UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

B-3 PROPERTIES, LLC, )

)

Debtor/Appellant, )

)

v. ) 2:14-cv-00128

)

DAVID B. LASCO and LASCO )

FAMILY TRUST, ) CHAPTER 11 PROCEEDING

) APPEAL OF CASE NO. 12-20432-jpk

Creditor/Appellee. )

MEMORANDUM OPINION AND ORDER

When used properly, bankruptcy affords individuals and companies who are

overwhelmed by debt a fresh start. When used improperly, however, the process can

be used by debtors to improperly stall creditors from collecting their debts. 

Unfortunately, the latter case is before me today.

B-3 Properties, L.L.C., appeals the dismissal of its second bankruptcy attempt. In

a nutshell, B-3 owns a single asset – a large piece of property in Hobart, Indiana – that it

has been unable to sell during the pendency of each of its bankruptcies. David Lasco, a

member of B-3 who is also one of its creditors, has foreclosed on the property and each

time the property has been up for auction, B-3 has filed a last-minute bankruptcy to stay

the sale. (The bankruptcies have been instituted on behalf of B-3 by one of its owners

who evidently no longer sees eye-to-eye with his partner, Lasco.)
During this second bankruptcy, the bankruptcy court eventually ordered B-3 to

submit both a valid purchase agreement and earnest money check by a date certain or

face dismissal and a bar to refiling. Then things went from bad to worse with B-3

tendering multiple incomplete, invalid purchase offers and two bad earnest money

checks in an attempt to stave off the sale of the property yet again. Because B-3 violated

the bankruptcy court’s order, it dismissed the bankruptcy and barred any refiling of it.

Since dismissal, the foreclosure action has moved ahead in state court. The state

court receiver has accepted Lasco’s bid to purchase the property and all that remains is

for the sale to close. I stayed the sale, however, pending this appeal because if the sale

went through, this appeal would be moot. 

As alluded to above, what really seems to be driving this dispute is a conflict

between two of B-3's members and Lasco. I don’t know why B-3 wants so desperately

to keep this property out of Lasco’s hands, but I do know that this is an improper use of

the bankruptcy process and it needs to stop. I will therefore AFFIRM the bankruptcy

court’s dismissal and bar to refiling.1

Background

B-3 Properties, L.L.C., is an Indiana limited liability company owned by Robert

Stiglich, Suheil Nammari, and David Lasco. Lasco is the Creditor/Appellee in this

1

 B-3 has requested oral argument on this issue, but I will deny this request as the

briefing is more than adequate in assisting me to make my decision. In addition, I have

already heard extensive oral argument on these issues during a hearing on B-3's

previous motion to stay the sale of the property pending appeal [DE 16] and do not

believe that hearing any further argument would be helpful. 

2
action. B-3's sole asset is a 200 acre plot of land in Hobart, Indiana. On February 20,

2013, Stiglich filed a Chapter 11 bankruptcy on behalf of B-3, minutes before a

scheduled auction sale of the property. (Rec. #1 at 6-14, 16-17.)2

 This was B-3's second

bankruptcy; the first was voluntarily dismissed by B-3 after failing to pay any quarterly

fees and failing to file required monthly reports. (Id. at 33, 200.) That first bankruptcy

was also filed on the eve of a scheduled sale of the property. (Id. at 6-14, 16-18.) 

Lasco moved to dismiss the Chapter 11 case, alleging, among other

transgressions, bad faith by B-3. (Id. at 18-19.) Lasco also requested a bar to refiling. 

(Id.) At a hearing on the motion to dismiss, the bankruptcy court allowed B-3 another

chance to sell the property, ordering B-3 to submit a marketing plan by June 10, 2013. 

(Id. at 131-32.) Judge Klingeberger stated that the reason for requiring this marketing

plan was that there were concerns about having extensive proceedings in the

bankruptcy considering that it was a second bankruptcy for B-3, and that there had

already been “unsuccessful attempts to market/sell the property under the protection

of the automatic stay.” (Id.) It is unclear whether B-3 complied with that order,

although the subsequent proceedings lead me to believe it did not. 

