REBECCA B. CONNELLY, Bankruptcy Judge.
The question this Court must answer is whether to dismiss the debtor's case for his failure to disclose assets, failure to disclose appropriate values, failure to comply with court orders, and other cause under 11 U.S.C. § 1208. The chapter 12 trustee advocates for dismissal under § 1208(c). Conversely, the debtor argues
Charles Gose Dickenson filed a chapter 12 petition on August 7, 2013. See Chapter 12 Petition, In re Dickenson, 13-71283 (Bankr.W.D.Va. Aug. 7, 2013) ECF Doc. No. 1. Two weeks later, on August 21, Mr. Dickson filed his bankruptcy schedules and statements. See Balance of Schedules, In re Dickenson, 13-71283 (Bankr.W.D.Va. Aug. 21, 2013) ECF Doc. No. 11. The next month, on September 19, 2013, the chapter 12 trustee conducted the section 341 Meeting of Creditors, which he continued to November 21, 2013, when it concluded. In the interim, on October 4, the debtor filed his amended Schedule A ("First Amended Schedule A") and amended Schedule D. See Amended Schedule A, Amended Schedule D, In re Dickenson, 13-71283 (Bankr.W.D.Va. Oct. 4, 2013) ECF Doc. No. 14.
Shortly thereafter, on October 21, 2013, Farm Credit of the Virginias, ACA ("Farm Credit"), filed a motion for relief from stay for cause under section 362, citing a lack of adequate protection. See Motion for Relief at 10, In re Dickenson, 13-71283 (Bankr.W.D.Va. Oct. 21, 2013) ECF Doc. No. 15. According to Farm Credit, as of the petition date, Mr. Dickenson owed it approximately $1,086,832.80, which represented roughly seventy percent of Mr. Dickenson's total debt and was secured by five separate tracts of real estate and certain items of personal property. Id. at 9-10. Farm Credit alleged that the collateral was insufficient to fully secure its claim and that the debtor was unable to provide it with adequate protection. Id.
Mr. Dickenson responded to the motion for relief by admitting all of the facts; except, he denied that Farm Credit had any lien on his farm products and denied that relief from stay was appropriate. See Response to Motion for Relief at 1-2, In re Dickenson, 13-71283 (Bankr.W.D.Va. Oct. 31, 2013) ECF Doc. No. 21. Furthermore, Mr. Dickenson asserted that granting Farm Credit relief from stay would not be in the best interest of the creditors. Specifically, he argued:
Id.
The parties agreed to continue the hearing on the motion for relief; however, prior to the continued hearing, the parties reached an accord wherein Farm Credit would table and continue its motion for relief for seven more months, until October 2014, in exchange for Mr. Dickenson providing adequate protection to Farm Credit in the form of a $10,000
After Farm Credit filed its motion for relief, on November 4, 2013, Mr. Dickenson filed his chapter 12 plan for reorganization ("the November 4 Plan"). See Chapter 12 Plan, In re Dickenson, 13-71283 (Bankr.W.D.Va. Nov. 4, 2013) ECF Doc. No. 22. The chapter 12 trustee and two of the debtor's four secured creditors — Farm Credit and New Peoples Bank — filed objections to confirmation of the November 4 Plan. Along with his objection to confirmation, the chapter 12 trustee also sought dismissal of the case, citing 11 U.S.C. § 1208. Trustee's Objection at 2, In re Dickenson, 13-71283 (Bankr.W.D.Va. Nov. 8, 2013) ECF Doc. No. 25.
During the confirmation hearing, the debtor conceded the November 4 Plan could not be confirmed over the objections of Farm Credit and New Peoples Bank. Additionally, the chapter 12 trustee argued the plan could not be confirmed, because (1) it provided a payment term for unsecured creditors exceeding the period permitted under section 1222; (2) it was unclear in its payment terms for its debts to the County Treasurer; (3) it did not provide sufficient funding to pay the claims as proposed; and (4) most importantly, the trustee was unable to determine the extent of the debtor's ownership interests in real property and was uncertain if the Code permitted the treatment proposed in the plan, wherein the debtor would transfer certain property to a certain secured creditor. Id. Accordingly, the Court entered an order denying confirmation of the plan and directing Mr. Dickenson to file an amended plan within fourteen days, absent which the Court would dismiss the case.
