Opinion
Case No. 19-10052
07-19-2019
In Re RODNEY THOMAS RIDDLE Debtor(s)
Chapter 7
MEMORANDUM DECISION GRANTING (i) UNITED STATES TRUSTEE'S MOTION TO DISMISS WITH REQUEST FOR THREE (3) YEAR BAR TO RE-FILING [Docket Number 34]; and (ii) TRUSTEE MARK ALAN GREENBERGER'S MOTION TO DISMISS [Docket Number 33]
[This opinion is not intended for publication or citation.]
These matters are before this Court on:
1) United States Trustee's Motion to Dismiss Chapter 7 Case with Request for Three Year Bar to Re-filing [Docket Number 34], Debtor's Motion for an Extension of Time to File Answer [Docket Number 37], and Debtor's Answer to Motion to Dismiss [Docket Number 40]; and,
2) Trustee Mark Alan Greenberger, Esq.'s Motion to Dismiss Chapter 7 Case [Docket Number 33], Debtor's Motion for an Extension of Time to File Answer [Docket Number 37], Trustee's Response [Docket Number 38], and Debtor's Answer to Motion to Dismiss [Docket Number 40] (collectively, the "Motions to Dismiss").
Mr. Riddle stated at the Hearing that it was his belief that his response was a response to both motions to dismiss.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334, and the standing General Order of Reference in this District. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
An evidentiary hearing was held on July 2, 2019 (the "Hearing"). The following constitutes this Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
Mr. Riddle filed a chapter 7 bankruptcy petition in the instant case, pro se, on January 8, 2019. The petition that was filed was a "skeletal" petition in that it was missing Mr. Riddle's schedules and statement of financial affairs. Many of the missing documents were filed by Mr. Riddle on January 22, 2019.
On February 7, 2019, Mark Alan Greenberger, the chapter 7 trustee appointed in this case (the "Chapter 7 Trustee" or the "Trustee") wrote to Mr. Riddle and requested that Mr. Riddle send the Trustee certain documents for review prior to Mr. Riddle's February 21, 2019 meeting of creditors. In addition, the Chapter 7 Trustee listed in his letter several documents that Mr. Riddle should bring with him to the meeting of creditors. He further noted the possibility of mistakes in Mr. Riddle's schedules and suggested that Mr. Riddle review his schedules carefully in case any amendments were required. The Chapter 7 Trustee stated in his letter that the failure of Mr. Riddle to comply with these instructions may result in the Trustee seeking dismissal of the case.
At the Hearing, the Chapter 7 Trustee testified that Mr. Riddle did not provide the documents requested by the Trustee prior to or at the February 21, 2019 meeting of creditors. The Trustee stated that he advised Mr. Riddle of known inaccuracies on the schedules which required amendment. At the Hearing, the Trustee identified numerous inaccuracies and omissions, including:
1) Mr. Riddle failed to note his divorce in December of 2018, stating instead that he was separated in his statement of financial affairs;
2) The schedules contained an inaccurate address for Mr. Riddle's former spouse;
3) Mr. Riddle failed to schedule an existing domestic support obligation;
4) The schedules did not include all vehicles titled in Mr. Riddle's name;
5) The schedules did not include certain assets awarded to Mr. Riddle in the divorce decree;
6) The valuation of assets in the schedules was inconsistent with the values given in the divorce decree; and,
7) The schedules failed to include all income and liabilities for certain rental properties.
On March 19, 2019, Mr. Riddle filed a motion to convert the case from chapter 7 to 13. The Chapter 7 Trustee objected and a hearing was held on April 4, 2019. At the hearing, this Court orally denied Mr. Riddle's motion to convert as Mr. Riddle was not able to present a feasible plan of reorganization.
On April 17, 2019, the Chapter 7 Trustee filed a motion to dismiss based on Mr. Riddle's failure to cooperate with the Trustee by complying with his request for documents and his failure to amend the known inaccuracies in Mr. Riddle's schedules and statement of financial affairs.
On April 19, 2019, the United States Trustee (the "UST") filed its own motion to dismiss for abuse and requested that this Court impose a three-year bar to Mr. Riddle refiling another bankruptcy case. The UST joined in the Chapter 7 Trustee's basis for dismissal and also noted Mr. Riddle's history of serial bankruptcy filings, which include cases in which Mr. Riddle was denied a discharge and/or barred from refiling for improper or abusive conduct. Specifically:
1) On October 14, 2011, Mr. Riddle filed a Chapter 7 case [Case No. 11-16241]. The UST brought an adversary complaint to deny Mr. Riddle's discharge for false oaths in connection with his bankruptcy case. This Court granted the UST summary judgment and denied Mr. Riddle's discharge for failure to disclose, in his schedules, his ownership
interest in his residence at 11440 Gideon Lane, a transfer of property located at 5946 Woodmont Ave that occurred a week prior to the petition filing date, and certain other business interests [See Adv. Proc. No. 11-1209, Docket Number 22]. The bankruptcy case was closed on January 9, 2013.
