Chisum, In re, 87-5513
| Citation | 847 F.2d 597 |
| Decision Date | 26 May 1988 |
| Docket Number | No. 87-5513,87-5513 |
| Parties | Bankr. L. Rep. P 72,330 In re Toney CHISUM, Debtor. MORTGAGE MART, INC., Plaintiff/Appellant, v. Martin RECHNITZER, Trustee in Bankruptcy, Toney Chisum, Debtor, and Julia C. Coleman, Defendants/Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Page 597
MORTGAGE MART, INC., Plaintiff/Appellant,
v.
Martin RECHNITZER, Trustee in Bankruptcy, Toney Chisum,
Debtor, and Julia C. Coleman, Defendants/Appellees.
Ninth Circuit.
Decided May 26, 1988.
Page 598
Leon L. Vickman, Encino, Cal., for plaintiff-appellant.
Julia C. Coleman, Compton, Cal., for defendants-appellees.
Appeal from the United States Bankruptcy Appellate Panels of the Ninth Circuit.
Before FARRIS, BOOCHEVER and REINHARDT, Circuit Judges.
REINHARDT, Circuit Judge:
Chisum filed a Chapter 13 petition on February 22, 1983. A voluntary dismissal was entered May 13. On July 21 of the same year, Chisum filed a second Chapter 13 petition, which was dismissed on August 29. A third Chapter 13 petition was filed on December 5 of the same year. A creditor gained relief from the automatic stay on January 27, 1984. Chisum dismissed his third petition on February 1. On the same day, Mortgage Mart bought Chisum's home at a foreclosure sale. The next day, February 2, Chisum filed, pro per, a Chapter 7 petition. Mortgage Mart filed for relief from the automatic stay in order to pursue an action for unlawful detainer.
Mortgage Mart filed a complaint against Chisum and his attorney, Julia Coleman, for sanctions, punitive damages, and attorney's fees. Mortgage Mart argued that Chisum's multiple filings constituted an abuse of the bankruptcy process. It argued that the petitions were filed solely to prevent foreclosure, an objective Mortgage Mart claimed to be improper. The bankruptcy court found for the defendants on all claims. On appeal, the bankruptcy appellate panel affirmed. In re Chisum, 68 B.R. 471 (9th Cir. BAP 1986).
The bankruptcy court found that Chisum's petitions had been filed in good faith and that the successive petitions were justified by changed circumstances in Chisum's financial situation. The court found that the first two Chapter 13 filings had been voluntarily dismissed because of Chisum's belief that he had obtained a loan sufficient to pay off his creditors; on each occasion, however, the loan arrangements fell through. The third Chapter 13 petition was filed in good faith "in that Debtor was prevented from performing only because of a new court ruling requiring post-petition mortgage payments which Debtor could not make, even though he was prepared to make post-petition mortgage payments required as of date of filing." The court excused the fourth filing, a filing under Chapter 7, by stating that "the Court as a matter of law advises debtors who are unable to perform in Chapter 13, that Chapter 7 is available as a means of saving equity in their real property." 1 Finally, the court added an extended, and persuasive, quotation from a concurring opinion in Talamini v. Allstate Ins., 470 U.S. 1067, 1070-72, 105 S.Ct. 1824, 1827-28, 85 L.Ed.2d 125 (1985) (Stevens, J., concurring), regarding why courts should hesitate to impose sanctions on persons filing actions or other proceedings.
The bankruptcy appellate panel affirmed. The panel first rejected the argument that the filings had been for an improper purpose: "Filing a bankruptcy petition to prevent foreclosure if undertaken pursuant to a legitimate effort at reorganization is not reprehensible and is in accord with the aim
Page 599
of the Bankruptcy Code." In re Chisum, 68 B.R. at 473. The panel also held that since there had been credible evidence of changed circumstances and of Chisum's good faith in filing multiple petitions, the bankruptcy court did not abuse its discretion in refusing to impose sanctions.The primary legal basis for a bankruptcy court's imposition of sanctions is Bankruptcy Rule 9011(a). 2 The bankruptcy appellate panel in this case applied an abuse of discretion standard in reviewing the bankruptcy court's decision not to impose sanctions. Chisum, 68 B.R. at 473. However, in a subsequent case, the bankruptcy appellate panel noted:
The standard of review for sanction cases appears to have changed recently....
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In re KTMA Acquisition Corp., Bankruptcy No. 4-89-3530.
...aff'd, 855 F.2d 560 (8th Cir.1988); In re Powers, 135 B.R. 980, 998 (Bankr.C.D.Cal.1991)); accord Mortgage Mart, Inc. v. Rechnitzer (In re Chisum), 847 F.2d 597, 599 (9th Cir.1988); see also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 392, 110 S.Ct. 2447, 2454, 110 L.Ed.2d 359 (1990) ("A......
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In re Herrera, Bankruptcy No. 96 B 02069.
...820 F.2d at 1498; Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir.1983); Mortgage Mart, Inc. v. Rechnitzer (In re Chisum), 847 F.2d 597, 600 (9th Cir.), cert. denied, 488 U.S. 892, 109 S.Ct. 228, 102 L.Ed.2d 218 (1988); Earl, 140 B.R. at 738; McKissie, 103 B.R. ......
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In re VIII South Michigan Associates, Bankruptcy No. 91 B 25677.
...11. 12 For the purposes of this discussion, the court will alternately refer to "Rule 9011" and "former Rule 11." 13 Accord In re Chisum, 847 F.2d 597, 599 (9th Cir.), cert. denied, 488 U.S. 892, 109 S.Ct. 228, 102 L.Ed.2d 218 (1988); In re Leigh, 165 B.R. 203, 231 14 See also Cooter & Gell......
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