In re Parker

560 B.R. 732, 76 Collier Bankr. Cas. 2d 1364, 2016 Bankr. LEXIS 3945, 2016 WL 6783268
CourtUnited States Bankruptcy Court, E.D. Tennessee
DecidedNovember 10, 2016
DocketNo. 1:16-bk-10539-NWW
StatusPublished

This text of 560 B.R. 732 (In re Parker) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Parker, 560 B.R. 732, 76 Collier Bankr. Cas. 2d 1364, 2016 Bankr. LEXIS 3945, 2016 WL 6783268 (Tenn. 2016).

Opinion

MEMORANDUM

Nicholas W. Whittenburg, UNITED STATES BANKRUPTCY JUDGE

This case is before the court on the motion to dismiss pursuant to 11 U.S.C. § 1208(b) filed by the debtor on August 18, 2016. Also pending are a motion to dismiss pursuant to § 1208(c) filed by the United States trustee on August 30, 2016, and a motion to convert this case to chapter 7 pursuant to § 1208(d) filed by the debtor’s former spouse, Jill St. John, on April 18, 2016. The U.S. trustee’s motion also seeks [733]*733a four-year bar to refiling pursuant to § 349(a),1 which the debtor does not oppose. Ms. St. John and the chapter 12 trustee each oppose the debtor’s motion to dismiss. The United States trustee generally agrees with Ms. St. John’s and the chapter 12 trustee’s position that the debt- or does not have a right to. dismiss a previously unconverted chapter 12 case when there is a pending motion to convert filed under § 1208(d). However, because the debtor has agreed that his: voluntary dismissal under § 1208(b) may be with prejudice, the United States trustee considers his motion resolved and does not oppose the dismissal of the chapter 12 case.

The question squarely presented is whether a chapter 12 debtor has an absolute right to dismiss his previously unconverted case while an opposing motion to convert the case to a chapter 7 liquidation case is pending. For the reasons set forth below, the court answers this question in the affirmative. The court will grant the debtor’s motion, rendering moot the United States trustee’s motion to dismiss and Ms. St. John’s motion to convert. Pursuant to 11 U.S.C, §§ 105(a) and 349(a), the dismissal will be with prejudice to the filing of another voluntary petition for relief under Title 11 of the United States Code for a period of four years from the date of the entry of the order dismissing this case. Because the debtor has consented to a four-year bar on refiling, an evidentiary hearing on the issue is unnecessary. Further, notwithstanding the dismissal of this case, the court will, pursuant to 11 U.S.C. § 105(a), retain jurisdiction to enforce its prior orders and to hear and determine the Motion for Sanctions filed by Jill St. John on November 8,2016.

I. Statutory Framework

Subsection (b) of § 1208 of the Bankruptcy Code provides that the court shall dismiss a previously unconverted chapter 12 case at the request of the debtor:

On request of the debtor at any time, if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.

Subsection (d) of § 1208, on the other hand, affords the court discretion to dismiss or convert a chapter 12 case, after notice and a hearing, upon a showing of fraud by the debtor:

On request of a party in interest, and after notice and a hearing, the court may dismiss a case under this chapter or convert a case under this chapter to a case under chapter 7 of this title upon a showing that the debtor has committed fraud in connection with the case.

There is one other provision that is relevant to the resolution of the legal dispute presented. Section 105(a) of the Code states:

The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to [734]*734preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

Ms. St. John and the chapter 12 trustee argue that the quoted subsections of § 1208 conflict. They contend that, to give full effect to all provisions of § 1208, subsection (d) should prevail over or be construed to qualify subsection (b) and the case should be converted to chapter 7. Ms. St. John’s motion to convert alleges various instances of fraud in connection with the case, including substantial prepetition transfers for no consideration, failure to disclose the transfers in the debtor’s schedules, concealment of asset sales, and dissipation of property of the estate. Conversely, the debtor contends that, as this case has not been converted under § 706 or § 1112 of the Bankruptcy Code and because he has requested dismissal, the court is required to dismiss his chapter 12 case. In other words, the debtor contends that, even assuming he is found to have committed fraud in connection with the case and, therefore, § 1208(d) allows the court to convert the case to chapter 7, § 1208(b) accords the debtor an absolute right to dismiss his previously unconverted case.

II. Legal Analysis

a. Section 1208(b) plainly accords the debtor an absolute right to dismiss a case that has not been previously converted.

The Eighth Circuit has held that a bankruptcy court may convert a chapter 12 case to one under chapter 7 pursuant to § 1208(d) based on a family farmer’s fraud, even though the debtor sought to voluntarily dismiss the case prior to conversion. Graven v. Fink (In re Graven), 936 F.2d 378 (8th Cir. 1991). Similarly, relying on §§ 1307(b) and (c) — the provisions of chapter 13 analogous to §§ 1208(b) and (d) — the Fifth, Ninth, and Eighth Circuits have likewise held that a debtor’s seemingly absolute right to dismiss a previously unconverted chapter 13 case is qualified by a requirement of good faith by the debtor. Jacobsen v. Moser (In re Jacobsen), 609 F.3d 647 (5th Cir. 2010); Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764 (9th Cir. 2008); Molitor v. Eidson (In re Molitor), 76 F.3d 218 (8th Cir. 1996). These courts, noting that “the purpose of the bankruptcy code is to afford the honest but unfortunate debtor a fresh start, not to shield those who avoid the bankruptcy process in order to avoid paying their debts,” Molitor, 76 F.3d at 220, held that bankruptcy courts may, in the exercise of their inherent powers or the authority afforded by § 105(a), qualify a debtor’s right to dismiss a previously unconverted case afforded by § 1208(b) or 1307(b) in order to police abuse or fraudulent conduct. They further reasoned that, if the debtor’s right to dismiss were not qualified by § 1307(c) or 1208(d), these sections would be “a dead letter and open up the bankruptcy courts to a myriad of potential abuses.” Id. Ignoring the plain text of the governing statutes, these courts based their decisions on policy grounds and the perceived incompatibility of the applicable subsections of § 1208 or 1307.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Anderson v. Yungkau
329 U.S. 482 (Supreme Court, 1947)
Ratzlaf v. United States
510 U.S. 135 (Supreme Court, 1994)
Marrama v. Citizens Bank of Mass.
549 U.S. 365 (Supreme Court, 2007)
Jacobsen v. Moser (In Re Jacobsen)
609 F.3d 647 (Fifth Circuit, 2010)
In re Burba
42 F.3d 1388 (Sixth Circuit, 1994)
BFP v. Resolution Trust Corporation
511 U.S. 531 (Supreme Court, 1994)
Rosson v. Fitzgerald (In Re Rosson)
545 F.3d 764 (Ninth Circuit, 2008)
In Re Patton
209 B.R. 98 (E.D. Tennessee, 1997)
In Re Williams
435 B.R. 552 (N.D. Illinois, 2010)
In Re Glenn
288 B.R. 516 (E.D. Tennessee, 2002)
Law v. Siegel
134 S. Ct. 1188 (Supreme Court, 2014)
Douglas Ellmann v. Michael James Baker
791 F.3d 677 (Sixth Circuit, 2015)
Graven v. Fink (In re Graven)
936 F.2d 378 (Eighth Circuit, 1991)

Cite This Page — Counsel Stack

Bluebook (online)
560 B.R. 732, 76 Collier Bankr. Cas. 2d 1364, 2016 Bankr. LEXIS 3945, 2016 WL 6783268, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-parker-tneb-2016.