The debtor filed an amended plan on March 25, 2014 ("the March 25 Plan"), and noticed it to be heard on May 8, 2014, which the Court set aside as a special hearing date specifically for these matters. See Amended Chapter 12 Plan, In re Dickenson, 13-71283 (Bankr.W.D.Va. Mar. 25, 2014) ECF Doc. No. 67. Nearly every secured creditor filed an objection to the March 25 Plan.
One month later, on April 23, Mr. Dickenson docketed a pleading entitled "Motion to Exchange Property (11 U.S.C. § 363(b))," but which was actually a motion to sell ("the Motion to Exchange"). Motion to Exchange, In re Dickenson, 13-71283 (Bankr.W.D.Va. Apr. 23, 2014) ECF Doc. No. 75. As part of the relief requested, the debtor also sought approval of a reduction in the notice period required by Rule 2002 to fourteen days. Id. at 2. The Motion to Exchange stated that the debtor was the owner of a one-quarter interest in approximately 200 acres of property, which he desired to transfer to his nephew. Id. According to the Motion to Exchange, "[t]he debtor desires to exchange his interest in this farm in exchange for the conveyance by his nephew ... of his nephew's three-quarter (3/4) interest in another farm of fifty (50) acres." Id. Thus, the Motion requested that Mr. Dickenson "be authorized to exchange properties with his nephew." Id.
Although the request sought permission prospectively, the debtor had, in fact, already
On April 30, 2014, shortly after filing the Motion to Exchange, Mr. Dickenson filed another amended plan ("the April 30 Plan"), which was more than a month after the Court's deadline to do so, ultimately frustrating the purpose of the special hearing on May 8 (the "May 8 Hearing"). See Second Amended Chapter 12 Plan, In re Dickenson, 13-71283 (Bankr.W.D.Va. Apr. 30, 2014) ECF Doc. No. 77. With only eight days before the special hearing date, the creditors did not have sufficient time to consider whether the April 30 Plan resolved their existing objections or gave rise to any new ones. See FED. R. BANKR.P. 2002(a)(5).
Two days later, on May 2, 2014, the chapter 12 trustee filed an objection to the Motion to Exchange. See Trustee's Objection to Motion to Exchange, In re Dickenson, 13-71283 (Bankr.W.D.Va. May 2, 2014) ECF Doc. No. 78. One of the grounds raised by the trustee in opposition to approval of the exchange was the debtor's failure to disclose in his schedules his interest in the 200 acres he sought to transfer as well as the clandestine nature of the transaction with his nephew. Id. at 1. Although the Court could not confirm the April 30 Plan, it resolved to go forward and hear the other matters already set for the May 8 Hearing — including the Motion to Exchange.
At the outset of the May 8 Hearing, counsel for Mr. Dickenson moved to withdraw his Motion to Exchange; however, the chapter 12 trustee, who responded in opposition to the Motion, objected to its withdrawal. May 8 Transcript, at 22-23. The Court denied the motion to withdraw, so counsel for the debtor proceeded with evidence in support of the Motion to Exchange. Id. at 68. Mr. Dickenson was the only witness to testify.
Mr. Dickenson testified that his failure to disclose both his interest in the 203.86 acres and his transfer of that interest to his nephew was simply an innocent mistake. Id. at 29 ("I had a lot of pieces of property and I guess I overlooked that."); id. at 44 ("I didn't forget [about the transfer]."). Throughout the hearing, Mr. Dickenson continually referred to his failure to disclose this information as "an oversight," and he explained the omission was merely because he "didn't have the tax tickets." Id. at 44. When pressed on whether he had made any other mistakes or omissions in his schedules, he stated, "I feel sure I
Mr. Dickenson explained that he owned a one-quarter interest in both the fifty — and 200-acre parcels, and his nephew owned the remaining three-quarters interest in each property.
