Eastern District of Pennsylvania case 2:16-cv-00778

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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