Jeff Bohm, United States Bankruptcy Judge.
The Court issues this Memorandum Opinion because there is split case law on a key issue in the dispute at bar.
There has been a plethora of opinions issued on whether a denial of a request to extend the stay applies only to the debtor personally and to his or her exempt property, or whether it also applies to non-exempt property of the estate. The majority of courts have held that denial of a request to extend the stay results in the stay lifting only as to the debtor personally and his or her exempt property, with the stay remaining in effect as to property of the estate (the "Limited View"). See, e.g., In re Scott-Hood, 473 B.R. 133, 140 (Bankr.W.D.Tex.2012); In re Jumpp, 356 B.R. 789, 791 n. 3 (1st Cir. BAP 2006). The minority of courts have held that a denial of a request to extend the stay results in the stay lifting not only as to the debtor personally and his or her exempt property, but also as to property of the estate (the "Expansive View"). See, e.g., In re Curry, 362 B.R. 394, 398-402 (Bankr. N.D.Ill.2007); In re Reswick, 446 B.R. 362, 365-73 (9th Cir. BAP 2011). No appellate court whose rulings bind this Court has issued opinions on this particular legal point, so this Court is left to decide whether to accept the Limited View or the Expansive View. Having now studied numerous opinions on this issue, this Court finds that the arguments articulated in support of the Expansive View to be more persuasive than the arguments in support of the Limited View. Therefore, this Court adopts the Expansive View and concludes that in the case at bar, if this Court denies the Debtor's request to extend the stay, then there will be no stay in place on the 30th day as to any property of the Debtor's Chapter 11 estate.
The Debtor initiated the pending Chapter 11 case by filing a petition on June 1, 2015. [Doc. No. I].
[PCB Ex. 22.] The Debtor has failed to provide PCB with a copy of any bank statement indicating that the Debtor has opened the account and that he has deposited the rents that he has collected.
At the hearing on the Motion held on June 23, 2015, this Court heard testimony from five witnesses: (1) Sandy Dasigenis; (2) Jeff Leva; (3) Gerald Womack; (4) David Cole; and (5) the Debtor. The Court finds that Ms. Dasigneis, Mr. Leva, Mr. Womack, and Mr. Cole were credible and the Court gives significant weight to their testimony. The Court notes, however, that these witnesses did not give extensive testimony. Rather, most of the testimony came from the Debtor.
The Court finds that the Debtor, for the most part, responded to the questions posed to him, but sometimes, he gave evasive answers on key points. For example, when counsel for PCB inquired whether he had ever provided an accounting to PCB, as referenced in the May 26 Order, the Debtor responded by saying that he gave documents to his attorney — thereby suggesting that he had provided an accounting and presumably wanting this Court to assume that his attorney had provided this accounting to PCB's attorney. However, when PCB's attorney pressed the Debtor for an answer as to whether the Debtor had provided PCB — as opposed to the Debtor's attorney — with an accounting, the Debtor eventually responded that he had not provided any accounting to PCB. [Testimony of the Debtor at the H'rg held on June 23, 2015, 3:59:27-4:01:42 P.M.]. Moreover, the Debtor never stated just exactly what documents he gave to his attorney, so this Court has no way of knowing whether the Debtor actually provided documents that indeed, and in fact, constitute an accounting. Thus, overall, the Court gives some weight to the Debtor's testimony, but does not find the Debtor entirely credible on certain issues about which he testified.
The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. § 1334(b). This dispute is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) because it concerns the administration of this Chapter 11 estate. Further, it is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(G) because it involves the Debtor's request to extend the automatic stay. Finally, it is core pursuant to the general "catch-all" language of 28 U.S.C. § 157(b)(2). See In re Southmark Corp., 163 F.3d 925, 930 (5th Cir.1999) ("[A] proceeding is core under § 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case."); De Montaigu v. Ginther (In re Ginther Trusts), Adv. No. 06-3556, 2006 WL 3805670, at *19 (Bankr.S.D.Tex. Dec. 22, 2006) (holding that a matter may constitute a core proceeding under 28 U.S.C. § 157(b)(2) "even though the laundry list of core proceedings under § 157(b)(2) does not specifically name this particular circumstance").
Venue is proper pursuant to 28 U.S.C. § 1408(1) because the Debtor's primary assets are located in Harris County, Houston, Texas, and this county is part of the Southern District of Texas.