2

 The record in this matter is admittedly a bit confusing. Any reference to the

docket in this Court, Case No. 2:14-cv-128, will be delineated as “DE .” The record

filed by the Appellant was filed in three separate portions, which I will refer to as “Rec.

#1” (filed at DE 1), “Rec. #2”(filed at DE 1-1), and “Rec. #3”(filed at DE 1-2), herein. 

Appellant further filed an addendum to its brief at DE 17-1, designating further

materials (some already in the record, some not), that I will refer to as “Addendum to

Appellant’s Br.” Based on Appellant’s opening brief, I permitted Appellee to

supplement the record, which I will refer to as “Supp. Rec.” and is found at DE 31.

3
After a pretrial conference on June 26, 2013, the court further considered the

motion to dismiss and afforded B-3 a final chance to sell the property, ordering B-3 to 

submit a motion to sell the property, including an offer to purchase that conformed to

the Agreed Terms of Sale. (Id. at 170-71.) In the event that B-3 failed to comply, Judge

Klingeberger made it clear that he would grant Lasco’s motion to dismiss forthwith,

“with a bar to refiling of any subsequent case under Title 11 . . . .” (Id.) The Agreed

Terms of Sale required a non-refundable payment of $75,000.00 and a signed purchase

agreement. (Id. at 173 (“There shall be a non-refundable earnest money deposit of

Seventy-five Thousand Dollars ($75,000.00), which shall be paid immediately upon

execution of Purchase Agreement by Buyer and Seller.”).) This was all detailed in the

bankruptcy court’s Order of July 17, 2013 and the parties’ Agreed Terms of Sale. (Id. at

170-71, 173.) 

On September 28, 2013, B-3 submitted a motion to sell the property, attaching a

purchase agreement and a copy of a $75,000.00 check representing the non-refundable

deposit. (Id. at 176-77, 188.) There were a couple of major problems with the motion:

the purchase agreement was not signed by the debtor and, more troubling, the check

later bounced. (Id. at 186, 197, 216, 220.) This was the second time B-3 had submitted a

bad check from a purported buyer. (Id.) And yet what is odd about this, according to

Lasco, is that B-3 never pursued any fraud charges against the people who furnished

the bad checks, which Lasco believes helps to demonstrate bad faith on the part of B-3.

(DE 21 at 5; see also Rec. #1 at 216.) In other words, according to Lasco, there really

4
wasn’t a bonafide purchaser of the property and instead Lasco’s partners were just

jerking him around to stave off his efforts to foreclose on the property. In any event,

after the check bounced, the would-be purchaser withdrew the offer to purchase. (Rec.

# 1 at 220.) 

On November 7, 2013, B-3 tried yet again; on that date it submitted yet another

offer to purchase the property. The problem was that this offer came more than a

month after the bankruptcy court’s deadline, and, in any event, the purchase offer was

otherwise fraught with problems: the offer was not signed, nor was any earnest money

provided. (Id. at 203-206.) Not surprisingly, Lasco again moved for dismissal asking

the bankruptcy court to grant its original Motion to Dismiss, as the court said it would

do if B-3 failed to comply with its Order of July 17, 2013. (Id. at 214-17.)3

The bankruptcy court set the matter for a final hearing on Lasco’s motion to

dismiss and an extensive hearing was held on December 19, 2013. (Rec. #2 at 10-11;

Addendum to Appellant’s Br. at 10, 20.) The court dismissed the action on the record,

following that up with a docket entry stating “Case Dismissed by separate order.” (Rec

#1 at 5.) B-3 then filed on January 2, 2014 an Emergency Motion to Reconsider

Dismissal, challenging the oral December 19, 2013 dismissal. (Rec. #2 at 11.) The

3 In the meantime, it seems that B-3 continued to flout the bankruptcy rules by

failing to submit its Monthly Operating Reports and by failing to pay the required

quarterly fees (Rec. # 1 at 200-201), all of which helps to show that the only thing B-3

was interested in was stalling the foreclosure. 