When pressed further to discuss his valuation of the properties, Mr. Dickenson testified that he believed the value of fifty-acre parcel was around $1900 per acre, which would increase to about $2000 per acre if he owned the entire property outright with no other interest holders. Id. at 63. Although Mr. Dickenson acknowledged that his schedules valued the property at only $1700 per acre, he could not explain the discrepancy between his current statements regarding valuation and the values he scheduled. Id. at 59, 62.
Furthermore, throughout his examination, Mr. Dickenson could not definitively identify which particular parcel of land was subject to this transfer between himself and his nephew. See id. at 34, 35, 37, 63. Again, when pressed, he explained that he did not have the "tax tickets," so he just forgot to list it in his schedules, even though the transfer occurred merely days before he filed his petition, when he would have been preparing his schedules. Id. at 26, 29, 34, 36, 44.
Later in the hearing, the chapter 12 trustee also confronted Mr. Dickenson about his Statement of Financial Affairs. According to his Statement of Financial Affairs, Mr. Dickenson indicated that he had not transferred any property within the two years immediately preceding the filing of his bankruptcy petition. See Exhibit B at 5, In re Dickenson, 13-71283 (Bankr.W.D.Va. May 8, 2014) ECF Doc. No. 81. Mr. Dickenson acknowledged that he failed to disclose the transfers to and from his nephew, and, once again, he asserted that this failure to disclose was simply an oversight. See May 8 Transcript, at 36, 37, 65.
When asked about these discrepancies in the record, Mr. Dickenson readily admitted that he intentionally concealed the interest in real property that his nephew conveyed to him and intentionally did not record the deed. Id. at 28. "I did not record my 50 acre deed because I knew I had to come before the Court to get that approved." Id. When asked why he thought he had to come before the Court to request permission to record deeds that he executed prior to his filing for bankruptcy, he testified, "I guess I was aware not to do that. That I had to come before this Court to do that, I guess." Id. 55. Mr. Dickenson did not, however, explain why he decided to wait ten months after filing his petition to come before the Court to request approval of the exchange as opposed to doing so right after filing.
At the conclusion of the May 8 Hearing, the Court continued the hearing on confirmation
Id. at 68-69. The Court's ruling was incorporated in orders.
Prior to the continued hearing on June 5, the debtor filed another amended Schedule A ("Second Amended Schedule A") as well as several operating reports and a "Second Amended Chapter 12 Plan."
Ms. Dickenson testified that her nephew was experiencing financial problems, so she signed on as guarantor for some of his loans. June 5 Transcript at 10-11, In re Dickenson, 13-71283 (Bankr.W.D.Va. June 27, 2014) ECF Doc. No. 130 [hereinafter June 5 Transcript]. In an effort to improve his financial condition, the nephew sought out a refinancing loan from First Bank and Trust for $150,000, secured by the "Home Place" (the 200-acre tract), but the bank required the nephew to own the property outright, with no other interest holders. Id. Accordingly, the nephew had to obtain Mr. Dickenson's one-quarter interest in the Home Place, in exchange for which, the nephew would give Mr. Dickenson his three-quarter interest in the fifty-acre "George Gose Place." Id. at 24-25. To consummate this deal, Ms. Dickenson admitted to having encouraged her nephew and the debtor to exchange the properties; however, she denied having knowledge of the debtor's intention to petition for bankruptcy.
Next, the debtor took the stand. To begin, Mr. Dickenson testified that he filed his Second Amended Schedule A to "cure" his previous omission of the parcels of property as well as to include both the tax-assessed values of the properties and his personal valuations of the properties. Id. at 37. When asked by the trustee why he had failed to include these parcels of property
On cross examination, the chapter 12 trustee walked Mr. Dickenson through each of his iterations of Schedule A, identified which parcels he had omitted in the earlier iterations, and questioned him as to why these parcels were not disclosed after the prior amendments. Mr. Dickenson could offer no explanation except that it was an oversight. Id. at 42, 44, 45. Furthermore, the trustee asked Mr. Dickenson why he had still failed to include the property transferred to him from his nephew in his Second Amended Schedule A. Id. at 45. Mr. Dickenson, once again, could not explain this omission.
