In re La Granja 240, L.P.

636 B.R. 801

IN RE: LA GRANJA 240, L.P., Debtor.

Case No.: 6:21-bk-12906-WJ

United States Bankruptcy Court, C.D. California, Riverside Division.

Signed January 10, 2022

Bruce T. Bauer, Brooks Bauer LLP, Santa Ana, CA, Jenny L. Doling, Veronica E. Ruiz, J. Doling Law, PC, Meredith A. Jury, Palm Desert, CA, for Debtor.

MEMORANDUM OF DECISION REGARDING 11 U.S.C. § 109(G)(2)

Wayne Johnson, United States Bankruptcy Judge

Section 109(g)(2) of the Bankruptcy Code prohibits a debtor from filing a new bankruptcy case for 180 days if the court dismissed a prior bankruptcy case after "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." 11 U.S.C. § 109(g)(2). So, if a bankruptcy trustee (or a creditor) files a motion to dismiss a case and the debtor asks the court to grant the motion or otherwise joins in or supports the motion, does the 180-day prohibition under 11 U.S.C. § 109(g)(2) against filing a new bankruptcy case arise? For the reasons stated below, the court concludes that the 180-day bar to re-filing a new case does apply.

I. THE PLAIN LANGUAGE OF 11 U.S.C. § 109(g)(2) APPLIES.

When a debtor voluntarily files a request for dismissal of a bankruptcy case after the filing of a motion for relief from stay, section 109(g)(2) applies. Some courts have debated whether they need to follow the provisions of section 109(g)(2) or have the discretion to not follow the statute under certain circumstances.¹ However, pursuant to the "plain meaning" of the statute, a large majority of courts have held that the provisions of section 109(g)(2) apply in any case in which a debtor voluntarily requests dismissal of a case at any time after the filing of a motion for relief from stay.² This is the "majority view"³ and this court follows it.⁴

Moreover, section 109(g)(2) would apply in this case under any of the theories of interpreting section 109(g). As discussed below, the debtor in this case seeks immediate dismissal of this case in order to file a new case to stop a foreclosure sale scheduled in three days by the creditor who recently obtained relief from stay in this pending case. Under this set of facts, courts who reject the "majority view" would still apply the 180-day bar of section 109(g)(2).⁵ Under any theory of interpreting section 109(g)(2), the 180-day bar would apply. Congress created section 109(g)(2) to prohibit precisely this activity.⁶

Having laid the initial legal foundation for the matter, the central issue in this case requires consideration of when a debtor takes sufficient steps to trigger application of section 109(g)(2). In the words of the statute, has the debtor in this case "requested" a voluntary "dismissal of the case following the filing of a request for relief from the automatic stay ...." For the following reasons, the court concludes the debtor has made such a request.

II. THE TRUSTEE'S MOTION TO DISMISS.

The debtor in this case filed a chapter 12 petition and proposed a chapter 12 plan. The primary secured creditor opposed confirmation of the plan and also filed a motion for relief from stay. Ultimately, the court concluded the chapter 12 plan was unconfirmable and denied confirmation. Given the delays in the case and the failure of the debtor to present a confirmable plan, the court also granted relief from the automatic stay.

At the hearings regarding confirmation of the plan and the motion for relief from stay, the chapter 12 trustee made an oral motion to dismiss the case. Previously, the trustee had supported confirmation but when the court denied confirmation and granted relief from stay, the trustee made an oral motion to dismiss. The debtor opposed the oral motion and the court ruled in favor of the debtor. The court indicated a written motion to dismiss should be filed on regular notice with an opportunity to oppose the motion.

Accordingly, the trustee promptly filed the written motion to dismiss and set the matter for a hearing. In response, the debtor filed a three-sentence brief. The first sentence described the brief as containing "Limited Opposition". However, the second and third sentences stated "Debtor respectfully requests this case be dismissed without a bar and not converted to any other Chapter under the bankruptcy code. The Trustee has not asked for a bar or conversion."

This brief by the debtor was unnecessary and problematic. The trustee had not requested that the court convert the case or dismiss it with a bar to refiling. The debtor's brief admits as much.

