UNITED STATES BANKRUPTCY
COURT
FOR THE WESTERN DISTRICT OF
MICHIGAN
|
In
the Matter of: |
Case No. GG 02‑05934 Chapter
7 |
|
Alleged
Debtors. |
|
AMENDED
OPINION REGARDING DISMISSAL OF
INVOLUNTARY PETITION WITH PREJUDICE TO REFILING1
On May 21, 2002, Philip L.
Hammond, "Hammond," filed what purports to be an involuntary petition
under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 303. The filing of an
involuntary petition commences a bankruptcy case. 11 U.S.C. § 303(b).
The court has jurisdiction
over this case. 28 U.S.C. § 1334. Determining whether an order for relief
should be granted in an involuntary case is a core proceeding. 28 U.S.C. §
157(b)(2)(A); see also 11 U.S.C. § 303(h) (which mandates that
the court shall determine whether to enter an order for relief or to dismiss an
involuntary case).
Hammond's involuntary
petition was filed against alleged debtor Donald Davis, who is an assistant
United States Attorney for the Western District of
____________________
1 The only changes in this
amended opinion are the correction of typographical errors in the original
opinion. This was done because the undersigned judge has decided to submit the
opinion for publication.
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Michigan. Also included in the caption, presumably
as a joint alleged debtor, is Honorable Robert Holmes Bell, Chief Judge, United
States District Court for the Western District of Michigan.2
The papers filed by Hammond
to commence this case are largely incomprehensible. When the papers were filed,
no filing fee was paid. After filing of Hammond's papers, a deputy bankruptcy
court clerk brought the papers to the undersigned judge who has been assigned
as the presiding judge in this case.
After a careful review of
Hammond's papers, and consideration of other admissible evidence that is
capable of judicial notice, the court has determined that it is appropriate, in
the interest of justice, to render this opinion and enter an order on its own
initiative.
A bankruptcy court may take
judicial notice of adjudicative facts. FED. R. EVID. 201. Judicial notice may
be taken by a court "whether requested or not." FED. R. EVID. 201(c).
Such notice may be taken "at any stage of the proceeding." FED. R.
EVID. 201(f).
A bankruptcy judge may take
judicial notice of the records on file before the court. Matter of Holly's,
Inc., 172 B.R. 545, 553 n. 5 (Bankr. W.D. Mich. 1994). See also
NCNB Texas National Bank v. Johnson, 11 F.3d. 1260 (5th Cir. 1994);
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2 In addition to the other
procedural deficiencies, some of which are addressed below, the court notes
that it is improper to file an involuntary petition against joint alleged
debtors. See e.g. In re Benny, 842 F.2d 1147 (9th Cir.
1988) (the Bankruptcy Code does not contemplate the filing of a joint
involuntary petition).
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Matter of Woodmar Realty Co., 294 F.2d 785 (7th Cir.
1961); Matter of Colorado Corp., 531 F.2d 463 (10th Cir. 1976).
In each judicial district,
bankruptcy judges constitute "a unit of the district court to be known as
the bankruptcy court for that district." 28 U.S.C. § 151. Therefore, in
appropriate circumstances, a bankruptcy judge may take judicial notice of the
district court's files. St. Louis Baptist Temple Inc. v. Federal Deposit
Ins. Corp., 605 F.2d 1169, 1172 (10th Cir. 1979) ("it has been held
that federal courts, in appropriate circumstances, may take notice of
proceedings in other courts, both within and without the federal judicial
system, if those proceedings have a direct relation to matters at issue");
In re Wright, 187 B.R. 826, 829 (Bankr. D. Conn. 1995) (the bankruptcy
court made an independent review and took judicial notice of the contents of
the action in the district court's file); In re Walters, 176 B.R. 835,
856 n. 12 (Bankr. N.D. Ind. 1994) (the bankruptcy court took judicial notice of
a file from the district court because the bankruptcy court is a unit of the
district court).
This court takes judicial
notice of a case file maintained by the United States District Court for the
Western District of Michigan, i.e., United States v. Anderson, et al.,
Case No. 1:01 CR 00175, the "Anderson" case, which was filed on July
26, 2001. In Anderson, a criminal case, there are fifteen co‑defendants.
Hammond is one of those defendants. The presiding judge is Honorable Robert
Holmes Bell, Chief Judge of the United States District Court for the Western
District of Michigan, "Judge Bell." The attorney for the plaintiff
United States is Donald A.
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Davis, Esq., from the United States Attorney's
Office for the Western District of Michigan, "Prosecutor Davis."
As disclosed by the Anderson
district court case file, on July 26, 2001, Hammond was indicted on a number of
counts, including conspiracy to defraud the United States, creating fictitious
obligations intending to defraud, and the making of false statements under the
penalty of perjury. (U.S.D.C. Docket 1.) On September 20, 2001, a jury trial
was scheduled regarding a number of the co‑defendants, including Hammond.
(U.S.D.C. Docket 176.) After a continuance was granted by the district court on
October 17, 2001 (U.S.D.C. Docket 193), and after a final Pretrial Conference
was held on November 19, 2001, a jury trial took place before Judge Bell. That
trial lasted eleven days during the period from November 26 to December 12,
2001. Per the Minutes in the district court's docket, the jury rendered its
verdict on December 12, 2001.
Hammond was convicted of
engaging in a number of illegal activities, including conspiring to defraud the
United States and creating fictitious obligations with the intent to defraud.
