In Re: Latricia L. Hardy, Civil Action No. 2016-1968

Background

Debtor LaTricia Hardy filed bankruptcy (initially Chapter 13, later converted to Chapter 7) and co-owned commercial property at 1414–1416 Pennsylvania Ave SE with her mother.
All Credit Considered Mortgage, Inc. (ACC) claimed a deed-of-trust lien on the property; ACC prevailed in related Superior Court litigation and the appeal there was stayed by the automatic bankruptcy stay.
The Chapter 7 trustee obtained a Bankruptcy Court order directing turnover of the property to the estate, took custody, sold the property to a third party, and distributed sale proceeds (including payment to ACC and Hardy’s co-owner).
Hardy repeatedly resisted: she sought to terminate conversion to Chapter 7, opposed turnover, refused to vacate/turn over leases, was found in contempt, and litigated ACC’s lien in Bankruptcy Court (ACC moved for summary judgment).
Bankruptcy Court granted turnover, denied Hardy’s motion to terminate conversion, held Hardy in contempt, granted ACC summary judgment on lien validity, and approved a settlement (compromise) between the Trustee and ACC.
The district court consolidated Hardy’s six appeals, affirmed all six Bankruptcy Court orders, granted the Trustee’s equitable-mootness dismissal as to reopening the sale, and denied dismissal as time-barred for the compromise appeal.

Issues

Issue	Plaintiff's Argument (Hardy)	Defendant's Argument (Trustee / ACC)	Held
Validity of turnover order / sale	Turnover inappropriate because ACC’s lien is disputed; sale should be stayed	Turnover proper because property and Hardy’s interest are estate property and amounts owed to Hardy were not contested; sale completed in good faith	Affirmed; appeal equitably moot as sale was not stayed and substantially implemented; turnover also proper on the merits
Conversion to Chapter 7 / standing to move for conversion	ACC lacked standing to move conversion because it was not the mortgage lender; Hardy did not consent	Trustee and Chapter 13 Trustee had independent grounds; ACC is a "party in interest" as a creditor with pecuniary stake	Affirmed; denial of Hardy’s motion to "terminate" conversion was not an abuse of discretion; conversion lawful
Contempt for refusal to turnover / vacate	Hardy asserted leases and other procedural defects (missing signature, trustee employment timing)	Trustee showed Hardy refused to vacate, continued leasing, and interfered with sale; procedural defects did not void orders	Affirmed; contempt finding and remedial orders were appropriate to effectuate turnover
Validity of ACC’s lien / summary judgment	Bankruptcy Court lacked jurisdiction due to parallel state appeal; ACC didn’t file proof of claim; ACC unregistered in D.C.	Bankruptcy Court had core jurisdiction over liens; lien survives without proof of claim; registration status didn’t invalidate mortgage	Affirmed; ACC’s lien is valid and summary judgment for ACC was appropriate
Approval of Trustee–ACC compromise	Settlement improper because ACC’s claim allegedly invalid and fees/interest improper	Compromise reasonable under Rule 9019; ACC was oversecured and entitled to fees/interest; settlement avoided further litigation	Affirmed; Bankruptcy Court reasonably approved the compromise

Key Cases Cited

In re Hope 7 Monroe St. Ltd. P’ship, 743 F.3d 867 (D.C. Cir. 2014) (sale to good-faith purchaser under § 363(m) limits reversal; equitable mootness doctrine)
In re AOV Indus., Inc., 792 F.2d 1140 (D.C. Cir. 1986) (equitable mootness — appeals dismissed when plan substantially implemented)
Stern v. Marshall, 564 U.S. 462 (2011) (limits on bankruptcy court constitutional authority in certain matters)
Dewsnup v. Timm, 502 U.S. 410 (1992) (secured liens pass through bankruptcy unaffected)
United States v. U.S. Gypsum Co., 333 U.S. 364 (1948) (clearly erroneous standard for factual findings)
Ron Pair Enterprises, Inc. v. Sec. Pac. Bank, 489 U.S. 235 (1989) (postpetition interest allowed for secured claims)
In re Chreky, 450 B.R. 247 (D.D.C. 2011) (standards for approving compromises under Rule 9019)