2) On August 26, 2014, Mr. Riddle filed another Chapter 7 case [Case No. 14-13583]. The case was dismissed October 15, 2014 upon the UST's filing of a motion to dismiss for abuse. Mr. Riddle did not respond to the motion. In the order of dismissal, this Court determined that the scheduled debts were not eligible for discharge because a discharge of those debts was denied in the prior case. [See Case No. 14-13583, Docket Number 43].
3) On February 23, 2015, Mr. Riddle filed his third Chapter 7 case since 2011 [Case No. 15-10588]. Again, the UST filed a motion to dismiss, this time including a request that Mr. Riddle be barred from refiling a bankruptcy case for three years on the grounds that Mr. Riddle was ineligible for a discharge of the debts requested because he was denied a discharge of this debts in the 2011 case. As such, the UST asserted that the only purpose for the filing the case was to improperly frustrate a foreclosure sale of Mr. Riddle's residence that had been scheduled for February 26, 2015. Mr. Riddle did not respond to the UST's motion to dismiss. On June 18, 2015 this Court dismissed the case and imposed the three-year bar to refiling because of Mr. Riddle's repeat filings [Case No. 15-10588, Docket Number 36].
4) The three-year bar ended on June 19, 2018. On November 27, 2018, Mr. Riddle filed his fourth bankruptcy case since 2011, this time a chapter 13 case [Case No. 18-14280]. Mr. Riddle's case was dismissed for the failure to show exigent circumstances necessary to request an extension of time for completing the required credit counseling course [Case No. 18-14280, Docket Number 14]. The dismissal occurred on November 29, 2018.
5) Within two months, Mr. Riddle filed his fifth and current case.
The Chapter 7 Trustee and the UST argue that Mr. Riddle's lack of cooperation with the Chapter 7 Trustee in the current case, his lack of candor and failure to correct inaccuracies in his schedules and statement of financial affairs coupled with Mr. Riddle's history of repetitive bankruptcy filings that are often dismissed for abuse are indications of Mr. Riddle's improper purpose and bad faith in filing this bankruptcy petition, warranting dismissal of this case with a bar to refiling.
At the Hearing, Mr. Riddle testified that he did not file the current bankruptcy case with any ill-motive. Rather, Mr. Riddle viewed this court as the only court with the authority to help him. Mr. Riddle expressed concern with protecting certain real properties, in particular, rental properties that were awarded to his former-spouse in a December 14, 2018 divorce decree and his residence, which he indicated was the subject of litigation before a state appellate court. Mr. Riddle was also concerned with addressing what he viewed as a wrongful award of back-child support, which resulted in the revocation of his driver's license upon petition by the Summit County Ohio child support agency. Mr. Riddle acknowledged some misstatements in his schedules and statement of financial affairs, as well as his failure to list certain assets, but he attributed these errors to the pending litigation involving the divorce decree, which he viewed as not being a final, binding decree because the objection and appeal process was not complete.
Section 707(a) of the Bankruptcy Code provides that a bankruptcy court may dismiss a chapter 7 bankruptcy case "for cause." 11 U.S.C. § 707(a). In the Sixth Circuit, "cause" includes dismissal of a chapter 7 case that is deemed to be in bad faith. Merritt v. Franklin Bank, N.A. (In re Merritt), 211 F.3d 1269 (Table), 2000 U.S. App. LEXIS 6877, at *5, 2000 WL 420681, at *2 (6th Cir. April 12, 2000); Indus. Insurance Servs., Inc. v. Zick (In re Zick), 931 F.2d 1124, 1126-27 (6th Cir. 1991); In re Johnson, 546 B.R. 83, 156 (Bankr. S.D. Ohio 2016); In re Stump, 280 B.R. 208, 213-14 (Bankr. S.D. Ohio 2002).
Unless otherwise indicated, the terms "Bankruptcy Code," "Section" and "§" refer to Title 11 of the United States Code, 11 U.S.C. § 101 et seq.
