493 B.R. 479
Bankr. S.D. Tex.2013Background
- Triumph Christian Center, Inc. filed its second Chapter 11 case on February 4, 2013, after a first Chapter 11 was filed in 2010 and confirmed in 2011.
- Foundation Capital Resources, Inc. (FCR) filed a motion to dismiss the second case for cause under 11 U.S.C. § 1112(b)(1) and Rule 1017(f)(2).
- The Plan in the first case treated FCR as Class 1 with liens and rights preserved, and a Restructure Agreement modified debt terms but preserved liens and security interests.
- Debtor allegedly sought to halt foreclosure by FCR by filing the Second Case, arguing unanticipated changed circumstances, while FCR argued the filing impermissibly modified a substantially consummated plan.
- The Court held that the Second Case impermissibly sought to modify the Plan and was filed in bad faith, with no unanticipated changed circumstances shown, and granted dismissal under § 1112(b)(1).
- The decision applied Little Creek factors to find bad faith and concluded dismissal was warranted, and found no unusual circumstances that would preserve the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Second Case impermissibly modified a substantially consummated Plan | FCR: second filing is necessary due to bad faith and not permitted by §1127(b). | Debtor: unanticipated changes justify a new filing and it does not modify FCR's rights in writing. | Second Case constitutes an impermissible modification; dismissal warranted. |
| Whether unanticipated changed circumstances justify a second filing | Debtor contends unforeseen events justify the second filing. | FCR: events were foreseeable or caused by debtor and do not qualify as unusual changes. | Unanticipated changed circumstances not shown; cannot justify second filing. |
| Whether the filing was in bad faith under Little Creek factors | Debtor's situation warrants relief; multiple factors suggest complexity beyond a single dispute. | FCR: majority of Little Creek factors indicate bad faith given foreclosure timing and debt concentration. | Five of six Little Creek factors indicate bad faith; dismissal supported. |
| Whether unusual circumstances exist that would prevent dismissal | Debtor argues unusual circumstances exist under §1112(b)(2) to protect creditors. | No unusual circumstances shown; debtor failed to prove best interests require denial of dismissal. | No unusual circumstances; dismissal ordered. |
Key Cases Cited
- In re Elmwood Dev. Co., 964 F.2d 508 (5th Cir. 1992) (unanticipated changes may justify a second filing but not typical market shifts)
- In re Casa Loma Assocs., 122 B.R. 814 (Bankr.N.D.Ga.1991) (unanticipated changes may justify second filing when plan impossible to perform)
- In re Bouy, Hall & Howard & Assocs., 208 B.R. 737 (Bankr.S.D.Ga.1995) (significant market changes may justify second filing)
- In re Savannah, Ltd., 162 B.R. 912 (Bankr.S.D.Ga.1993) (foreseeable events and repairs generally do not constitute unanticipated changes)
- In re Roxy Real Estate Co., Inc., 170 B.R. 571 (Bankr.E.D.Pa.1993) (foreseeability of lease terms undermines unanticipated change claim)
- In re Little Creek Dev. Co., 779 F.2d 1068 (5th Cir. 1986) (six factors guide bad faith evaluation for serial filings)
- In re McMahan, 481 B.R. 901 (Bankr.S.D.Tex.2012) (presence of multiple Little Creek factors supports bad faith finding)