Delving further into the Second Amended Schedule A, the trustee confronted Mr. Dickenson about three newly disclosed pieces of property,
Furthermore, in explaining his relationship with the aforementioned Mr. Hart and Mr. Hilton, Mr. Dickenson continually referred to them as his "partners;" however, he could not explain why he had not listed Mr. Hilton and Mr. Hart as partners in his statement of financial affairs or his interest in the partnership on his Schedule B.
Upon hearing of the February 2014 deed, counsel for Farm Credit realized one of the tracts of property included therein was that which Mr. Dickenson had pledged as adequate protection to his client as part of their compromise to settle its motion for relief from stay. Id. at 59-64. After the trustee's questioning, Farm Credit's counsel also asked questions about how Mr. Dickenson could have pledged the property as adequate protection, when he apparently did not own any interest in it at the time. Id. at 63. Mr. Dickenson claimed the deed must have been wrong, saying, "[w]ell, I guess it's a mistake. I don't know." Id. Furthermore, Mr. Dickenson, disclosed that Mr. Hilton and Mr. Hart were already timbering the property, without approval from Farm Credit, without any of the proceeds going to the estate, and without ever even disclosing the presence of marketable timber
In conclusion, the trustee asked Mr. Dickenson if he could find anywhere in the schedules where he disclosed the existence of a life insurance policy, for which he had reported a $683.28 per month payment on his Operating Reports. Id. at 53. Mr. Dickenson responded that he had "evidently not" disclosed it. Id. Continuing, the trustee asked if he had disclosed anywhere in the schedules the transfer of the property to his nephew, which Mr. Dickenson again said that he had not. Id. at 54-55. Finally, the trustee asked Mr. Dickenson about some cattle that he had recently sold.
According to the testimony and record in the case, the Court finds the following facts. Mr. Dickenson:
The question before the Court is whether the conduct of the debtor constitutes cause to dismiss his case under Bankruptcy Code section 1208. The chapter 12 trustee urges the Court to conclude that the debtor's conduct warrants dismissal under section 1208(c)(1), based on the debtor's repeated failure to provide accurate schedules, failure to confirm a plan, and post-petition misconduct. Conversely, the debtor argues that while such conduct may warrant dismissal, the debtor's representations and actions in this case do not rise to the level to justify dismissal.
As more fully set forth below, the Court agrees with the trustee and finds that cause exists to dismiss the case under section 1208(c)(1) and for other good cause under section 1208(c) and (d). The Court holds that Mr. Dickenson's behavior throughout the pendency of the case constitutes not only an unreasonable and prejudicial delay to creditors but also a lack of good faith in dealing with the creditors and the Court in this case. Accordingly, cause exists to dismiss the case.
The Bankruptcy Code outlines the circumstances justifying dismissal of a case in section 1208(c). Specifically, subpart (c)(1) provides, "the court shall dismiss a case under this chapter for cause, including ... unreasonable delay, or gross mismanagement, by the debtor that is prejudicial to creditors...." 11 U.S.C. § 1208(c)(1). The Code does not specify a particular length of delay that is considered per se "unreasonable" or "prejudicial;" however, examples of what courts have found to be unreasonable are abundant. See, e.g., United States v. Suthers (In re Suthers), 173 B.R. 570 (W.D.Va.1994) (ruling the bankruptcy court's decision not to dismiss a case was an abuse of discretion, when the debtor failed to confirm multiple amended plans over a span of just under three years and violated various court orders, and directing dismissal of the petition for "unreasonable delay"); In re Carroll, No. 13-08930, 2014 WL 3571535 (Bankr.W.D.Mich. July 14, 2014) (holding the debtors' failure to file an amended plan "promptly," as indicated by the court's denial of confirmation of an earlier plan and refusal to adjourn the hearing, was "unreasonable" under the circumstances and ran afoul of the intended "swift" disposition of chapter 12 cases). Consequently, the Court will determine if cause for dismissal exists by considering the specific facts of this case, including the length of the delay, the reason for or explanation of the delay, the impact of the delay on creditors, and how close the debtor is to having a viable plan ready for confirmation.
