In re Cisneros
| Decision Date | 25 August 2021 |
| Docket Number | 21-12338-MCR |
| Parties | In re: Mario Fernando Cisneros, Debtor. |
| Court | U.S. Bankruptcy Court — District of Maryland |
Before the Court is a Motion to Dismiss [Dkt. No. 20] (the "Motion to Dismiss") filed by MarketPro South, Inc. (the "Movant"). The Motion to Dismiss seeks to dismiss the above- captioned bankruptcy case pursuant to Section 707(a) of the United States Bankruptcy Code (the "Bankruptcy Code") for the alleged lack of good faith by Mario Fernando Cisneros (the "Debtor") in filing for bankruptcy relief under Chapter 7. The Debtor filed an opposition to the Motion to Dismiss [Dkt. No. 21] (the "Opposition") and the Court held a hearing on the Motion to Dismiss and the Opposition on August 24, 2021. The Court has considered the Motion to Dismiss, the Opposition, the entire record in this case, the exhibits admitted at the hearing, the Debtor's testimony at the hearing, the arguments of counsel at the hearing and applicable law. For the following reasons, the Motion to Dismiss will be denied.
The material facts are not in dispute.
On April 8, 2021 (the "Petition Date"), the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code along with his Schedules and Statement of Financial Affairs.[1]Petition, Schedules and Statement [Dkt. No 1]. The Chapter 7 Trustee held the meeting of creditors under Section 341 of the Bankruptcy Code on May 12, 2021. Notice of Case [Dkt. No. 8]. On May 13, 2021, the Chapter 7 Trustee filed his Report of No Distribution stating that he "made a diligent inquiry into the financial affairs of the Debtor" and "that there is no property available for distribution from the estate over and above that exempted by law." Report [Dkt No. 18]. The Debtor's bankruptcy case was thereafter designated a "no asset" bankruptcy case based on the Chapter 7 Trustee's report.
On July 12, 2021, the Movant filed the Motion to Dismiss, arguing the case should be dismissed because the Debtor has acted in bad faith. Motion to Dismiss [Dkt. No. 20] (hereinafter cited as "Motion"). The Movant's claim is based on a lawsuit it filed against the Debtor in the Superior Court of the District of Columbia, Case No. 2019 CA 002235B, based on the Debtor's alleged breach of contract with the Movant and other tort claims (the "D.C. Lawsuit"). Motion at ¶ 2. It appears that the Debtor filed his bankruptcy case prior to the D.C. Lawsuit's adjudication. Motion at ¶¶ 2-4. The Debtor listed the Movant's claim in his schedule of general unsecured claims in the amount of $75, 000 and listed the claim as "disputed." Sch. E/F [Dkt. No. 1] at p. 3.
The Movant attached six exhibits to its Motion to Dismiss as purported support for its allegation that the Debtor has acted in bad faith. See Motion, Exhs. A-F. Exhibit A to the Motion to Dismiss consists of the Debtor's Schedule E/F, which identifies all of the Debtors priority and general unsecured claims, including the Movant's claim in the amount of $75, 000. Exhibit B appears to be an undated and incomplete copy of a transcript from the Debtor's meeting of creditors on May 12, 2021. Exhibit C is an excerpt from the Debtor's Schedule A/B containing a summary of the Debtor's assets and reflecting a total value of $507, 842.98 for all of the Debtor's real and personal property. Exhibit D is the first page of the Debtor's Summary of Assets and Liabilities reflecting total assets of $507, 842.98, total liabilities of $105, 145.50, monthly income of $5, 230.43 and monthly expenses of $7, 794. Exhibit E is the first page of the Debtor's Schedule I showing his employment information and gross monthly income of $0. Exhibit F is an incomplete copy of an email sent from the Chapter 7 Trustee to the Movant's counsel on May 13, 2021, stating that payments made to the law firm of Vida Law, LLC were made by the Debtor's spouse and not by the Debtor, that he would not be pursuing a preference claim against the law firm and that he would not be pursuing another transfer made in 2016 because it was outside the statute of limitations. Exhibit F concludes with the Chapter 7 Trustee stating, "[i]t does not appear that there are any assets in these [sic] case to administer or any further action for me to take." Motion, Exh. F (email).
