1

The Honorable David S. Doty, United States District Judge

for the District of Minnesota.

 2The Honorable Nancy C. Dreher, United States Bankruptcy

Judge for the District of Minnesota.

___________

No. 95-1180

 ___________

In re: Edward J. Molitor, *

 *

Debtor. *

 * 

___________________________ *

*

Edward J. Molitor, * Appeal from the United States

 * District Court for the District

Plaintiff-Appellant, * of Minnesota.

 *

v. * 

 * 

Gary C. Eidson; Jeffrey M. *

Schoenwetter, *

 *

Defendants-Appellees. * _______________

Submitted: October 19, 1995

 Filed: February 9, 1996 _______________

Before MORRIS SHEPPARD ARNOLD, FLOYD R. GIBSON, and ROSS, Circuit

Judges. _______________ 

FLOYD R. GIBSON, Circuit Judge.

Appellant Edward Molitor appeals the district court's1

affirmance of the bankruptcy court's2 order converting his Chapter

13 case to a Chapter 7 case. We have jurisdiction pursuant to 28

U.S.C. § 158(d) (1988), and we affirm.
2

I. BACKGROUND

This appeal involves Molitor's manipulation of the bankruptcy

code in order to retain possession of a three-bedroom home

purchased originally from John and Patricia Galle under a contract

for deed. When Molitor failed to fulfill his obligations pursuant

to the terms of the contract, the Galles twice attempted to cancel

the contract and evict Molitor. Each time, Molitor responded by

seeking an injunction in Hennepin County District Court and then

filing a Chapter 13 bankruptcy petition in order to invoke the

bankruptcy code's automatic stay provision. Molitor's first

petition was dismissed when he and the Galles reached a compromise

agreement. Molitor's second petition was dismissed by the Chapter

13 Trustee when Molitor failed to propose a reorganization plan

within a reasonable period of time. This appeal concerns Molitor's

third Chapter 13 petition.

On January 5, 1993, the Galles granted Molitor a 90-day

purchase option expiring on April 5, 1993. After Molitor failed to

execute the purchase option, the Galles conveyed the property to

Appellees Gary Eidson and Jeffrey Schoenwetter (Appellees).

Molitor continued to occupy the property pursuant to the expired

agreement with the Galles, but paid no rent. When Molitor sought

protection in state court, Hennepin County District Judge Roberta

Levy determined that Molitor had no right, title, or interest in

the property and ordered him to vacate the property as of 11:59

p.m., June 30, 1993. The deadline came and went, but Molitor

failed to vacate the premises. Appellees then obtained a writ of

restitution and made arrangements with the Hennepin County Sheriff

to serve and execute the writ and evict Molitor.

Molitor filed his third Chapter 13 petition on July 12, 1993,

the day before the writ was scheduled to be served and executed.

On August 4, 1993, Appellees filed a motion for relief from the

automatic stay and a motion for dismissal or conversion. The
3

motion for dismissal or conversion alleged that Molitor had filed

for bankruptcy in bad faith because he fraudulently misrepresented

his debts by failing to list state and federal income tax debts in

excess of $100,000.00. The motion also charged that Molitor was

ineligible for Chapter 13 bankruptcy because those tax liabilities

constituted over $100,000.00 in non-contingent liquidated unsecured

debt. The Trustee filed a response supporting Appellees' motion

for conversion.

On August 11, 1993, the day the motions were originally

scheduled to be argued, Molitor appeared without counsel and

requested additional time to prepare a defense. The bankruptcy

court continued the hearing until August 31, 1993. On August 31,

Molitor's counsel filed a voluntary dismissal of his Chapter 13

petition. Noting that Molitor was aware that there was a motion

for dismissal or conversion pending and that there were serious

allegations of multiple filings, bad faith, and improper listing of

liabilities on the schedules, the bankruptcy court refused to allow

the dismissal and subsequently granted Appellees' motion to convert

Molitor's Chapter 13 bankruptcy to a Chapter 7 proceeding.

Molitor appealed the bankruptcy court's order to the United

States District Court for the District of Minnesota. The district

court adopted the magistrate's report and recommendation affirming

the bankruptcy court's order. Molitor appeals again, alleging: (1)

that he is entitled to voluntary dismissal prior to conversion as

a matter of right under Chapter 13; and (2) that the bankruptcy

court erred in granting Appellees' motion for conversion in the

absence of a showing of fraud. We review the bankruptcy court's

legal conclusions de novo and its findings of fact for clear error.

