Court Opinion

ID: 814941
Source: CourtListenerOpinion
Date Created: 2013-01-08 00:09:36+00
Date Added: 2024-06-11T18:00:53.932597
License: Public Domain

Case: 12-30707       Document: 00512103636         Page: 1     Date Filed: 01/07/2013

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                          January 7, 2013

                                     No. 12-30707                          Lyle W. Cayce
                                   Summary Calendar                             Clerk

In the Matter of: GEORGE TIMOTHY ELLIOTT,

                                                  Debtor.

GEORGE TIMOTHY ELLIOTT,

                                                  Appellant,
v.

MARK K. SUTTON, Trustee,

                                                  Appellee.

                   Appeal from the United States District Court
                      for the Western District of Louisiana
                             USDC No. 3:12-CV-514

Before HIGGINBOTHAM, OWEN, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
       George Timothy Elliott appeals the judgment of the District Court for the
Western District of Louisiana affirming the bankruptcy court’s denial of his
motion to dismiss his Chapter 13 bankruptcy case and subsequent conversion

       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
     Case: 12-30707            Document: 00512103636         Page: 2     Date Filed: 01/07/2013

                                            No. 12-30707

of his case to a case under Chapter 7. Because the bankruptcy court committed
no reversible error, we affirm.
          Elliott filed for Chapter 13 bankruptcy on August 11, 2011. At the
confirmation hearing for Elliott’s bankruptcy plan on November 3, 2011, the
bankruptcy court heard testimony from Elliott and denied confirmation, citing
numerous misrepresentations in the forms contained in his bankruptcy petition.
On November 16, 2011, the bankruptcy court sua sponte entered an order to
appear and show cause why the case should not be dismissed or converted to a
Chapter 7 case under 11 U.S.C. § 1307. On November 28, 2011, Elliott filed a
motion to dismiss his case under § 1307(b), which the bankruptcy court denied
the following day. At the hearing on its order to show cause on January 12,
2012, the bankruptcy court found that Elliott had filed his petition in bad faith
and converted his case. Elliott subsequently appealed to the district court,
which affirmed. This appeal followed.
          “We apply the same standard of review to the bankruptcy court’s findings
of fact and conclusions of law as applied by the district court.”1 We review the
bankruptcy court’s factual findings, including its finding of bad faith,2 for clear
error and its conclusions of law de novo.3 Finally, we review the bankruptcy
court’s decision to deny a motion to dismiss a Chapter 13 case and to convert the
case into a Chapter 7 case for abuse of discretion.4

          1
        The Cadle Co. v. Pratt (In re Pratt), 524 F.3d 580, 584 (5th Cir. 2008) (citing Nesco
Acceptance Corp. v. Jay (In re Jay), 432 F.3d 323, 325 (5th Cir. 2005)).
          2
        Jacobsen v. Moser (In re Jacobsen), 609 F.3d 647, 652 (5th Cir. 2010) (citing Humble
Place Joint Venture v. Fory (In re Humble Place Joint Venture), 936 F.2d 814, 816 (5th Cir.
1991)).
          3
              Pratt, 524 F.3d at 584 (citing Carrieri v. Jobs.com Inc., 393 F.3d 508, 517 (5th Cir.
2004)).
          4
              Jacobsen, 609 F.3d at 660, 662.

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     Case: 12-30707          Document: 00512103636         Page: 3     Date Filed: 01/07/2013

                                            No. 12-30707

       Elliott first briefly argues that our precedent establishing the bad-faith
exception to § 1307(b), Jacobsen v. Moser (In re Jacobsen),5 does not govern this
case. On its face, § 1307(b) of the Code gives the debtor an unqualified right to
dismiss his bankruptcy case at any time.6 Nevertheless, in Jacobsen, this circuit
held that “a bankruptcy court has the discretion to grant a pending motion to
convert for cause under § 1307(c) where the debtor has acted in bad faith or
abused the bankruptcy process and requested dismissal under § 1307(b).”7 In
so doing, we “decline[d] to read § 1307(b) as an ‘escape hatch’ from which to
escape a conversion motion filed under § 1307(c).”8 Our holding was a logical
extension of the Supreme Court’s decision in Marrama v. Citizens Bank of
Massachusetts,9 which identified a bad-faith exception in a provision that
seemingly created an unqualified right to convert a case from Chapter 7.10
       Elliott initially contends that Jacobsen does not apply here since no party
filed a motion to convert in the bankruptcy court. In making this argument,
Elliott fails to recognize that the bankruptcy court on its own motion entered an
order to show cause why the case should not be dismissed or converted under
§ 1307(c). Elliott also asserts that the bankruptcy court was without authority
to invoke § 1307(c) sua sponte. This argument lacks merit.11 In short, Elliott

