Haynes v. Stephenson

Albert D. Haynes, Appellant, v. William K. Stephenson, Jr., Trustee.

C/A No. 3:14-352-MGL-PJG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA COLUMBIA DIVISION

January 26, 2015

REPORT AND RECOMMENDATION

This bankruptcy appeal is before the court for a Report and Recommendation pursuant to Local Civil Rule 73.02(B)(2) DSC. The Appellant Debtor, Albert D. Haynes, who is self-represented, appeals an order of the United States Bankruptcy Court for the District of South Carolina dismissing Haynes's Chapter 13 action with prejudice and barring Haynes from refiling under any chapter of the Bankruptcy Code for one year. (Appellant Br. at 2, ECF No. 18 at 2.) This court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158, which grants district courts jurisdiction to hear appeals from "final judgments, orders, and decrees" of bankruptcy judges. 28 U.S.C. § 158(a)(1). Having carefully considered the parties' submissions and the applicable law, the court concludes that the bankruptcy court's order should be affirmed and Haynes's appeal dismissed.

BACKGROUND

Haynes has filed three petitions for relief under the Bankruptcy Code. The first action was filed under Chapter 7 on November 2, 2012. See Haynes v. Anderson, C/A No. 12-6884-jw (Bankr. D.S.C. Nov. 2, 2012). Following a hearing, the bankruptcy court dismissed Haynes's firstbankruptcy case upon motion of the Trustee, finding that the Trustee "presented evidence that the debtor has failed to file accurate and complete bankruptcy schedules and statements" and that Haynes's delay impaired the Trustee's "determination of whether assets exist which may be liquidated for the benefit of creditors." Id. at ECF No. 59. Haynes filed a motion for reconsideration of the order dismissing his case and further requested that his case be converted to one under Chapter 13. Id. at 62. The bankruptcy court denied Haynes's motion, stating in part that his schedules reflected a negative monthly income, "indicating an inability to fund a plan," and "the inaccurate and incomplete bankruptcy schedules and statements would have to be amended in a chapter 13 case as well, and the debtor had failed to make any amendments despite several opportunities to do so." Id. at ECF No. 70. Haynes did not appeal the court's orders in his first bankruptcy action.

Haynes filed a second bankruptcy action under Chapter 13 on May 2, 2013. See Haynes v. Stephenson, C/A No. 13-2610-jw (Bankr. D.S.C. May 2, 2013). The Trustee filed a motion to dismiss the case with prejudice for a period of one year based in part on Haynes's failure to file complete and accurate schedules. Id. at 30. Haynes filed a motion to voluntarily withdraw from Chapter 13, seeking dismissal of the action without prejudice, id. at ECF No. 39, which the court granted. Id. at ECF No. 43.

Haynes filed his third bankruptcy case under Chapter 13 on October 4, 2013. See Haynes v. Stephenson, C/A No. 13-5901-jw (Bankr. D.S.C. Oct. 4, 2013). The record reflects that Haynes did not file a certificate of credit counseling with the petition and the bankruptcy court notified Haynes that his case could be dismissed unless he cured this deficiency. Id. at ECF Nos. 1, 7. Haynes filed a certificate stating that he received credit counseling one day after he filed the petition. Id. at ECF No. 11. The Trustee requested dismissal of the case for Haynes's failure to certify thatcredit counseling had been completed within 180 days prior to filing and further cited Haynes's "repetitive filings and failure to comply with Local Rules" as reason to dismiss the case with prejudice for one year. Id. at ECF No. 16. On October 24, 2013, the bankruptcy court dismissed the case with prejudice for one year for failure to comply with the credit counseling requirement of 11 U.S.C. § 109(h), unless Haynes filed an objection within fourteen days. Id. at 20. Haynes retained counsel and filed an objection to the dismissal.¹ Id. at ECF No. 24. After a hearing on Haynes's objection, the bankruptcy court dismissed the case with prejudice and barred Haynes from refiling under any bankruptcy chapter of the Bankruptcy Code for one year. Id. at ECF Nos. 26, 28. Haynes appealed, presenting the following issue:

1. Whether the Bankruptcy Court committed an error of law or an abuse of discretion in granting Amended Order Dismissing Case with Prejudice, based on Section 349(a) of the Bankruptcy Code which authorized the Bankruptcy Court to dismiss a case with prejudice to bar future filings upon a finding of cause.

a. Whether the Bankruptcy Court committed an error of law or abuse of discretion by dismissing Appellant's Case With Prejudice based solely upon the Chapter 13 Trustee's Request for Dismissal with Prejudice, filed on October 21, 2013. By order entered October 24, 2013 ("Dismissal Order").

b. Whether the Bankruptcy court committed an error of law or an abuse of discretion in basing final Dismissal With Prejudice solely on the Trustee's Request.

c. Whether the Bankruptcy Court committed an error of law or an abuse of discretion in finding that the Appellant failed to file complete and accurate documents in his bankruptcy cases . . . until after the dismissal of this case.