In the wake of the Supreme Court's issuance of its opinion in Stern v. Marshall, ___ U.S.___, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), this Court is required to determine whether it has the constitutional authority to enter a final order in any dispute brought before it. In Stern, which involved a core proceeding brought by the debtor under 28 U.S.C. § 157(b)(2)(C), the Supreme Court held that a bankruptcy court "lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim." Id. at 2620. The pending dispute before this Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (G). Because Stern is replete with language emphasizing that the ruling is limited to the one specific type of core proceeding involved in that dispute, this Court concludes that the limitation imposed by Stern does not prohibit this Court from entering a final order here. A core proceeding under § 157(b)(2)(A) and (G) is entirely different than a core proceeding under § 157(b)(2)(C). See, e.g., Badami v. Sears (In re AFY, Inc.), 461 B.R. 541, 547-18 (8th Cir. BAP 2012) ("Unless and until the Supreme Court visits other provisions of Section 157(b)(2), we take the Supreme Court at its word and hold that the balance of the authority granted to bankruptcy judges by Congress in 28 U.S.C. § 157(b)(2) is constitutional."); see also In re Davis, 538 Fed.Appx. 440, 443 (5th Cir.2013), cert. denied sub nom, Tanguy v. W., ___ U.S. ___, 134 S.Ct. 1002, 187 L.Ed.2d 851 (2014) ("[W]hile it is true that Stern invalidated 28 U.S.C. § 157(b)(2)(C) with respect to `counterclaims by the estate against persons filing claims against the estate,' Stern expressly provides that its limited holding applies only in that `one isolated respect.' We decline to extend Stern's limited holding herein.") (internal citation omitted).
Alternatively, even if Stern applies to all of the categories of core proceedings brought under § 157(b)(2), see In re Renaissance Hosp. Grand Prairie Inc., 713 F.3d 285, 294 n.12 (5th Cir.2013) ("Stern's `in one isolated respect' language may understate the totality of the encroachment upon the Judicial Branch posed by Section 157(b)(2) ..."), this Court still concludes that the limitation imposed by Stern does not prohibit this Court from entering a final order in the dispute at bar. In Stern, the debtor filed a counterclaim based solely on state law; whereas, here, the Motion is based solely on an express Code provision, § 362(c)(3), and judicially-created bankruptcy law interpreting this provision; there is no state law involved in this Court's resolution of this dispute. This Court is therefore constitutionally authorized to enter a final order on the Motion. See In re Airhart, 473 B.R. 178, 181 (Bankr.S.D.Tex.2012) (noting that the court has constitutional authority to enter a final order when the dispute is based upon an express provision of the Code and no state law is involved).
Moreover, this Court has the constitutional authority to enter a final order because all of the parties in this contested matter have consented, impliedly if not explicitly, to adjudication by this Court. Wellness Int'l Network, Ltd. v. Sharif, ___ U.S.___, 135 S.Ct. 1932, 1947, 191 L.Ed.2d 911 (May 26, 2015) ("Sharif contends that to the extent litigants may validly consent to adjudication by a bankruptcy court, such consent must be express. We disagree. Nothing in the Constitution requires that consent to adjudication by a bankruptcy court be expressed. Nor does the relevant statute, 28 U.S.C. § 157, mandate express consent...."). Specifically,
There is no question that § 362(c)(3) governs this dispute. That is one major point on which both the Debtor and PCB agree.
There are three subsections of § 362(c)(3) that govern the dispute at bar: (c)(3)(A), (c)(3)(B), and (c)(3)(C). First, § 362(c)(3)(A) sets forth that if a debtor files a case within one year after a prior case was dismissed, then in the second case, the automatic stay will terminate on the 30th day. In the case at bar, the Debtor filed his second case (i.e., the pending Chapter 11 case) on June 1, 2015, [Finding of Fact No. 11] — which was within one year after the dismissal of his first case. [Finding of Fact No. 6]. Thus, in the pending Chapter 11 case, the automatic stay will terminate 30 days after June 1, 2015 — i.e., on July 1, 2015.
