TICO Const. Co., Inc. v. Van Meter (In re Powell)

Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
1 year 4 months ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

No. 22-60052 (9th Circuit, Oct 01,2024) Published

Tag(s):

Ruling:

The U.S. Court of Appeals for the Ninth Circuit held a bankruptcy court did not err in granting a debtor's motion to voluntarily dismiss his chapter 13 case under 11 U.S.C. § 1307(b) over a creditor's objection that the debtor was ineligible to be in chapter 13 and, thus, had no right to dismiss. The bankruptcy court did not have to determine determine the debtor's eligibility for chapter 13 relief before granting a request to voluntarily dismiss. The dissenting judge would have held that only a debtor properly in a chapter 13 may voluntarily dismiss under § 1307(b).

Procedural context:

The majority opinion explains that, when evaluating a chapter 13 debtor's motion to voluntarily dismiss their case, the inquiry is limited: "Considering only the plain text of § 1307(b), all that is required for voluntary dismissal is (1) a request, (2) by a debtor, (3) who has a Chapter 13 case, (4) that has not been converted to another enumerated chapter under Title 11." The opinion rejects the "interpretive leaps" of the Bankruptcy Code that the creditor suggested to support its view that only an eligible chapter 13 debtor can invoke the absolute right to dismiss. But the dissent did not agree that "so long as the debtor’s petition initiating the Chapter 13 proceeding facially supports the view that the debtor was eligible to proceed under Chapter 13, the debtor may later invoke § 1307(b)’s absolute right of dismissal even if the debtor was not in fact ever eligible to proceed under Chapter 13, even if the debtor certified his schedules in bad faith, and even if a creditor has first sought to convert the proceeding to one under another chapter." The dissent explains: "It seems to me implicit in the language of § 103(j) and § 1307(b) that the various rights and procedures specified in Chapter 13, including the absolute right of voluntary dismissal under § 1307(b), apply only in a case that is properly 'under such chapter.' That common-sense conclusion is reinforced by the fact that, under § 301(a), a 'voluntary case' under a given chapter of the Bankruptcy Code is only authorized to be filed in the first place by 'an entity that may be a debtor under such chapter.' Id. § 301(a) [ ]. It makes no sense to say that, having specified various eligibility conditions for even proceeding under a particular chapter, the Code nonetheless allows the various rights contained within a given chapter to be invoked by an entity that is ineligible to proceed under that chapter."

Facts:

In 2000, TICO Construction Company, Inc. sued Jason Powell, its former employee, in Nevada state court. It ultimately obtained a judgment against Powell for over $200,000, but could not collect on it. In 2021, Powell filed a chapter 13 petition in the U.S. Bankruptcy Court for the District of Nevada. His petition and related filings stated Powell met the chapter 13 eligibility requirements in 11 U.S.C. § 109(e), including that his debts were below the statutory thresholds, and he represented that the information in his petition and schedules was truthful under penalty of perjury. His attorney also certified "that he had informed Powell about the eligibility requirements and available relief for each chapter, and that he had notified Powell of the consequences of 'knowingly and fraudulently conceal[ing] assets or mak[ing] a false oath or statement under penalty of perjury in connection with a case' under Title 11." After Powell filed his petition, TICO filed an adversary proceeding to except the judgment debt from Powell's discharge. A few months later, Powell moved to voluntarily dismiss his bankruptcy case under § 1307(b). TICO objected, contending that, "because Powell was ineligible for Chapter 13 relief under § 109(e) [as he had total unsecured debts exceeding the then-existing limit], the bankruptcy court had no authority to dismiss his case under § 1307(b), and that it should convert Powell’s case to Chapter 7 or 11 proceedings instead. Alternatively, TICO asked the bankruptcy court to sanction Powell and place conditions on dismissal." The bankruptcy court granted Powell's motion to dismiss, finding Ninth Circuit authority provides a debtor has “an absolute right to voluntarily dismiss his Chapter 13 bankruptcy case.” The bankruptcy court also declined to award TICO attorneys' fees and sanctions. TICO appealed to the U.S. Bankruptcy Appellate Panel for the Ninth Circuit, which affirmed. TICO filed a second appeal to the Ninth Circuit.

Judge(s):

Forrest and Sung (majority), and Collins (dissent)

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