596 B.R. 809
Bankr. E.D. Pa.2019Background
- Robert Murphy obtained a $35,000 state-court judgment against debtor Michele Marinari and later filed an adversary complaint in her Chapter 13 bankruptcy seeking nondischargeability under §523(a).
- Debtor filed a Chapter 13 petition (Nov. 2014) and later filed a praecipe/application to voluntarily dismiss her Chapter 13 case under 11 U.S.C. §1307(b) (Feb. 2017).
- Judge FitzSimon treated the filing as a §1307(b) motion, held a hearing (May 10, 2017), and concluded that §1307(b) grants a Chapter 13 debtor an absolute right to dismiss; a dismissal order was entered May 17, 2017 (subject to limited conditions if debtor refiled).
- Murphy appealed and moved to reconsider/vacate (arguing lack of notice, bad-faith forfeiture of §1307(b) rights, and other defects); the case was remanded and reassigned; this Court later considered Murphy’s renewed motion under Fed. R. Civ. P. 59(e), 52(b), and 60(b).
- The court found Murphy presented no intervening law, new evidence, clear error, manifest injustice, jurisdictional defect, fraud, or other extraordinary circumstances warranting relief, and denied his motion to reconsider or vacate the dismissal.
Issues
| Issue | Plaintiff's Argument (Murphy) | Defendant's Argument (Marinari) | Held |
|---|---|---|---|
| Whether §1307(b) grants an absolute right to voluntarily dismiss a Chapter 13 case | §1307(b) is not absolute where debtor acted in bad faith; courts can deny dismissal/convert to Chapter 7 | §1307(b) unambiguously grants an absolute right to dismiss if case not converted | Court upheld FitzSimon: dismissal stands; Murphy failed to show controlling intervening law or clear error |
| Whether Judge’s dismissal violated due process or notice requirements | Debtor’s praecipe/application was not a proper motion and Murphy lacked adequate notice | Debtor gave notice; earlier dismissal was vacated and a hearing afforded; labeling does not void order | Court found adequate notice and opportunity to be heard; no void judgment |
| Whether bad faith or pending creditor motions required an evidentiary hearing or conditions on dismissal | Bad faith alleged; pending motions (conversion, confirmation objections, adversary) justify denying dismissal or imposing conditions | §1307(b) dismissal trumps competing conversion/confirmation motions; court may impose conditions but did not here and Murphy did not request evidentiary hearing | Court: no reversible error in declining an evidentiary hearing; Murphy had chance to seek conditions at hearing and did not do so |
| Whether relief is warranted under Rules 59(e)/52(b)/60(b) to alter/vacate dismissal | Seeks reconsideration/vacatur based on alleged legal errors, surprise, and other grounds | Dismissal was lawful; no new law/evidence; not excusable neglect, fraud, or void judgment | Motion denied: Murphy did not meet the high standards for relief under these rules |
Key Cases Cited
- Jacobsen v. Moser, 609 F.3d 647 (5th Cir.) (bad-faith exception to voluntary dismissal recognized)
- Barbieri v. RAJ Acquisition Corp., 199 F.3d 616 (2d Cir.) (§1307(b) construed to give debtor an absolute right to dismiss)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (conversion under §706 subject to chapter qualifications; courts may deny conversion for bad faith)
- Law v. Siegel, 571 U.S. 415 (2014) (bankruptcy courts cannot use equitable powers to contravene explicit Code provisions)
- Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764 (9th Cir.) (courts may deny dismissal to bad-faith debtors)
- Molitor v. Eidson (In re Molitor), 76 F.3d 218 (8th Cir.) (similar holding on bad-faith exception)
- Ross v. AmeriChoice Federal Credit Union, 858 F.3d 779 (3d Cir.) (addresses court authority re: injunctions post-dismissal; lower Ross decision supporting absolute right discussed in opinion)