In re Latimer
| Decision Date | 05 February 1988 |
| Docket Number | Bankruptcy No. 87-01312S,Adv. No. 87-0900S. |
| Citation | 82 BR 354 |
| Parties | In re Robert H. LATIMER and Joyce C. Latimer, Debtors. Adolph E. SINKOW, Plaintiff, v. Robert H. LATIMER and Joyce C. Latimer, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Mitchell W. Miller, Jack K. Miller, Philadelphia, Pa., for debtors.
Marjorie Rendell, Lisa Jacobs, Philadelphia, Pa., for Sinkow.
Peter L. Fiss, Corr, Stevens & Fenningham, Trevose, Pa., for Corr, Stevens & Fenningham.
Arthur Liebersohn, Philadelphia, Pa., Trustee.
Consolidated for disposition before us are an adversary proceeding by a large creditor of the Debtors objecting to their discharge on the basis of 11 U.S.C. §§ 727 (a)(2), (a)(4), and (a)(5), and a motion to dismiss the Debtors' bankruptcy case filed by the plaintiff in the adversary proceeding and joined by another creditor on the basis of 11 U.S.C. §§ 707(a) and 105(a).
In the adversary proceeding, we find that the creditor fell far short of meeting its necessarily stiff burdens of establishing cause for denial of the Debtors' discharge pursuant to 11 U.S.C. §§ 727(a)(2), (a)(4), or (a)(5). Resolution of the motion to dismiss causes us to review the scope of 11 U.S.C. § 707(a) and to determine that the "cause" for dismissal referenced there is a narrow concept, confined to violations of the Bankruptcy Code or court orders. Thus, such "cause" does not include a consideration of whether the debtor has "substantially abused" the provisions of Chapter 7 or has proceeded in "bad faith." We therefore have little difficulty in denying any relief to the creditors in either of the matters before us.
The Debtors, husband and wife, filed a joint Chapter 7 bankruptcy case on March 18, 1987. They filed their Schedule of Income and Expenses and Schedules of Assets and Liabilities on May 7, 1987. A meeting of creditors pursuant to 11 U.S.C. § 341(a) was conducted in their case by the interim Trustee, Arthur P. Liebersohn, Esquire, on August 18, 1987.
The flurry of conflict between the Debtors and ADOLPH E. SINKOW (hereinafter referred to as "Sinkow"), the large creditor who instituted both the adversary proceeding and the motion in issue, appears to have been set off by the Debtors' filing of both a motion to avoid the lien of a judgment of at least $160,000.00 in favor of Sinkow against their residence pursuant to 11 U.S.C. § 522(f)(1) and an adversary proceeding, at Adv.No. 87-0867S, attacking the validity of Sinkow's lien pursuant to 11 U.S.C. § 506(a), on October 6, 1987. Ten days later, on October 16, 1987, Sinkow initiated the instant adversary proceeding against the Debtors. On November 6, 1987, the Debtors also filed a motion pursuant to § 522(f)(1) to avoid the lien of a judgment in the amount of about $3,500.00 against their residence in favor of the other creditor involved herein, the law firm of Corr, Stevens, & Fenningham (hereinafter referred to as "Corr").
The lien avoidance matters involving Sinkow were both amicably resolved by an agreement that Sinkow's lien would be reduced to $25,500.00, the equity remaining in the premises, valued at $130,000.00 and owned exclusively by the wife-Debtor, after exemptions. Corr's lien was avoided without response or objection.
On October 19, 1987, Sinkow filed a motion to compel the interim Trustee, Mr. Liebersohn, to investigate the affairs of the Debtors, reciting, inter alia, as grounds therefor the Debtors' combined salary of $85,000.00, their valuable home, and "discrepancies in the Debtors' lifestyle with their claim of bankruptcy," specifically noting their $200.00 a month claimed expenditure to clean clothing valued at $300.00, and the fact that they sent their children to private school and were driving a 1984 Mercedes automobile. After a hearing on November 18, 1987, at which Mr. Liebersohn indicated no interest in "investigating" the Debtors' situation further because of their apparent lack of assets available for distribution to unsecured creditors, we denied the motion without prejudice to Sinkow to move to dismiss the case.