Importantly, the three-sentence brief by the debtor contained no substantive opposition to the motion. The debtor did not argue against dismissal for any reason. Thus, the debtor likely intended in the brief to communicate the idea that the debtor acquiesced to the dismissal of the case and wanted to insure that the only relief granted should be the only relief requested: dismissal without a bar to re-filing.

Unfortunately, the debtor used problematic language in the second sentence of the brief. Rather than stating something like "the debtor opposes dismissal with a bar or conversion because no one has requested such relief" the debtor wrote "Debtor respectfully requests that this case be dismissed without a bar ...." Seizing upon this language, the secured creditor then filed its own responsive brief arguing that, in light of the language in the debtor's brief, the case must now be dismissed with a 180-day bar to refiling the case pursuant to the plain language of section 109(g)(2). That statute forbids a debtor from filing a new bankruptcy case for 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." Given this language, the secured creditor contends that the debtor has now (in effect) either joined in the motion to dismiss or presented its own request to dismiss. In doing so, the creditor argues the debtor has triggered the mandatory provisions of section 109(g)(2) that require dismissal with a 180-day prohibition.

The argument by the secured creditor does not lack merit. The brief filed by the debtor did not provide any reasons in opposition to dismissal. Nothing in the brief opposed dismissal. In addition, the debtor (unfortunately) used in the second sentence of the brief the word "requests" which is the present tense version of the very word contained in section 109(g) ("requested").

In light of this unexpected development, the court thought it fair to allow the debtor to file a second brief. Although the local rules do not contemplate additional briefs under these circumstances, it seemed fairest to allow the debtor to respond to the brief and arguments filed by the secured creditor. Therefore, prior to the hearing regarding the trustee's motion to dismiss, the court issued a scheduling order that continued the hearing and requested further briefing from all sides. The court did not wish to rule on the matter without an opportunity to consider briefing regarding the application of section 109(g)(2).

At this point, the question of whether or not section 109(g)(2) applied presented a debatable issue. Fair arguments existed on both sides and it could have been a "close call" either way. See, e.g., In re Walker, 171 B.R. 197, 202-03 (Bankr. E.D.Pa. 1994) (holding that the 180-day bar to refiling did not apply because the "the Debtor's failure to oppose our dismissal of his case was not tantamount to a voluntary dismissal" but describing the decision as a "close call"). Unfortunately, the next step by the debtor significantly changed the situation and proved fatal to its contentions.

III. THE EMERGENCY MOTION BY THE DEBTOR.

The debtor responded to the court order continuing the hearing regarding the motion to dismiss and setting a briefing schedule by filing an emergency motion. In the emergency motion, the debtor (for the first time) admits that it seeks to immediately file a new chapter 12 case. In the past, the debtor had announced an intention to appeal the orders denying confirmation and granting relief from stay. However, in the emergency motion, the debtor announces a new strategy of intending to file a new chapter 12 case immediately upon dismissal of this one.

In order to accomplish this plan, however, the debtor needs the current case dismissed immediately. For the first time, the debtor informs the court that a foreclosure sale will occur in three days (January 13, 2022). Therefore, the emergency motion asks the court to vacate the scheduling order and hold the hearing regarding the motion to dismiss immediately. The entire thrust of the emergency motion asks the court to immediately hold a hearing regarding the motion to dismiss and dismiss the case with no bar to refiling so that the debtor may file a new case to stop the foreclosure sale. Indeed, the last sentence of the motion ends as follows: "Debtors respectfully request this Court reinstate the dismissal hearings on January 12, 2022 or earlier, and enter the dismissal orders moved for by the [chapter 12 trustee]."

This motion and request undermine the entire strategy of the debtor. It is now impossible for the court to dismiss the case without a bar to refiling. If the court must dismiss the case, section 109(g)(2) would clearly apply.

The debtor argues that section 109(g)(2) does not apply because the trustee, not the debtor, initiated the pending motion to dismiss. However, parties may join in any motion or they may make their own independent requests to dismiss. As to the former, the debtor has clearly done so. Indeed, at this point in time, the debtor is now the primary advocate for the trustee's motion to dismiss.

Whereas the trustee seems content with the scheduling of the motion to dismiss, the debtor is not. The trustee has not filed an emergency motion to advance the hearing date and...