Opinion
No. 02-36595DWS
January 2, 2003
MEMORANDUM OPINION
Before the Court is the Motion of Alaska Seaboard Partners, LLP ("ASP") for Dismissal of the Case and Nullification of the Tax Lien Sale (the "Motion") and the Objection of Wachovia Bank, N.A., as Trustee ("Wachovia") thereto (the "Objection"). The Debtor neither filed an answer nor appeared at the hearing at which the following factual background was stipulated.
BACKGROUND
On September 27, 2002 an Order (the "Bar Order") was entered granting ASP's motion for relief from the automatic stay imposed in Debtor's prior bankruptcy case, 02-31768, and precluding Debtor from filing any further bankruptcy petitions for 180 days from the date of the Order without leave of Court. (The "Bar Motion") Doc. No. 10. On October 11, 2002 the case was dismissed for failure to file the documents required by Bankruptcy Rule 1007 (the "Dismissal Order"). Doc. No. 14. However, notwithstanding the pendency of the Bar Order and in violation thereof, Debtor filed this Chapter 13 case, his ninth case, on November 19, 2002 without leave of Court. On November 20, 2002 the Sheriff of Philadelphia County sold Debtor's property located at 305-309 East Wyoming Avenue (the "Property") to satisfy the tax lien held by Wachovia. ASP was present at the sale and participated in the bidding which ultimately concluded with Debtor's son purchasing the Property. The filing of the new bankruptcy was not disclosed. On November 25, 2002 Debtor filed a motion to dismiss this bankruptcy case without prejudice to his refiling. The Motion was served on Wachovia but not on ASP, and Debtor's counsel never requested that it be set for a hearing pursuant to Local Rules of this Court. The Debtor never filed any of the documents required by F.R.Bankr.P. 1007 and this Court's Order dated November 19, 2002, and the case is subject to dismissal on these grounds as well.
The Bar Motion, which was unopposed, alleged eight prior filings since 1997, all of which were dismissed for Debtor's failure to appear at a hearing or make payments under a Chapter 13 plan. I take judicial notice of the filings documented by number and date in the Bar Motion. Fed.R.Evid. 201, incorporated in these proceedings by F.R.Bankr.P. 9017.See Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n. 3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991); see generally In re Indian Palms Associates, Ltd., 61 F.3d 197 (3d Cir. 1995).
Wachovia had acquired the tax claim in a sale of same pursuant to Philadelphia Special Ordinance and 53 P.S. § 7147 in June 1997.
ASP speculates that given Debtor's son success in purchasing the Property, the Debtor has no reason to rely on the bankruptcy stay. Had the outcome been different, it suggests that Debtor's position might be as well. This may also explain the Debtor's failure to participate in the Motion and request that the bankruptcy case be dismissed.
ASP seeks to have this case dismissed with prejudice as it was filed in violation of the Bar Order. Nonetheless, it wants this Court to give effect to the illegal filing to declare that the tax lien sale is a nullity having occurred in violation of the automatic stay of § 362.In re Siciliano, 13 F.3d 748, 751 (3d Cir. 1994) (creditor actions taken in violation of the stay are void). Wachovia, whose lien was satisfied in the tax sale, not surprisingly objects. It argues that since the Debtor was barred from filing this case, the automatic stay was not operative, and the sale was not invalid by reason of this bankruptcy filing. DISCUSSION
ASP's motivation in seeking these seemingly inconsistent consequences of Debtor's conduct in filing this case stems from the outcome of the tax lien sale. Apparently chilled by the Debtor's son's bidding, ASP stopped bidding for the Property. As a result, it was sold to Debtor's son, and pursuant to Pennsylvania law, ASP's mortgage was discharged. If the tax sale is of no effect, ASP seeks to schedule a mortgage foreclosure sale of the Property. The prejudice to ASP from Wachovia's sale is not obvious since ASP will be remitted the excess proceeds after Wachovia's lien is satisfied and it had the opportunity to bid at the tax lien sale. ASP speculates that if it were able to credit bid (as opposed to bid in real dollars as it had to at the tax lien sale), it would have continued bidding and the Debtor's son would have paid more for the Property. Apparently, however, it was not sufficiently convinced of that fact to have continued bidding against the son at the tax lien sale.