5
bankruptcy court both denied that motion and issued its written order of dismissal on

January 9, 2014. (Id. at 11-12.) The dismissal stated:

B-3 Properties, LLC, and any party having an interest in that entity, or otherwise

with respect to real property which comprised property of the bankruptcy estate

in Case No. 13-20432, is permanently enjoined from filing any case under Title 11

of the United States Code which includes as property of the bankruptcy estate of

any such person or entity any real estate comprising property of the bankruptcy

estate in Case No. 13-20432.

(Rec. #2 at 149.) B-3 then filed a second motion for reconsideration on January 23, 2014,

challenging the January 9, 2014 dismissal order and that motion was denied on

February 7, 2014. (Id. at 12.) B-3 filed its Notice of Appeal on February 21, 2014. (Id.) 

B-3 initially appealed both the bankruptcy court’s dismissal and bar to refiling,

and its denial of B-3's request for a stay. Before its appeal of the denial of its request for

stay was docketed, B-3 filed in this Court an emergency motion requesting a stay of the

state court sale. (DE 6.) After the parties fully briefed the issue and I heard oral

argument (DE 16), I granted the stay (DE 18), mooting the appeal of the stay order. The

only issue before me, then, is B-3's appeal of the dismissal and permanent bar to

refiling. In addition, Lasco challenges my jurisdiction over this appeal, claiming that 

B-3 has filed the appeal too late. 

Discussion

In reviewing a bankruptcy court’s decision pursuant to 28 U.S.C. § 158(a), the

district court functions as an appellate court and is authorized to affirm, reverse,

modify, or remand the bankruptcy court’s ruling. Fed. R. Bankr. P. 8013. The standard

6
for review of bankruptcy court decisions depends upon the issue being reviewed. 

Findings of fact are upheld unless clearly erroneous, but legal conclusions are reviewed

de novo. Id.; In re Marrs-Winn, 103 F.3d 584, 589 (7th Cir. 1996). Dismissals of

bankruptcy petitions are reviewed for an abuse of discretion. In re Hall, 304 F.3d 743,

746 (7th Cir. 2002). 

In reviewing for abuse of discretion, I have to reverse where a bankruptcy court’s

“decision is premised on an incorrect legal principle or a clearly erroneous factual

finding, or when the record contains no evidence on which the court rationally could

have relied.” In re KMart Corp., 381 F.3d 709, 713 (7th Cir. 2004); see also Corp. Assets, Inc.

v. Paloian, 368 F.3d 761, 767 (7th Cir. 2004). Whether I agree with the bankruptcy judge’s

decision is beside the point as long as the decision is within the range of options from

which one would expect a reasonable trial judge to select. Liu v. Price Waterhouse LLP,

302 F.3d 749, 754 (7th Cir. 2002). It is for this reason that B-3 faces an uphill challenge in

trying to convince me that Judge Klingeberger abused his discretion. Zhou v. Guardian

Life Ins. Co. of Am., 295 F.3d 677, 679 (7th Cir. 2002).

As noted above, B-3 takes issue with the bankruptcy court’s dismissal order and

Lasco argues that I don’t even have jurisdiction to hear this appeal. I will first address

Lasco’s jurisdictional arguments. I will then turn to whether Judge Klingeberger

abused his discretion in dismissing B-3's bankruptcy petition with a permanent bar to

refiling. 

7
Jurisdiction

Lasco claims B-3's appeal is not properly before me because it was filed too late. 

Under Bankruptcy Rule 8002, an appellant must file its notice of appeal within 14 days

of the judgment appealed. B-3 filed its Notice of Appeal on February 21, 2014. Lasco

argues that B-3's 14-day time clock began to run on January 9, 2014 — the date on which

Judge Klingeberger issued his denial of B-3's motion for reconsideration and also issued

his written order dismissing the case. (DE 21 at 1.) That would mean that over 40 days

elapsed before B-3 filed its Notice of Appeal.

