Court Opinion

ID: 8991711
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:19:47.684077+00
Date Added: 2024-06-11T17:10:57.388318
License: Public Domain

NOONAN, Circuit Judge,
concurring and dissenting:
I concur in the dismissal of this case, but dissent as to the reversal of dismissal with prejudice. The longer the case goes on the more Bayoutree profits from its tactics. These tactics deserve penalties, not a reward.
Bayoutree owns a single asset, an apartment complex located in Houston, Texas. Bayoutree has no equity in the apartments and acknowledges secured claims exceeding $17.3 million on a property valued by the bankruptcy court at $12,6 million.
Just before Bayoutree’s note to the Oaks in the principal amount of $3.2 million matured in November 1989, Bayoutree sued the Oaks in a Texas state court contending that the note had been orally modified. A jury trial began on February 26, 1990 in this case. The verdict was against Bayou-tree. The Oaks was then free to enforce its lien. Four days later Bayoutree filed this bankruptcy case in Tucson, Arizona. Bayoutree picked a filing site where it knew in advance who the bankruptcy judge would be, as there was only one bankruptcy judge in Tucson.
That this plan to circumvent the Oaks had been prearranged by Bayoutree is shown not only by its prompt filing, but by the fact that inadvertently Bayoutree had filed an earlier bankruptcy petition in Tucson, Arizona on the very day that the jury trial began. It was clearly in the mind of Bayoutree and its counsel that a run to Arizona would be desirable and that Bayou-tree’s Texas case did not stand much chance of success.
Bayoutree has virtually no connection with Arizona. It is a Texas limited partnership, formed in 1984. The address of its general partners is in Dallas, Texas. None of its creditors and only one of its 75 limited partners have an address in Arizona. Its scheduled assets list no assets in Arizona.
Bayoutree’s only connection with Arizona is a contract with MGP III, Inc. MGP was created as an Arizona corporation on January 24, 1990. It is a wholly owned subsidiary of the Hall Financial Group, Inc., whose place of business is at the same address as Bayoutree’s in Texas. The only connection between MGP and Bayoutree is tenuous. A consulting agreement between MGP and Bayoutree provides that MGP will render certain financial analysis and consulting services, not to Bayoutree, but *807to Hall 84 Associates, one of Bayoutree's general partners.
Under 28 U.S.C. § 1408(1) an entity filing a bankruptcy case must have had its principal place of business in the district in which the case was filed for 180 days immediately preceding the filing. This bankruptcy petition was filed on March 5, 1990. As there was not the slightest connection between the Oaks and Arizona prior to January 1990 it is evident that this elementary requirement for jurisdiction was not complied with.
At no point has Bayoutree offered a plausible legal argument for its attempt to avoid the plain requirements of Section 1408. Almost nine months after the bankruptcy filing, after resisting the venue motion of the Oaks in the bankruptcy court and on appeal, Bayoutree offered to stipulate for transfer of venue — a concession, in advance of the judgment of the district court on the appeal, that Bayoutree had no legal basis for the venue that it had been defending. The bankruptcy filing was a desperate gambit of Bayoutree to avoid enforcement of the lien on its property that the Oaks had every right to enforce. On the record before us, as on the record before the district court, Bayoutree’s bad faith is plain.
The motion to dismiss for lack of venue filed by the Oaks explicitly referred to “the Debtor’s bad faith efforts in creating venue.” The Oaks appealed from the order of the bankruptcy court denying this motion. Consequently, bad faith was before the district court.
We explicitly directed the district court to make findings of fact as to Bayoutree’s bad faith, and the district court complied. It is a strained and over-technical position for us now to say that our earlier directive was incorrect and that it failed to establish the law of the case.
This anomalous change in our views put to one side, our precedents make plain that an appellate court may rule on the record before it where the record provides an adequate basis for review. Syncom Capital Corp. v. Wade, 924 F.2d 167, 169 n. 2 (9th Cir.1991). What is true of our procedure under Fed.R.Civ.P. 52(a) should be true under Fed.R.Bankr.P. 7052(a), which is derived from the federal rule. Dahnken’s of Santa Barbara, Inc. v. Marsh Industries, 11 B.R. 536, 537-38 (Bankr. 9th Cir.1981). Evident on this record is the filing of a petition in Arizona in flagrant disregard of the elementary requirement of a place of business for 180 days in that state. The majority points to no material fact in dispute as to which fact-finding by the bankruptcy court would aid decision.
Matter of Pizza of Hawaii, Inc., 761 F.2d 1374 (9th Cir.1985) (unfortunately mis-eited by the majority opinion) is decisive. We there repeated an earlier holding that “it is within the district court’s discretion whether to consider issues not presented to the bankruptcy court.” Id. at 1377. We went on to repeat this holding with reference to cases decided in this way by various bankruptcy courts. Id. at 1379. All that is essential is that the district court have before it an issue presented by the record. Id. The district court did not abuse its discretion here. To the contrary, it properly brought Bayoutree’s shameless tactics to an end.
The opinion of the majority is self-contradictory. It first holds that the district court should have remanded the case to the bankruptcy court for factual findings on bad faith. It then holds that the district court did not abuse its discretion in dismissing the case because it properly found that the filing had been made in bad faith. It is difficult to understand how the district court can find bad faith for dismissal but not bad faith for dismissal with prejudice.
Although the majority reverses the judgment of the district court, the district court is still not without resources to act in this case. This court has approved a district court withdrawing reference to a bankruptcy court nunc pro tunc. See Mission Indians v. Amer. MGMT & Amusement, Inc., 824 F.2d 710, 715 (9th Cir.1987). Accordingly, for “cause shown,” 28 U.S.C. § 157(d), the district court can withdraw the case nunc pro tunc from the bankruptcy court and reach again the conclusions it has already reached. The cause shown *808could well be the bankruptcy court’s egregious error in refusing to dismiss for lack of venue when the venue statute uneontro-vertibly was not complied with.
The district court is also not without remedies that could appropriately be taken as to counsel who have filed this bankruptcy case and who have continued to defend the filing on appeal to the district court. See Fed.R.Civ.P. 11.
We too have responsibilities under the Code of Judicial Conduct both as to such counsel and as to the bankruptcy court. These will be carried out by appropriate actions not necessary to specify here.