Because it views the stay not to have attached, it did not move for relief nunc pro tunc. However, its counsel indicated that if the Court found the stay to have been in place, it was making such a motion orally at this time. Id. Since I agree with Wachovia that the stay was not operative, I need not address its alternative argument except to note that the operation of the automatic stay is not always clear and parties proceed with some risk to ignore it when a bankruptcy case is pending.
I. Dismissal with a Bar Against Future Filing
The granting of this request is so obvious that it bears no extended discussion. This is the Debtor's ninth bankruptcy filing, and it occurred during the pendency of a refiling bar. It was prompted by the imminence of the Wachovia tax sale which occurred on November 20, 2002. When the results of the sale, i.e., the purchase of the Property by Debtor's son free of ASP's mortgage, achieved the Debtor's end, he promptly moved to dismiss the latest bankruptcy case. On these facts, I easily dismiss with a bar against future filings, finding the Debtor's conduct to be in bad faith. In re Dami, 172 B.R. 6 (Bankr. E.D. Pa. 1994). However, whether that same conduct supports Wachovia's position that the automatic stay did not come into effect by reason of the bar against refiling in this case is discussed below.
II. Nullification of Tax Sale as in Violation of Automatic Stay
Wachovia finds support for its position that the automatic stay did not attach upon filing this case in the language of the Bankruptcy Code. Section 362 states that a petition filed under § 301 operates as a stay of any action to enforce a lien against property of the estate. Section 301 authorizes a petition' to be filed by any entity that may be a debtor under the filing chapter. Wachovia contends that the stay was not applicable to the instant petition because it was not filed under § 301, i.e., by an entity that may be a debtor. By reason of the Bar Order, the Debtor was not permitted to file without leave of court which he did not obtain. Wachovia offers no decisional authority in support of its position and fails to mention the provision of the Bankruptcy Code that supplies the missing link to its argument, albeit not as broadly applied as Wachovia suggests.
Section 109 of the Bankruptcy Code outlines who may be a debtor. Congress sought to address the type of abusive serial filings made by the Debtor here in § 109(g)(1). That section states as follows:
Notwithstanding any other provision of this section, no individual may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if —
(1) the case is dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in a proper prosecution of the case;
11 U.S.C. § 109(g)(1). Thus, to the extent the bar against Debtor is supported by findings required under § 109(g)(1), Wachovia is correct in concluding that Debtor was not an authorized debtor under § 301, and the stay does not apply to him nor his property.
As I noted in a previous decision construing this provision of the Code, "willful failure," while not expressly defined by Congress, is generally understood to refer to conduct that is intentional, knowing and voluntary as opposed to accidental or beyond the person's control. In re Aucoin, 1999 WL 1080364, at *2 (Bankr. E.D. Pa. Nov. 29, 1999) (citing cases). See also In re Campbell, 266 B.R. 709, 711 (Bankr. W.D. Ark. 2001). It can be established by (1) an admission of intentional conduct; (2) a conclusion that denials of intentional conduct are not credible; or (3) drawing adverse inferences from all of the circumstances attendant to the filing, including the failure to prosecute the present case and whether the conduct in filing serial cases manifests an abuse of the bankruptcy process. In re Arena, 81 B.R. 851, 853 (Bankr. E.D. Pa. 1988). Since it is unlikely that a debtor will admit intentional misconduct and very likely that the debtor will not appear to defend a bad faith dismissal, an examination of the circumstances surrounding the debtor's performance in the present and prior bankruptcy cases is usually the most probative evidence of willful conduct.
Indeed in most cases the debtor does not appear nor defend a bar motion. That was the case here. Debtor neither appeared nor defended the dismissal motion in this case nor the Bar Motion or dismissal motion in the prior bankruptcy case. Accordingly, while his failure to answer allowed me to treat the well pled averments of the Bar Motion relating to his prior bankruptcy history as admitted, the Dismissal Order was not accompanied by an express finding that his conduct was a willful failure under § 109(g)(1).
