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following “the majority of the circuits and the case law” in concluding “that the Bankruptcy Court had the authority to bar future filings in excess of 180 days” where the bankruptcy court had barred the debtor from filing another bankruptcy case for 18 months
Summary of this case from In re MehlhoseOpinion
Case No. 99-74189.
August 24, 2000.
OPINION ORDER AFFIRMING DECISION OF THE BANKRUPTCY COURT
This matter comes before the Court on appeal from an opinion and order entered by the Bankruptcy Court on July 26, 1999. The Bankruptcy Court issued an order dismissing Debtor/Appellant's Chapter 13 case with an eighteen month bar to future filings. Three issues are presented in this appeal: (1) whether the Bankruptcy Court abused its discretion in dismissing Debtor's case without considering his proposed amended Chapter 13 plan; (2) whether the Bankruptcy Court had the authority to dismiss Debtor's case with prejudice in excess of 180 days; and finally, (3) whether the Bankruptcy Court abused its discretion in dismissing Debtor's case with prejudice in excess of 180 days.
The District Court reviews the Bankruptcy Court's findings of fact for clear error and its conclusions of law de novo. Michigan Nat'l Bank v. Charfoos, 979 F.2d 390, 392 (6th Cir. 1992).
The Court finds that the Bankruptcy Court did not abuse its discretion by dismissing Debtor's case without considering his proposed amended Chapter 13 plan. The Bankruptcy Court recognized a list of seven deficiencies which were present in the previously filed plan, and noted that, "[i]n an attempt to resolve the overwhelming objections, the Debtor responds by filing an amendment to [the] plan on the date scheduled for confirmation and motion for dismissal." Opinion Granting Motion to Dismiss at 4. Under the rules, the Bankruptcy Court could not substitute the amended plan for the original plan at the confirmation hearing because the rules require twenty-five days notice of a hearing to consider confirmation of a Chapter 13 plan. Fed.R.Bank.P. 2002(b). Further, despite the timing of the filing of the amended plan, the Bankruptcy Court asked the parties whether the plan was confirmable as amended. Tr. at 9. Counsel for secured creditors indicated that it did not treat secured claims appropriately. The Bankruptcy Court thus did not abuse its discretion by failing to consider an amended plan filed moments before the hearing.
The second issue is whether the Bankruptcy Court had the authority to dismiss Debtor's case with prejudice in excess of 180 days. Debtor relies on the Tenth Circuit's opinion in In re Frieouf, 938 F.2d 1099 (10th Cir. 1991), in support of its argument that the Bankruptcy Court lacks the authority to restrict future filings in excess of 180 days. In Frieouf, the court construed 11 U.S.C. § 349 (a) as limiting a bankruptcy court's ability to restrict future filings. The statute reads as follows:
Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(g) of this title.11 U.S.C. § 349 (a).
Pursuant to section 109(g), an individual may not file another bankruptcy petition within 180 days of dismissal of a previous filing if the debtor willfully failed to comply with a court order in the dismissed case or requested a voluntary dismissal following a creditor's motion for relief from the automatic stay. See 11 U.S.C. § 109 (g).
The Tenth Circuit in Frieouf interpreted § 349(a) in a technical manner, reasoning that the semi-colon separating the two independent clauses in the statute prevents the qualifying clause, "Unless the court, for cause, orders otherwise . . ." from modifying the second independent clause. Frieouf, 938 F.2d at 1103-04. Under the Tenth Circuit's interpretation, a Bankruptcy Court lacks the authority to dismiss a case with prejudice, except for when section 109(g) applies.
As the Second Circuit Court of Appeals has recognized, the Tenth Circuit's construction of the statute is the minority view. In re Casse, 198 F.3d 327, 336 (2d Cir. 1999). In Casse, the Second Circuit expressly declined to follow Frieouf. "While lower courts in the Tenth Circuit have perforce followed Frieouf with a reluctant obedience, no other circuit has adopted its reading of the Bankruptcy Code, and the Fourth Circuit rejects it, and so do all the lower courts which sit outside the Tenth Circuit." Casse, 198 F.3d at 336-37 (footnote omitted); In re Tomlin, 105 F.3d 933 (4th Cir. 1997) (rejecting Tenth Circuit's approach).
As the Fourth Circuit pointed out in Tomlin, § 109(g) was "added to the Bankruptcy Code in 1984 to address the precise abuse of the bankruptcy system at issue here — the filing of meritless petitions in rapid succession to improperly obtain the benefit of the Bankruptcy Code's automatic stay provisions as a means of avoiding foreclosure under a mortgage or other security interest." Id. at 937. After noting the purpose of the provision, the Tomlin Court declined to accept a restrictive view of the interplay between § 109(g) and § 349(a):
Our analysis of the plain language and statutory scheme of the statute leads us to conclude that § 349 was never intended to limit the bankruptcy court's ability to impose a permanent bar to discharge that would have res judicata effect. Rather, the language of § 349, as amended, seems to make clear that the court has the power to order such a sanction in circumstances other than those dealt with by new § 109(g).Id. at 938.
In all circuits but the Tenth, "bankruptcy courts invariably derive from . . . the Code the power to sanction bad-faith serial filers. . . by prohibiting further bankruptcy filings for longer periods of time than the 180 days specified by § 109(g)." In re Casse, 198 F.3d at 337-38. This Court declines to follow Frieouf, and in keeping with the majority of the circuits and the case law, concludes that the Bankruptcy Court had the authority to bar future filings in excess of 180 days.
The final issue is whether the court below abused its discretion in ordering an eighteen month bar to future filings. The Court concludes that the Bankruptcy Court did not abuse its discretion. In its opinion and order, the Court recounted the numerous filings by Debtor, and documented Debtor's "blatant indicia of bad faith." See Opinion Granting Motion to Dismiss at 5. The Court found that Debtor's actions "certainly demonstrate[d] improper prepetition conduct." Id. The Court recognized that "[a]lthough the Debtor's property has not been posted for foreclosure, the Debtor has successfully avoided this action due to the series of filings." Id. The Court found that Debtor engaged in the following inappropriate conduct: (1) serial filings and subsequent dismissal for failure to properly file bankruptcy pleadings pursuant to 11 U.S.C. § 521; (2) abuse of the bankruptcy system and lack of good faith; (3) actions causing prejudice to creditors; (4) manipulation of the process to avoid payment to creditors; and (5) meticulously timed filings in order to prevent the payment of county taxes. Opinion Granting Motion to Dismiss at 5. The Court concluded that although the remedy was harsh, it was "necessary in the present case to prevent any further unjustifiable hindrance of creditors." Id. at 6. Based on the findings of fact made by the Bankruptcy Court, and in the absence of evidence that the findings are clearly erroneous, the Court did not abuse its discretion by ordering an eighteen month bar to future filings.
Being fully advised in the premises, having read the pleadings, and for the reasons set forth above, the Court hereby orders as follows:
The decision of the Bankruptcy Court is AFFIRMED.
SO ORDERED.