In Re Borg
ORDER DISMISSING CASE
In this Chapter 12 case, a hearing was held April 18, 1989, on the Motions of First Security Bank of Sidney (Bank) and John Hancock Mutual Life Insurance Company (Hancock) to Dismiss this case. The motions are based on the allegations that the Debtor (1) filed in bad faith, (2) has no reasonable prospect of successfully reorganizing, (3) has caused unreasonable delay and prejudice to creditors, and (4) has an aggregate debt limit exceeding the $1,500,-000.00 limit imposed by 11 U.S.C.
On April 7, 1986, the Debtor filed for relief under Chapter 11 of the Code. The Debtor filed four separate Disclosure Statements and Chapter 11 Plans, none of which were approved or confirmed. On March 17, 1987, the Debtor’s Chapter 11 case was converted to a Chapter 12 case by this Court upon motion of the Debtor. The Chapter 12 case was dismissed on August 4, 1987, after two unsuccessful Plans had been filed with the Court. Thereafter, on August 26, 1987, the Debtor filed another Chapter 12 petition. This Chapter 12 case was dismissed by this Court on June 8, 1988. The Debtor filed a timely appeal of this Court’s June 8, 1988, Order of Dismissal and the appeal is presently pending before the Bankruptcy Appellate Panel of the Ninth Circuit. Thereafter on March 6, 1989, the Debtor filed the instant Chapter 12 Petition. It is the March 6, 1989, case which the Bank and Hancock have moved to dismiss.
Dismissal of a Chapter 12 case, upon motion of a creditor, is governed by 11 U.S.C. § 1208(c). In this ease, the Bank and Hancock assert that §§ 1208(c)(1) and (c)(9) are applicable. Sections 1208(c)(1) and (c)(9) provide:
“(c) On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter [11 USCS §§ 1201 et seq.] for cause, including—
(1) unreasonable delay, or gross mismanagement, by the debtor that is prejudicial to creditors;
He * * * *
(9) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation.”
The Bank and Hancock further allege that the Debtor’s latest Chapter 12 Petition is not filed in good faith.
This Court has previously held that the Bankruptcy Code contains an implied requirement of good faith in the filing of any bankruptcy petition.
In re Turner,
“Whether it [good faith] exists in any case depends upon the facts and circumstances presented. No one evidentiary fact can be given paramount weight in deciding the question. If it is obvious that a debtor is attempting unreasonably to deter and harass creditors in their bona fide efforts to realize upon their securities, good faith does not exist. But if it is apparent that the purpose is not'to delay or defeat creditors but rather to put an end to long delays, administration expenses ... to mortgage foreclosures, and to invoke the operation of the [bankruptcy law] in the spirit indicated by Congress in the legislation, namely, to attempt to effect a speedy efficient reorganization upon a feasible basis ... good faith cannot be denied.”
This Court pointed out in Turner that it is not a novel approach for a Debtor to file bankruptcy when faced with foreclosure. However, as the Court went on to analyze, the bankruptcy cannot be filed to “frustrate and delay the efforts” of creditors “enforcing their rights” where reorganization is not possible or the true goal of the Debtor.
In this case, the record is replete with indicia that the Debtor is attempting to unreasonably deter and harass creditors in their bona fide efforts to realize upon their securities. The Debtor filed his Chap
The Debtor filed this Chapter 12 case while appeal was pending on his last Chapter 12 case with the Bankruptcy Appellate Panel of the Ninth Circuit. The Debtor’s last Chapter 12 case has not been closed, and remains an open case in this Court. Since the United States Supreme Court decision in
Freshman v. Atkins,
“The filing of two simultaneous petitions is contrary to the obvious contemplated function of the Bankruptcy Code to resolve debtors’ financial affairs by administration of a debtor’s property as a single estate under a single Chapter within the Code. 11 U.S.C. Sections 103, 301, 302, and 303.” Cowen, at 894.
Accordingly, this Court finds that the Debt- or’s March 6, 1989, filing of a Chapter 12 Petition, with a Chapter 12 case pending, is an abusive, frivolous, and invalid filing.
Bankruptcy Rule 9011 allows the Court, on its own motion, to impose sanctions for frivolous filings. Case law establishes that the imposition of sanctions is appropriate when a bankruptcy petition is not filed for legitimate purposes.
Community Electric Service of Los Angeles v. Nat’l Elec. Contractors Association,
IT IS ORDERED:
(1) That the Motions of the Bank and Hancock to Dismiss this case are granted; and
(2) That the Debtor is enjoined from filing any reorganization proceedings under Chapters 11, 12, or 13 for a period of three (3) years from the date of this Order.
Notes
. By reason of the holding in this Order the Court does not deem it necessary to decide the issue regarding eligibility.