However, § 362(c)(3)(B) provides for the continuation of the stay beyond the 30-day period if four requirements are met: (1) a motion to extend the stay is filed; (2) there is notice and a hearing; (3) the notice and hearing are completed before the expiration of the original 30-day stay period; and (4) the debtor proves that the filing of the second case "is in good faith as to the creditors to be stayed." 11 U.S.C. § 362(c)(3)(B). In re Collins, 335 B.R. 646, 650 (Bankr.S.D.Tex.2005). In the case at bar, the Debtor filed the Motion on June 8, 2015, [Doc. No. 9] — which was one week after he filed the petition initiating this Chapter 11 case, [Finding of Fact No. 11]; this Court issued an order on June 10, 2015 setting the hearing on the Motion for June 23, 2015, which was then transmitted to the appropriate creditors and parties-in-interest, including PCB's attorney, [Doc. No. 10]. On June 23, 2015, this Court held a hearing on the Motion. [Hr'g Minutes on Docket Sheet for June 23, 2015]. Thus, requirements one, two, and three are satisfied. The analysis must therefore now focus on the fourth requirement: whether the filing of this Chapter 11 case "is in good faith as to the creditors to be stayed." 11 U.S.C. § 362(c)(3)(B). Here, the Debtor requests this Court to extend the stay as to all creditors, [Doc. No. 9, pp. 2 & 3], so this Court must focus on whether the filing of this Chapter 11 case is in good faith as to these creditors, including PCB.
However, before addressing this issue under § 362(c)(3)(B), this Court, pursuant to § 362(c)(3)(C), must determine whether a rebuttable presumption arises that the pending Chapter 11 case was not filed in good faith. If either subparagraph (i) or (ii) of § 362(c)(3)(C) is satisfied, then it is presumed that this Chapter 11 case was not filed in good faith, and the Debtor's burden becomes more onerous with respect to satisfying the fourth requirement: specifically, the Debtor's burden increases from one of "preponderance of the evidence"
Section 362(c)(3)(C)(i)(II)(aa) is applicable here. This subsection, in pertinent part, sets forth that the Debtor's burden under § 362(c)(3)(B) increases from one of preponderance of the evidence to one of clear and convincing evidence when "a previous case under any of chapters 7, 11, and 13 in which the individual was a debtor was dismissed within such 1-year period, after the debtor failed to ... file ... documents as required by this title or the court without substantial excuse." 11 U.S.C. § 362(c)(3)(C)(i)(II)(aa). Here, the Debtor's first case (i.e., his Chapter 13 case) was filed on April 7, 2015, [Finding of Fact No. 4]; it was dismissed on April 23, 2015 because of the Debtor's failure to timely file his schedules, statement of financial affairs, and other documents, [Finding of Fact No. 6];
Another bankruptcy judge in this district, the Honorable Marvin Isgur, has articulated various factors for considering
As indicated in Charles, the first two factors are threshold factors. See id. at 219. A finding that the creditor, against whom the extension of the stay is sought, agrees to a stay extension ends the "good faith" inquiry. Further, a finding that the pending case is unlikely to result in the debtor receiving a discharge means that the case fails an objective good faith standard and ends the inquiry, resulting in a finding that the debtor's filing is not in good faith. If neither of the first two factors ends the inquiry, then the remaining six factors should be considered under the totality of the circumstances in order to determine if the case is filed in good faith under the "clear and convincing evidence" standard. In re Collins, 335 B.R. at 653.
Application of the above-referenced factors to the Debtor's pending Chapter 11 case results in the following analysis. With respect to the first factor, only SPS has agreed to an extension of the stay. No other creditor has agreed to an extension, and PCB vigorously objects to the extension; therefore, this Court must continue the inquiry. With respect to the second factor, this Court finds that it is fairly likely that the Debtor will obtain a discharge in this case. The Debtor appears to have substantial equity in the Wheeler Property and the Rosewood Property, [Findings of Fact Nos. 15 & 16] — as well as in the Roseneath Property on which MidSouth Bank has a lien, [Id.]; whereas, the Debtor has only $3,600.00 of unsecured priority claims and only $36,736.00 of general unsecured claims, [PCB Ex. 27]; [Doc. No. 1, pp. 20-22 of 55]. Thus, the Debtor might be able to obtain confirmation of a liquidating plan — indeed, the Debtor has already obtained a contract for the Rosewood Property and has a broker presently marketing the Wheeler Property, [Findings of Fact Nos. 17 & 18] — which would eventually result in the Debtor obtaining a discharge. Moreover, the Debtor receives social security payments of $1,482.00 per month and has a wife who generates monthly net income of $5,871.76.
