Artesanias Hacienda Real S.A. De C.V. v. Jeffery (In re Jeffery), Case No. 16-15037 (REF)
| Decision Date | 29 March 2018 |
| Docket Number | Adv. No. 17-0028 (JKF),Case No. 16-15037 (REF) |
| Parties | In re Ivan L. Jeffery, Debtor. Artesanias Hacienda Real S.A. de C.V., Plaintiff, v. Ivan Jeffery, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Artesanias Hacienda Real S.A. de C.V. ("Plaintiff") commenced this adversary proceeding by filing a five count complaint ("Complaint") against defendant, Ivan Jeffery ("Debtor").1 Plaintiff moves for summary judgment solely on Count IV of the Complaint.
Count IV seeks to have Debtor's bankruptcy case dismissed based on § 521(e)(2)(C) of the Bankruptcy Code. This provision of the Code provides for the mandatory dismissal of a bankruptcy case when: (i) a debtor is obligated to provide acopy of a Federal income tax return to a creditor pursuant to § 521(e)(2)(A)(ii); (ii) the debtor fails to do so; and (iii) the debtor does not demonstrate that his or her failure to provide a copy of the tax return was due to circumstances beyond his or her control. In its motion for summary judgment ("Motion"),2 Plaintiff contends that Debtor's bankruptcy case must be dismissed because Debtor failed to timely provide it with a copy of his 2015 tax return and cannot demonstrate that his failure to do so was beyond his control.
At a pretrial status hearing on the matter, I raised the issue of whether it was proper procedure to request a dismissal pursuant to § 521(e)(2)(C) as a claim in an adversary proceeding rather than by filing a motion to dismiss in a debtor's bankruptcy case. Based on the Federal Rules of Bankruptcy Procedure, it is indisputable that Plaintiff's request for dismissal under § 521(e)(2)(C) should have been made by filing a motion. However, the parties' § 521(e)(2)(C) dispute is squarely before me and no party in interest will be prejudiced by my ruling on it so I elect to do so. To do otherwise at this juncture would be an inefficient use of judicial resources and a senseless exercise that would result in yet more legal fees being incurred.
Upon consideration, Plaintiff's Motion shall be denied. The material facts are not in dispute and Plaintiff is not, as a matter of law, entitled to a dismissal under § 521(e)(2)(C). I shall also utilize my discretion and sua sponte grant summary judgment in favor of the Debtor.
On July 15, 2016, Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. (Complaint ¶ 5, Adversary Proceeding ("AP") Docket #1). On Schedule D, Debtor listed only one secured creditor, namely Morgan Stanley Bank, N.A., with a claim in the amount of $274,633.41.3 (Bankruptcy Case No. 16-15037 ("BC") Docket #1). On Schedule E/F, Debtor listed four unsecured creditors. (Id.). Only three of these creditors filed proofs of claim: (i) Plaintiff: (ii) LEPCO; and (iii) North Mill Capital, LLC. See BC, Claims Register. On January 31, 2017, North Mill Capital filed a praecipe to withdraw its proof of claim. (Id. Docket #124). Accordingly, Plaintiff and LEPCO are the only unsecured creditors with pending proofs of claim. Plaintiff filed a proof of claim for $923,457.87 based on a judgment which Plaintiff obtained against Debtor on April 29, 2016. (Complaint ¶¶ 1-2, 7; Proof of Claim 3-1). LEPCO filed a proof of claim for $87,558.37 based on a guaranty of a lease. (Proof of Claim 1-2). Both parties agree that LEPCO's claim was "satisfied from proceeds of real estate at 67 Cedar Common Lane, Birdsboro Pennsylvania in which debtor Jeffrey had an interest." (Motion ¶ 7).4
When Debtor filed his bankruptcy case, it was assigned to the Honorable Richard E. Fehling ("Bankruptcy Judge"). On July 18, 2016, Lynn Feldman was appointed as the Chapter 7 Trustee in the bankruptcy case. (Bankruptcy Case No. 16-15037 ("BC") Docket #7).
On July 31, 2016, notice was sent to, inter alia, Plaintiff's counsel by first class mail notifying him that the first meeting of creditors was scheduled for August 22, 2016. (BC Docket #16). At the first meeting of creditors, Debtor "testified that his 2015 tax returns were on extension and had not been filed[.]" (Complaint ¶ 83).5
Thereafter, Plaintiff "made repeated demands in writing" for a copy of Debtor's 2015 income tax returns. (Id. ¶ 84).6 In particular, Plaintiff sent an email to Debtor's counsel on November 22, 2016, demanding a copy of the 2015 tax returns. (Id.).