(U.S.D.C. Docket Minutes between docket entries 263 and 264.) Hammond was
scheduled to be sentenced on May 21, 2002 at 1:00 p.m. (U.S.D.C. Docket 286.)
Less than three hours before
Hammond's sentencing hearing, on May 21, 2002, at 10:46 a.m., the bankruptcy
court received Hammond's involuntary petition against Prosecutor Davis and
Judge Bell.
The procedural defects of the involuntary petition are
numerous. By way of
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illustration, the information required about the
alleged debtors is lacking, the nature of Hammond's alleged claim is not
disclosed, and the amount of Hammond's alleged claim is unstated. This material
information is required pursuant to Official Bankruptcy Form 5, Involuntary
Petition.
Hammond did not pay the
requisite filing fee. FED. R. BANKR. PRO. 1006. This failure, standing alone,
constitutes sufficient cause for dismissal. 11 U.S.C. § 707(a)(2).
The nearly incomprehensible
documents attached to Hammond's involuntary petition, and the gibberish in
Hammond's "Complaint" within the involuntary petition, conclusively
demonstrate that he has two (2) major goals: (1) to get out of jail and (2) to
harass Prosecutor Davis and Judge Bell. To seek to achieve these goals, Hammond
is abusing the bankruptcy system.
A petitioning creditor must
be the "holder of a claim" against the alleged debtor to be eligible
file an involuntary petition against the alleged debtor. 11 U.S.C. § 303(b).
"Claim" is defined in the Bankruptcy Code. 11 U.S.C. § 101(5). There
is absolutely nothing in Hammond's papers which even remotely suggests that he
holds any "claim" against Prosecutor Davis or Judge Bell. Therefore,
Hammond is not eligible to file an involuntary petition against either
Prosecutor Davis or Judge Bell in this case.
The Sixth Circuit Court of
Appeals has held it is permissible to dismiss a chapter 7 case for bad faith
filing. In re Zick, 931 F.2d 1124 (6th Cir. 1991) (debtor was in bad
faith; under facts of the case, an evidentiary hearing was not
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required); cf. In re Trident Assocs. Ltd.
Partnership, 52 F.3d 127 (6th Cir. 1995) (chapter 11 case dismissed for lack of good faith; "good
faith is an amorphous notion, largely defined by factual inquiry").
Although the Sixth Circuit has not addressed the issue, a number of other
circuit courts have upheld chapter 13 cases being dismissed because of bad
faith filings. In re Lilley, 91 F.3d 491 (3d Cir. 1996); In re Eisen,
14 F.3d 469 (9th Cir. 1994); In re Gier, 986 F.2d 1326 (10th Cir. 1993);
Matter of Love, 957 F.2d 1350 (7th Cir. 1992) (all upholding dismissals
for bad faith filings); cf. In re Molitor, 76 F.3d 218 (8th Cir.
1996) (upholding conversion of case from chapter 13 to chapter 7 as a result of
a bad faith filing).
No reported decisions have
been found when a bankruptcy court has sua sponte dismissed an
involuntary petition for a bad faith filing. However, under extraordinary
circumstances, such as exist in the present case, such an action is proper.
First, 11 U.S.C. § 303(i) permits an award of punitive damages when an
involuntary petition is filed in bad faith. Therefore, the Bankruptcy Code
expressly contemplates that a bad faith involuntary filing may take place.
Second, there is no principled reason to distinguish bad faith filings in
involuntary cases from bad faith filings in voluntary cases, whether filed
under chapter 7, 11 or 13. Third, this judge believes the bankruptcy court has
a duty to dismiss abusive or manipulative cases and it is proper for the court
to act, when extreme circumstances exist, on its own initiative. To delay or do
nothing would permit a bad faith filer, in this instance a convicted criminal
who wants to harass government officials, to drag inculpable individuals, such
as the alleged debtors in this case, through illegal mud.
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See
11 U.S.C. § 105(a) (a bankruptcy
court may issue sua sponte orders to prevent an abuse of
process).
This involuntary petition is
nothing more than a convicted criminal's fantasy and should be addressed
swiftly. FED. R. BANKR. PRO. 1001 (the Bankruptcy Rules "shall be
construed to secure the just, speedy, and inexpensive determination of every
case and proceeding"). Filing an abusive involuntary petition is not some
type of Monopoly game whereby Hammond may attempt to win some sort of "get
out of jail free" card.
In chapter 13 cases, an
extremely large number of decisions have held that dismissal is warranted when
the case is abusively filed. See cases cited in Norton Bankruptcy Law
& Practice 2d § 125:5 n. 68 (in a number of these reported decisions, the
court dismissed the case with a 180 day bar
to refile or dismissed the case "with prejudice," meaning the
case could not be refiled). Also, in egregious instances, sua sponte dismissal
is warranted. Id. at n. 40.
The court determines the
proper disposition of this involuntary bankruptcy petition is to dismiss the
case with prejudice. Further, it strongly appears that Hammond may have
committed a bankruptcy crime. See 18 U.S.C. § 152(2), (3) and perhaps
(4). This judge is obligated to report the possibility of Hammond's bankruptcy
crimes to the United States Attorney. 18 U.S.C. § 3057. Therefore, a copy of
this opinion, a copy of the dismissal order, and a copy of the involuntary
petition (with attachments) shall be transmitted to the United States Attorney
for the Western District of Michigan in lieu of a formal report.
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An order shall be entered accordingly.
James D. Gregg
Chief Judge
Dated this 24th day of May, 2002 at Grand
Rapids, Michigan
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