In re Gill

584 B.R. 63

IN RE: James A. GILL, Debtor.

Case No. 17–14920–JDL

United States Bankruptcy Court, W.D. Oklahoma.

Signed January 22, 2018

Anita F. Sanders, Anita F. Sanders, Inc., Oklahoma City, OK, for Debtor.

ORDER DISMISSING CASE

Janice D. Loyd, U.S. Bankruptcy Judge

The above matter comes on for consideration upon the Motion to Dismiss Bankruptcy filed by CBM Mortgage and Financial Services, LLC (CBM) (the "Motion") [Doc. 6] and the Debtor's Response and Objection to Creditors Motion to Dismiss Bankruptcy (the "Response") [Doc. 10]. The Motion presents a case of first impression for this Court: the interpretation of 11 U.S.C. § 109(g)(2)¹ which renders an individual ineligible to be a debtor where the debtor had a prior bankruptcy case pending within one year which case was voluntarily dismissed following the filing of a motion for relief from the automatic stay. The Court concludes that the text of § 109(g)(2) renders the Debtor ineligible for bankruptcy relief under Title 11 and therefore requires dismissal of this case. The following represents the Court's findings of fact and conclusions of law pursuant to Fed.R.Bankr.P. 7052 and 9014.

I. Jurisdiction

This Court has jurisdiction under 28 U.S.C. § 1334 and the General Order of Reference entered in this District pursuant to LcvR 81.4. This is a "core proceeding" under 28 U.S.C. § 157(b)(2)(A) and (G), thus the Court may enter final judgment. 28 U.S.C. § 157(b)(1).

II. Facts

1. CBM is the holder of a first mortgage on five tracts of land owned by the Debtor and his wife in Woodward County, Oklahoma.

2. On October 14, 2016, the Debtor filed a Chapter 13. [Case No. 16–14136]. This was apparently in response to avoid a sheriff's sale on CBM's collateral which was scheduled to take place on October 17, 2016.

3. On January 24, 2017, this Court entered an Order Approving Stipulation Regarding Objection to Confirmation by which CBM and Debtor agreed that Debtor would sell as many of his properties as necessary before May 1, 2017, in order to pay CBM's secured claims in full. The Stipulation was incorporated by reference in the Order Confirming Plan filed on February 3, 2017.

4. On May 10, 2017, CBM filed a Corrected Motion for Relief from the Automatic Stay and from Co–Debtor Stay and for Order of Abandonment.

5. The Corrected Motion for Relief was resolved by the Court entering a Stipulation and Agreed Order on July 7, 2017. Under the Stipulation the Debtor was to make monthly adequate protection payments to CBM in the amount of $750.00 and to carry sufficient insurance on all properties until the debt owed CBM was satisfied in full. The Stipulation also contained a "drop dead" clause which provided that in the event the Debtor failed to comply with the Stipulation then CBM was permitted to seek ex parte relief from the automatic stay.

6. The Debtor failed to make adequate protection payments to CBM and to carry insurance as required by the Stipulation and Agreed Order. Accordingly, on September 12, 2017, this Court entered an Order Granting CBM Relief from Automatic Stay and from Co–Debtor Stay and Order for Abandonment and authorizing CBM to take such action as it deems necessary including, but not limited to, foreclosure of its security interest and sheriff sale in state court.

7. On September 14, 2017, the Trustee filed a Motion to Dismiss Case for Failure to Pay Plan Payments.

8. In response to the Trustee's Motion to Dismiss, on October 13, 2017, Debtor filed Debtor's Motion for Voluntary Dismissal of Chapter 13 Case.

9. On October 30, 2017, this Court entered an Order Granting Debtor's Motion for Voluntary Dismissal of Chapter 13 Case.

10. After the dismissal of the case, on November 20, 2017, Debtor's property subject to CBM's mortgage was sold at sheriff's sale. A hearing on confirmation of the sheriff's sale was set for December 7, 2017.

11. The day before the hearing on confirmation of the sheriff's sale the Debtor filed this second bankruptcy on December 6, 2017. On the same day, December 6, 2017, CBM filed the present Motion to Dismiss.²

III. Discussion

CBM asserts that the case should be dismissed because the Debtor is not eligible to be a debtor under § 109(g)(2) which, in pertinent part, provides as follows:

[N]o 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...the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title. (Emphasis added).

Section 109(g)(2) renders a person ineligible for bankruptcy relief where five conditions are met: (1) the person is an individual, (2) the person was a debtor in a previous bankruptcy case, (3) a party filed a request for relief from the automatic stay in the previous case, (4) the person (debtor) requested and obtained a voluntary dismissal in the previous case following the party's request for relief under § 362, and (5) voluntary dismissal in the previous case occurred within 180 days of the petition date of the person's present case.

