In re Leverett

486 B.R. 391, 68 Collier Bankr. Cas. 2d 1669, 2013 WL 249571, 2013 Bankr. LEXIS 265
CourtUnited States Bankruptcy Court, W.D. Texas
DecidedJanuary 23, 2013
DocketNo. 12-60651-CAG
StatusPublished
Cited by1 cases

This text of 486 B.R. 391 (In re Leverett) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Leverett, 486 B.R. 391, 68 Collier Bankr. Cas. 2d 1669, 2013 WL 249571, 2013 Bankr. LEXIS 265 (Tex. 2013).

Opinion

MEMORANDUM OPINION AND ORDER DENYING TRUSTEE’S MOTION TO REVOKE ORDER CONFIRMING DEBTORS’ CHAPTER 13 PLAN

CRAIG A. GARGOTTA, Bankruptcy Judge.

Came on to be considered the above-numbered bankruptcy proceeding and, in particular, the Chapter 13 Trustee’s Motion to Revoke Order Confirming Debtor’s Chapter 13 Plan (ECF No. 29). The Court held a hearing on this matter on December 18, 2012, and took the matter under advisement. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334, and this is a core proceeding under 28 U.S.C. § 157(b)(2)(L). This matter has been referred to the Bankruptcy Court under the District Court’s Standing Order of Reference. This Memorandum Opinion constitutes the Court’s Findings of Fact and Conclusions of Law pursuant to Federal Rule of Bankruptcy Procedure 7052. For reasons stated in this Memorandum Opinion, the Court is of the opinion that the Trustee’s Motion should be DENIED.

Factual and Procedural Background

In February of 2012, Rose Lever-ett — one of the Debtors in this case — was indicted in Bosque County for alleged theft of an amount between $20,000 and $100,000. The charges stem from Mrs. Leverett’s alleged theft of money from a local group known as the West Shore Civic Association.1 On June 12, 2012, while the criminal case was pending, Mrs. Leverett and her husband (the “Debtors”) filed bankruptcy under Chapter 13 and submitted their required schedules and statements (ECF No. 1). According to testimony provided by both Mrs. Leverett and her criminal defense counsel, Debtors filed bankruptcy without defense counsel’s knowledge. Similarly, Debtors did not disclose to their bankruptcy counsel that Mrs. Leverett was facing criminal charges. The Court confirmed Debtors’ Chapter 13 Plan on October 24, 2012 (ECF No. 26). It was only after confirmation that the Trustee learned of Mrs. Leverett’s pending criminal case, when the District Attorney’s office called the Trustee after learning of the bankruptcy case. The District Attorney was apparently concerned that Debtors were secretly selling off assets in order to acquire enough money for a plea bargain.2 Shortly thereafter, the Trustee [394]*394filed this Motion to Revoke Order Confirming Debtor’s Chapter 13 Plan (ECF No. 29), and asked the Court to revoke Debtor’s Confirmation Order because the Order was allegedly procured by fraud.

Parties’ Contentions

The Trustee claims Debtors fraudulently concealed critical facts during the confirmation process, and that the Court would not have confirmed Debtors’ Plan had it known the concealed facts. Most of these alleged concealments stem from Mrs. Lev-erett’s pending criminal case, of which the Trustee’s office had no knowledge until after plan confirmation. According to Trustee, Debtors should have disclosed the pending criminal indictment and their employment of defense counsel, neither of which were on Debtors’ schedules and statements. Specifically, Trustee alleges the following omissions on Debtors’ schedules and statements allowed them to obtain confirmation by fraud: (1) payments to defense counsel, (2) a claim for restitution in the criminal case, (3) a failure to list the potential restitution claim on Schedule J, (4) a $10,000 bond claim owed by Debtors to Farmers Insurance, (5) a claim for $500 owed to Mrs. Leverett’s defense counsel, (6) an allegedly undisclosed execu-tory contract with Mrs. Leverett’s defense counsel, (7) a failure to disclose the pending criminal case itself, and (8) an alleged sale of a boat to Mrs. Leverett’s stepdaughter in January of 2012. Debtors respond that some of these alleged “failures” stem from disclosures that were not required under the Code, and that others stemmed from inadvertent errors, not by fraud. Debtors argue that, under any circumstance, none of the undisclosed information would have any effect on confirmation, and that as a result the Trustee has not proven a critical element of its case for fraud.

Discussion

The Bankruptcy Code allows courts to revoke an order of confirmation of a Chapter 13 plan if, after notice and a hearing, the court determines that the order was procured by fraud. 11 U.S.C. § 1330 (West 2012). This is a higher standard than the one trustees and objecting parties face at the plan confirmation stage, which allows courts to deny confirmation if a debtor cannot show that the plan is filed in good faith. See 11 U.S.C. § 1325(a)(3). When considering the requirements a debtor must meet to have a Chapter 13 plan confirmed, revocation of that plan after the fact is an extraordinary remedy. A motion to revoke confirmation, therefore, is not simply an opportunity to relitigate issues that were or should have been addressed at confirmation; rather, a party must prove (1) that the debtor made a statement that was materially false; (2) that the representation was either known by the debtor to be false, or was made without belief in its truth, or was made with reckless disregard to the truth; (3) that the representation was made to induce the court to rely upon it; (4) that the court did rely upon it; and (5) that as a consequence of such reliance, the court entered confirmation. In re Nikoloutsos, 199 F.3d 233, 238 (5th Cir.2000) (citing In re Edwards, 67 B.R. 1008, 1009-10 (Bankr.D.Conn.1986)).

In Nikoloutsos, the Fifth Circuit considered whether a debtor procured confirmation through fraud by failing to schedule a judgment of over $800,000, even after the judgment was “unmistakably final.” Id. The judgment stemmed from a from a personal injury lawsuit in which Mr. Nikol-outsos was found liable for a “malicious assault” against his former spouse. Id. at 233. On his schedules, however, Mr. Ni-koloutsos stated that he owed nothing to his former spouse. Id. at 238. The Fifth [395]*395Circuit noted that the bankruptcy case itself stemmed from an attempt to avoid paying any of the judgment against him, and that therefore he clearly concealed the judgment against him in order to induce the bankruptcy court to confirm his plan. Id. Further, had Nikoloutsos reported the debt, it would have made him ineligible for Chapter 13. Id. (citing 11 U.S.C. § 109(e), which states debtors are only eligible for Chapter 13 if they have noncontingent, liquidated debts of less than $360,475).3 On those facts, the Fifth Circuit held that Mr. Nikoloutsos obtained confirmation by fraud. 199 F.3d at 238.

The Bankruptcy Court for the Eastern District of Texas revoked confirmation in a case where the debtor misrepresented the nature of debts in order to avoid paying her creditors in her Chapter 13 case. In re Davis, 2011 WL 1302222 (Bankr. E.D.Tex. Mar. 31, 2011). In Davis, the Court noted that, based the on debtor’s schedules and statements, she filed bankruptcy “solely for the purpose of addressing her credit card debts.”

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Cite This Page — Counsel Stack

Bluebook (online)
486 B.R. 391, 68 Collier Bankr. Cas. 2d 1669, 2013 WL 249571, 2013 Bankr. LEXIS 265, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-leverett-txwb-2013.