 B-3, however, argues that the clock didn’t start until February 7, 2014 — the date

on which Judge Klingeberger issued his denial of B-3's second motion for

reconsideration, because the first motion for reconsideration essentially jumped the gun

by challenging only a non-final oral order and was therefore inoperative. (DE 22 at 1-2.) 

According to B-3, the clock didn’t start until it properly moved to reconsider the

bankruptcy court’s final written order, issued on January 9, 2014. (Id. at 3.) I agree with

B-3 on the jurisdictional argument.

In general, filing a motion for reconsideration tolls the time limit for filing an

appeal until after full resolution of that motion. Martinez v. City of Chicago, 499 F.3d 721,

725 (7th Cir. 2007). While a premature motion for reconsideration (e.g. one filed after an

oral ruling, but before the Rule 58 written judgment has issued) tolls the timing

deadline, this happens only if the motion challenges a final ruling. See Borrero v. City of

Chicago, 456 F.3d 698, 699 (7th Cir. 2006) (stating that a motion for reconsideration tolls

8
the statute of limitations if “the motion is filed before the Rule 58 judgment order has

been docketed or even before there is a Rule 58 judgment, provided that a final judgment

has been rendered.”) (some emphasis original, some added); Martinez, 499 F.3d at 725

(“The key is whether the [motion for reconsideration] followed a final judgment, not how

the finality of the judgment is demonstrated.”)(emphasis added). 

There is no doubt that Judge Klingeberger’s oral order on December 19, 2013 was

not a final judgment. Not only did he follow up the hearing with a docket entry stating

that the case would be “[d]ismissed by separate order” (Rec. #1 at 5), but he also

explicitly stated as much in his January 9, 2014 order denying B-3's first motion for

reconsideration: “Whatever may have been determined on a [sic] record at the

December 19, 2013 hearing was not an actionable final order of the United States

Bankruptcy Court for the Northern District of Indiana.” (Supp. Rec. at 33.) Since Judge

Klingeberger was in the best position to interpret his own ruling, it is clear that his

ruling was not final. In re Chicago, Rock Island, & Pac. R.R. Co., 860 F.2d 267, 272 (7th Cir.

1988) (finding bankrupcty court was “in the best position to interpret its own orders”);

accord Hastert v. Illinois St. Bd. of Elect. Comm’rs., 28 F.3d 1430, 1438 (7th Cir. 1993). 

Judge Klingeberger’s dismissal therefore did not become final until his January 9,

2014 order, and B-3's time clock began to run after February 7, 2014 – when its January

23, 2014 renewed motion to reconsider was denied. Thus, because B-3 thereafter timely

filed its appeal, this appeal properly before me.

9
Evidentiary Hearing on Motion to Dismiss

B-3 argues that I should reverse the dismissal of its bankruptcy petition because

the bankruptcy court “failed to follow its own prior order as to a possible hearing of

dismissal.” (DE 17 at 13.) In that prior order — the Record No. 66 Order — Judge

Klingeberger stated that “[i]f a motion and an offer to purchase subject to that motion

which conform to the foregoing requirements of this order are timely filed by debtor and the

motion for sale is not approved . . . then the court will conduct a hearing as to further

proceedings on the record No. 10 motion.” (Rec. #1 at 171 (emphasis added).) Recall

that the Record No. 10 Motion that Judge Klingeberger was referring to was B-3's

original motion to dismiss. If B-3 failed to conform to the terms of the order, however,

then B-3's petition would “forthwith be dismissed on the record No. 10 motion with a

bar to refiling of any subsequent case under Title 11 . . . .” (Id.) So in essence, if B-3

complied with the order and for some reason the sale did not go through, then the court

would hear further argument as to why the petition should not be dismissed. If B-3

instead failed to comply with the order, then its action would be immediately dismissed

with no further hearing. 

