Franco v. U.S. Tr. (In re Franco)
| Decision Date | 02 June 2016 |
| Docket Number | BAP No. CC-15-1281-KiTaL |
| Parties | In re: ROGELIO FRANCO, Debtor. ROGELIO FRANCO, Appellant, v. UNITED STATES TRUSTEE; TIMOTHY YOO, Chapter 7 Trustee, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
NOT FOR PUBLICATION
MEMORANDUM1Argued and Submitted on May 19, 2016, at Pasadena, California
Appeal from the United States Bankruptcy Court for the Central District of California
Appearances: Appellant Rogelio Franco on brief;2 Nancy S. Goldenberg argued for appellee, United States Trustee.
Before: KIRSCHER, TAYLOR and LANDIS,3 Bankruptcy Judges.
Appellant, chapter 74 debtor Rogelio Franco, appeals an order dismissing his case for "cause" under § 707(a). The court dismissed his case with prejudice and imposed a one-year refiling bar under §§ 349(a) and 105(a). We AFFIRM.
Debtor filed a chapter 13 bankruptcy petition on February 13, 2015, pro se (case no. 15-12214), which included a signed copy of Exhibit D — Individual Debtor's Statement of Compliance with Credit Counseling Requirement. In Exhibit D, Debtor asserted under the penalty of perjury that "[W]ithin the 180 days before the filing of my bankruptcy case, I received a briefing from a credit counseling agency approved by the United States trustee or bankruptcy administrator that outlined the opportunities for available credit counseling and assisted me in performing a related budget analysis, and I have a certificate from the agency describing the services provided to me." Debtor did not claim that any of the three exceptions to the prepetition credit counseling requirement under § 109(h) applied. Debtor later converted his case to chapter 7; Timothy Yoo was appointed as trustee.5
Prior to this case, Debtor, together with his wife, filed at least four other bankruptcy cases within the past four years.6 In the first case, a chapter 7 case, Debtor received a discharge along with his wife on August 23, 2011. The fourth case, a chapter 7 case later converted to chapter 13, was still pending when Debtor filed the instant case. Between Debtor's third and fourth cases (filed in 2011 and 2014, respectively), his wife filed two bankruptcy cases (alone), one in 2012 and the other in 2013, receiving a discharge in the second case on February 24, 2014, despite having received a chapter 7 discharge less than three years before.7
On February 17, 2015, the bankruptcy court issued a Notice of Non-Entitlement to Discharge to Debtor. It is presumed Debtor received it; he has not argued to the contrary.
Debtor filed his certificate of credit counseling on February 27, 2015, wherein he stated that he had received creditcounseling on March 21, 2011, nearly four years prior to the petition date. Debtor filed this same certificate again on May 12, 2015.
The United States Trustee ("UST") moved to dismiss Debtor's case under § 707(a) for failure to obtain prepetition credit counseling within 180 days prior to the filing as required under § 109(h)(1) ("Motion to Dismiss"). The certificate Debtor filed was stale, having been obtained nearly four years prior to the petition date. The UST requested that the case be dismissed with prejudice under § 349 and that a one-year refiling bar be imposed due to Debtor's alleged bad faith repeat filings, his alleged abuse of the bankruptcy system, and the fact that he, under oath, misled the court as to the timeliness of the taking of his prepetition credit counseling course. Any opposition to the Motion to Dismiss was due no later than July 9, 2015.
Concurrently with the Motion to Dismiss, the UST filed a motion under § 727(a)(8), seeking to deny Debtor's discharge because of the chapter 7 discharge entered less than eight years prior in August 2011. The Motion to Dismiss and the § 727(a)(8) motion were scheduled for hearing on the same day.
In his late opposition to the Motion to Dismiss filed on July 14,8 Debtor asserted that he thought the prepetition credit counseling certificate could be used more than once; he did not know the course had to be completed every time before he filed a new bankruptcy case. Debtor also disputed the one-year refiling bar, stating that he did not intend to file any more cases.Debtor indicated that he filed the instant case in good faith so he could negotiate a loan modification with his mortgage lender.
Subsequently, Debtor completed a credit counseling course on July 1, 2015, and filed his certificate of credit counseling on July 14, 2015. In reply to the Motion to Dismiss, the UST argued that Debtor's recent completion of credit counseling and filed certificate did not comply with § 109(h).
At the hearing on the Motion to Dismiss and the § 727(a)(8) motion, Debtor appeared pro se with an interpreter. After the parties stated they had nothing to add beyond the papers submitted, the bankruptcy court announced its oral ruling granting the Motion to Dismiss:
Hr'g Tr. (July 23, 2015) 5:17-6:14. Because the court was granting the Motion to Dismiss, it denied the § 727(a)(8) motion as moot. Debtor timely appealed the dismissal order.
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The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
We review de novo whether a type of misconduct can constitute "cause" under § 707(a); we review for abuse of discretion the bankruptcy court's decision to dismiss a case for misconduct that constitutes "cause." Sherman v. SEC (In re Sherman), 491 F.3d 948, 969-70 (9th Cir. 2007). The decision to dismiss a bankruptcy case with prejudice and impose a filing bar is reviewed for abuse of discretion. See Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224 (9th Cir. 1999). The bankruptcy court abuses its discretion if it applied the wrong legal standard or its findings were illogical, implausible or without support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
We may affirm on any ground supported by the record, regardless of whether the bankruptcy court relied upon, rejected or even considered that ground. Fresno Motors, LLC v. Mercedes-Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014); Arnot v. Endresen (In re Endresen), 548 B.R. 258, 268 (9th Cir. BAP 2016).
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A bankruptcy court may dismiss a chapter 7 case if the movant establishes "cause," which includes such conduct as (1) unreasonable delay in prosecuting the case, (2) failure to pay statutory fees and charges, or (3) failure to file financial disclosures. § 707(a)(1)-(3). Section 707(a) does not define "cause," but the Ninth Circuit has recognized that "cause" for dismissal is not limited to the three examples in the statute. Neary v. Padilla (In re Padilla), 222 F.3d 1184, 1191 (9th Cir. 2000).
Section 109 of the Code identifies who may be a debtor. To qualify as a debtor, an individual must first participate in a credit counseling session within 180 days before filing a petition. § 109(h)(1).9 Section 109(h)(1) is implemented by § 521(b)(1) and Rule 1007(b)(3) and (c), which require a debtor to file a certificate from the credit counseling agency that providedthe credit counseling within 14 days after filing the petition. The exceptions to this requirement are identified in § 109(h); none of them apply here.
The bankruptcy court made no mention at the hearing of § 109(h)(1) or Debtor's failure to comply with it. It referred only to what it considered to be a bad-faith bankruptcy filing by Debtor. It is not clear from the transcript whether the court was finding bad faith as a basis for dismissal under § 707(a) or as support for its decision to dismiss Debtor's case with prejudice and impose the one-year refiling bar under §§ 349(a) and 105(a). The dismissal order states only that Debtor's case is "DISMISSED pursuant to 11 U.S.C. § 707(a)."
To the extent the bankruptcy court dismissed Debtor's case for bad faith, it erred. Bad faith does not constitute "cause" for dismissal under § 707(a). In re Padilla, 222 F.3d at 1194 (). However, such error was harmless because another ground existed to dismiss Debtor's case for "cause" under § 707(a).
The UST argued that Debtor's case should be dismissed for cause under § 707(a) for failing to comply...
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