Bad faith dismissals should not be taken lightly. In re Zick, 931 F.2d at 1129 (noting that dismissals based on lack of good faith should generally be reserved for egregious cases). In determining whether at case warrants dismissal for bad faith, courts use the "smell test," which considers multiple objective factors. Id. at 1128; In re Johnson, 546 B.R. at 157. Relevant to this proceeding, such factors include: (1) multiple bankruptcy filings or other procedural "gymnastics," particularly on the eve of foreclosure; (2) failure of the debtor to make full disclosure in the bankruptcy schedules; (3) a pattern to evade a single major creditor or judgment; and, (4) other conduct or motives evidencing an abuse of the protections of the Bankruptcy Code. See In re Stump, 280 B.R. 208, 214 n.2 (Bankr. S.D. Ohio 2002); In re Spagnolia, 199 B.R. 362, 365 (Bankr. W.D. Ky. 1995).
When egregious facts are demonstrated, other sanctions may be imposed pursuant to §§ 105(a) and 349(a), including barring a debtor from future filings for a finite period of time. See, e.g., In re Grischkan, 320 B.R. 654, 659-61 (Bankr. N.D. Ohio 2005) (dismissing a case and barring debtors from re-filing for 180 days based on debtor's bad faith in filing four bankruptcy cases in three years with the purpose to thwart a lender's legitimate attempts to foreclose on a house they continued to live in without making any attempts at repayment of the mortgage loan); In re Stump, 280 B.R. at 214-16 (dismissing case and imposing two-year bar to refiling based on debtors' bad faith conduct in shielding assets from creditors while continuing to live a lavish lifestyle and take numerous vacations).
In this case, many of the factors cited in other cases to support a bad faith dismissal are evident in this case. As the Chapter 7 Trustee noted, Mr. Riddle has failed to cooperate with the Trustee and meet his obligations under the Bankruptcy Code. He failed to provide the Trustee with required documents and he failed to revise inaccuracies in his schedules and statement of financial affairs that are necessary for the Trustee to administer the case.
Mr. Riddle also appears to have undervalued some assets in his schedules compared to their values in the divorce decree and failed to disclose other assets including vehicles he owns. This is a pattern that is repeated from his 2011 chapter 7 case where Mr. Riddle was denied a discharge for failure to disclose his ownership interests in certain property and failure to disclose the transfer of property on the eve of bankruptcy.
This chapter 7 case and the 2018 chapter 13 case appear to be filed in an effort to stall Mr. Riddle's eviction from his residence on Gideon Lane without curing or otherwise satisfying the claims of creditors with liens against the property as would be required under the Bankruptcy Code. Mr. Riddle's schedules reflect that he is not making any mortgage payments to the mortgage holder. In addition, it appears that the Gideon Lane property was sold at Sheriff's sale in July of 2018. If so, Mr. Riddle would not be able to reaffirm any mortgage obligation in chapter 7 or cure and maintain any mortgage obligation in chapter 13. See Fed. Land Bank of Louisville v. Glenn (In re Glenn), 760 F2d 1428, 1442 (6th Cir. 1985) (holding that a debtor-mortgagor cannot revive and reinstate a residential mortgage under a chapter 13 plan if a pre-petition bankruptcy sale had taken place).
As relates to the divorce decree and child support obligation, Mr. Riddle stated that his purpose in filing this chapter 7 case was because the bankruptcy court was the only authority he could turn to in order to protect himself from mistakes he believes were made by the domestic relations court. This purpose is misplaced. The bankruptcy court does not stand in a position to conduct an appellate review of determinations made in a state domestic relations court. Instead, state court determinations of property rights of spouses in a domestic relations matter are typically honored in bankruptcy, with a bankruptcy court reserving the power to control disposition or distribution of the property in the bankruptcy case. See generally, 1 Collier Family Law and the Bankruptcy Code ¶ 5.02[1][a] (2019). Moreover, the establishment of a child support obligation is also typically left to the discretion of the state court because state courts are considered to have expertise in family law matters. In re El-Amin, 126 B.R. 855, 858 (Bankr. E.D. Va. 1991) ("[Bankruptcy] courts' restraint in modifying support obligations is illustrative of the reluctance of bankruptcy courts to make determinations on domestic issues." (citing White v. White (In re White), 851 F.2d 170, 173 (6th Cir. 1988)).
While Mr. Riddle may have legitimately thought that the bankruptcy court was the only forum that could resolve his financial and domestic relation issues, for the reasons stated above, such is not the case. Moreover, Mr. Riddle's failure to cooperate with the Chapter 7 Trustee by providing required documents and amending inaccuracies in his schedules and statement of financial affairs and his failure to properly disclose and value his assets, liabilities, income and expenses are an abuse of the bankruptcy process. Given the history of this case as well as the history of Mr. Riddle's prior cases, this Court grants the Motions to Dismiss with a three-year bar to refiling.
SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/_________
Beth A. Buchanan
United States Bankruptcy Judge
Dated: July 19, 2019
Distribution list:
Default List