Court Opinion

ID: 3043455
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:11:29.467849+00
Date Added: 2024-06-11T11:49:03.669715
License: Public Domain

United States Bankruptcy Appellate Panel
                           FOR THE EIGHTH CIRCUIT

                                   _______________

                                      07-6024EA
                                   _______________

In re: Bobby Ernest Finch and                *
       Donna Lynn Finch,                     *
                                             *
       Debtors                               *
                                             *
Bobby Ernest Finch and                       *   Appeal from the United States
Donna Lynn Finch,                            *   Bankruptcy Court for the
                                             *   Eastern District of Arkansas
       Debtors-Appellants                    *
                                             *
              v.                             *
                                             *
David D. Coop,                               *
                                             *
       Trustee-Appellee                      *

                                 __________________

                              Submitted: October 30, 2007
                               Filed: November 26, 2007
                                ___________________

SCHERMER, FEDERMAN and MAHONEY, Bankruptcy Judges

FEDERMAN, Bankruptcy Judge

      Debtors Bobby Ernest Finch and Donna Lynn Finch appeal from the Order of
the Bankruptcy Court1 denying their Motion to Reopen their Chapter 13 Case and

       1
          The Honorable Richard D. Taylor, Bankruptcy Judge, United States Bankruptcy Court
for the Eastern District of Missouri.
denying their Applications to Proceed without Prepayment of Fees. For the reasons
that follow, the Order is AFFIRMED.

                            FACTUAL BACKGROUND

        The Debtors filed their Chapter 13 bankruptcy case on September 9, 2004, and
filed their schedules and plan on October 6, 2004. Among their secured creditors, the
Debtors listed First Security Bank (“First Security”), who had a security interest in the
Debtors’ 1999 Toyota Tacoma pickup truck, and First State Bank (“First State”), who
had a security interest in the Debtors’ 1994 Dodge one-ton pickup truck. On
September 21, 2004, First Security filed a motion for relief from stay regarding the
Toyota Tacoma pickup. In addition, both First Security and First State objected to the
Debtors’ proposed plan. First Security’s motion for relief from stay and objection to
confirmation were dismissed based on a stipulation with the Debtors as to the plan’s
treatment of its claim, and First State’s objection to confirmation was sustained.
Ultimately, after at least two amendments, the Debtors’ plan was confirmed on
February 23, 2005.

       In July 2005, First State and the Chapter 13 Trustee each moved to dismiss the
case due to default in plan payments. The Chapter 13 Trustee later withdrew his
motion to dismiss. As to First State’s motion to dismiss, on November 15, 2005, the
court entered an Order, based on agreement between the parties, placing the Debtors
on “strict compliance” such that they were required to make full and timely plan
payments for the following twelve months (the “Strict Compliance Order”). In the
event that the Debtors failed to timely make such a payment, First State had the right,
upon ex parte motion, to an order granting it relief from the stay to allow it to pursue
its security interest in the Debtors’ Dodge pickup.

     The Debtors did not make the November or December 2005 plan payments. On
December 16, 2005, First Security filed a motion to dismiss due to default in plan

                                           2
payments. In addition, on December 22, 2005, First State filed an ex parte motion for
relief from the stay, alleging that the Debtors had not timely made the payments
required under the Strict Compliance Order. The court entered the ex parte Order
granting First State relief from the stay on December 27, 2005.

       Meanwhile, in the midst of this period of time when they were in default on
their plan payments, the Debtors filed a motion, on October 11, 2005, asking that they
be permitted to release their attorney from representing them in the case. The attorney
responded, essentially stating that he had no objection to the Debtors’ request that he
withdraw from the case. On December 28, 2005, the day after State Bank’s ex parte
Order for relief from the stay was entered, the court granted the Debtors’ request to
release their attorney. From that point forward, the Debtors represented themselves
pro se.

       On January 11, 2006, First Security again moved to dismiss, due to default
under the Strict Compliance Order. On January 12, 2005, the Debtors filed a motion
requesting that the ex parte Order granting relief to First State be set aside. The court
did not rule on the motion to set aside because, on March 14, 2006, it dismissed the
case for failure to make timely payments under the Strict Compliance Order. On April
5, 2006, the Chapter 13 Trustee filed a Final Report and Account, and the court
entered an order discharging the Trustee. The court clerk closed the case on April 17.

       However, prior to the closing of the case, on April 4, 2006, the Debtors had
filed a Notice of Appeal of the March 14 Order dismissing their case, as well as the
December 28, 2005 Order allowing the attorney to withdraw. Accordingly, since an
appeal was pending in the case, the bankruptcy court entered an Order on May 11,
2006, stating that the case had been closed in error, and reopening the case. We then
dismissed the Debtors’ appeal of the two Orders as untimely. Similarly, on August
31, 2006, the Court of Appeals for the Eighth Circuit dismissed the appeal for lack
of jurisdiction.

