IN RE MARTIN-TRIGONA, (Bankr.E.D.Va. 1997)

STEPHEN MITCHELL, Bankruptcy Judge

A hearing was held in open court on November 4, 1997, on the motion filed by the debtor on October 20, 1997, (a) to reconsider the order entered on October 8, 1997, dismissing her case with prejudice and awarding the chapter 13 trustee sanctions, and (b) to grant a stay pending appeal of that order. The debtor was not present at the hearing but had telephoned chambers prior to the hearing and advised the court that she was too ill to attend the hearing. The chapter 13 trustee was present.

Background

The debtor, Helen Martin-Trigona, filed a voluntary petition under chapter 13 of the Bankruptcy Code in this court on July 14, 1997. Only a bare-bones petition was filed, unaccompanied by schedules, a statement of financial affairs, or a proposed plan for the restructuring and payment of her debts. Based on the circumstances of the filing, the standing chapter 13 trustee sought and obtained an order requiring the debtor to appear for examination under Federal Rule of Bankruptcy Procedure 2004 on August 18, 1997, at 9:30 a.m., at the Office of the United States Trustee. This was the same date, time, and place as the meeting of creditors, and the practical effect of the order was to make the meeting of creditors also a Rule 2004 examination. On August 19, 1997 "the day after the scheduled meeting of creditors "the debtor filed a motion to quash the order for the Rule 2004 examination, asserting that she had not been given proper notice. The court, after reviewing the motion in chambers, denied it by memorandum opinion and order dated August 20, 1997. Since the debtor had not appeared for the Rule 2004 examination and concurrently-scheduled meeting of creditors, nor had she ever filed schedules, a statement of financial affairs, or a plan, the chapter 13 trustee filed a motion on August 21, 1997, for an order to show cause why the case should not be dismissed with prejudice and monetary sanctions awarded. On September 9, 1997, the court entered an order to show cause, returnable to October 7, 1997. The debtor was present on October 7, 1997, and, aside from a generalized assertion that she was in ill health and that appearing before the chapter 13 trustee would be unreasonably stressful, offered no excuse for her failure to appear for the meeting of creditors and Rule 2004 examination on August 18, 1997, nor did she offer any cogent explanation as to why she had never filed schedules, a statement of financial affairs, or a plan D all of which were due at the latest 15 days after the filing date of her petition, and for which no extension of the filing date had ever been requested. Based on the debtor's responses to the court's questions, the court concluded that the debtor had filed her chapter 13 petition, not with the intent to propose a plan for the repayment of her debts, but solely, by invoking the automatic stay, to hinder and delay the mortgage company that was attempting to foreclose on her son's residence. Accordingly, the court dismissed the case with prejudice to the filing of a case under any chapter of the Bankruptcy Code for 180 days. The court also adjudged the debtor in civil contempt for her willful failure to appear as ordered for the scheduled Rule 2004 examination, and as a sanction for such contempt ordered her to pay the chapter 13 trustee $300.00 to compensate him for the expense of bringing the debtor's noncompliance before the court. An order reflecting the court's ruling was entered on October 8, 1997. The present motion follows.

The debtor had previously filed a chapter 13 case in this court on February 8, 1993, Case No. 93-10522-DOT. That case was dismissed on July 12, 1993, after confirmation of her proposed plan was denied.

On August 20, 1997, the Internal Revenue Service filed a pre-emptive objection to confirmation on the ground that the debtor had not yet filed a 1996 tax return. Since, however, there was no plan actually before the court, there was nothing to which the objection could relate.

The debtor filed a motion to continue the hearing on the motion for a show cause order on the ground that she was scheduled to undergo medical tests the day after the hearing, and having to appear in court would create a [s]tressful situation "that, because of her "unpleasant experiences" in the past with the chapter 13 trustee, would only "agitate and exacerbate" her medical condition. Since the hearing on September 9, 1997, was not to decide the merits of the truste's allegations but only to determine whether they should be set for hearing, the court simply entered the show cause order, making it returnable to October 7, 1997. To the extent the debtor seems to believe that it was her failure to appear on September 9, 1997, that resulted in sanctions, she is mistaken. It was her failure to appear at the meeting of creditors and Rule 2004 examination on August 18, 1997, that was the basis for the finding of contempt.

Discussion

Under Federal Rule of Civil Procedure 59, made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 9023, a motion to alter or amend a final order or judgment, or to grant a new trial, must be filed within 10 days of the entry of the order in question. In this case, the tenth day fell on a Saturday, and the debtor's motion, which was filed on the following Monday, is timely. F.R.Bankr.P. 9006(a).

I.