In dismissing the action, the bankruptcy court found that B-3 had not complied

with the requirements of its Record No. 66 Order because it had not presented a valid

purchase offer. (Rec. #2 at 148-49.) Therefore, under the procedures set forth in its

order, an evidentiary hearing was not contemplated. In any event, B-3 wasn’t entitled

to a hearing anyway. See In re Bartle, 560 F.3d 724, 729 (7th Cir. 2009) (finding

10
bankruptcy courts are not required to hold a hearing on a motion to dismiss where “the

court by virtue of having presided over the case is already familiar with those facts”

because “neither the notice nor the hearing requirement is rigid” and parties are not

entitled to “a particular type of hearing”). 

But Judge Klingeberger didn’t do that — instead, he did hold an extensive

hearing prior to dismissing B-3's action. On December 19, 2013, the court held a twohour hearing during which the court heard opening and closing arguments from

counsel for both B-3 and Lasco, and engaged in extensive questioning of both attorneys. 

And although B-3 claims that it did not receive the required 21-day notice of the

hearing, the bankruptcy docket reveals that the court gave the parties 23 days’ notice,

which is more than sufficient. (Rec. #2 at 10.)

Given these facts, it is difficult to figure out why B-3 believes it did not obtain a

hearing on its dismissal. Although not explicitly argued, B-3 seems to take issue with

the fact that the notice and hearing referenced Lasco’s Record No. 83 Motion to Dismiss

instead of the Record No. 10 Motion to Dismiss. But this is of no consequence because,

as discussed in the background section above, Lasco’s Record No. 83 Motion to Dismiss

merely requested that the court grant its Record No. 10 Motion to Dismiss as the court

had previously said it would if B-3 failed to comply with the court’s order regarding

sale of the property.

Simply put, the bankruptcy court afforded B-3 more than ample opportunity to

be heard on whether dismissal was proper. Far from “violating” its own order, the

11
court went above and beyond what it had contemplated by affording B-3 an additional

opportunity to explain its continued inability to sell the property. There is no abuse of

discretion here. 

Dismissal For Cause

B-3 argues that there was no cause for dismissal because “[a] close review of

paragraphs A through P [of Section 1112 of the Bankruptcy Code] show that none of

these listed ‘causes’ apply to B-3 Properties L.L.C.” (DE 17 at 19.) I disagree. Section

1112 of the Bankruptcy Code governs dismissal of bankruptcy actions and lists “failure

to comply with an order of the court” at Paragraph E as one of a number of different

actions constituting cause for dismissal. 11 U.S.C. § 1112(b)(4)(E). The bankruptcy

court ordered B-3 to submit a motion to sell real property including an offer to purchase

that conformed to the Agreed Terms of Sale. (Rec. #1 at 170-71.) In the event that B-3

failed to comply, its action would be dismissed forthwith with a permanent bar to

refiling. (Id.) The Agreed Terms of Sale required a non-refundable payment of

$75,000.00 and a signed purchase agreement. (Id. at 173.) 

B-3 argues that the unsigned purchase agreement it submitted should suffice

because there can’t be a valid purchase agreement prior to court approval under 11

U.S.C. § 363. (DE 17 at 19.) But Section 363 doesn’t say that and B-3 doesn’t point me to

any specific part of Section 363 or any case law to support its interpretation. Even if that

were the case, however, the bankruptcy court’s order also required a valid earnest

money deposit, which B-3 failed to provide since the check it submitted bounced. (Rec.

12
#1 at 220.) For that reason alone, B-3 violated the bankruptcy court’s order, warranting

immediate dismissal. The bankruptcy court therefore did not abuse its discretion in

dismissing this action for failing to comply with its order.

Permanent Bar to Refiling

The more difficult question is whether the bankruptcy court abused its discretion

by further imposing a permanent bar to refiling. In dismissing B-3's action, the

bankruptcy court stated:

B-3 Properties, LLC, and any party having an interest in that entity, or otherwise

with respect to real property which comprised property of the bankruptcy estate

in Case No. 13-20432, is permanently enjoined from filing any case under Title 11

of the United States Code which includes as property of the bankruptcy estate of

any such person or entity any real estate comprising property of the bankruptcy

estate in Case No. 13-20432. 