At first glance, it appears that all five conditions for dismissal have been met; however, in his Response at ¶ 6, the Debtor states that "[b]ankruptcy courts have taken four (4) approaches to the applicability of the statute creditor sites (sic) ... including bankruptcy courts which hold the statute applies only if the motion for relief is pending at the time the Debtor requests voluntary dismissal." He then cites three cases purportedly supporting his position.

It is true that while the language of § 109(g)(2) may appear to be straightforward, courts are divided on its proper application. Since its enactment in 1984, courts and academics have struggled as to how to interpret § 109(g)(2) and in particular, the term "following". In re Gibas, 543 B.R. 570, 587 (Bankr. E.D. Wis. 2016) (citing Harry Wright IV, Comment, Must Courts Apply Section 109(g)(2) When Debtors Intend No Abuse in an Earlier Dismissal of Their Case? , 7 Bankr.Dev. J. 103 (1990) ; Ned W. Waxman, Judicial Follies: Ignoring the Plain Meaning of Bankruptcy Code § 109(g)(2), 48 Ariz. L.Rev. 149 (Spring 2006) ). Three primary interpretive approaches have emerged, and the Tenth Circuit has yet to take up the question. The three primary and distinct approaches that have been articulated are a mandatory approach, a discretionary approach, and a causal connection approach. See In re Durham , 461 B.R. 139 (Bankr. D. Mass. 2011) (citing In re Richter , 2010 WL 4272915 at *2 (Bankr. N.D. Iowa 2010) ).

The first approach, and probably the majority view, holds that the term "following" means "after" and is plain and unambiguous, requiring only that the events identified in section 109(g)(2) occur chronologically or sequentially. See e.g. In re Andersson , 209 B.R. 76 (6th Cir. BAP 1997) ; In re Richardson , 217 B.R. 479 (Bankr. M.D. La.1998) ; In re Guerrero , 540 B.R. 270 (Bankr. S.D. Tex. 2015) ; In re Gibas , 543 B.R. 570 (Bankr. E.D. Wis. 2016) ; In re Dickerson, 209 B.R. 703 (W.D. Tenn. 1997) (rejecting a causal reading and finding the statute mandatory); In re Steele , 319 B.R. 518 (E.D. Mich. 2005) ("once a motion for relief from stay has been filed, if a debtor chooses to voluntarily dismiss his case, he cannot file another case for 180 days following the dismissal."); Kuo v. Walton, 167 B.R. 677 (M.D Fla. 1994) (impliedly embracing the chronological test by finding the statute mandatory). This approach is also regarded as the "mandatory" or strict statutory construction approach since equating the word "following" with its most commonly accepted equivalent of "after" does not require the court to seek further interpretation. Under this sequential or chronological approach, if a debtor requests and obtains a voluntary dismissal of his case after a party moved for relief from the automatic stay, that person is not eligible for bankruptcy relief in the 180 days after dismissal, and no further inquiry is needed.

The second, or "causal connection" approach, holds that the term "following" means "as a result of" and requires a judicial determination of a causal relationship between two of the actions referenced in section 109(g)(2). In re Payton , 481 B.R. 460 (Bankr. N.D. Ill. 2012) ; In re Rivera , 494 B.R. 101 (1st Cir. BAP 2013) ; In re Duncan , 182 B.R. 156 (Bankr. W.D. Va. 1995) ; In re Copman , 161 B.R. 821 (Bankr. E.D. Mo. 1993). Under this "causal" approach, if a debtor requests and obtains voluntary dismissal of his case after a party moves for relief from the stay, the person is ineligible for bankruptcy relief within 180 days only if the court determines he requested and obtained a voluntary dismissal because of the parties motion for release from stay. Courts adopting this approach find that there is an ambiguity with use of the word "following", and using the strict chronological interpretation of equating "following" with "after" could bring about results inconsistent with Congress' intent which was to prevent abusive repetitive filings by debtors who "voluntarily dismiss one case in which relief was sought and then file another case, obtaining repetitive automatic stays to prevent a creditor from taking action against the debtor's property." Payton , 481 B.R. at 466. "These courts employing the "causal connection" approach note that the chronological approach could apply in cases where the debtor had no motive to abuse, or, at the very least, the creditor seeking the protection was at no risk of frustration. Id.

The third, or "discretionary" approach, endorses the chronological or sequential interpretation of " following", but that a literal application of the statute is undesirable. This view adopts a more discretionary approach "because legislative enactments should never be construed as establishing statutory schemes that are illogical, unjust, or capricious." In re Luna , 122 B.R. 575, 577 (9th Cir. BAP 19...