The fact that neither the Dismissal Order nor Bar Order contained findings of willfulness does not determine the outcome of this contested matter as I may determine in the present case whether the prior case was dismissed as a result of Debtor's willful failure to abide by an order of the Court or properly prosecute his case. In re Pike, 258 B.R. 876, 881 (Bankr. W.D. Ohio 2001). As noted above, this case is Debtor's ninth bankruptcy filing and was filed in violation of an extant bar order that permitted refiling only upon demonstration of a valid bankruptcy purpose. The Debtor would have taken advantage of that opportunity if he were acting in good faith. Rather he refiled on the eve of another foreclosure sale and advised no one. Securing an order for relief on November 19, 2002, the Debtor sought voluntary dismissal without prejudice one week later. The filing fee had not been paid and the required documents were not filed. As noted above, the Debtor did not attempt to gain the benefit of the automatic stay but rather his son bought the Property at the tax lien sale. I infer from his repeated use of bankruptcy filings to stay foreclosure of his Property that he would have done so here had that sale not concluded so favorably with his son as purchaser.
He had retained counsel to assist him in this latest filing although I question whether he advised his counsel of the Bar Order.
The eight prior bankruptcy cases were all dismissed. The last prior case filed on August 20, 2002 seeking to stay ASP's mortgage foreclosure judgment was subsequently dismissed on October 11, 2002 after stay relief was granted to ASP when the Debtor failed to file his required documents. The case was pending for a mere six weeks during which Debtor also did nothing to prosecute it. Based on this history, I am able to find the requisite willfulness that supports a dismissal under § 109(g)(1).
A copy of the state court judgment is attached to the Bar Motion as Exhibit A. Notably it was signed and entered on August 22, 2002, two days after the commencement of case no. 02-31768. The proximity of the filing to the Order suggests that Debtor, who filed a response to the motion for summary judgment that gave rise to the Order, knew of the adverse decision or that it was imminent. Curiously, ASP appears to rely on that Order entered during the pendency of a bankruptcy case in direct contradiction to its position with respect to Wachovia's tax sale relief during the pendency of this bankruptcy case.
The Bar Motion had requested dismissal or in the alternative, relief from stay. As this was a Chapter 7 case, I granted relief, thereby affording ASP the same remedies as with dismissal but allowing Debtor (although he never appeared to request as much) to prosecute his case and secure a discharge. This consideration was not well placed since Debtor did nothing to prosecute his case.
Lest this ruling be interpreted too broadly, I must state what I have not concluded. I do not hold that every violation of a bar order and concomitant or subsequent dismissal of a case warrants relief under § 109(g)(1). Rather each case must be decided on its own facts. However, in this case I conclude that the automatic stay of § 362(a) did not attach when Debtor filed his new petition after dismissal of the bankruptcy case for willful failure to comply with the order requiring documents to be filed and properly prosecute this prior case. Accordingly, the Motion is granted in part and denied in part. This case is dismissed with a bar toward refiling for 180 days without leave of Court. ASP's request for nullification of the tax lien sale is denied.
For example, many of the dismissals with a bar against refiling are consensual resolutions to motions for relief. There is no wilfulness to be implied from these negotiated bar orders. Rather the bar order gives effect to the parties' agreement while allowing the debtor to refile upon a change of circumstances provided leave of court is first secured. Compare Friend v. Chemical Residential Mortgage Corp, (In re Friend), 191 B.R. 391 (Bankr. W.D. Tenn. 1996)
An Order consistent with the foregoing Memorandum Opinion shall be entered.
ORDER
AND NOW, this 2nd day of January 2003, upon consideration of the Motion of Alaska Seaboard Partners, LLP for Dismissal of the Case and Nullification of the Tax Lien Sale (the "Motion") and the Objection of Wachovia Bank, N.A., as Trustee thereto (the "Objection") and after notice and hearing, and for the reasons stated in the accompanying Memorandum Opinion;
It is hereby ORDERED and DECREED that the Motion is GRANTED In-Part And DENIED In-Part. This case is Dismissed with a bar toward refiling for 180 days without leave of Court. ASP's request for nullification of the tax lien sale is Denied.