On December 10, 1987, the adversary proceeding was listed for trial. Apparently having proceeded no further in preparation for trial nor having filed any motion to dismiss the case between November 18, 1987, and December 10, 1987, Sinkow moved for a continuance, indicating a desire to file a motion to dismiss on that very date and consolidate the hearing on that motion with that on the adversary proceeding. The continuance request was vigorously opposed by the Debtors, whose counsel contended that the husband-Debtor had arranged to appear at the hearing and that he would suffer crucial financial detriment if he were compelled to make similar arrangements again. Although it is not our policy to lightly grant any continuances, especially where the moving party cites, as here, less than compelling reasons for doing so and the motion is opposed, we granted Sinkow's motion in an Order of December 11, 1987. We did so because we would otherwise have been faced with a subsequent hearing on the motion to dismiss in any event. Therefore, we scheduled a consolidated hearing on the adversary proceeding and the motion to dismiss on December 22, 1987, with the proviso that, if the Debtors were successful in these proceedings, they could move the court to allow as costs compensation of their reasonable expenses incurred by our granting the continuance from Sinkow.
On December 15, 1987, Sinkow moved to take a Bankruptcy Rule 2004 Examination of the Debtors. Recalling the events of December 10, 1987, we denied this motion, stating that same "should have been conducted well before the last minute requests made by the movant," or a least should have been mentioned and scheduled on or before December 10, 1987. On December 18, 1987, Corr moved to join the motion to dismiss, which motion we ultimately granted on December 22, 1987, at the outset of the hearing.
The only witness at the hearing was the husband-Debtor, called both as of cross-examination by the creditors and in the Debtors' own case. An offer by the Debtors to call the father-partner of their counsel was refused. The Debtors also offered into evidence eleven pleadings filed in either their main bankruptcy case or in Adv. No. 87-0867S. At the close of the trial, we accorded the parties until January 8, 1988 (creditors), and January 22, 1988 (Debtors), to file Briefs supporting their respective positions. Since we deem no disputed factual matters as significant to our disposition, we have prepared our Opinion in narrative form.
The husband-Debtor (referred to hereinafter as "the Debtor") testified that the root of the Debtors' financial troubles began in 1982 or 1983, when he formed a warehousing and moving business called Transportation Services International. Sinkow had initially been a customer of that business, and subsequently provided substantial financial assistance to the Debtors on its behalf. However, the business nevertheless failed, the Debtor did not repay Sinkow's loans, and in September, 1984, Sinkow purchased the business at a sheriff's sale for $2,000.00, apparently retaining a sizable deficiency claim against the Debtors.
The Debtor stated that his bankruptcy filing was necessitated by the combination of Sinkow's attempt to foreclose on the Debtors' home and of a threat by the Internal Revenue Service (hereinafter referred to as "IRS"), owed taxes as a result of the aforesaid business reversals, to attach his wages.
The focal point of the creditors' claims was the Debtors' monthly Schedule of Current Income and Expenditures, which we summarize as follows:
The Debtor's Statement of Property included their home, solely in the wife-Debtor's name, valued at $130,000.00 and encumbered by two mortgages totalling $97,000.00, as well as Sinkow's lien; home furnishings valued at $1,470.00; cash and bank deposits of $51.00; wearing apparel valued at $300.00; and jewelry valued at $500.00. All of the Debtors' property was claimed to be exempt.
The Debtor testified that the deficit of about $500.00 of monthly expenses over income had been made up by not paying the IRS on some occasions and, on others, by contributions from the wife-Debtor's mother, afflicted with Alzheimer's disease, who resided with them. Also, as of September, 1987, the Debtor obtained new employment, which increased his monthly earnings to about $3,000.00.
Sinkow raised numerous questions concerning the legitimacy of several of the expenses claimed. Most striking were as follows: (1) A $200.00 monthly bill for cleaning clothing allegedly worth only $300.00; (2) Costs for private tuition, day care, and housekeeping which exceeded $12,000.00 annually; and (3) Rental of a luxury car. The Debtor's responses to these inquiries were as follows: (1) Clean clothes were a necessity, since both he and his wife were employed in marketing. The sale value of used clothing, despite its expense in procurement, was believed to be very low; (2) Rumors of a "drug problem" in the Upper Dublin, Montgomery County public school system had caused the Debtors...
To continue reading
Request your trial