Mr. Dickenson's case has now been pending for several months,
At the May 8 Hearing, in attempting to explain the circumstances surrounding his Motion to Exchange, Mr. Dickenson acknowledged that his original Schedule A, filed on August 21, 2013, did not disclose the parcel of real estate he sought to transfer to his nephew, with no explanation as to why. May 8 Transcript, at 44. Only a few weeks later, Mr. Dickenson amended his Schedule A ("First Amended Schedule A") to fix some inaccuracies; however, even the First Amended Schedule A did not include his interest in the 200 acres he sought to transfer. See Amended Schedule A, Amended Schedule D, In re Dickenson, 13-71283 (Bankr.W.D.Va. Oct. 4, 2014) ECF Doc. No. 14. Still, Mr. Dickenson could provide no proper explanation as to why he did not include the property in his schedules and still has yet to do so.
Ultimately, despite being filed under penalty of perjury and the many opportunities to correct them, Mr. Dickenson's schedules remain deficient. To date, his Second Amended Schedule A double-counts certain parcels of real estate and may have other deficiencies that remain unknown; he has not disclosed his partnership with Mr. Hilton and Mr. Hart; he has not disclosed a life insurance policy; he has not indicated any transfers of property in his statement of financial affairs; and his valuations of the property on his schedules compared to his testimony before the Court are at odds.
Furthermore, since the filing of the case, Mr. Dickenson has proposed four separate chapter 12 plans for reorganization, none of which the Court can confirm due to the myriad deficiencies in the schedules. It is impossible for the Court, the trustee, or Mr. Dickenson's creditors to accurately evaluate the sufficiency of the proposed plan without the assurance of adequate disclosure of his assets and liabilities in his schedules. Despite all of these misgivings, Mr. Dickenson has provided no reasonable explanation to quell any fears of the various parties in this case that he can provide accurate and reliable schedules.
Considering the facts of this case, it appears to the Court that despite many months under the protections of the Bankruptcy Code, four failed attempts to propose a confirmable plan, and three attempts to file accurate and complete schedules and statements, Mr. Dickenson's case is getting more convoluted and perplexing with each passing hearing. Meanwhile his creditors are waiting in the wings without payment, as their interests are impaired and collateral is devalued. Accordingly, the Court finds Mr. Dickenson's repeated delays and failure to propose a confirmable plan unreasonable, without justification, and harmful to his creditors. Accordingly, the case should be dismissed under section 1208(c)(1).
Similarly, the Court holds that other good cause exists to dismiss the case under section 1208. As mentioned above, Bankruptcy Code section 1208(c) lists the various circumstances under which a court may dismiss or convert a case. Courts across the country, however, have held the enumerated provisions of subsection (c) are not exclusive, and other circumstances may rise to the level of necessitating dismissal "for cause." See Euerle Farms, Inc. v. State Bank in Eden Valley (In re Euerle Farms, Inc.), 861 F.2d 1089, 1091
Thus, a court may dismiss a case by analyzing the totality of the circumstances and reasoning that cause exists for dismissal based on the debtor's inappropriate and fraudulent post-petition conduct.
Courts applying the totality of the circumstances approach consider various factors, including:
Id. at 1357. Ultimately, at the heart of the inquiry is "whether the filing is fundamentally fair to creditors and, more generally, is ... fundamentally fair in a manner that complies with the spirit of the Bankruptcy Code's provisions." Id. Furthermore, the Fourth Circuit has held that "[o]ne factor
Considering the aforementioned factors, the Court finds cause to dismiss Mr. Dickenson's case for his improper post-petition conduct. As explained more fully below, the Court finds that Mr. Dickenson's actions during the pendency of his case, considering the totality of the circumstances, necessitate dismissal. Mr. Dickenson has repeatedly failed to disclose assets, failed to provide the Court with complete and correct filings, and failed to comply with various orders of the Court. Accordingly, in terms of the Love factors, mentioned above, Mr. Dickenson's actions have negatively affected his creditors; he has not been forthright with the Court and his creditors; and his actions suggest his filing does not comply with the spirit of the Bankruptcy Code.