[d]. Whether the Bankruptcy Court committed an error of law or an abuse of discretion in relying upon contested facts in awarding substantial contribution claim.

[e]. Whether the Bankruptcy Court committed an error of law or an abuse of discretion in considering and relying upon facts outside of a stipulated record without affording the objector the opportunity to engage in discovery relating to the facts that were not part of the stipulated record. [Citing Haynes's first two bankruptcy actions]

[f]. Whether the Bankruptcy Court committed an error of law or abuse of discretion by granting the Appellant 14 days, until November 7, 2013, to object to the dismissal to be with prejudice; then dismissed the case even though the Appellant's case C/A No. 13-02610 was withdrawn by Appellant, in good faith.

[g]. Whether the Bankruptcy Court committed an error of law or an abuse of discretion by granting Order Dismissing case With Prejudice, even after Appellant followed the Court's recommendations to hire Counsel to file Objection to Dismissal with Prejudice.

(ECF No. 12 at 1-3.) Haynes's appellant brief, filed on April 29, 2014, argues that: (1) the bankruptcy court erred in dismissing Haynes's Chapter 13 case; (2) the bankruptcy court erred in entering the dismissal with prejudice for one year; and (3) the bankruptcy court was biased against Haynes. (Appellant Br. at 2-5, ECF No. 18 at 2-5.) The Trustee filed his brief on May 9, 2014. (ECF No. 20.)²

DISCUSSION

A. Standard of Review

Section 158 of Title 28 of the United States Code authorizes district courts to act as appellate tribunals for final orders from bankruptcy courts. 28 U.S.C. § 158(a)(1). The standard of review of a bankruptcy appeal by a district court is the same as when a court of appeals reviews a districtcourt proceeding. See 28 U.S.C. § 158(c)(2). Accordingly, a district court reviews the bankruptcy court's findings of fact for clear error, and its legal conclusions de novo. See Nat'l Heritage Found., Inc. v. Highborne Found., 760 F.3d 344, 347 (4th Cir. 2014); SG Homes Assoc., LP v. Merinucci, 718 F.3d 327, 334 (4th Cir. 2013). A finding of fact is clearly erroneous when a review of the entire record shows that " 'a mistake has been committed.' " United States v. Hall, 664 F.3d 456, 462 (4th Cir. 2012) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). "Mixed questions of law and fact are also reviewed de novo." Zurich Am. Ins. Co. v. Tessler (In re J.A. Jones, Inc.), 492 F.3d 242, 249 (4th Cir. 2007).

B. Haynes's Claims on Appeal

1. Dismissal of Haynes's Bankruptcy Case

Haynes appears to challenge the bankruptcy court's initial order dismissing his third bankruptcy case. (ECF No. 12 at 2, citing the order of dismissal entered on October 24, 2013.) The Trustee argues that Haynes's bankruptcy case was properly dismissed for his failure to receive credit counseling within 180 days before filing the action. (Appellee Br. at 13, ECF No. 20 at 20.) The court agrees.

As discussed and amply supported by law in the Trustee's brief, individuals seeking bankruptcy relief are required to receive "during the 180-day period ending on the date of filing of the petition," an individual or group briefing "from an approved nonprofit budget and credit counseling agency." 11 U.S.C. § 109(h)(1). The Bankruptcy Code provides limited exceptions to this pre-filing credit counseling requirement. See 11 U.S.C. § 109(h)(2), (3). While the majority of courts have found that failure to comply with § 109(h) is not jurisdictional, see Adams v. Zarnel (In re Zarnel), 619 F.3d 156, 169 (2d Cir. 2010); see also In re Fiorillo, 455 B.R. 297, 305 (Bankr.D. Mass. 2011), "courts have held that the proper remedy for failure to comply with Section 109(h) is dismissal of the debtor's case, as one who is not a debtor cannot obtain relief under the Bankruptcy Code." In re Mitrano, 409 B.R. 812, 819 (Bankr. E.D. Va. 2009) (citing In re Ross, 338 B.R. 134, 136 (Bankr. N.D. Ga. 2006)); see also In re Borges, 440 B.R. 551, 556 (Bankr. D.N.M. 2010) (collecting cases).

The Bankruptcy Code confers authority for bankruptcy courts to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). The Code further allows the court to sua sponte take "any action or [make] any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process." Id. "Thus, bankruptcy courts necessarily have authority to dismiss cases sua sponte where the filer has failed to satisfy 109(h) and consequently is not an eligible debtor." In re Mitrano, 409 B.R. at 819.

In this case, the record reflects that Haynes did not file a certificate of credit...