999 F.3d 452
6th Cir.2021Background
- Ronald Smith repeatedly filed Chapter 13 petitions shortly before scheduled foreclosures (2007, 2017, 2019) and then moved to dismiss each petition, triggering and then removing the automatic stay.
- Bankruptcy court granted each dismissal; U.S. Bank did not promptly seek stay-relief or sanctions under Rule 9011 or § 362(d)(4)(B).
- In June 2019 the bankruptcy court vacated its own dismissal of Smith’s 2019 Chapter 13 case under Civil Rule 60(b) (Bankr. R. 9024) and reinstated the case, also lifting the stay for two years.
- Smith appealed; the district court denied a stay pending appeal but certified the legal question whether reinstatement was contrary to law; this court granted interlocutory review.
- The central legal question: could the bankruptcy court reinstate (or refuse to dismiss) a Chapter 13 case when § 1307(b) mandates dismissal on the debtor’s request, despite the debtor’s bad faith and regardless of alleged misconduct?
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 11 U.S.C. § 1307(b) requires dismissal on debtor’s request even if petition filed in bad faith | Smith: § 1307(b) is mandatory—court must dismiss on debtor’s request | U.S. Bank: Marrama/§105 grants bankruptcy courts equitable power to deny dismissal for bad faith | Held: §1307(b) is mandatory; equitable powers under §105 do not override the Code (Law v. Siegel controlling) |
| Whether §105(a)/Marrama permits denying or undoing a dismissal to prevent abuse of process | Smith: §105 cannot be used to circumvent a clear statutory command | U.S. Bank: Marrama dictum supports equitable denial of dismissal for bad faith | Held: Marrama’s dictum is cabined by Law v. Siegel; courts may not use §105 to contravene explicit Code provisions |
| Whether Fed. R. Civ. P. 60(b)(3) (Bankr. R. 9024) authorized vacating the dismissal for fraud or misconduct | Smith: Rule 60(b) cannot nullify a statutory right to dismissal | U.S. Bank: Rule 60(b)(3) allows relief from final orders for misconduct, permitting reinstatement | Held: Bankruptcy Code prevails over procedural rules; Rule 60(b) cannot be used to circumvent §1307(b) |
| Whether the district court abused its discretion by denying Smith a stay pending appeal | Smith: denial was legal error because reinstatement was contrary to law | U.S. Bank: argued denial proper | Held: District court abused its discretion; reinstatement unlawful and case must be dismissed |
Key Cases Cited
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (dictum suggesting §105 might bar certain bad-faith conversions or motions)
- Law v. Siegel, 571 U.S. 415 (2014) (equitable powers under §105 are limited and must operate within the Bankruptcy Code)
- Me. Cmty. Health Options v. United States, 140 S. Ct. 1308 (2020) (statutory text controls where plain)
- Harris v. Viegelahn, 575 U.S. 510 (2015) (Chapter 13 is a wholly voluntary alternative to Chapter 7)
- Jacobsen v. Moser (In re Jacobsen), 609 F.3d 647 (5th Cir. 2010) (applied Marrama to deny dismissal for bad faith)
- Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764 (9th Cir. 2008) (similar to Jacobsen)
- United States v. Chavis (In re Chavis), 47 F.3d 818 (6th Cir. 1995) (Bankruptcy Code prevails over conflicting procedural rules)
Summary disposition: The court reversed the district court’s denial of a stay, held that §1307(b) mandates dismissal on the debtor’s request and that neither §105 nor Rule 60(b) may be used to circumvent that statutory command, and remanded with instructions to dismiss Smith’s most recent Chapter 13 case.