Soto v. Doral Bank (In re Soto)

• Decision Date: 08 May 2013
• Docket Number: Bankruptcy No. 12–01093–BKT.,BAP No. PR 12–075.
• Citation: 491 B.R. 307
• Parties: In re Edwin Sepulveda SOTO and Arlene Lisette Gonzalez Rivera, Debtors. Edwin Sepulveda Soto and Arlene Lisette Gonzalez Rivera, Appellants, v. Doral Bank and Alejandro Oliveras Rivera, Chapter 13 Trustee, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

491 B.R. 307

In re Edwin Sepulveda SOTO and Arlene Lisette Gonzalez Rivera, Debtors.

Edwin Sepulveda Soto and Arlene Lisette Gonzalez Rivera, Appellants,

v.Doral Bank and Alejandro Oliveras Rivera, Chapter 13 Trustee, Appellees.

BAP No. PR 12–075.

Bankruptcy No. 12–01093–BKT.

United States Bankruptcy Appellate Panel of the First Circuit.

May 8, 2013.

Alexander Zeno, Esq., San Juan, PR, on brief for Appellants.

Osmarie Navarro Martinez, Esq., on brief for Appellee.

Alejandro Oliveras Rivera, Chapter 13 Trustee.

Rebeca Caquías Mejías, Esq., Hato Rey, PR, on brief for Appellee, Doral Bank.

Before HAINES, FEENEY, and HOFFMAN, United States Bankruptcy Appellate Panel Judges.

HOFFMAN, Bankruptcy Judge.

The debtors, Edwin Sepulveda Soto and Arlene Lisette Gonzalez Rivera, appeal from the bankruptcy court order dismissing their chapter 13 case. For the reasons set forth below, we AFFIRM the order.

BACKGROUND

The debtors, who are married, filed a joint petition for chapter 13 relief on February 15, 2012. They subsequently attended the first meeting of creditors pursuant to Bankruptcy Code § 341¹ convened by the chapter 13 trustee and appellee, Alejandro Oliveras Rivera, on March 28, 2012. Although both debtors were employed, they failed to provide the trustee at or prior to the meeting with evidence of their income, or with copies of their federal and Puerto Rico tax returns for the years 2008 through 2011.² The trustee informed them of their obligation to comply with § 521(a)(1), including the requirement that they provide employment payment advices, and continued the meeting to May 3, 2012. The trustee's report of the May 3, 2012 meeting reflects that the debtors and their counsel failed to appear and also that the debtors failed to supply him with copies of their Puerto Rico tax returns. The trustee did not, however, check the box on the report form to indicate that the debtors' payment advices remained due.

On June 20, 2012, the debtors filed an amended chapter 13 plan, to which the appellee, Doral Bank (“Doral”),³ and the Internal Revenue Service objected.⁴ On July 23, 2012, the debtors filed another amended chapter 13 plan, to which the Internal Revenue Service again objected. On September 26, 2012, the trustee filed a report recommending denial of plan confirmation, asserting, among other things, that the debtors had failed to provide evidence of their income and copies of their Puerto Rico tax returns.⁵

During the September 27, 2012 hearing on plan confirmation, Doral orally moved for dismissal of the case pursuant to § 521, based on the debtors' continued failure to provide the required payment advices and Puerto Rico tax returns. Challenging the sufficiency of notice as well as Doral's standing to make the motion, the debtors objected to dismissal. Furthermore, the debtors' counsel informed the court of the debtors' contention that they had provided to him the payment advices, although the debtors' counsel could not recollect if he had forwarded them to the trustee. Counsel declined the bankruptcy court's invitation to testify or have the debtors testify under oath that the payment advices had been submitted to the trustee. Unpersuaded by the debtors' arguments, the bankruptcy court accepted the trustee's representation that the payment advices had not been provided and dismissed the case pursuant to § 521(i) based on the debtors' failure to file all of the information required by § 521(a). In the summaryof proceedings prefacing its order of dismissal the court stated:

Once the discussion of the IRS issue concluded, Doral Bank moved for the dismissal of the case under 11 U.S.C. § 521, because the Debtor[s] failed to provide the state tax returns for the years 2009 through 2011, and had failed to provide the Trustee with the payment advices, as indicated in the Trustee's report on confirmation filed on September 26, 2012 (Dkt. No. 136). The Trustee confirmed that the payment advices were still pending, among other matters that impeded confirmation. Debtor[s'] counsel, Alexander Zeno, informed that according to the debtor, the payment advices were provided to counsel, but counsel could not recollect if he submitted them to the Trustee or not, and declined to put himself and the debtor under oath to proffer testimony as to having submitted to the Trustee copies of the payment advices. Consequently, the Court determined that under 11 U.S.C. § 521 automatic dismissal is proper.