With respect to the third factor, the nature of the debt held by PCB is straightforward. PCB holds promissory notes on the Wheeler Property and on the Rosewood Property. While the Debtor disputes the amount he owes PCB under these notes, [PCB Ex. 27]; [Doc. No. 1, p. 16 of 55], this Court, at least based upon the record made so far — with one eye constantly cocked on the "clear and convincing evidence" standard — is unpersuaded by the Debtor that his debt figures are correct. However, even if the Debtor is correct — i.e., that he owes less to PCB than the amount claimed by PCB — the Debtor nevertheless does not deny that he owes some amount under these two promissory notes to PCB. [PCB Ex. 20, 13:7-15].
With respect to the fourth factor, the nature of the collateral held by PCB is also straightforward. PCB has liens on rental properties located in Houston, Harris County, Texas — i.e., the Wheeler Property and the Rosewood Property. [Finding of Fact No. 14]. Moreover, according to the deeds of trust and assignments of rents held by PCB, [see PCB Exs. 3, 4, 6, 9 & 10], PCB has a lien not only on the real estate itself, but also on all of the rents paid by tenants. Yet, despite this security interest, the Debtor, as noted in the paragraph immediately above, was, prior to filing his Chapter 13 petition, collecting and pocketing the rents for over at least 15 months without (a) paying a dime to PCB; (b) setting aside the rental payments in an interest-bearing account until his dispute with PCB over the exact amount that he owes is resolved; or (c) providing an accounting to PCB as to what exactly he was doing with the rental payments that he collected from the tenants. Under these circumstances, this fourth factor weighs against extending the stay.
With respect to the fifth factor, there is no evidence of a specific purchase that the Debtor made on the eve of the filing of this pending Chapter 11 case. However, there is evidence that the Debtor made a substantial purchase or purchases. On the Debtor's amended Schedule B, filed on May 21, 2015 in his Chapter 13 case, the Debtor represented to his creditors and to this Court that he had $107,935.76 in his bank accounts. [Finding of Fact No. 5]. Yet, in his Schedule B filed on June 1, 2015 in this pending Chapter 11 case, the Debtor represented to his creditors and to this Court that he had $99,041.38 in his bank accounts. [Finding of Fact No. 12]. Thus, just prior to the filing of the petition initiating this pending case, the Debtor spent $8,894.32. Given the fact that the Debtor, by his own admission, had made no payments to PCB for over 15 months prior to the filing of his first bankruptcy petition, and also taking into account that the Debtor is in substantial arrears on his homestead note to SPS, [Finding of Fact No. 13], the Debtor's expenditure of $8,894.32 on the eve of the filing of his Chapter 11 petition is very disconcerting — particularly given the fact that it is the Debtor's burden to prove, by clear and convincing evidence, that he filed this Chapter 11 case in good faith. Under these circumstances, this fifth factor weighs against extending the stay.
With respect to the sixth factor, the Debtor's conduct in this pending case has not been exemplary in several respects. In the May 26 Order (issued in the Debtor's Chapter 13 case), the Court stated that, "[g]iven the amount of court time spent at the hearing on May 22, 2015, the Court wants the Debtor to know that if the Debtor files a second petition and then files a motion to extend the automatic stay under 11 U.S.C. § 362(c), then, for the Debtor to have any chance of keeping the stay in place beyond the 30th day, he will need, at a minimum, to provide adequate protection payments to [PCB] and to account for all rental payments that the Debtor has received since December of 2012." (emphasis added). [Finding of Fact No. 8]. Yet, at the hearing on the Motion held on June 23, 2015, this Court learned
Second, the Debtor's conduct towards PCB has been unbecoming given his status as a debtor-in-possession. Once he filed his Chapter 11 petition, the Debtor took on a fiduciary duty towards all of his creditors, including PCB. Wolf v. Weinstein, 372 U.S. 633, 649-50, 83 S.Ct. 969, 10 L.Ed.2d 33 (1963); Louisiana World Exposition v. Federal Ins. Co., 858 F.2d 233, 249-50 (5th Cir.1988). Ten days after the Debtor filed his petition, PCB, through its counsel, made a request to the Debtor, through the Debtor's counsel, to provide a copy of the initial bank statement evidencing that the Debtor had opened up a debtor-in-possession bank account, as referenced in the Adequate Protection Order. [Finding of Fact No. 25]. Additionally, counsel for PCB requested counsel for the Debtor to provide him with dates during the two weeks following the request (which was made on June 11, 2015) so that PCB's appraisal could inspect the Wheeler Property and the Rosewood Property. [Finding of Fact No. 26]. Both of these requests were eminently reasonable for any secured creditor in a Chapter 11 case to make of the debtor. Yet, here, PCB received no response. The Debtor's silence was deafening — and his silence reflects a breach of his fiduciary duty to PCB.
