In re Francis

• Decision Date: 10 September 2019
• Docket Number: Bankruptcy Case No. 17-12708-FJB,BAP NO. MB 18-053
• Citation: 604 B.R. 101
• Parties: Paul FRANCIS, Debtor. Paul Francis, Appellant.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

604 B.R. 101

Paul FRANCIS, Debtor.

Paul Francis, Appellant.

BAP NO. MB 18-053

Bankruptcy Case No. 17-12708-FJB

United States Bankruptcy Appellate Panel of the First Circuit.

September 10, 2019

Carmenelisa Perez-Kudzma, Esq., on brief for Appellant.

Before Tester, Cabán, and Fagone, U.S. Bankruptcy Appellate Panel Judges.

Fagone, U.S. Bankruptcy Appellate Panel Judge.

Paul Francis (the "Debtor") refused to comply with several orders issued by the bankruptcy court. On its own initiative, the court denied the Debtor a chapter 7 discharge. The Debtor has appealed the order denying his discharge (the "Order"), contending that the bankruptcy court should have dismissed the case and that the court lacked the authority to deny him a discharge sua sponte. We AFFIRM .

BACKGROUND

In May 2017, the Debtor's chapter 13 case was dismissed due to his failure to file required documents. About two and a half months later, the Debtor filed another case, the one in which this appeal arises. This case began under chapter 13 but was later converted to chapter 11. The chapter 11 case was not successful. Due to the Debtor's accumulated omissions, including his failure to file a plan and disclosure statement, the bankruptcy court granted a motion by the United States trustee and issued an order converting the case to one under chapter 7. In so doing, the bankruptcy court considered whether dismissal or conversion would be in the best interests of the creditors and the estate. Based, in part, on the likely existence of equity for unsecured creditors in a chapter 7 case, the court decided that conversion was the right option. The Debtor appealed that decision and the Panel affirmed. See Francis v. Harrington (In re Francis), BAP No. MB 18-012, 2019 WL 1265316 (1st Cir. BAP Mar. 14, 2019).

The failures that contributed to the conversion of the case were not the Debtor's only failures to comply with the Bankruptcy Code and court orders.¹ When it converted the case, the bankruptcy court also issued an order (the "Order to Update") requiring the Debtor to file: (1) an Official Form 108—a Statement of Intention for Individuals Filing Under Chapter 7 (the "Statement of Intention") "[w]ithin 30 days of the filing of [his] bankruptcy petition or the scheduled date of the § 341 Meeting of Creditors, whichever is earlier"; and (2) a schedule listing post-petition creditors by April 3, 2018 or a statement that he had none. The Order to Update warned:

Failure to file the required documents with the Clerk's Office may result in the dismissal of your case....

Please note that if not dismissed earlier, the case MUST be automatically dismissed under 11 U.S.C. § 521(i) if certain documents are not filed within 45 days of the date of the filing of the petition. If you file another bankruptcy petition within 12 months of the dismissal, the automatic stay may be limited or may not take effect depending upon your circumstances.

The Debtor did not comply with the Order to Update. He also failed to appear at the § 341 meeting of creditors as scheduled.

In an apparent effort to secure the Debtor's compliance, the bankruptcy court entered another order (the "Second Order"), this time requiring the Debtor to file the missing documents by July 19, 2018. The Second Order also warned "that refusal to obey a lawful order of the court is grounds for denial of discharge in chapter 7" under § 727(a)(6)(A).

After the Debtor failed to comply with the Second Order, the bankruptcy court issued yet another order, this one on August 13, 2018 (the "Order to Show Cause"). The Order to Show Cause required the Debtor "to show cause in writing, with supporting affidavit(s), why he should not be denied a discharge for refusal to obey a lawful order of the court."

Shortly after the Order to Show Cause was issued, the Debtor's counsel filed a statement indicating: (1) the Debtor had not provided her with the list of post-petition creditors or Statement of Intention; (2) she hoped to obtain the Debtor's court-ordered affidavit the following day; and (3) she would file all required documents on or about August 30, 2018.

The bankruptcy court then scheduled a hearing on the Order to Show Cause for September 18, 2018 and directed the Debtor to appear at the hearing. The court rescheduled the hearing for September 25, 2018 at the Debtor's request. On September 21, 2018—more than five months after the expiration of the deadline prescribed in the Order to Update—the Debtor finally filed a "Notice of No Post[-]Petition Creditors," representing he had no post-petition creditors. Additionally, on September 23, 2018, the Debtor filed a Statement of Intention, indicating that he intended to retain and redeem three properties.