                                           3
       Meanwhile, on August 30, 2006, the Debtors moved to reinstate their
bankruptcy case. The Chapter 13 Trustee opposed the motion, pointing out that the
Debtors had missed numerous payments while the case was pending, and that the
delinquency was compounded by the additional payments not made during the period
after the case was dismissed. On October 27, 2006, the Court entered an Order
denying the motion to reinstate the case. On November 6, 2006, the Chapter 13
Trustee again submitted a Final Report and Account, and the court entered an Order
discharging the Trustee from the case. The case was then closed on March 21, 2007.
By this time, it appears that both the Dodge and the Toyota pickup trucks had been
repossessed.

       On April 9, 2007, the Debtors again filed a motion to reopen their case, along
with applications for each of them to proceed without prepayment of fees. The
Chapter 13 Trustee again opposed the motion to reopen. The Trustee again pointed
out that, although the Debtors could perhaps file a new Chapter 13 or Chapter 7 case,
this case should not be reopened or reinstated because the Debtors would not be able
to overcome the substantial and continually increasing delinquency in plan payments.
Following a hearing, the Court denied the Debtors’ motions and applications by Order
entered April 30, 2007. The Debtors timely appealed the April 30 Order.

                               STANDARD OF REVIEW

      The BAP reviews findings of fact for clear error, and legal conclusions de
novo.2 A bankruptcy court’s decision to reopen a case is within the court’s discretion,
based on the particular circumstances and equities of the particular case.3

      2
        First Nat’l Bank of Olathe v. Pontow (In re Pontow), 111 F.3d 604, 609 (8th Cir.
1997); Sholdan v. Dietz (In re Sholdan), 108 F.3d 886, 888 (8th Cir. 1997); Fed. R.
Bankr. P. 8013.
      3
          In re Apex Oil Co., Inc., 406 F.3d 538, 542 (8th Cir. 2005).

                                              4
                                   DISCUSSION

       The Debtors raise numerous grievances concerning the events in their case. The
crux of the Debtors’ complaint, however, is that, due to no fault of their own, they
were unable to make the plan payments and, since they promptly notified the Trustee
and creditors that they could not make the payments, the stay should not have been
lifted and their case should not have been dismissed. Specifically, at the time the
Debtors filed their bankruptcy case, their sole source of income was through acquiring
used or damaged pallets and then repairing and reselling them. This required the use
of a pickup truck. However, the trucks were inoperable or otherwise unusable for
significant periods of time for various reasons and, as mentioned above, they were
ultimately repossessed. Thus, through no fault of their own, they contend, they were
prevented from earning a living and making their plan payments.

      Further, at around the time the Strict Compliance Order was entered in the fall
of 2005, the Debtors were seeking to discharge their attorney. Unable to make the
plan payments, and without the assistance of counsel, the Debtors consulted a booklet
given to them by the Chapter 13 Trustee’s Office at the outset of their case.
According to the Debtors, the booklet said that if they were unable to timely make a
payment without causing a hardship on themselves, they should contact the Chapter
13 Trustee to explain the situation. Believing this would relieve them of any duty to
make their plan payments, even under the Strict Compliance Order, they contacted the
Chapter 13 Trustee to explain the situation. They assert that, since they notified the
Trustee about the situation, the trucks were wrongfully repossessed and their case was
improperly dismissed and closed. Hence, they ask that their case be reopened so that
they can regain possession of the trucks and obtain their discharge.

      Section 350 of the Bankruptcy Code governs the closing and reopening of
bankruptcy cases. That section provides:

                                          5
       (a) After an estate is fully administered and the court has discharged the
       trustee, the court shall close the case.

       (b) A case may be reopened in the court in which such case was closed
       to administer assets, to accord relief to the debtor, or for other cause.4

In essence, the Debtors assert that the case should be reopened to accord them relief
(i.e., allowing them to proceed with their Chapter 13 case, regain possession of the
trucks, and obtain their discharge) and for other cause (i.e., to remedy the alleged
wrongs done to them by their creditors and award them damages for such wrongs).

       The Debtors misunderstand the nature and effect of reopening a closed case.

       Reopening is supposed to be little more than an administrative function
       which is designed to resurrect closed files from the court’s archives so
       that some type of request for relief can be received and acted upon. This
       is usually done in order to take care of some detail that was overlooked
       or left unfinished at the time the case was closed. It was not designed as
       an opportunity to create, and then enforce, rights that did not exist at the
       time the case was originally closed.5

Rather than wanting to take care of some overlooked or unfinished detail, what the
Debtors really seek is to have the dismissal of their case set aside and their trucks
returned to them.