In her motion, the debtor takes the position that, under Local Bankruptcy Rules 1007-1 and 3015-2, she had a right to have her case dismissed by the simple expedient of not timely filing schedules or a plan, and that the trustee's ex parte motion, which the court granted, to suspend the local rules and thus prevent automatic dismissal of her case, violated her rights, thereby justifying her failure to appear at the meeting of creditors and Rule 2004 examination. Although these issues have already been discussed in the court's memorandum opinion and order of August 20, 1997, some brief additional comment may nevertheless be appropriate.

A.

In a chapter 13 case, the debtor's schedules, statement of financial affairs, and plan, if not filed with the petition, are due at the latest 15 days after the petition is filed. F.R.Bankr.P. 1007(c) and 3015(b). Under Local Bankruptcy Rules 1007-1 and 3015-2, the clerk is directed to dismiss a bankruptcy case if the debtor fails to timely file schedules and a statement of financial affairs or, in a chapter 13 case, fails to timely file a plan. The purpose of these rules is not to the dismissal of cases where a debtor fails to comply with the requirements imposed by the Federal Rules of Bankruptcy Procedure. There will be times, however, when dismissal is not should not be dismissed until he had had an opportunity to investigate the reasons for the filing. The suspension of the dismissal that would otherwise occur under the local rules did not deprive the debtor of any right created by the Bankruptcy Code or the Bankruptcy Rules. § 1307(b), Bankruptcy Code seeking such relief. Indeed, so long as the case had not been converted to chapter 13 from some other chapter, the debtor had an absolute right to dismiss her without prejudice make such dismissal with prejudice to the discharge, in a later case, of debts that were dischargeable in the dismissed case, or with prejudice to the filing of another petition. 349(a), Bankruptcy Code. The chapter 13 trustee was clearly entitled to an opportunity be heard in Q case, and the suspension of the local rules providing automatic dismissal by the Clerk simply preserved the trustee s right to be heard and to conduct an investigation to determine whether circumstances existed that would justify dismissal with prejudice.

Local Bankruptcy Rule 1007-1 provides in relevant part as follows:

(A) Dismissal of Case : In any case where lists, schedules and statements are not filed at the time of the filing of a voluntary petition, the Clerk shall enter an order of dismissal unless the same are filed within fifteen days after the filing of the petition, or a motion to extend time for filing lists, schedules and statements has been filed prior to the expiration of the fifteen day period.

Local Bankruptcy Rule 3015-2 provides in relevant part as follows:

(F) Dismissal of Case for Failure to Timely File or Distribute Plan

(1) Clerk to Issue: The clerk shall issue an order of dismissal in any chapter 13 case not meeting the timeliness of filing requirements of subdivisions (B) or (C) of this Local Rule.

B.

With respect to the motion for examination of the debtor under Federal Rule of Bankruptcy Procedure 2004, such motions, as the court noted in the prior memorandum opinion, may be, and commonly are, considered ex parte. See, Hunter v. Hickman (In re Hickman), 151 B.R. 135, 128 (Bankr. N.D. Ohio, 1993) ("The motion [for Rule 2004 examination] may be heard ex parte or it may be heard after disseminating notice."); In re Sutera, 141 B.R. 539, 542 (Bankr. D. Conn. 1992) ("Rule 2004 motions . . . are typically granted ex parte, with notice of the examination thereafter given to affected entities."). To the extent that compliance with the order would be unreasonably burdensome or would implicate a testimonial privilege, the court always retains the power to grant appropriate protective relief even after the order has been entered. Fed.R.Civ.P. 45(c), as incorporated by F.R.Bankr.P. 9016; F.R.Bankr.P. 9024. In this case, however, no motion was ever made to the court to vacate or otherwise modify the order for the Rule 2004 examination on the ground that it was burdensome or implicated a testimonial privilege. The only objection to the order was that it had been entered without prior notice to the debtor. Moreover, as discussed in the prior memorandum opinion, the Rule 2004 order required only that the debtor do what she was already required to do by the Bankruptcy Code and the Bankruptcy Rules D that is, to appear for examination at the date, time and place of the scheduled meeting of creditors and to supply the trustee with copies of her schedules and plan. §§ 343 and 521(1) and (3), Bankruptcy Code; F.R.Bankr.P. 4002(1).

II.

The real issue, then, is whether the debtor has set forth in her motion meritorious grounds for the alteration or amendment of the order dismissing her case with prejudice and imposing sanctions.

A.

The debtor asserts that the trustee had no "legitimate reason" for pursuing what she characterizes as a "personal vendetta" against her. She admits that she filed the present chapter 13 petition solely to stop a scheduled foreclosure sale of a house owned by her son, but she asserts that she did so because she learned of the sale only "about" five days before the foreclosure sale and that an unnamed lawyer, who was "eaving for the beach," advised her "to go straight to the court house and file the Voluntary Petition for bankruptcy, to save the house. . . ." The filing, she states, was intended as "a stop gap action" until her son could come back from Florida and decide whether to file his own bankruptcy. By way of further background, she relates that the current chapter 13 trustee was also the trustee in her son's prior chapter 13 case. Apparently, the confirmed plan in that case had required her son to sell the real estate by a specified date, or it would pass to the trustee to be sold. When it was not sold, the trustee attempted to carry out his duty by selling the property, but the son was successful in obtaining a "Stay" and thereafter voluntarily dismissed the chapter 13 case.