Third, in his initial Schedule C, filed on June 1, 2015, the Debtor had the gumption to claim as exempt property not only the Homestead (on which PCB does not have a lien), but also all three of his rental properties (on two of which PCB does have liens). There is absolutely no basis under Texas law to claim any of these rental
With respect to the seventh factor, the Debtor testified that he wants to extend the automatic stay because he has substantial equity in the Wheeler Property and the Rosewood Property, and he wants to sell these properties and use the sale proceeds not only to pay off the debt owed to PCB, but to pay off all of his other debts. [Testimony of the Debtor at the H'rg held on June 23, 2015, 2:36:01-2:36:35 P.M.]. The Debtor emphasized in his testimony that his rental properties comprise the major percentage of his assets, and that if PCB is allowed to foreclose on the Wheeler Property and the Rosewood Property, he will be unable to completely pay off all of his other debts. [Doc. No. 25, 2 ¶ 10]. This factor therefore weighs in favor of extending the stay.
With respect to the eighth factor, there are indeed unique facts and circumstances particular to this case, none of which are favorable to the Debtor. First, he is a highly educated individual, having practiced ophthalmology prior to retiring several years ago, at which time he went into the real estate investment business. [Findings of Fact Nos. 1 & 2]. As a highly educated person, who clearly is also a sophisticated businessman, the Debtor ought to know better than to collect rents and then fail to pay PCB, or, alternatively, to at least deposit the rents into an interest-bearing account pending the resolution of any dispute he has with PCB. Second, prior to filing his two bankruptcy petitions this year, the Debtor repeatedly and unsuccessfully attempted to obtain an injunction against PCB in state court to prevent PCB from foreclosing on the Wheeler Property and the Rosewood Property. [Findings of Fact Nos. 21 & 22]. Thus, it should now come as no surprise to the Debtor that the Wheeler Property and the Rosewood Property could soon be foreclosed upon. Indeed, the Debtor's lack of success in state court prior to his bankruptcy filings should have led him to conclude that, at a minimum, he now needs to: (a) collect and deposit the monthly rental payments in a separate interest-bearing account; and (b) provide an accounting of these deposits to PCB. Yet, he still has not done the latter despite this Court's May 26 Order. [See Finding of Fact No. 8]. Third, the Debtor, under cross examination by PCB's counsel, admitted that the monthly expenses associated with the upkeep and insurance of the Wheeler Property and the Rosewood Property exceed the monthly revenues by approximately $1,241.00. [Testimony of the Debtor at the H'rg held on June 23, 2015, 3:09:49-3:10:40 P.M.]. Thus, these two properties are not producing positive cash flow and therefore are not as valuable as the Debtor wants this Court to believe. Under all of these circumstances, the eighth factor weighs against extending the stay.
In sum, factors 3, 4, 5, 6, and 8 weigh against extending the stay, and only factor 7 weighs in favor. Keeping in mind that it is the Debtor's burden, by clear and convincing evidence, to demonstrate that he filed this Chapter 11 case in good faith, this Court finds that the Debtor has failed to meet his burden. Accordingly, this Court finds that the Motion must be denied, and that therefore the stay must terminate upon the 30th day after the Debtor filed the petition initiating this Chapter 11 case. Thus, because the Debtor initiated this pending Chapter 11 case on June 1, 2015, [Finding of Fact No. 11], the stay will terminate on July 1, 2015.
In Charles, Judge Marvin Isgur made an important point about § 362(c)(3)(B):
Charles, 334 B.R. at 223 (citations omitted).