(Rec. #2 at 149.) B-3 argues that such a bar violates Sections 109(g) and 349(a) of the

Bankruptcy Code. 

There is some tension between those two sections of the code. Section 109(g)

states in relevant part:

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 was dismissed by the court for willful failure of the debtor to abide

by orders of the court . . . .

11 U.S.C. § 109(g). By contrast, Section 349(a) states:

Unless the court, for cause, orders otherwise, the dismissal of a case under this

title does not bar the discharge, in a later case under this title, of debts that were

13
dischargeable in the case dismissed; nor does the dismissal of a case under this title

prejudice the debtor with regard to the filing of a subsequent petition under this

title, except as provided in section 109(g) of this title.

11 U.S.C. § 349(a).

According to B-3, any bar beyond 180 days would violate 11 U.S.C. Section

109(g). In support, B-3 cites to In re Frieouf, a Tenth Circuit case where the court held

that Section 349(a) was not intended to expand a bankruptcy court’s power to bar

refilings, and therefore Section 109(g) is the only means by which a court can deny a

debtor’s future access to bankruptcy. In re Frieouf, 938 F.2d 1099, 1103 (10th Cir. 1991). 

Therefore, under Frieouf, courts are not permitted to bar filings beyond the 180 days set

forth in Section 109(g). Id.

In re Frieouf has been widely criticized by nearly every other circuit addressing

this issue, including two bankruptcy courts in this district, because it essentially reads

out Section 349(a)’s statement of “unless the court, for cause, orders otherwise....” See

e.g In re Casse, 198 F.3d 327, 336 (2nd Cir. 1999) (rejecting Frieouf and recognizing that

“no other circuit has adopted its reading of the Bankruptcy Code”); In re Dietrich, No.

05-2255, 2007 WL 579547 at *4-5 (6th Cir. Feb. 15, 2007)(rejecting Frieouf’s interpretation

of Sections 349(a) and 109(g) as the minority view); In re Garcia, 479 B.R. 488, 494

(N.D.Ind.Bkrtcy. 2012) (J. Klingeberger) (“The court first notes that it does not agree

with the limitations imposed upon the use of 11 U.S.C. § 349(a) determined in In re

Frieouf . . . .”); cf. In re Earl, 140 B.R. 728, 741 (N.D.Ind.Bkrtcy. 1992)(“this Court disagrees

14
with the conclusions reached by the Court in In re Frieouf. . . that § 105 does not provide

the Bankrupcty Court with the equitable power to enjoin future filings.”)(citation

omitted). 

So the majority view is that Section 109(g) and Section 349(a) are entirely

reconcilable with one another. The former is specifically aimed at preventing serial

filers from bogging down the bankruptcy process; the latter is a more general provision

that allows bankruptcy judges to bar refiling when there is otherwise good cause for

doing it. In re Casse, 198 F.3d at 340-41. In other words, bankruptcy courts are

authorized to bar refilings beyond the 180 days set forth in Section 109(g) under either

Section 349(a), authorizing the court to bar refilings “for cause,” or Section 105(a),

authorizing courts to “issue any order, process, or judgment that is necessary or

appropriate to carry out the provisions of this title . . . or prevent an abuse of process.” 

See id. 

Though the Seventh Circuit has not explicitly addressed In re Frieouf, it follows

the majority view that courts may impose bars to refiling of longer than 180 days. In re

Dempsey, 247 Fed.Appx. 21, 2007 WL 2478674 at *25, **4 (7th Cir. 2007) (upholding oneyear bar to bankruptcy refiling). I therefore see no problem with the fact that the bar

imposed exceeds 180 days. 