With these documents as support, the Movant argues in the Motion to Dismiss that "the record demonstrates that Debtor filed the instant Chapter 7 petition solely to frustrate [the Movant]." Motion at ¶ 19. More specifically, the Movant argues in the Motion to Dismiss that the case should be dismissed because (i) "Debtor is solvent and is not entitled to a no-asset Chapter 7 discharge," (ii) "Debtor has material income" as evidenced by his testimony at the meeting of creditors, and (iii) the Debtor's "only substantial debt is a potential contested litigation-based claim that has not even matured into a judgment yet." Motion at p. 1. The Motion to Dismiss reviews the eleven factors adopted by this Court in In re Wilson in determining whether a Chapter 7 case should be dismissed as a bad faith filing (discussed in more detail below) and closes by stating, "[t]he totality of the circumstances demonstrate that Debtor filed his instant no asset Chapter 7 petition in bad faith and it should be dismissed." Motion at ¶ 25.
The Opposition maintains that "the Debtor responded accurately and truthfully in his bankruptcy Schedules and his Statement of Financial Affairs" and explains that the Debtor, who is self-employed as a draftsman in a sole proprietorship, was not owed any money for previously completed jobs and had "no concrete prospects of any additional new draftsman work on the Petition Date." Opposition [Dkt. No. 21] (cited hereinafter as "Opposition") at ¶¶ 3 and 12. The Opposition further points out that any post-petition earnings by the Debtor would not be property of his bankruptcy estate and that, despite repeated assertions in the Motion to Dismiss that the Debtor filed a "no asset Chapter 7 Petition," it was the Chapter 7 Trustee - not the Debtor - who made the determination that the Debtor's case was a "no asset case." Opposition at ¶¶ 16 and 20. The Debtor argues that he has not concealed or misrepresented any assets or sources of income; that his Schedules were truthful, complete and accurate to the best of his abilities and knowledge; and that he responded truthfully when questioned at the meeting of creditors. Opposition at ¶¶ 25-26. The Opposition argues that the Wilson factors do not support dismissal, the Debtor's bankruptcy petition was filed in good faith and the Movant has failed to establish anything to the contrary. See generally Opposition at ¶¶ 23-39.
The Court notes that the Movant has not filed a motion to take the Debtor's oral examination pursuant to Bankruptcy Rule 2004, a complaint objecting to the Debtor's discharge under Section 727 and/or a complaint seeking a determination that its debt is not dischargeable under Section 523. The Court also notes that the time to take any of these actions has passed because the deadline to file a complaint was July 12, 2021. Consequently, to the extent the Movant has a claim against the Debtor, the Movant has a dischargeable general unsecured claim.
The Motion to Dismiss seeks relief under Section 707(a), which provides:
11 U.S.C. § 707(a). The three illustrative grounds for dismissal contained in Section 707(a) are non-exclusive. 11 U.S.C. § 102(3) (); McDow v. Smith, 295 B.R. 69, 74 (E.D. Va. 2003) ("'Cause' is not expressly defined in § 707(a); stated instead are three non-exclusive, illustrative grounds for dismissal.").
The United States Court of Appeals for the Fourth Circuit recently agreed with the majority of circuit courts and ruled that a debtor's bad faith in filing for bankruptcy relief may constitute cause for dismissal under Section 707(a). Janvey v. Romero, 883 F.3d 406, 412 (4th Cir. 2018). The Court reasoned that the "majority view is the sounder one, because it is the most helpful in preventing serious abuses of the bankruptcy process." Id. "But acknowledging that bad faith may constitute 'cause' under § 707(a) also requires that the remedy of dismissal be reserved for cases of real misconduct." Id. "In short, bad faith exists only where 'the petitioner has abused the provisions, purpose, or spirit of bankruptcy law.'" Id. (quoting Tamecki v. Frank (In re Tamecki), 229 F.3d 205, 207 (3d Cir. 2000)). This Court has previously determined that dismissal for bad faith under Section 707(a) should be used sparingly and reserved for egregious cases. In re Wilson, 12-32715-WIL, 2016 WL 1254637, at *5 (Bankr. D. Md. Mar. 30, 2016).
In this case, the Court has reviewed the entire record and considered the testimony of the Debtor and the six exhibits admitted at the hearing. Simply put, the Court finds that the Motion to Dismiss has no evidentiary support whatsoever. Not only are the allegations in...
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