530 B.R. 277
E.D. Pa.2015Background
- Raymond Ross filed two Chapter 13 petitions timed to stop sheriff's sales of his home; AmeriChoice held a mortgage and had a state-court foreclosure judgment.
- Ross’s second Chapter 13 (pro se) lacked required schedules; the Bankruptcy Court extended time for filings but later modified the automatic stay to allow foreclosure.
- AmeriChoice moved under 11 U.S.C. § 1307(c) to convert or dismiss for cause, alleging Ross filed in bad faith to delay foreclosure.
- Ross moved the day before the scheduled hearing to voluntarily dismiss under 11 U.S.C. § 1307(b).
- The Bankruptcy Court the next day granted AmeriChoice’s § 1307(c) motion, dismissed the case with prejudice, and enjoined Ross from refiling without court permission; Ross appealed.
Issues
| Issue | Ross’s Argument | AmeriChoice’s Argument | Held |
|---|---|---|---|
| 1. Whether the court could act on §1307(c) after Ross filed §1307(b) | §1307(b) gives an absolute right to voluntary dismissal; court should have granted Ross’s motion | §1307(b) not absolute when debtor acts in bad faith; court properly granted §1307(c) | Court: §1307(b) is textually absolute; bankruptcy court erred in acting on §1307(c) instead, but error was harmless given record of bad faith |
| 2. Whether continuing proceedings after Ross’s §1307(b) filing was improper | Court should have stopped further proceedings once debtor moved to dismiss | Court may adjudicate pending objections and consider bad faith allegations before or as part of dismissal | Court: Continuing proceedings was permissible; no prejudice because dismissal outcome would be same |
| 3. Whether dismissal with prejudice and an injunction barring future filings was improper | Such sweeping, unlimited injunction and prejudice were improper | Conditions on dismissal (prejudice, filing bar) are permissible to prevent abuse | Court: Bankruptcy court did not abuse discretion in imposing prejudice and prefiling injunction given repeated abuse and timing of filings |
| 4. Whether the court had to issue written findings/opinion rather than rely on oral reasons | Ross: written findings required for review | AmeriChoice: oral ruling on record sufficed | Court: oral statements on the record were adequate for appellate review; no reversible error |
| 5. Whether a discrepancy about whether a hearing occurred (docket vs. order) prejudiced Ross | Ross claims order falsely states a hearing occurred on Dec 17, 2014 | AmeriChoice says hearing occurred and Ross failed to appear; in any event record shows briefing and prior hearing on bad faith | Court: any clerical discrepancy was harmless and caused no prejudice |
Key Cases Cited
- In re Trans World Airlines, Inc., 145 F.3d 124 (3d Cir. 1998) (standards of appellate review for bankruptcy rulings)
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (U.S. 2007) (bad-faith conduct can affect availability of chapter relief and interaction of §§ 706 and 1307)
- In re Myers, 491 F.3d 120 (3d Cir. 2007) (bad-faith dismissal reviewed for abuse of discretion)
- In re Barbieri, 199 F.3d 616 (2d Cir. 1999) (holding §1307(b) provides an absolute right to dismissal)
- In re Molitor, 76 F.3d 218 (8th Cir. 1996) (recognizing a bad-faith exception to voluntary dismissal rights)
- Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (U.S. 1998) (interpretation of mandatory statutory "shall")