Matter of Jennings, Bankruptcy No. 1-82-03316.
| Decision Date | 29 June 1983 |
| Docket Number | Bankruptcy No. 1-82-03316. |
| Citation | 31 BR 378 |
| Parties | In the Matter of James JENNINGS dba/Jennings Construction Co., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Vernon R. Brose, Cincinnati, Ohio, for debtor.
Thomas J. Geygan, Cincinnati, Ohio, for Trustee.
Peter L. Outcalt, Cincinnati, Ohio, for Creditor The Standard Oil Co.
Richard A. Bernat, Cincinnati, Ohio, for Creditor Mike Albert Leasing Co.
This matter is before the Court under the following circumstances: On November 19, 1982 debtor filed a petition under Chapter 7. Pursuant to 11 U.S.C. § 341 a first meeting of creditors was held on December 15, 1982. At that meeting the trustee learned that debtor's schedules contained false information. Specifically, it was revealed that debtor owned a one-half interest in real estate which he transferred to his wife on March 4, 1982; that he transferred title to a 1979 automobile to his wife one day before he signed his bankruptcy schedules; and that he failed to indicate on his schedules the sale of a one-third interest in a houseboat in September or October of 1982 which generated $11,500.00 in proceeds.
At a Rule 205(a) examination of the debtor and his wife conducted on February 11, 1983, Betty Jennings testified that she was unaware that debtor's one-half interest in real estate had been transferred to her.
Debtor testified during his 205(a) examination that he owned no accounts receivable. The trustee alleges that he has learned of an account receivable which was invoiced on October 20, 1982. Debtor received payment on such account on November 26, 1982, some seven days after filing his petition.
On the same day that the 205(a) examinations were held, debtor filed an application to dismiss his voluntary petition on the grounds that he misunderstood "the nature of the bankruptcy" and that his financial condition had changed. He further stated that he had contacted his creditors, and that they did not object to the dismissal.
Thereafter, the trustee as well as two creditors, The Standard Oil Company and Mike Albert Leasing, Inc. filed objections to dismissal, citing debtor's concealment of assets and false financial information.
On March 24, 1983 a hearing was held on debtor's application to dismiss, at which time debtor moved in the alternative to convert this Chapter 7 case to a case under Chapter 13 pursuant to 11 U.S.C. § 706(a). Debtor's counsel represented that due to an upturn in the construction industry, debtor was now in a position to pay off all of his creditors within eight months. While not specifically denying the facts presented by the trustee, debtor's counsel alleged that the debtor was unsophisticated and had misunderstood the requirements of the law.
Pursuant to this Court's instructions at the hearing, memoranda of law were subsequently filed by the trustee and objecting creditors. Counsel for the debtor failed to respond to these memoranda.
The issues presented by the trustee's factual allegations are as serious as they are troubling. We must first decide whether the trustee has "standing" to object to the debtor's application to dismiss under 11 U.S.C. § 707. As a special officer of this Court and as the representative of debtor's estate under 11 U.S.C. § 323, we believe that the trustee does have the right to object, particularly where other creditors have joined in his objection and where there is evidence of fraud by the debtor. A contrary conclusion would substantially emasculate this Court's ability to uphold the integrity of its own processes. In many cases the creditors have neither the interest nor the resources to bring debtor misconduct to the Court's attention. If the trustee is not permitted to object, the Court might be left in the position of sanctioning fraud sub silentio.
Our holding is buttressed not only by the broad language of § 704 regarding the duties of the trustee, but also by persuasive authority from other courts. In re Bryant, 28 B.R. 362, 10 B.C.D. 485 (Bkrtcy.N.D.Ind. 1983); In re Carroll, 24 B.R. 83 (Bkrtcy.N. D.Ohio 1982); In re Waldrep, 20 B.R. 248 (Bkrtcy.W.D.Tex.1982); In re St. Laurent, 17 B.R. 768 (Bkrtcy.D.Me.1982); In re Hall, 15 B.R. 913 (Bkrtcy.App. 9th Cir.1981).
For much the same reason, we also hold that Debtor's voluntary motion to dismiss should be and hereby is DENIED. We agree with the holding of In re Wolfe, 12 B.R. 686, 687 (Bkrtcy.S.D.Ohio 1981), wherein Judge Burton Perlman concluded that 11 U.S.C. § 707 "is not directed at the question of dismissal voluntarily sought by debtor" and that "such dismissal is `controlled by equitable principles'."
Having submitted himself to the jurisdiction of this Court and availed himself of the protections of the Code, a debtor may not engage in questionable or fraudulent conduct and then freely dismiss his case once such conduct is...
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