This Court agrees with Judge Isgur's interpretation of the statute. Thus, even if a debtor can prove, by clear and convincing evidence, that his or her case is filed in good faith, the Court is not required to extend the stay. The Court has the discretion to extend the stay — or to decline to extend the stay.
In the case at bar, even if the Debtor could prove that he filed this case in good faith, this Court, in its discretion, would still decline to extend the stay beyond the 30th day. This Court takes this position for four reasons. First, this Court is disturbed by the amount of cash that the Debtor has hoarded since January of 2013. Not only did he not pay a dime to PCB for 29 months, [Finding of Fact No. 24], but he also has not made payments for many months on the Homestead note — as evidenced by the Debtor's own admission in his Schedule D that arrearages to SPS are $75,240.00. [Finding of Fact No. 13]. The Debtor has wholly failed to explain to this Court why he is in default to SPS on the note secured by the Homestead. Meanwhile, the Debtor has been collecting monthly rents in excess of $4,500.00, and his wife and he have been comfortably residing in the Homestead, which the Debtor values in excess of $300,000.00. [Id.]. In short, it appears as if the Debtor "wants to have his cake and eat it too." He wants to live the good life without paying for it.
Second, the Court notes that the Debtor's Schedule D reflects that he owes past due property taxes on the Rosewood Property in the amount of $2,539.00 and past due property taxes on the Wheeler Property in the amount of $9,206.00. [PCB Ex. 27]; [Doc. No. 1, p. 15 of 55]. If these properties are really as important to the Debtor as he has testified, then he most definitely should have timely paid the taxes to the appropriate taxing authorities. The Debtor's collection of monthly rental payments from these two properties of $4,535.00 for the past 29 months without paying a dime to PCB, [Findings of Fact Nos. 23 & 24], together with the fact that the balances of his bank accounts exceed $99,000.00, [Finding of Fact No. 12], underscore that he has had more than enough cash to make these tax payments, and there is nothing in the record that shows making these payments would somehow undermine any of the claims that he alleges against PCB. The Debtor's failure to keep taxes current on these properties leads this Court to question just exactly what his motives are. After all, a failure to pay real property taxes in Texas automatically places liens on the properties, In re Pointer, 952 F.2d 82, 83 (5th Cir.1992), and puts them in jeopardy of being foreclosed upon to the detriment of all of the Debtor's creditors — i.e., the same creditors whom the Debtor testified he
Third, it is disconcerting to this Court that the Debtor has no written leases with any of his tenants. [PCB Ex. 20, 26:6-17]. This fact, combined with the fact that the Debtor has not provided a written accounting to PCB about his collection and use of the rents since January of 2013, [Testimony of the Debtor at the H'rg held on June 23, 2015, 3:59:27-4:01:42 P.M.], is simply unacceptable to this Court. It is not in the ordinary course of the apartment leasing business to allow tenants to lease valuable property without executing a written lease agreement. And, the Debtor, as well as the real estate brokers who testified on his behalf, have made it abundantly clear that these rental properties are valuable. The complete absence of any documentation to evidence the leases and the rentals associated therewith causes this Court to have pause: there is no way to test the Debtor's testamentary assurances in open court about the amounts of the rental payments that tenants residing in the Wheeler Property and the Rosewood Property are required to make against written proof of the amount of these monthly rental payments and the Debtor's collection of these obligations.
Fourth, this Court is not enamored with the Debtor playing a "shell game" with his exemptions. As already noted, the Debtor's initial Schedule C attempted to exempt not only the Homestead, but also the three rental properties under the Texas Property Code. [Finding of Fact No. 19]. Yet, there is no basis under Texas law to exempt the rental properties. The Court finds that the Debtor made this initial exemption in the hope that no creditor would lodge an objection thereto prior to the deadline for objecting to exemptions. The Debtor was no doubt attempting to benefit from the noteworthy holding of the Supreme Court in Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992), that a failure to timely object to an exemption forever bars any late-filed objection — even if that exemption has no basis at law — and makes the property exempt for all purposes. Thus, here, the Debtor was hoping to exempt all of the equity that he believes he has in the rental properties; stated differently, he was hoping to avoid having to use this equity to pay any creditors other than the lienholders on these properties. Yet, when PCB, in its objection to the Motion, pointed out that the Debtor was acting in bad faith by attempting to exempt the rental properties, [Doc. No. 17, 7 ¶ 13], the Debtor — prior to the hearing on the Motion on June 23, 2015 — filed an amended Schedule C to delete the rental properties from being claimed as exempt, [Doc. No. 19]. The Debtor then tried to convince this Court at the hearing that it is his intention to sell one or more of the rental properties and use the equity to pay all of his creditors. [Testimony of the Debtor at the H'rg held on June 23, 2015, 2:36:01-2:36:35 P.M.]. The Debtor's initial attempt to exempt these rental properties casts doubt on the sincerity of his testimony that he really intends to use the equity from the rental properties to pay all of his debts.