      However, a dismissed case cannot be reopened under § 350(b); rather a
dismissal can be undone only through an appeal or a motion under Federal Rule of
Bankruptcy Procedure 9023 or 9024.6 As mentioned above, the Order granting First

       4
           11 U.S.C. § 350.
       5
           In re Bartlett, 326 B.R. 436, 438 (Bankr. N.D. Ind. 2005).
       6
        3 Collier on Bankruptcy ¶ 350.03, at 350-6 (15th ed. rev. 2004) (citing Income
Property Builders, Inc., 699 F.2d 963 (9th Cir. 1982); additional citations omitted); see

                                              6
State relief from the stay was entered on December 27, 2005, and the Order dismissing
their case was entered on March 14, 2006. The Debtors did not timely seek
amendment of the Orders granting relief from the stay and dismissal under Rule 9023,
nor did they timely appeal such Orders, because those acts must occur within ten days
after entry of the Order.7

       Arguably, the Debtors’ Motion to Reopen the case could be viewed as a Rule
60(b) request for relief from the Orders granting relief from the stay and dismissing
the case, as that rule is made applicable to this bankruptcy case by Rule 9024. That
rule provides, in relevant part:

      On motion and upon such terms as are just, the court may relieve a party
      or a party’s legal representative from a final judgment, order, or
      proceeding for the following reasons: (1) mistake, inadvertence, surprise,
      or excusable neglect; (2) newly discovered evidence which by due
      diligence could not have been discovered in time to move for a new trial
      under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or
      extrinsic), misrepresentation, or other misconduct of an adverse party;
      (4) the judgment is void; (5) the judgment has been satisfied, released,
      or discharged, or a prior judgment upon which it is based has been
      reversed or otherwise vacated, or it is no longer equitable that the
      judgment should have prospective application; or (6) any other reason
      justifying relief from the operation of the judgment. The motion shall be
      made within a reasonable time, and for reasons (1), (2), and (3) not more
      than one year after the judgment, order, or proceeding was entered or
      taken.8

also In re Ragland, 2006 WL 1997416 at *4-5 (Bankr. E.D. Pa. May 25, 2006) (slip
copy).
      7
          Fed. R. Bankr. P. 9023(e) and 8002(a).
      8
          Fed. R. Civ. P. 60(b), made applicable in bankruptcy cases by Fed. R. Bankr. P. 9024.

                                                7
At the outset, we question whether the motion was timely under this provision. If the
Debtors assert any of the grounds for relief under Rule 60(b)(1), (2), or (3), then the
motion is untimely because it was brought more than one year after the Orders were
entered. Assuming that the Debtors are seeking relief under Rule 60(b)(6) for “any
other reason justifying relief from the operation of the [orders],” then such motion
must have been brought within a “reasonable time.” “What constitutes a reasonable
time is dependent on the particular facts of the case in question and is reviewed for
abuse of discretion.”9

       As to the December 27, 2005 Order granting First State relief from the stay,
First State has undoubtedly taken actions in reliance on the Order in the nearly two
years since it was entered. Accordingly, the motion for relief from that Order was not
brought within a reasonable time. As to the March 14, 2006 Order dismissing the
case, we will assume for the sake of argument that the motion for relief from that
Order was timely.

       However, the standard of review for a denial of a Rule 60(b) motion is whether
the bankruptcy court abused its discretion,10 and “[r]elief under Rule 60(b)(6) will
only be granted in extraordinary cases.”11 We agree with the bankruptcy court that
allowing the Debtors to proceed in this case would be futile. The Debtors are
significantly delinquent in their plan payments. Contrary to the Debtors’ stated belief,
simply being unable to make plan payments does not excuse them of the obligation
to do so. As the bankruptcy court pointed out at the hearing, the Debtors sought to
proceed in forma pauperis in moving to reopen their case because they did not have
sufficient funds to pay the necessary filing fees. They stated at the hearing that their
sole source of income at this point is collecting cans along the highway from which

      9
           In re Alexander, 270 B.R. 281, 289 (B.A.P. 8th Cir. 2001).
      10
           Id. at 286.
      11
           In re Woodcock, 326 B.R. 441, 448 (B.A.P. 8th Cir. 2005).

                                                 8
they might earn $120 per week. The bankruptcy court did not abuse its discretion in
denying the relief, and reinstating the case, because the Debtors are unable to cure the
delinquency or make future plan payments.

      Accordingly, the bankruptcy court did not err in refusing to reopen or reinstate
the Debtors’ bankruptcy case. The bankruptcy court’s Order denying their Motion to
Reopen and denying their Applications to Proceed without Prepayment of Fees is,
therefore, AFFIRMED.

                                           9