POSITIONS OF THE PARTIES

Although the debtors concede that Doral is a party in interest in their chapter 13 case, they argue that Doral nonetheless lacked standing to move for dismissal. They assert that the bankruptcy court erred in dismissing their case pursuant to § 521(i), which allows any party in interest to move for dismissal under certain circumstances, and that the court instead should have applied § 1307(c)(9), which provides that only the United States trustee may move to dismiss a chapter 13 case for failure to file the information required by § 521(a)(1) and that dismissal must be preceded by notice and a hearing. They claim that because § 1307 is “more specific and was revised after § 521(i)(2),” it “trumps” the latter provision. Additionally, they argue that: (1) they lacked sufficient notice of Doral's oral motion to dismiss and that the motion amounted to a “surprise attack”; (2) they complied with § 521(i)(1) by submitting to the trustee their federal tax returns and payment advices “[a]fter the first meeting of creditors but before the second”; and (3) the trustee's failure to indicate in his report of the continued creditors' meeting that the advices were missing proves that the advices were supplied.

The trustee maintains that the debtors never submitted payment advices as required by § 521(a)(1)(B)(iv), Bankruptcy Rule 1007(b)(1)(E), and P.R. LBR 1007–1(f).⁶ According to the trustee, an examination of the report of the continued creditors' meeting reveals simply that the debtors failed to attend that meeting, not that they provided the required payment advices. The trustee contends that where, as here, a party fails to submit the payment advices as required by § 521(a)(1)(B)(iv), automatic dismissal should follow pursuant to § 521(i)(1). He further argues that the debtors received notice of his report recommending denial of plan confirmation, which noted the debtors' failure to provide evidence of income. Lastly, the trustee asserts that notwithstanding § 1307(c)(9), the bankruptcy court could dismiss under § 521(i) and, therefore, § 1307's notice and hearing requirement do not apply.

Doral similarly asserts that § 1307(c)(9) is not applicable to dismissal under § 521(i) and that § 521(i)(1) mandates automatic case dismissal without notice and a hearing when a debtor fails to file all the information required by § 521(a)(1)(B). Doral points out that the debtors neglected to request an extension of time to provide the required information.

JURISDICTION

A bankruptcy appellate panel is “ ‘duty-bound’ ” to determine its jurisdiction before proceeding to the merits, even if not raised by the litigants. Boylan v. George E. Bumpus, Jr. Constr. Co., Inc. (In re George E. Bumpus, Jr. Constr. Co., Inc.), 226 B.R. 724, 725–26 (1st Cir. BAP 1998) (quoting Fleet Data Processing Corp v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998)). A panel may hear appeals from “final judgments, orders, and decrees [pursuant to 28 U.S.C. § 158(a)(1) ] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3) ].” In re Bank of New England Corp., 218 B.R. at 645. “An order dismissing a Chapter 13 case is a final, appealable order.” Gonzalez–Ruiz v. Doral Fin. Corp. (In re Gonzalez–Ruiz), 341 B.R. 371, 375 (1st Cir. BAP 2006) (citation omitted). Accordingly, we have jurisdiction.

STANDARD OF REVIEW

A bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. See Lessard v. Wilton–Lyndeborough Coop. Sch. Dist., 592 F.3d 267, 269 (1st Cir.2010). We review an order dismissing a chapter 13 case for abuse of discretion. Howard v. Lexington Inv., Inc., 284 F.3d 320, 322–23 (1st Cir.2002) (citations omitted). “A bankruptcy court abuses its discretion if it ignores a material factor deserving of significant weight, relies upon an improper factor or makes a serious mistake in weighing proper factors.” Id. at 323 (internal quotations and citation omitted).

DISCUSSION

I. The Standards

Section 521 provides that unless the court orders otherwise, a debtor shall file “copies of all payment advices or other evidence of payment received within 60 days before the date of the filing of the petition, by the debtor from any employer of the debtor.” 11 U.S.C. § 521(a)(1)(B)(iv). “To satisfy the statute, ... a debtor may file either the payment advices or some other evidence of payment.” In re Wojda, 371 B.R. 656, 660 (Bankr.W.D.N.Y.2007). General Order 05–06, issued by the United States Bankruptcy Court for the District of Puerto Rico, directs debtors not to file with the court the information required by § 521(a)(1)(B)(iv), but, rather, to provide it to the trustee and interested creditors.⁷ That order further provides that “[f]ailure of debtor to comply with the requirements of [ § ] 521(a)(1)(B)(iv) will result in automatic dismissal under [ § ] 521(i)(1).” General Order 05–06.

Section 521(i) provides, in relevant part:

(1) Subject to paragraphs (2) and (4) and notwithstanding section 707(a), if an individual debtor in a voluntary case under chapter 7 or 13 fails to file all of the information required under subsection (a)(1) within 45 days after the date of the filing of the petition, the case shall be automatically dismissed effective on the 46th day after the date of the filing of the petition.

(2) Subject to paragraph (4) and with respect to a case described in paragraph (1), any party in interest may request the court to...