In re Gilbert

535 B.R. 317, 2015 Bankr. LEXIS 2485, 2015 WL 4556293
CourtUnited States Bankruptcy Court, C.D. California
DecidedJuly 27, 2015
DocketCase No.: 6:14-bk-11606-MH
StatusPublished

This text of 535 B.R. 317 (In re Gilbert) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, C.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Gilbert, 535 B.R. 317, 2015 Bankr. LEXIS 2485, 2015 WL 4556293 (Cal. 2015).

Opinion

MEMORANDUM OF DECISION DENYING CONFIRMATION OF DEBTOR’S. CHAPTER 13 PLAN AND DISMISSING DEBTOR’S CHAPTER 13 CASE WITHOUT PREJUDICE

Mark Houle, United States Bankruptcy Judge

I. FACTUAL BACKGROUND

THE PHOENIX PROPERTY

Debtor Maurice Allen Gilbert (“Debt- or”), filed for bankruptcy on February 10, 2014 (“Petition Date”). Prior to the Petition Date, on August 29, 2005, InterBay Funding LLC (“InterBay”) loaned $380,000 (the “Loan”) to Debtor, and In-terBay secured its right to repayment of the Loan by obtaining a deed of trust (the “Phoenix Deed of Trust”) on real property located at 402 & 406 N. 42nd Street, Phoenix, AZ 85008 (the “Phoenix Property”).

On August 28, 2006, InterBay assigned the Phoenix Deed of Trust to Bayview Loan Servicing, LLC (“Bayview”) by way of a corporate deed of assignment recorded on February 26, 2007. Without the consent of Bayview, on August 7, 2008, Debtor transferred title in the Phoenix Property to Ridgeline Financial, LLC (“Ridgeline”) and Sardius Group, LLC (“Sardius”), two LLC companies owned by the Debtor.

After a series of corporate assignments, Creditor APT 4891, LLC (“APT”) succeeded to the Phoenix Deed of Trust on April 11, 2013. After Debtor defaulted on the Loan, on May 2, 2013, APT sent the Debt- or a notice of default, and accelerated the debt underlying the Loan. On August 31, 2013, APT recorded a notice of trustee’s sale of the Phoenix Property. In an effort to stall the Trustee’s Sale of the Phoenix Property, Ridgeline and Sardius filed two chapter 7 bankruptcy petitions on December 16, 2013 (Case No. 2:13-bk-39366-VZ and Case No. 2:13-bk-39362-TD), respectively. Both cases were dismissed in January 2014, with a 180 day re-filing bar, for failure to file required case commencement documents. After the Sardius and Ridge-line bankruptcy cases were dismissed, APT scheduled another foreclosure sale (the “Second Foreclosure”) on the Phoenix Property for February 11, 2014.

DEBTOR’S CHAPTER 13 CASE

On the Petition Date, the day before the Second Foreclosure on the Phoenix Prop[320]*320erty was scheduled to take place and less than two months after the Ridgeline and Sardius bankruptcies were dismissed, Debtor filed for relief under chapter 13 of the Bankruptcy Code.

RELIEF FROM STAY

On February 27, 2014, APT filed a motion for relief from the automatic stay under 11 U.S.C. § 362 (the “Relief From Stay Motion”), requesting entry of an order finding that the automatic stay did not apply to the Phoenix Property because the Phoenix Property was entirely owned by non-debtor entities, Ridgeline and Sardius. On April 2, 2014, the bankruptcy court entered an order (the “Relief From Stay Order”) granting the Relief From Stay Motion, holding that the Phoenix Property was not property of the Debtor’s bankruptcy estate because it was entirely owned by Ridgline and Sardius. On May 8, 2014, APT finally foreclosed on the Phoenix Property and sold it to a third party, known as Panther 42nd St Partners LLC (“Third Party Purchaser”).

On April 16, 2015, Debtor filed a Notice of Appeal of the Relief from Stay Order to the U.S. District Court of the Central District of California. On January 27, 2015, the District Court entered an Order dismissing the appeal of the Relief From Stay Order as moot, because Arizona law did not provide Debtor with a right to redeem the Phoenix Property after it had been sold to a third party buyer.

INITIAL CONFIRMATION HEARING AND CASE DISMISSAL

Debtor filed his first chapter 13 plan (“First Plan”) on the Petition Date. APT filed an objection to confirmation of the First Plan on March 20, 2015. APT objected to the confirmation of the First Plan on the basis that Debtor filed the bankruptcy in bad faith, and to the extent that APT held a valid claim in Debtor’s bankruptcy, the First Plan was infeasible pursuant to 11 U.S.C. section 1307(c).

On April 3, 2014, a confirmation hearing on the First Plan took place, and was continued to May 1, 2014, for supplemental briefing. On April 2, 2014, APT filed a supplemental objection to confirmation of the First Plan in the basis that Debtor filed the instant case in bad faith and the First Plan was infeasible. On April 9, 2014, Creditor U.S. Bank, N.A. (“US Bank”), also filed an objection to confirmation of the First Plan on the basis of infeasibility. After the May 1, 2014 hearing, on May 2, 2014, the bankruptcy court entered an order (“Dismissal Order”) denying confirmation of Debtor’s First Plan, and dismissing Debtor’s bankruptcy case because the First Plan was infeasible and because Debtor filed the case in bad faith.

APPEAL OF DISMISSAL ORDER

On May 14, 2015, Debtor appealed the Dismissal Order to the U.S. District Court of the Central District of California. On January 27, 2015, the District Court entered an Order, in part, reversing and remanding the Dismissal Order (the “District Court Order”) for further findings regarding the presence or lack of bad faith on the part of the Debtor in filing the chapter 13 petition as a basis for the Dismissal Order.

II. PROCEDURAL BACKGROUND POST-REMAND

On February 20, 2015, at 1:30 p.m., the Court held a status conference regarding the District Court Order. On February 25, 2015, the Court entered a scheduling order (“Scheduling Order”) providing Debtor with an opportunity to file and serve an amended plan (the “Second Plan”), amended schedules I and J, and current proof of income no later than March 13, 2015, and setting a confirmation hearing (“Confirmation Hearing”) on the [321]*321Second Plan for April 23, 2015. The Scheduling Order also provided that any objection to confirmation or request to dismiss Debtor’s case be filed by April 16, 2015.

On March 13, 2015, pursuant to the Scheduling Order, Debtor filed the Second Plan and amended schedules I (“Amended Schedule I”) and J (“Amended Schedule J”). However, Debtor then proceeded to file in rapid succession: (1) his third chapter 13 plan on March 27, 2015 (“Third Plan”); (2) his fourth plan on April 14, 2015 (“Fourth Plan”); and, on April 22, 2015, one day before the Confirmation Hearing, his fifth plan (“Fifth Plan”). In opposition to confirmation of Debtor’s Second Plan, on April 16, 2015, the chapter 13 trustee (“Trustee”) and APT each filed objections to confirmation and requests to dismiss Debtor’s case.

The Court, having heard and considered the arguments of the parties at the Confirmation Hearing and having considered the pleadings filed with the Court, and finding notice proper, finds cause to deny Debtor’s Second Plan and Fifth Plan (assuming, arguendo, that the Fifth Plan is operative), and to dismiss the instant case.

III. LEGAL DISCUSSION

11 U.S.C. section 1307(c) enumerates eleven non-exclusive grounds which may constitute “cause” for dismissal of a chapter 13 bankruptcy case. Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir.1999); In re Eisen,

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Bluebook (online)
535 B.R. 317, 2015 Bankr. LEXIS 2485, 2015 WL 4556293, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-gilbert-cacb-2015.