In sum, based upon the four reasons discussed above, even if the Debtor could, by clear and convincing evidence, prove that he filed this Chapter 11 case in good faith — and he has not done so — this Court would nevertheless decline to exercise its discretion under § 362(c)(3)(B) to extend the stay beyond the 30th day. The Debtor has not been completely transparent about his business transactions and he has not been consistent about his intentions to pay all of his creditors.
As noted at the beginning of this Opinion, the Debtor contends that even if this Court does not extend the stay beyond the 30th day, this ruling applies only to the Debtor personally and to his exempt property, and not to the property of the estate such as the Wheeler Property and the Rosewood Property. According to the Debtor, the stay continues in effect as to these two properties and all other property of his Chapter 11 estate. PCB disagrees and asserts that this Court's decision to deny the Motion means that there is no automatic stay in place as to the Debtor personally or as to any property of the estate, including the Wheeler Property and the Rosewood Property. This Court agrees with PCB.
This Court does not need to review all of the arguments that have been made in numerous opinions on this issue. Rather, this Court simply notes that it finds the arguments set forth in Curry and Reswick to be compelling, and therefore adopts the Expansive View. See In re Curry, 362 B.R. at 398-402; In re Reswick, 446 B.R. at 365-73. Accordingly, this Court concludes that by denying the relief requested by the Debtor in the case at bar, there will be no stay as of July 1, 2015 preventing PCB from foreclosing on the Wheeler Property and the Rosewood Property.
Bankruptcy is a very deadline-oriented area of the law. The Code and the Rules impose numerous — and sometimes tight — deadlines. Debtors need to move with alacrity to comply with these provisions. When the Debtor, in his first bankruptcy case, failed to timely file his schedules and statement of financial affairs and other documents, this Court dismissed his case. [Finding of Fact No. 6]. And, because of this dismissal, when the Debtor filed his second bankruptcy petition to initiate the pending Chapter 11 case, he was saddled with having to affirmatively obtain an extension of the stay beyond the 30th day of this case by proving, with clear and convincing evidence, that he filed this pending case in good faith. He has been unable to satisfy this very high burden — in part because he failed to move swiftly after the issuance of the May 26 Order to provide PCB with documentation showing specifically how he spent the rental proceeds that he collected from January of 2013 through May of 2015. Thus, the stay will not be extended beyond the 30th day of this Chapter 11 case.
This Court's decision not to extend the stay, however, does not necessarily prevent the Debtor from achieving his stated objective of paying off all of his debts through selling his rental properties. If the Debtor moves swiftly, he can still accomplish this goal. Keeping in mind that PCB, even after the stay lifts on July 1, 2015, will still need time to comply with applicable Texas law to foreclose on the Wheeler Property and the Rosewood Property, see Tex. Prop. Code § 51.002, the Debtor can still — prior to any foreclosure sale — sell these properties and generate proceeds sufficient to pay off not only PCB, but all other creditors. Indeed, the Debtor has already obtained a contract on the Rosewood Property for $300,000.00, [Finding of Fact No. 17], and this Court has stated on the record that it will hold an expedited hearing on any motion that the Debtor files to sell this property pursuant to this contract. Additionally, or alternatively, the Debtor can quickly file a joint disclosure statement and plan (which can propose to restructure the obligation owed to PCB if it has not foreclosed on the
In sum, the Debtor may be down, but he is not out — at least not yet. But, he must move quickly. And, he must remember to continue complying with all of this Court's existing orders — including the Adequate Protection Order. [Finding of Fact No. 20].
An order consistent with this Memorandum Opinion will be entered on the docket simultaneously herewith.