The docket entries in the Clerk's office reflect that the debtor's son, George B. Martin-Trigona, filed two chapter 13 cases in this court. The first, Case No. 93-14875-MVB, was filed on November 23, 1993, and was dismissed on January 10, 1994, at Mr. Martin-Trigona's request, without a plan having ever been filed. Four months later (May 6, 1994), he filed another chapter 13 petition, Case No. 94-11777-DOT. A plan was confirmed but the case was ultimately dismissed on January 27, 1997, with prejudice to refiling for a period of six months.

Even if everything the debtor says is true, it would not alter the court's determination that the filing was for an improper purpose. The purpose of chapter 13, simply stated, is the restructuring of the debts of an individual with a regular income. Consistent with that purpose, an essential component of every properly-motivated chapter 13 case is a bona fide intent to file and obtain confirmation of a plan for the restructuring and repayment of one's debts. It may well be, particularly when circumstances have compelled a hasty filing, that upon a fuller examination of the debtor's income and debt structure, it will be determined that the debtor is unable to propose a confirmable plan. In such instances, a debtor may properly seek to dismiss his or her case or convert it to a case under some other chapter of the Bankruptcy Code. But to file chapter 13 solely as a "stop gap" in order to invoke the automatic stay of '362 and thereby temporarily stop creditors in their tracks, without any genuine intent to seek confirmation of a plan, is an abuse of the Bankruptcy Code, pure and simple. Put another way, the valuable protection afforded by the automatic stay to debtors legitimately seeking bankruptcy relief was never intended by Congress to simply be the cheapest injunction in town. The debtor' use of the automatic stay for that purpose was a blatant misuse of the bankruptcy system. Moreover, the debtor, although proceeding pro se, is no stranger to chapter 13, having previously filed a chapter 13 case in this court. She can hardly be heard to say, therefore, that she did not understand the purpose of a chapter 13 filing.

B.

As noted above, the debtor has an absolute right to dismiss her chapter 13 case. D 1307(b), Bankruptcy Code. Section 349, Bankruptcy Code, addresses the effect of dismissing a bankruptcy case, and provides in relevant part as follows:

The court notes, however, that the debtor has never filed a motion to dismiss her case, and the only dismissal motion before the court was the chapter 13 trustee's.

(a) Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(g) of this title. (emphasis added). Although some courts have read D 349 as permitting a court to dismiss a bankruptcy case with prejudice to the filing of another petition only for the reasons and for the periods stated in § 109(g), the majority of courts, including those in this District, have read the introductory phrase in § 349(a), "Unless the court, for cause, orders otherwise," as applying to the second as well as the first clause of D 349(a), thereby giving the court the power, "for cause," to order dismissal with prejudice to refiling in situations other than those specified in § 109(g). Jolly v. Great Western Bank (In re Jolly), 143 B.R. 383 (E.D. Va. 1992) (Smith, J.), aff'd 45 F.3d 426 (4th Cir. 1994) (unpublished table disposition).

There can be little doubt that "cause" exists in this case for dismissal with prejudice to refiling for a finite period of time sufficient to ensure that the debtor, by the simple expedient of serial filings, does not further abuse the Bankruptcy Code. Additionally, the debtor's willful failure to appear for the Rule 2004 examination would, under § 109(g)(1), constitute an independent bar to the debtor's refiling for a period of 180 days. At the same time, the debtor's conduct is not so egregious as to warrant barring in some future case, should she then have a legitimate need for bankruptcy relief, the discharge of debts that would have been dischargeable in this case. Accordingly, the court ruled that dismissal of the debtor's case would be with prejudice to the filing of another petition under any chapter of the Bankruptcy Code for a period of 180 days. Nothing the debtor has presented in the motion for reconsideration convinces the court that

C.

In addition to dismissal of the case with prejudice, the court found the debtor to be in civil court's. ¹⁰ prior memorandum opinion, it does not affirmatively appear that has acknowledged that she learned of and read the order on August 14, 1997, some four days prior to the date of the examination, when she came into the Clerk's office to pay a portion of the filing fee. Notwithstanding that she was fully aware that the court had ordered her to appear for D at a date, time, and place of which she had already been given notice in connection D she deliberately chose not to appear. It is true that, the hearing date had passed, she filed a motion to vacate the order directing her to appear. That prior to the scheduledto quash the examination. As noted above, nothing in the debtor'

physically incapacitated or otherwise reasonably prevented from appearing on August 18, 1997.