Two days later, at the hearing on the Order to Show Cause, the Debtor's attorney explained that the Debtor had been confused about what was required of him in his bankruptcy case and that it was difficult for him to comply with court orders because his wife managed the family's financial matters. The bankruptcy court then examined the Debtor to ascertain whether he received court notices:

THE COURT: Mr. Francis, we sent you a number of notices concerning things that you needed to do in connection with your case. We sent them to your counsel ... but we also sent them to you, right? Did you get those notices?

....

MR. FRANCIS: Yes.

THE COURT: All right. You opened them up and you read them. Is that right?

MR. FRANCIS: Well, yes. My wife did it.... I don't collect the mail. My wife collect[s] the mail....

....

THE COURT: ... [I]n this current bankruptcy case we sent you notices ... in March, July, and in August at least three times in connection with your list of post-petition creditors and your statement of intent. Is that how you understand it as well? You saw these notices and you opened them and read them, or they were opened and you read them after your wife did; is that right?

MR. FRANCIS: Yes, my wife opened them but I don't know what time she get[s] them. I also want to tell you that my wife wasn't here. My wife was out of the country and then she came back. After she came back she suffered a second degree burn

so that set back things when she opened things and then she wasn't here....

....

THE COURT: ... [B]ut you were home, right? You were living there, is that right?

MR. FRANCIS: Yes ....

....

THE COURT: ... [W]hen your wife was away out of the country and then she was ill or injured ... you got the mail and opened it, right?

MR. FRANCIS: No, I don't touch the mail.

....

[M]y daughter collect[s] mail[ ] and put[s] them in a pile for her.

The Debtor's attorney then asked the Debtor whether he had "intentionally disobey[ed] a court order[.]" After responding in the negative, the Debtor assured her that he would "be more responsible with the mail."

The court then denied the Debtor his discharge from the bench, reasoning:

[I]t's like pulling teeth with Mr. Francis and this has been going on since March 2017, not this March. And so we have repeatedly issued orders to show cause as to why ... various things shouldn't happen and [his] case be dismissed, he loses his discharge because he hasn't done what he has been required to do and it shouldn't be that way. It can't be that way.

This is the poster child for someone who has ignored what the court has required from him.... A big part of the problem in this case that caused its conversion was that we ordered him to file a plan and disclosure statement and that was ignored. Ignored. It was never filed. It was just a way to hold up the system.

That would be my conclusion with respect to the way he's chosen to handle this bankruptcy case.

So it is my intention to deny him his discharge in this Chapter 7 case because of repeated and willful failures to abide by orders of this Court. And under 11 U.S.C. [§] 727 [ (a) ](6)(A) ... the court may deny a discharge to a debtor where the debtor has refused in the case to obey any lawful order of the court other than an order to respond to a material question or to testify. So it has nothing to do with that; it has only to do with the day-to-day, week-to-week requirements of being in a Chapter 11 and then in a converted Chapter 7.

So at some point in time every judge sees a case where we say, enough is enough....

The Order entered the same day provided:

Upon consideration of the order to show cause, the debtor being present and testifying at this hearing, and the undertakings of counsel, the Court finds that the Debtor repeatedly ignored lawful orders of the Court, and therefore denies the Debtor a discharge. Title 11 U.S.C. § 727(a)(6)(A) states that a court may deny a discharge if a debtor has refused "to obey any lawful order of the court ...." In this district, "some degree of volition or willfulness on the part of the debtor" is necessary to show a refusal. [Riley v. Tougas (In re Tougas) ], 354 B.R. 572, 578 (Bankr. D. Mass. 2006). A debtor willfully refuses to obey a court order when he avoids court mailings. See[Katz v. Araujo (In re Araujo) ], 292 B.R. 19, 24 (Bankr. D. Conn. 2003) (denying discharge after debtor failed to maintain a current mailing address with the court).

Here, the Debtor was ordered to submit statements of intent and of post-petition creditors on March 20, 2018, July 5, 2018, and August 13, 2018. The Debtor failed and refused to timely comply with each of these lawful orders of the Court. Finally, the debtor complied, but only on September 21 and 23, 2018, respectively, just before the hearing on September 2[5], 2018. His counsel stated in the response to the order to show cause that "Debtor has not provided Counsel with the statement of post-petition creditors or intent," placing the blame squarely on the debtor. I have to assume that the blame is properly placed.

At the present hearing, the Debtor testified that he intended to comply with all orders, but that he does not look at his mail. However, the Debtor cannot claim that these were innocent omissions in light of this Court's repeated

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