In re Howell Enters., Inc., 934 F.2d 969, 971 (8th Cir. 1991).
4

II. DISCUSSION

 11 U.S.C. § 1307(b) (1988) provides that "[o]n request of

the debtor at any time, if the case has not been converted under

section 706, 1112, or 1208 of this title, the court shall dismiss

a case under this chapter." The next subsection, however, provides

that:

[O]n request of a party in interest or the United States

trustee and after notice and a hearing, the court may

convert a case under this chapter to a case under chapter

7 of this title, or may dismiss a case under this

chapter, whichever is in the best interests of creditors

and the estate, for cause . . . . 

11 U.S.C. § 1307(c). Molitor argues that section 1307(b) confers

upon the debtor an absolute right to withdraw his Chapter 13

petition prior to conversion. As such, he argues that the

bankruptcy court erred in converting his case to a Chapter 7

proceeding. Conversely, the Appellees argue that subsection (c)

necessarily limits a debtor's ability to voluntarily withdraw under

the previous subsection.

Neither viewpoint is without support. Several courts have

adopted Molitor's position, holding that the Chapter 13 debtor's

pre-conversion right to voluntary dismissal under section 1307(b)

is absolute. E.g., In re Looney, 90 B.R. 217 (Bankr. W.D. Va.

1988). Other courts have held that section 1307(c) curtails a

Chapter 13 debtor's right to voluntary dismissal. E.g., In re

Gaudet, 132 B.R. 670, 675-76 (D.R.I. 1991). We are guided by our

prior decision in In re Graven, 936 F.2d 378 (8th Cir. 1991). In

that case, this Court concluded that analogous provisions of

Chapter 12, § 1208(b) and (d), did not afford the Chapter 12 debtor

an unlimited right to voluntary dismissal. "We conclude that the

broad purpose of the bankruptcy code, including Chapter 12, is best

served by interpreting section 1208(d) to allow a court to convert
5

a case to Chapter 7 upon a showing of fraud even though the debtor

has moved for dismissal under subsection (b)." Id. at 385.

We believe that same broad purpose as well as the principles

of statutory construction employed in Graven apply equally well to

the nearly identical provisions of Chapter 13 and the instant case.

As in Graven, we are mindful that the purpose of the bankruptcy

code is to afford the honest but unfortunate debtor a fresh start,

not to shield those who abuse the bankruptcy process in order to

avoid paying their debts. Id. As in Graven, we also look to the

overall purpose and design of the statute as a whole rather than

viewing one subsection in isolation. Id. In this case, Molitor

failed to offer any defense whatsoever to the Appellees'

allegations of bad faith. Instead, he chose to use section 1307(b)

as an escape hatch once the Appellees called his bluff. To allow

Molitor to respond to a motion to convert by voluntarily dismissing

his case with impunity would render section 1307(c) a dead letter

and open up the bankruptcy courts to a myriad of potential abuses.

We decline to do so. 

Molitor argues alternatively that the bankruptcy court erred

in granting Appellees' motion to convert in the absence of a

showing of fraud. No such showing is required to convert a case

under Chapter 13, however. While Chapter 12 provides for

conversion only "upon a showing that the debtor has committed fraud

in connection with the case," 11 U.S.C. § 1208(d), a Chapter 13

petition filed in bad faith may be dismissed or converted "for

cause" under 11 U.S.C. § 1307(c). In re Eisen, 14 F.3d 469, 470

(9th Cir. 1994) (per curiam). Such cause includes filing a

bankruptcy petition in bad faith. See, e.g., Matter of Smith, 848

F.2d 813, 816 n.3 (7th Cir. 1988). The bad faith determination

focuses on the totality of the circumstances, specifically: (1)

whether the debtor has stated his debts and expenses accurately;

(2) whether he has made any fraudulent representation to mislead

the bankruptcy court; or (3) whether he has unfairly manipulated
6

the bankruptcy code. In re LeMaire, 898 F.2d 1346, 1349 (8th Cir.

1990). 

The bankruptcy court found that there was no justification for

Molitor's multiple filings. It also noted that Molitor's most

recent filing took place on the eve of eviction, leading it to

characterize Molitor's multiple filings as inappropriate "delay

tactics." As the bankruptcy court observed, "Once may be O.K., but

three times is too many." Molitor's actions constitute a clear

abuse of the legal process set forth in the Bankruptcy Act to aid

and assist honest debtors. It was also undisputed at the motion

hearing that Molitor misrepresented both his tax liabilities and

his monthly rent expenses on his schedules. We do not find the

bankruptcy court's findings to be clearly erroneous. 

III. CONCLUSION

For the above reasons, we affirm the decision of the district

court affirming the decision of the bankruptcy court.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.