As extensively detailed above, Mr. Dickenson repeatedly failed to disclose several parcels of real property as well as various property transactions. A debtor's lack of candor to the Court by concealing assets and transactions undermines the entire bankruptcy process and prejudices creditors. See In re Kloubec, 268 B.R. 173, 178 (N.D.Iowa 2001); see also Harford, 1986 WL 17681, at *1 (affirming the bankruptcy court's ruling that the debtors' lack honesty in representing facts alone was sufficient to dismiss the case, because such conduct placed an undue burden on the trustee to "check up" on the debtor); In re Alt, 305 F.3d 413, 421 (6th Cir.2002) ("Whether the debtor has been forthcoming with the bankruptcy court and the creditors is properly considered in deciding whether dismissal for lack of good faith is appropriate."). Although mistakes and omissions certainly occur, when the debtor demonstrates a pattern of such behavior, dismissal may be appropriate.
In this case, the trustee repeatedly requested and, in addition, the Court directed, that Mr. Dickenson update his schedules to include any omitted properties, yet every time Mr. Dickenson amended, more uncertainty emerged. The Court became aware of Mr. Dickenson's inaccurate disclosures when he filed his Motion to Exchange on April 23, 2014, and revealed that he and his nephew had signed deeds of exchange shortly before the filing of his petition. See Motion to Exchange, In re Dickenson, 13-71283 (Bankr.W.D.Va. Apr. 23, 2014) ECF Doc. No. 75. At the May 8 Hearing, the Court, trustee, and creditors heard evidence concerning the fact that Mr. Dickenson's schedules were not complete. In particular, he had not included the property he sought to transfer to his nephew or the property he had received from his nephew. May 8 Transcript, at 44. Furthermore, Mr. Dickenson had not indicated on his statement of financial affairs that he had engaged in this transaction with his nephew. Id. at 36-37. Mr. Dickenson had no explanation for either of these omissions. At this hearing, Mr. Dickenson admitted he had likely made other mistakes in his schedules, but he could not identify any other particular omissions or mistakes. Id. at 44.
Prior to the next hearing on June 5, Mr. Dickenson, once again, amended his schedules to include his previously omitted parcels of property. June 5 Transcript, at 37. Notwithstanding, Mr. Dickenson still failed to include either the property he had received from his nephew or the existence of the transfer of property between them. Id. at 54. Also, during the June 5 Hearing, the trustee questioned Mr. Dickenson about his recently revealed transfer of the property known as the "Ramsey Land." Although Mr. Dickenson had previously
Furthermore, at the June 5 Hearing, Mr. Dickenson disclosed his "partnership" with Claude Hart and Michael Hilton. Id. at 48-49. Although this was an informal arrangement, as mentioned above, such an understanding is considered a partnership under Virginia law,
Throughout the duration of the case, Mr. Dickenson has repeatedly failed or refused to comply with the various orders and directives of the Court and the Bankruptcy Code and Rules. Not only has he constantly failed to provide the Court with complete operating reports, he has also knowingly violated his consent order with Farm Credit of the Virginias and failed to file complete and accurate schedules.
First, Mr. Dickenson failed to provide complete operating reports as required by Rule 2015(b) of the Federal Rules of Bankruptcy Procedure and section 704(a)(8) of the Code. Rule 2015(b) requires a chapter 12 debtor in possession to comply with the requirements of subsection (a)(2)-(4). FED. R. BANKR.P. 2015(b). Subsection (a), clauses (2) through (4) require the debtor in possession:
FED. R. BANKR.P. 2015(a)(2)-(4). Furthermore, section 704(a)(8) of the Code requires the debtor in possession to "file with the court ... periodic reports and summaries of the operation of such business, including a statement of receipts and disbursements, and such other information as ... the court requires...." 11 U.S.C. § 704(a)(8).