 B-3 further argues that the court could not order a bar of any duration because

there was “no motion filed or order entered alleging ‘bad faith’ by B-3 Properties

L.L.C.” and “[t]here was no hearing or finding of ‘bad faith.’” (DE 17 at 17.) The

15
Seventh Circuit, however, has ruled that Section 105(a) permits courts to issue refiling

bars of greater than 180 days without finding bad faith: 11 U.S.C. § 105(a)

“independently authorizes bankruptcy courts to prohibit bankruptcy refilings from

debtors who are demonstrably ineligible to receive bankruptcy relief . . . . This includes

cases where the debtor has not acted in bad faith.” In re Dempsey, 247 Fed.Appx. at 25

(upholding one-year bar to refiling where debtor filed eight rejected plans and his

“current financial situation necessarily prevents him from presenting a workable plan

for the near term”)(citations omitted). Certainly, given B-3's repeated unsuccessful

attempts at selling its primary asset and two unsuccessful bankruptcy attempts, B-3

demonstrated that it is ineligible to receive bankruptcy relief. The bankruptcy court

was therefore within its discretion to prohibit future filings without making explicit

findings of bad faith. 

Where the rubber really meets the road here is whether the bankruptcy court

abused its discretion in issuing a permanent bar to refiling without making explicit

findings of bad faith. In the case of a permanent bar, courts generally do require some

kind of bad faith actions on the part of the debtor before forever barring them from

refiling. For example, the Seventh Circuit has held that “dismissals with prejudice are

therefore generally reserved for extreme situations, such as when a debtor conceals

information from the court, violates injunctions, files unauthorized [bankruptcy]

petitions, or acts in bad faith.” In re Hall, 304 F.3d at 746. 

16
Other circuits have upheld permanent bars where they have found some kind of

bad faith behavior on the part of the debtor. See e.g. In re Casse, 198 F.3d at 342

(upholding permanent bar to refiling where debtor’s bankruptcy filings repeatedly

delayed creditor’s foreclosure proceedings); In re Leavitt, 171 F.3d 1219, 1225-26 (9th Cir.

1999)(affirming permanent bar to refiling where debtor used the bankruptcy system to

avoid paying a judgment); In re Dietrich, 2007 WL 579547 at *5 (upholding permanent

refiling bar because “the plain language of section 349(a) appears to allow a bankruptcy

court to dismiss a bankruptcy petition with prejudice, permanently, if there is sufficient

cause” where debtor had filed three previous unsuccessful bankruptcy petitions and the

filing of a fourth violated the court’s order prohibiting future filings); cf. In re Tomlin,

105 F.3d 933, 938 (4th Cir. 1997) (finding “§ 349 was never intended to limit the

bankruptcy court’s ability to impose a permanent bar to discharge that would have res

judicata effect”); In re Johnson, BAP No. EC-13-1094, 2014 WL 2808977 at *7 (9th Cir. June

6, 2014)(“Upon a finding of bad faith, a bankruptcy court may dismiss a case with a

permanent bar to refiling”). 

As these cases demonstrate, using the bankruptcy system to forestall a

foreclosure and violating court orders are sufficient bases for permanently barring

refiling. But did the bankruptcy court need to make explicit findings of bad faith for me

to uphold the permanent bar? B-3 argues that I should reverse the bankruptcy court

because: 

17
[T]here was no motion filed or order entered alleging “bad faith” by B-3

Properties L.L.C. There was no hearing or finding of “bad faith.” This is just an

order “out of the blue” with no foundation in pleadings or facts. There was no

motion by a creditor alleging bad faith. 

(DE 17 at 17.) 

This is a flat out misrepresentation of the proceedings below, and it is troubling. 

It is true that Judge Klingeberger did not make explicit findings of bad faith either on

the record or in his order of dismissal. But contrary to B-3's assertion, Lasco filed not

one but two motions alleging bad faith by B-3 and Judge Klingeberger heard extensive

oral argument on these motions, all of which set forth in great detail B-3's continued

attempts to forestall the state court foreclosure proceedings and repeated tendering of

bad checks. (See e.g. Rec. #1 at 18 (“‘Bad faith’ is additional grounds for dismissal”); Id.

at 216 (alleging two recent sale attempts involving NSF checks are “suspicious on their

face”).) To say there was “no motion filed” alleging bad faith or there was “no

foundation in pleadings or facts” is simply untrue. 