On December 5, 2016, a continued § 341 meeting of creditors was held. (BC Docket #88). Debtor did not provide Plaintiff with a copy of his 2015 Federal income tax return prior to that date. (Complaint ¶ 86).7 However, at the meeting of creditors on December 5th, Debtor impliedly admitted that his 2015 Federal income tax return had been filed by testifying about the return. (Id. ¶ 85).8
On January 19, 2017, Plaintiff commenced the instant adversary proceeding by filing its Complaint. (AP Docket #1). In the Complaint, Plaintiff stated: "This Complaintseeks denial of discharge of Defendant Debtor Jeffery's debts pursuant to (among other things) 11 U.S.C. §§ 727(a)(2), (3) & (4) or in the alternative denial of discharge under § 523(a)(6) or alternatively dismissal of his bankruptcy case pursuant to 11 U.S.C. § 521(e)." (Complaint ¶ 9) (emphasis added). In response to the Complaint, Debtor filed a motion to dismiss Counts II through V of the Complaint. (AP Docket #4).
On March 24, 2017, the Bankruptcy Judge held a hearing on Debtor's motion to dismiss. During the hearing, the Bankruptcy Judge advised Plaintiff's counsel three times that debtor's bankruptcy case was not going to be dismissed. See Transcript, March 24, 2017, at 3-4, 25-26. At the close of the hearing, the Bankruptcy Judge took Debtor's motion to dismiss under advisement. On April 4, 2017, the Bankruptcy Judge issued an Order denying the motion. (AP Docket #15).
On May 2, 2016, Debtor filed his Answer to the Complaint. (AP Docket #19). A preliminary pretrial conference was subsequently held. Approximately four days later, the Bankruptcy Judge issued an Order recusing himself from the instant adversary proceeding for reasons that are irrelevant to the disposition herein. (AP Docket #27). Importantly, the Bankruptcy Judge did not recuse himself from Debtor's bankruptcy case. (Id.). The adversary proceeding was reassigned from the Bankruptcy Judge to the undersigned judge.
On September 28, 2017, Plaintiff filed its Motion and supporting memorandum of law on Count IV of the Complaint. (AP Docket #33). Although Count IV of the Complaint asserts that Debtor's bankruptcy case should be dismissed solely on oneground, namely Debtor's "failure and refusal to deliver his tax returns" to Plaintiff (see Complaint ¶¶ 81-87), Plaintiff inexplicably includes factual allegations and legal assertions in its Motion asserting that Debtor's bankruptcy case should be dismissed on the following additional grounds ("Additional Grounds"):
(Motion ¶¶ 34-47, AP Docket #33).
On October 12, 2017, Debtor filed his Response to the Motion and a supporting memorandum of law. (AP Docket #34 & #35). In the Response, Debtor admits that his 2015 Federal Tax return was on extension when the First Meeting of Creditors was held.11 (Response ¶ 22). In his supporting memorandum of law (Debtor's "Supporting Memorandum"),12 Debtor argues that he did not have an obligation to give Plaintiff a copy of his 2015 tax return under § 521(e)(2)(A)(ii) because Plaintiff did not request a copy of the return until after he had already given it to the Trustee and, therefore, his bankruptcy case cannot be dismissed under § 521(e)(2)(C). (Debtor's Supporting Memorandum at 4-5, AP Docket #35). As this Court's discussion below will show, Debtor misconstrues the requirements of § 521(e)(2)(A)(ii) but, nevertheless, correctly concludes that he was not obligated to give Plaintiff a copy of his 2015 tax return under that provision.
Thereafter, Plaintiff filed a reply memorandum ("Reply") to Debtor's Response.13 (AP Docket #36). In the Reply, Plaintiff asserts that Debtor's "strained" construction of § 521(e)(2) would "eviscerate the very purpose" of the provision which Plaintiff contends is to "to provide the debtor's most recent tax return to creditors prior to the debtor's 341 meeting." (Reply at 5, AP Docket #36). Plaintiff's interpretation of § 521(e) is skewed in its favor and wholly ignores pertinent language in the provision that is unfavorable to it. Plaintiff also argues in its Reply that, by failing to address the Additional Grounds which it asserts for dismissal, Debtor impliedly concedes to them.14 (Id. at 2, 6-7).
On October 20, 2017, the Chapter 7 Trustee filed a response ("Trustee's Response") to the Motion.15 (AP Docket #37). In the response, the Chapter 7 Trustee addressed: (i) the propriety of filing a request for dismissal based on § 521(e)(2)(C) as a claim in an adversary proceeding rather than as a motion in a bankruptcy case; and (ii) the merits of the Additional Grounds. (Trustee's Response ¶¶ 21-31 & ¶¶ 32-83, APDocket #37). The Chapter 7 Trustee's Response provided no insight on the substance of Plaintiff's § 521(e)(2)(C) request.
Plaintiff then filed a reply ("Reply to the Trustee")16 objecting to the Trustee's Response to the extent that it contains...
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