Mr. Dickenson's conduct ran afoul of these provisions. At the June 6 Hearing, Mr. Dickenson admitted he had sold a load of cattle, with net receipts of $36,000, yet he did not disclose this income on his monthly operating reports. June 5 Transcript, at 58-59. Instead, he testified the proceeds went into a bank account in his sister's name, where she would draft money for him, upon his request. Id. at 59. His failure to disclose the receipt of such substantial amounts of money and his retention of such in an undisclosed bank account held by a third party violated the
Second, on January 22, 2014, Farm Credit and Mr. Dickenson filed a Motion for Adequate Protection, wherein Mr. Dickenson would pledge a certain parcel of real estate, in which he allegedly owned a one-quarter interest, to Farm Credit as adequate protection. See Motion for Adequate Protection, In re Dickenson, 13-71283 (Bankr.W.D.Va. Jan. 22, 2014) ECF Doc. No. 52. In exchange for this pledge as well as his pledge of various other parcels, Farm Credit agreed to postpone prosecuting its motion for relief from stay for nearly a year. Id. The Court approved the consent agreement on March 13, 2014. See Order Approving Motion for Adequate Protection, In re Dickenson, 13-71283 (Bankr.W.D.Va. Mar. 21, 2014) ECF Doc. No. 64.
At the June 5 Hearing, however, the trustee confronted Mr. Dickenson with a deed signed on February 19, 2014, which transferred real estate from Garland Ramsey, Betty Lou Mays, Robert Preston Ramsey, Rebecca Ramsey Sturgill, Paul David Carroll, and Larry Carroll a one-half interest to Charles Gose Dickenson, Jr., and Barbara Jean Dickenson, as tenants by the entirety with right of survivorship, and a one-half interest to Michael Hilton, II, and Claude Hart. Exhibit N at 1, In re Dickenson, 13-71283 (Bankr. W.D.Va. June 4, 2014) ECF Doc. No. 122. One of the tracts of real estate involved in this transaction was the property Mr. Dickenson pledged as adequate protection to Farm Credit a month earlier. Mr. Dickenson could not explain how he pledged his interest in this property in January, yet the grantors of the deed transferred two one-half interests to the grantees in February.
Even assuming he did own the property when he pledged it as adequate protection, though, Mr. Dickenson's conduct remains disconcerting. When discussing the property at the June 5 Hearing, Mr. Dickenson explained that he did not have to pay anything for the property, because Claude Hart and Michael Hilton paid for his share. Id. at 55. He claimed he owed them no money for this transaction; however, he later explained that although Hart and Hilton were timbering the property, he had yet to receive any proceeds, because he needed to pay them back for buying the property for him. Id. at 56. Although such an arrangement could be proper, Mr. Dickenson had not procured Farm Credit's consent and was allowing Hart and Hilton to remove valuable assets from Farm Credit's collateral.
Regardless, his conduct was improper. It appears to the Court one of three scenarios occurred: (1) Mr. Dickenson pledged property he did not actually own as adequate protection; (2) he owned the property when he pledged it as adequate protection, but he later transferred it to someone else, who then re-conveyed to it to him and his wife in a form that placed it beyond the reach of Farm Credit; or (3) he obligated himself on further debts to his partners without prior approval and was actively involved in transferring proceeds from the assets pledged as adequate protection out of the estate without the secured creditor's consent.
Finally, as mentioned above, the Court directed Mr. Dickenson to correct his
"The veracity of the bankrupt's statements is essential to the successful administration of the Bankruptcy Code." McLean v. Harlow (In re Harlow), 107 B.R. 528, 530 (Bankr. W.D.Va.1989). "When a debtor signs a schedule and a statement of affairs, he does so under penalty of perjury, and such `written declarations have the force and effect of oaths.'" Peoples Bank of Charles Town v. Colburn (In re Colburn), 145 B.R. 851, 857 (Bankr. E.D.Va.1992) (quoting Bold City VII, Ltd. v. Radcliffe (In re Radcliffe), 141 B.R. 1015, 1021 (Bankr.E.D.Ark.1992)). Accordingly, when a court directs a debtor to amend and update schedules, implicit within that directive is the mandate that the schedules should be correct, even if the court did not expressly identify each and every defect the debtor should cure.
