Court Opinion

ID: 3032755
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:48:25.353073+00
Date Added: 2024-06-11T11:48:20.890467
License: Public Domain

United States Bankruptcy Appellate Panel
                           FOR THE EIGHTH CIRCUIT
                                   _____________
                                   No. 03-6013WA
                                   _____________

In re: Kathleen Elizabeth Pennino,      *
                                        *
      Debtor                            *
                                        *
Kathleen Elizabeth Pennino,             *   Appeal from the United States
                                        *   Bankruptcy Court for the
      Debtor-Appellant,                 *   Western District of Arkansas
                                        *
                          v.            *
                                        *
Evergreen Presbyterian Ministries,      *
                                        *
      Interested Party-Appellee,        *
                                        *
and                                     *
                                        *
Jo-Ann L. Goldman,                      *
                                        *
      Trustee-Appellee,                 *

                                   _____________

                          Submitted: September 19, 2003
                             Filed: October 10, 2003
                                 _____________

Before SCHERMER, FEDERMAN, and VENTERS, Bankruptcy Judges.

                                   _____________

FEDERMAN, Bankruptcy Judge.
                           _____________
       Pro se debtor Kathleen Elizabeth Pennino appealed the bankruptcy court’s1
order to abstain and dismiss her Chapter 7 bankruptcy case, as well as two related
adversary proceedings. We affirm.

                           FACTUAL BACKGROUND

       Pennino has filed six Chapter 13 bankruptcy cases since 1996. Each case has
been dismissed prior to discharge. The last four are relevant to this appeal. On
November 30, 2000, Pennino filed a bankruptcy petition, and on November 13, 2001,
the court granted the trustee’s motion to dismiss that case. On June 17, 2002, Pennino
filed a case, which was dismissed on July 10, 2002, for failure to file schedules. She
filed a case on August 20, 2002, which she voluntarily dismissed after she failed to
file schedules. On October 11, 2002, she filed this case. A secured creditor in the
case, Evergreen Presbyterian Ministries (Evergreen), objected to confirmation of her
Chapter 13 plan. On December 11, 2002, the court held a hearing and sustained
Evergreen’s objection. On December 20, 2002, the Chapter 13 trustee filed a motion
to dismiss for abuse of the bankruptcy process. And, on December 31, 2002, before
the court entered its written order sustaining Evergreen’s objection to confirmation,
Pennino filed a motion to alter and amend the judgment denying confirmation.

       On January 13, 2003, the court issued its own order, sua sponte, for Pennino
to appear and show cause why the court should not abstain from this case. On that
same date, the court set a hearing date of February 19, 2003, on Pennino’s motion to
alter or amend judgment. The also court set a hearing date of February 19, 2003, to
hear the trustee’s motion to dismiss and the court’s order to show cause.

      1
      The Honorable Richard D. Taylor, United States Bankruptcy Judge for the
Western District of Arkansas.
                                          2
       Pennino is also pursuing a cause of action filed September 5, 2002, in the
United States District Court for the Western District of Arkansas under the Racketeer
Influenced and Corrupt Organizations Act of 19702 (the RICO Action). In apparent
duplication of the RICO Action, on February 10, 2003, Pennino filed an adversary
proceeding in the United States Bankruptcy Court for the Western District of
Arkansas naming Evergreen, Richard Donovan of the Rose Law Firm, and Judge
Smitherman of the Garland County Circuit Court, Arkansas, as defendants. On
February 14, 2003, Pennino filed another adversary proceeding in the bankruptcy
court naming the three defendants above and approximately 79 others, including the
Federal Bureau of Investigation and the City of Hot Springs, Garland County,
Arkansas.

       On March 7, 2003, the court abstained as to the bankruptcy case and the
attendant adversaries, and granted the trustee’s motion to dismiss. Pennino appealed
that order.

                                 STANDARD OF REVIEW

      A bankruptcy appellate panel shall not set aside findings of fact unless clearly
erroneous, giving due regard to the opportunity of the bankruptcy court to judge the
credibility of the witnesses.3 The decision to abstain is within the discretion of the
bankruptcy judge.4 We review such a decision for abuse of that discretion.5 A court

      2
          18 U.S.C. § 1961, et seq.
      3
       Gourley v. Usery (In re Usery), 123 F.3d 1089, 1093 (8th Cir. 1997); O'Neal
v. Southwest Mo. Bank (In re Broadview Lumber Co., Inc.), 118 F.3d 1246, 1250 (8th
Cir. 1997) (citing First Nat'l Bank of Olathe, Kansas v. Pontow, 111 F.3d 604, 609
(8th Cir.1997)). Fed. R. Bankr. P. 8013.
      4
       See 11 U.S.C. § 305(a); Heartland Community Church v. Waddle, 335 F.3d
684, 688 (8th Cir. 2003); Webb v. B.C. Rogers Poultry, Inc., 174 F.3d 697, 701 (5th
                                          3
abuses its discretion “when its ruling is founded on an error of law or a
misapplication of law to the facts.”6

                                      DISCUSSION

       Section 305(a) of the Bankruptcy Code (the Code) permits a bankruptcy court
to either dismiss a case or suspend proceedings under certain circumstances:

      (a) The court, after notice and a hearing, may dismiss a case under this
      title, or may suspend all proceedings in a case under this title, at any
      time if–

                (1) the interests of creditors and the debtor would be better
                served by such dismissal or suspension.7

In determining if both the creditors and Pennino would be better served by abstention,
the court considered the following facts: (1) Pennino has filed six cases since 1996;
(2) there is another, and more appropriate, forum, the United States District for the
Western District of Arkansas, for Pennino to seek relief from alleged corruption; (3)
there is no reasonable prospect for reorganization under Chapter 13 unless she
prevails in her RICO Action; (4) she has made no payments since 1999 to Evergreen,

Cir. 1999), cert. denied, 2Webb v. B.C. Rogers Poultry, Inc., 528 U.S. 964, 120 S. Ct.
399, 145 L. Ed. 2d 311,(1999); In re Manchester Heights Assoc., 140 B.R. 521, 522
(Bankr. W.D. Mo. 1992).
      5
       Kadjevich v. Kadjevish (In re Kadjevich), 220 F.3d 1016, 1019 (9th Cir. 2000);
Varsity Carpet Serv., Inc. v. Richardson (In re Colortex Industries, Inc.), 19 F.3d
1371, 1374 (11 Cir. 1994).
      6
       First Nat’l Bank of Olathe, Kansas v. Pontow (In re Pontow), 111 F.3d 604,
609 (8 Cir. 1997); Sholdan v. Dietz (In re Sholdan), 108 F.3d 886, 888 (8th Cir.
      th

1997).
      7
          11 U.S.C. § 305(a)(1).

                                             4
which holds a Deed of Trust on what she claims is her principal asset, and there is no
credible prospect of payments being made; and (5) Pennino admittedly filed the last
three bankruptcy cases to delay her creditors while she pursues the RICO Action.

      Abstention is an extraordinary power that should be used only in extraordinary
circumstances.8 The Code, therefore, permits a court to abstain and dismiss a case
only when the best interests of both the debtor and his or her creditors are better
served.9 The decision on whether to dismiss or suspend should be made on the facts
of each particular case.10 When determining whether abstention is appropriate, courts
look at the following factors: (1) whether the case is a two-party dispute, (2) the
economy and efficiency of administration; (3) the availability of another case or
forum to protect the interests of the parties; (4) alternative means of achieving
equitable distribution of assets, and (5) the purpose for which bankruptcy jurisdiction
has been sought.11

       The bankruptcy court applied these factors to the facts of this case and found
that the best interests of both Pennino and her creditors would be better served by
dismissing the case. The court found that the only benefit Pennino derived from the
various bankruptcy filings was to delay her creditors, without payment, while she
pursued the RICO Action in federal district court. In addition, the court found that
Pennino’s principal asset was not generating enough income to allow her to
reorganize under Chapter 13. The adversary actions filed by Pennino in the
bankruptcy court are substantially similar to and arise out of the same facts and
circumstances as the RICO Action; therefore, these adversaries are duplicative.

      8
          In re Manchester Heights Assoc., 140 B.R. 521, 522 (W.D. Mo. Bankr. 1992)
      9
          Schwartz v. Kujawa (In re Kujawa), 270 F.3d 578, 580 (8th Cir. 2001).
      10
           In re Iowa Trust, 135 B.R. 615, 621 (Bankr. N.D. Iowa 1992).
      11
           Id. at 621-22.
                                               5
Pennino testified that she cannot at this time fund any plan payments, and the attorney
for the trustee stated that Pennino was in substantial arrears with respect to her
proposed plan payments. Weighing all these factors, the court found that Pennino
could seek relief in her RICO Action; therefore, allowing this bankruptcy case, and
its attendant adversaries, to proceed would be inefficient and duplicative. The court
then found that, based on the above factors, no valid bankruptcy or administrative
purpose would be served by allowing this case to proceed. We agree.

       The bankruptcy court correctly found that the only purpose served by this case
is to delay the making of any payments to legitimate creditors. Pennino has used the
bankruptcy process to delay her creditors for approximately seven years and still, as
the court found, is not able to propose a feasible Chapter 13 plan, now or in the near
future, without a successful conclusion of her RICO Action. The number of failed
cases, and the attendant delays, would in and of themselves have justified dismissal
of this latest case.12 Given the pendency of the RICO Action, however, abstention is
appropriate. We conclude that the court did not abuse its discretion in finding that no
valid purpose is served by this bankruptcy case. We, therefore, affirm.

      A true copy.

             Attest:

                     CLERK, U.S. BANKRUPTCY APPELLATE PANEL,
                     EIGHTH CIRCUIT

      12
         See, e.g. Tolbert v. Fink (In re Tolbert), 255 B.R. 214, 217 (8th Cir. B.A.P.
2000) (where we affirmed the court’s dismissal of debtor’s sixth case within three
years with prejudice to refiling for 180 days); In re Belden, 144 B.R. 1010 (Bankr. D.
Minn. 1992) (where the court dismissed debtor’s ninth case in 15 years with prejudice
to refiling for two years).
                                          6