Although making specific findings of bad faith is certainly the more prudent

practice, the fact that it did not happen here does not automatically render the

bankruptcy court’s decision to bar refiling an abuse of discretion because I “may affirm

the judgment below on any ground supported by the record.” In re Disch, 417 F.3d 769,

779 (7th Cir. 2005); see also In re Leavitt, 171 F.3d at 1223 (upholding permanent bar and

finding “remand is not required when express findings are not made, if a complete

18
understanding of the issues may be had from the record without the aid of separate

findings”)(quotation marks and citations omitted). 

Here, the record before the bankruptcy court paints a clear picture of B-3's bad

faith:

• B-3 has filed two bankruptcies, both on the eve of a scheduled

foreclosure/auction sale of B-3's sole asset. (Rec. #1 at 6-14, 16-18.) It ultimately

voluntarily dismissed the first action after failing to pay any quarterly fees or file

monthly operating reports. (Id. at 33, 200.)

• B-3 presented two separate bad checks from alleged potential buyers (Id. at 197,

216, 220), one of which occurred on the last day B-3 was permitted to file a

motion for approval of sale under the terms of the bankruptcy court’s Record No.

66 Order. (Id. at 176-188.)

• After withdrawing these non-compliant offers, B-3 submitted a new offer on

November 7, 2013 – more than a month after the bankruptcy court’s deadline –

and again failed to provide any signed offer or earnest money. (Id. at 203-206.)

• B-3 blithely ignored the fact that it received bad checks from the would-be

buyers and never pursed any fraud charges against them. (Id. at 216.)

Based on these events, it is clear that B-3 was using the bankruptcy process as a

way of forestalling the inevitable foreclosure and sale of its property to Lasco. And

most of this was in direct violation of the bankruptcy court’s Record No. 66 Order. 

These facts and more were all before the bankruptcy court both in the form of extensive

19
briefing and oral argument, not to mention that Judge Klingeberger was no-doubt very

familiar with these facts by virtue of having presided over the bankruptcy. Indeed, he

cited the repeated bankruptcies and stalled sales as a reason for requiring B-3 to put

forth an explicit marketing plan back in April 2013. (Rec. #1 at 132.) Based solely on the

facts in the record before the bankruptcy court, I can find no abuse of discretion for

permanently barring B-3 from any future bankruptcy filings.4

 

Although the record before Judge Klingeberger is entirely sufficient to support

this ruling, I feel compelled to note that B-3's practice of promising to produce a

bonafide buyer for the property only to have it fall apart has continued even in this

Court. During prior briefing on the stay pending appeal that I granted in this matter

(DE 18), B-3 assured me that a buyer was ready, willing, and able to proceed with the

sale for $5 million. (DE 6 at 3.) Yet not one month later, B-3 changed its story yet again,

submitting an alternate buyer because the prior proposed deal fell through. (DE 26 at 3.) 

I have no doubt that if I reinstated this bankruptcy, B-3 would continue to run through

“potential buyers” in this fashion. A permanent bar to refiling will finally end B-3's

abuse of the process.

4

 B-3 also argues, with no development or citation to authority, that the

permanent bar would impermissibly apply “to anyone who could later own such

property either personally or as an entity.” (DE 17 at 16.) I do not agree with B-3's

interpretation. The bankruptcy court’s order appears to be limited to individuals or

entities who had an interest in the property at the time of the order, not those who may

later acquire the property. And even if B-3's reading is right, it has no standing to

challenge the harm that may come to future owners as it has no personal stake in that

matter and would suffer no injury itself. Warth v. Seldin, 422 U.S. 490, 498-99 (1975). 

That would be a matter for another day.

20
Conclusion

For the reasons stated above, the judgment of the bankruptcy court is

AFFIRMED. All other pending motions are rendered MOOT by this ruling and the stay

granted by the Court on July 11, 2014 (DE 18) is LIFTED. 

SO ORDERED.

ENTERED: September 19, 2014

 s/Philip P. Simon 

PHILIP P. SIMON, CHIEF JUDGE

UNITED STATES DISTRICT COURT

21