As detailed above, Mr. Dickenson's conduct led to prejudicial delays to his creditors. The creditors have patiently waited on the sidelines while Mr. Dickenson's case has floundered. While the creditors waited, Mr. Dickenson improperly obligated himself on further debts; he devalued a creditor's collateral by transferring property pledged to it out of the estate; and he hid money in a bank account held by a third party.
Further, however, these delays not only prejudice the creditors by affirmatively devaluing collateral and the debtor assuming more debt, but they also cause the various parties in interest other prejudices — most notably, uncertainty. In Harford, the Fourth Circuit explained, "[m]isrepresentations place a burden on the trustee because most of the burden of checking upon [sic] debtors' schedules falls upon the ... trustee and counsel for the ... trustee." Harford, 1986 WL 17681, at *1. Thus, such continually incomplete and improper representations make it impossible for the creditors to evaluate whether Mr. Dickenson's proposed plans are fair and proper, or whether the secured creditors' interests are adequately addressed and/or protected. Similarly, the Court and the trustee cannot evaluate whether the plan complies with the provisions of the Bankruptcy Code or whether the treatment of the various creditors is equitable. Thus, these incessant improprieties demonstrate Mr. Dickenson's clear disregard of the spirit and essence of the Bankruptcy Code and Rules. See Love, 957 F.2d at 1357.
When a debtor has consistently misrepresented his assets, income, and liabilities and has failed to honor his obligations to the Bankruptcy Court and process, his conduct merits dismissal. Mr. Dickenson's case is similar to In re Suthers, another case from the Western District of Virginia, in which the district court determined dismissal was appropriate. See United States v. Suthers (In re Suthers), 173 B.R. 570 (W.D.Va.1994). In Suthers, the district court held that the bankruptcy court abused its discretion by not dismissing the debtors' case for bad faith. Id. at 573. Important to this ruling, the district court highlighted the fact that the debtors had incurred further debts without consent of the bankruptcy court, sold collateral securing a creditor's
This ruling is not one the Court takes lightly. As explained above, Mr. Dickenson did not merely make mistakes. His case was marred with omissions, contradictions, and tribulations, transforming it from that of the "typical" to the "atypical." The Court is aware that honest mistakes happen, and such mistakes may not warrant dismissal for bad faith per se. When, however, a debtor has demonstrated a pattern of deceitful and/or irresponsible conduct that prejudices the creditors and confounds the trustee, the case should be dismissed. In such an instance, the debtor has revealed a lack of respect for the spirit of the Bankruptcy Code and proven himself not to be an "honest but unfortunate debtor."
It appears to the Court Mr. Dickenson is either actively concealing assets from his creditors, or he is not able or willing to provide the Court and interested parties with reliable information sufficient to confirm a plan. Either way, the Court does not believe giving Mr. Dickenson yet another opportunity to try to amend his schedules is in the best interest of any party.
For all of these reasons, the Court grants the trustee's motion to dismiss. The Court will enter the order of dismissal after ordering the appropriate disposition of the funds held by the trustee and resolving any other remaining matters. Accordingly, the Court will set a hearing on October 16, 2014, in the second floor courtroom, United States Bankruptcy Court, 210 Church Avenue, SW, Roanoke, VA 24011, at 2:00PM, to hear and consider the disposition of the pre-confirmation funds held by the chapter 12 trustee or such other and further relief as is necessary before entering the order of dismissal.
Thus, the Court finds that cause exists to dismiss the debtor's bankruptcy case pursuant to the provisions of 11 U.S.C. § 1208 and
The Court will contemporaneously issue an order consistent with the findings and ruling of this opinion.