       5
           609 F.3d 647.
       6
        11 U.S.C. § 1307(b) (“On 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. Any waiver of the right to dismiss under this subsection is unenforceable.”).
       7
           Jacobsen, 609 F.3d at 660.
       8
           Id. at 661 (citation omitted).
       9
           549 U.S. 365 (2007).
       10
            Marrama, 549 U.S. at 374-75.
       11
         See 11 U.S.C. § 105(a) (“No provision of this title providing for the raising of an issue
by a party in interest shall be construed to preclude the court from, sua sponte, taking any

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     Case: 12-30707        Document: 00512103636          Page: 4     Date Filed: 01/07/2013

                                        No. 12-30707

filed his motion to dismiss only after the bankruptcy court threatened
conversion. This case therefore is on all fours with Jacobsen.
        Elliott next challenges the bankruptcy court’s factual finding that he
acted in bad faith and, by implication, the court’s decision to deny his motion to
dismiss and convert his case. In reviewing the bankruptcy court’s finding of bad
faith for clear error, “[o]ur role is not to weigh the evidence ourselves but merely
to determine whether the lower court’s account is ‘plausible in light of the record
viewed in its entirety.’”12 We will not reverse unless, viewing the record as a
whole, we are “left with the definite and firm conviction that a mistake has been
committed.”13 “Clear error review is ‘especially rigorous’ when we review a lower
court’s assessment of trial testimony, ‘because the trier of fact has seen and
judged the witnesses.’”14
       After reviewing the record in its entirety, we cannot say that the
bankruptcy court’s bad-faith finding was clearly erroneous. In Jacobsen, this
court upheld a bankruptcy court’s finding of bad faith when the debtor possessed
assets and made transfers that were not disclosed in his schedules and

action or making any determination necessary or appropriate to enforce or implement court
orders or rules, or to prevent an abuse of process.”); Hammers v. IRS (In re Hammers), 988
F.2d 32, 34-35 (5th Cir. 1993) (upholding a sua sponte dismissal under § 1307(c) where the
debtor was ineligible for Chapter 13 relief); see also Rosson v. Fitzgerald (In re Rosson), 545
F.3d 764, 771 n.8 (9th Cir. 2008) (“Although the statute provides for conversion ‘on request of
a party . . . or the . . . trustee,’ there is no doubt that the bankruptcy court may also convert
on its own motion.” (alterations in original) (citation omitted)).
       12
        Jacobsen, 609 F.3d at 662 (quoting Anderson v. City of Bessemer City, 470 U.S. 564,
574 (1985)).
       13
         Becker v. Tidewater, Inc., 586 F.3d 358, 367 (5th Cir. 2009) (internal quotation marks
omitted).
       14
         Valley Educ. Found., Inc. v. Eldercare Props. Ltd. (In re Eldercare Props. Ltd.), 568
F.3d 506, 515 (5th Cir. 2009) (quoting United States v. Casteneda, 951 F.2d 44, 48 (5th Cir.
1992)).

                                               4
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                                        No. 12-30707
statement of financial affairs.15 In the instant case, Elliott’s testimony in the
bankruptcy court revealed that his schedules, statement of financial affairs, and
statement of current monthly income contained a large number of similar
misrepresentations. In pertinent part, his testimony revealed that these forms
(1) misrepresented his own income, (2) misrepresented his marital status,
(3) failed to disclose his wife’s income, (4) misrepresented his household size,
(5) failed to disclose information regarding his prior business interest, (6) failed
to disclose information regarding his current business interest, and (7) failed to
disclose that he had an accountant who kept his books and records. Although
we are mindful of Elliott’s assertion that these misstatements were innocent
mistakes, the bankruptcy court’s finding of bad faith is plausible on this record.
      Given the breadth of Elliott’s misrepresentations, we also hold that the
bankruptcy court did not abuse its discretion in denying Elliott’s motion to
dismiss and converting the case to a case under Chapter 7. As Elliott points out,
both Marrama and Jacobsen suggested that bankruptcy courts may invoke the
bad-faith exceptions to § 706 and § 1307(b), respectively, only if the debtor’s bad
faith is somehow “atypical” or “extraordinary.”16 Elliott’s conduct meets this
standard. Indeed, the bankruptcy court found that “the level of [Elliott’s] deceit
here is just virtually unprecedented” and even referred the case to the U.S.
Attorney for investigation. Given the evidence before it, the bankruptcy court
did not abuse its discretion in denying Elliott’s motion to dismiss and converting
his case.
                                        *    *     *
      AFFIRMED.

      15
           Jacobsen, 609 F.3d at 662.
      16
         Marrama v. Citizens Bank of Mass., 549 U.S. 365, 375 n.11 (2007); Jacobsen, 609
F.3d at 662.

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