She simply chose to take the position that if she had not been given advance notice of the motion requesting the order, the order was thereby rendered invalid. As discussed above, that is not the law. The fact that she may have genuinely, if mistakenly, believed her legal position to be justified is a factor that may properly be taken into account in determining sanctions, but it does not insulate the debtor from a finding of civil contempt. As explained by the Fourth Circuit in Burd v. Walters (In re Walters), 868 F.2d 665 (4th Cir. 1989):

"The absence of willfullness does not relieve from civil contempt. Civil as distinguished from criminal contempt is a sanction to enforce compliance with an order of the court or to compensate for losses or damages sustained by reason of noncompliance.

. . . [citations omitted] Since the purpose is remedial, it matters not with what intent the defendant did the prohibited act.D

Id. at 668 (quoting McComb v. Jacksonville Paper Co., 336 U.S. 197, 191, 69 S.Ct. 497, 499, 93 L.Ed 599 (1949), (alteration and omission in original). Walters held that a bankruptcy court has authority, under D 105(a), Bankruptcy Code, to enforce its orders by holding a disobedient party in civil contempt. Notwithstanding the debtor's attempt to characterize the chapter 13 trustee's actions as a "personal vendetta" against her and her son, the record does not reflect that the trustee has taken any actions inconsistent with his duty to creditors and the court. The trustee had a right to investigate the reasons for the chapter 13 filing and, in order to do so, enlisted the court's aid in the form of an order for examination under Rule 2004. The debtor's disobedience of that order, coupled with her failure to file schedules, a statement of financial affairs, or a plan, justified his bringing the matter before the court in the form of a motion to dismiss the debtor's case with prejudice. The monetary sanctions adjudged by the court were intended to compensate the trustee for losses or damages sustained by reason of the debtor's noncompliance. In particular, the trustee had to prepare pleadings and make two court appearances. Based on its general familiarity with fees charged by counsel appearing at the bar of this court, the court determined that an award of $300 in sanctions would fairly compensate the trustee for his efforts. Accordingly, the court concludes that no sufficient basis has been shown for altering the finding of civil contempt and the award of $300 in damages.

III.

There remains, finally, the issue of a stay pending appeal. F.R.Bankr.P. 8005. A notice of appeal has not yet been filed, but, inasmuch as the debtor filed a timely motion to alter or amend the order of October 8, 1997, a notice of appeal would be premature, since the time for filing a notice of appeal does not begin to run until an order is entered disposing of such motion. F.R.Bankr.P. 8002(a). In this Circuit, a party moving for a stay pending appeal must show (1) that the party will likely prevail on the merits of the appeal; (2) that the party will suffer irreparable injury if the stay is denied; (3) that other parties will not be substantially harmed by the stay; and (4) that the public interest will be served by granting the stay. Long v. Robinson, 432 F.2d 977, 979 (4th Cir 1970); In re Kent, 145 B.R. 843 (Bankr. E.D. Va. 1991). The most important factors are the relative harm to the parties if the stay is granted or denied. If the harm to the appellant would be great from not staying the judgment, and the appellee would suffer little harm, it is sufficient that grave or important questions are presented for appeal. In addition, the court believes it proper to take into account the standard of review. A finding of civil contempt is subject, upon timely objection by the person named in the order, to de novo review by a United States District Judge, who "may accept, reject, or modify the proposed findings of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with instructions." F.R.Bankr.P. 9020(c) and 9033(b) and (d).

Applying the above-stated factors, the court concludes that a stay pending appeal is not appropriate with respect to that portion of the challenged order dismissing the debtor's case with prejudice to refiling for a period of 180 days. No novel or unsettled issues are raised, and a stay of that portion of the court's ruling would simply allow the debtor to continue to abuse the bankruptcy system by filing a new chapter 13 petition if the secured creditor again attempts foreclosure. With respect to that portion of the order, however, finding the debtor in civil contempt for failure to appear for the Rule 2004 examination, a stay pending appeal is appropriate in light of the relative balance of harms to the parties and the debtor's right to de novo review by the District Court.

ORDER

For the foregoing reasons, it is

ORDERED:

1. The motion to alter or amend the order entered October 8, 1997, is DENIED.

2. The motion for a stay pending appeal is GRANTED in part and DENIED in part. A stay is DENIED with respect to that portion of the order entered on October 8, 1997, dismissing the debtor's case with prejudice to refiling for a period of 180 days. A stay pending appeal is GRANTED with respect to that portion of the order adjudging the debtor in civil contempt and imposing a monetary sanction in the amount of $300.00, payable to the chapter 13 trustee.

3. The clerk shall mail a copy of this memorandum opinion and order to the debtor, to the chapter 13 trustee, and the United States Trustee.

Section 1307, Bankruptcy Code, provides in relevant part as follows:

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.