Angelo v. Gee

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 9, 1999
• Docket: 99-50693
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

____________________

No. 99-50693 Summary Calendar ____________________

In The Matter Of: NOLA FAYE GEE,

Debtor. ______________________________

ANGELA ANGELO, Personal Representative of the Estate of Nola Faye Gee, Debtor,

Appellant,

v.

DEBORAH GEE,

Appellee. _________________________________________________________________

Appeal from the United States District Court for the Western District of Texas Docket No. A-99-CA-074-SS _________________________________________________________________

December 9, 1999

Before KING, Chief Judge, and SMITH and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

Appellant Angela Angelo seeks reversal of the district

court’s affirmance of the bankruptcy court’s dismissal, under 11

U.S.C. § 707(a), of debtor’s Chapter 7 case. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. Nola Gee (“Debtor”) filed a Chapter 13 bankruptcy case on

March 17, 1998. Debtor’s largest asset was her homestead, a

ranch that was valued at $380,300. Debtor elected that Texas

state law be used to define her exempt property, and under that

law, her ranch was exempt at the time of her filing. Her largest

creditor was the estate of her ex-husband, the Honorable Thomas

Gee, to which she claimed she owed $207,000 as a result of a

lawsuit to enforce a divorce decree. That estate was

administered by Deborah Gee, Judge Gee’s widow. Debtor’s Chapter

13 case was converted to a Chapter 7 case on May 1, 1998.

Debtor died May 12, 1998. Deborah Gee filed a motion to

dismiss the bankruptcy case under 11 U.S.C. § 707(a) on August

28, 1998 to allow the distribution of assets to be handled

entirely by the state probate court. Dismissal was sought

because under Texas law, there is no homestead exemption when the

sole homesteader dies without dependents or a spouse. See TEX.

CONST. art. XVI, §§ 50, 51 (West 1998); TEX. PROP. CODE ANN.

§ 41.002(b)(1) (West 1998); Grey v. Longview Nat’l Bank, 161

S.W.2d 166, 166 (Tex. Civ. App. 1942, no writ) (holding that

where no family member survives, the decedent’s homestead is

available to satisfy the claims of creditors). As a result,

dismissal would make the homestead available to satisfy the

Debtor’s creditors. Continuation of the case, on the other hand,

would cause the homestead to be included in the probate estate as

a result of it being an exempt asset at the time the bankruptcy

petition was filed. This would leave only other non-exempt

2 assets available to satisfy creditors.

A hearing on the matter was held October 6, 1998, and on

December 14, the bankruptcy court granted Deborah Gee’s motion.

Weighing the equities of dismissal against retention of the case,

the bankruptcy court determined that continuation of the case

would cause Debtor’s heirs to be placed ahead of creditors, and

would not give the Debtor the benefit of a “fresh start” inasmuch

as she had died. Dismissal, on the other hand, would benefit the

creditors, and would result in Debtor’s heirs receiving the

assets that remained after creditors had been paid. The district

court affirmed, holding that the bankruptcy court had not abused

its discretion in dismissing the case. Angelo timely appeals.

II. DISCUSSION

Angelo argues that the district court erred in affirming the

bankruptcy court’s dismissal because the clear language of

Bankruptcy Rule 1016 prohibits dismissal when a Chapter 7 debtor

dies after filing a bankruptcy petition. Rule 1016 provides that

“[d]eath or insanity of the debtor shall not abate a liquidation

case under chapter 7 of the Code. In such event the estate shall

be administered and the case concluded in the same manner, so far

as possible, as though the death or insanity had not occurred.”

Angelo points to the use of the word “shall” in the above, and

argues that the provision is mandatory, i.e., the court shall not

abate the case. The bankruptcy court’s reliance on the notion

that a dead person does not need a “fresh start,” Angelo urges,

3 reads Rule 1016 out of existence.

We review the bankruptcy court’s dismissal under 11 U.S.C.

§ 707(a) for abuse of discretion. See Peterson v. Atlas Supply

Corp. (In re Atlas Supply Corp.), 857 F.2d 1061, 1063 (5th Cir.

1988). In order to find that the court abused its discretion, we

must determine that its factual findings were clearly erroneous,

or that it applied incorrect legal standards. See Latvian

Shipping Co. v. Baltic Shipping Co., 99 F.3d 690, 692 (5th Cir.

1996).

We agree with Angelo that in enacting the Bankruptcy Code of

1978, Congress contemplated that a Chapter 7 debtor’s exempt

assets would be transferred to her probate estate upon her death.

See In re Gridley, 131 B.R. 447, 450 (Bankr. S.D. 1991) (quoting

a portion of the legislative history to 11 U.S.C. § 541). Rule

1016, promulgated by the Supreme Court under 28 U.S.C. § 2075,

allows that result. At issue here, however, is whether Rule 1016

restricts creditors’ use of provisions within the Bankruptcy Code

to seek, and obtain, dismissal of a Chapter 7 case.

“As a general matter, the [Bankruptcy] Code defines the

creation, alteration or elimination of substantive rights but the

Bankruptcy Rules define the process by which these privileges may

be effected.” Hanover Indus. Mach. Co. v. American Can Co. (In

re Hanover Indus. Mach. Co.), 61 B.R. 551, 552 (Bankr. E.D. Pa.

1986). Under 28 U.S.C. § 2075, the rules the Supreme Court was

given the power to promulgate are not to “abridge, enlarge, or

modify any substantive right.” This would suggest that as a

4 general matter, Rule 1016 cannot restrict the operation of the

Code’s provisions. Gridley, a case cited by Angelo in support of

her argument, also suggests that Rule 1016 does not restrict the

application of other sections of the Bankruptcy Code. See 131

B.R. at 451-52 (considering whether a Chapter 7 case should be

dismissed under 11 U.S.C. § 305 and finding that the facts of the

case did not support dismissal). Nothing in § 707(a) indicates

that the death of the debtor has the effect of restricting the

provision’s availability as a means of seeking and obtaining

dismissal of a Chapter 7 case.

The language of Rule 1016 supports this interpretation. The

Rule provides that the court administer and conclude the Chapter

7 case “in the same manner, so far as possible” as though the

debtor’s death had not occurred. This language suggests that the

Code’s provisions, including § 707(a), are to be applied as they

otherwise would be. Rule 1016 also specifically contemplates

courts considering the fact that the debtor has died after filing

a petition. To suggest that courts must ignore the debtor’s

death entirely makes the Rule’s phrase “so far as possible”

meaningless. See In re Moss, 239 B.R. 537, 542 (Bankr. W.D. Mo.

1999).

For the above reasons, we do not find that the bankruptcy

court misapplied the law. A review of the bankruptcy court’s

thorough opinion and of the facts of this case leads us to

conclude that the bankruptcy court did not abuse its discretion

in granting Deborah Gee’s motion to dismiss the Debtor’s Chapter

5 7 case under § 707(a). As a result, we AFFIRM.