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Lawrence Frumusa Land Development, LLC v. Arnold

October 29, 2009

LAWRENCE FRUMUSA LAND DEVELOPMENT, LLC
v.
MICHAEL H. ARNOLD, TRUSTEE, AND KATHLEEN SCHMITT, U.S. TRUSTEE, APPELLEES.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

Bankruptcy Case No. 09-21126

DECISION AND ORDER

INTRODUCTION

Appellant Lawrence Frumusa Land Development LLC, purportedly proceeding "pro se," commenced the instant action to appeal an Order (Bankruptcy Case No. 09-21126-JCN, Bankruptcy Docket No. [#147]) of the Honorable John C. Ninfo, II, United States Bankruptcy Judge, which converted Appellant's Chapter 11 case to Chapter 7. Now before the Court are two applications by Appellant: 1) a motion [#10] for a stay of the Chapter 7 proceedings and return of assets to the debtor; and 2) a motion [#14] "for an expedited ex-parte hearing." For the reasons discussed below, the applications are denied and this action is stayed to allow Appellant to retain counsel.

BACKGROUND

This action is closely related to another action which the Court recently dismissed, In re Lawrence Frumusa, Docket No. 09-CV-6436. The reader is presumed to be familiar with the facts of this case, which are essentially the same as the facts in 09-CV-6436, set forth by the Court in two Decisions and Orders. (09-CV-6436, Docket Nos. [#3] & [#9]). It is sufficient to note the following additional procedural history.

Appellant filed the underlying bankruptcy case as a Chapter 11. On May 14, 2009, creditor Monroe Capital, Inc. filed a motion to convert the case to Chapter 7. (Bankruptcy Docket No. [#24]). On May 20, 2009, the U.S. Trustee also filed a motion to convert the case to Chapter 7. (Bankruptcy Docket No. [#39]). On May 22, 2009, Appellant's attorneys filed objections to the motions to convert. (Bankruptcy Docket No. [#45]). However, on May 28, 2009, Appellant's attorneys reached a consent agreement with the U.S. Trustee, whereby Appellant agreed to provide certain documentation to the Trustee by June 4, 2009, otherwise Appellant would consent to the case being converted to Chapter 7.

On July 13, 2009, Appellant filed a Chapter 11 plan. However, on July 20, 2009, Appellant filed a motion to convert the case from Chapter 11 to Chapter 7. (Bankruptcy Docket No. [#145]) The same day, Bankruptcy Court granted the application, and converted the Case to Chapter 7 (Order Converting Case to Chapter 7, Bankruptcy Docket [#147]).

Appellant subsequently changed its mind and asked Bankruptcy Court to reconsider the Order. In that regard, on July 22, 2009, Appellant filed a motion for reconsideration (Bankruptcy Docket No. [#156]), in which Appellant's attorneys stated, in relevant part: "Although the Debtor instructed undersigned counsel to file the Motion to Convert, [Appellant's owner] Lawrence Frumusa mistakenly believed that the Court would hold a hearing on this matter before entering the Order wherein the impact on unsecured claims would be considered." Id. ¶ 4.

On July 27, 2009, Appellant's attorneys moved to withdraw, on the grounds that Mr. Frumusa was not cooperating with them or with the Chapter 7 Trustee. (Bankruptcy Docket No. [#167]).

On July 28, 2009, Mr. Frumusa filed a motion to withdraw Appellant's Motion to Convert, in which he explained why Appellant filed the motion to convert the case to Chapter 7. (Bankruptcy Docket No. [#172]). Mr. Frumusa stated that he discussed the issue on the telephone with his attorneys, but he was rushed, because he was on his way to visit a relative in the hospital. Mr. Frumusa further stated that he had not given adequate consideration to how conversion would impact on Appellant and on Appellant's creditors. Notably, though, Mr. Frumusa did not indicate that his attorneys filed the motion without his permission. Such fact appears highly relevant, inasmuch as Appellant's attorneys specifically stated previously that Mr. Frumusa had authorized the filing of the motion.

On July 30, 2009, the Chapter 7 Trustee opposed Appellant's motion for reconsideration, stating that converting the case back to Chapter 11 would not be in the creditors' best interest, and that Appellant was not cooperating with the Trustee. (Bankruptcy Docket No. [#185]).

On July 30, 2009, Mr. Frumusa filed an additional request to vacate the conversion order, and he reiterated the explanation that he previously gave, namely, that he had made the decision to seek conversion to Chapter 7 hurriedly, and had not given the matter sufficient thought. (Bankruptcy Docket No. [#187]). Again, as with his previous submission, Mr. Frumusa did not indicate that his attorneys had filed the conversion motion without his permission.

On July 30, 2009, creditor Monroe Capital, Inc. filed papers opposing Appellant's motion for reconsideration. Monroe Capital stated that there was no legal basis for the motion, and that Appellant was not properly ...


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