Rodolfo Velasquez

OCR transcription for search; preserved printed pages are authoritative

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November 06, 2006

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT

NOT FOR PUBLICATION

HAROLD S. MARENU
U.S. BKCY. APP.
OF THE NINTH CIR

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: BAP No. NC-06-1150-SPaBu

RODOLFO VELASQUEZ, Bk. No. 05-35378

Debtor.

RODOLFO VELASQUEZ,

Vv.

DAVID BURCHARD, Chapter 13
Trustee; JOSE TELLECHEA,
Administrator of the Estate
of Juan Jose Tellechea,

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Appellant, )
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Appellees. )
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Argued and Submitted on October 18, 2006
at San Francisco, California

Filed - October 25, 2006

Appeal from the United States Bankruptcy Court
for the Northern District of California

Honorable Dennis Montali, Bankruptcy Judge, Presiding.

Before: SMITH, PAPPAS and BUFFORD,* Bankruptcy Judges.

* This disposition is not appropriate for publication and
may not be cited except when relevant under the doctrine of law
of the case or rules of res judicata, including claim preclusion
and issue preclusion. See 9th Cir. BAP Rule 8013-1.

? Hon. Samuel L. Bufford, United States Bankruptcy Judge for
the Central District of California, sitting by designation.

5
PAN

Entered on Docket F I L E D

NORTHERN DISTRICT OF CALIFORNIA OCT 25 2006

CLERK
EL
CUIT

US. GI
INFO

IRMATION

eee 05-35378 Doc#67 Filed: 10/25/06 Entered: 11/06/06 15:20:25 Pagelo
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Following the entry of a judgment against debtor in state
court, appellee proceeded to place a judgment lien on debtor's
non-exempt real property. However, before appellee could levy
upon the property, debtor filed for chapter 13° relief. Appellee
moved for dismissal of the bankruptcy case under § 1307(c) on the
basis of bad faith. The bankruptcy court granted the motion. A
timely notice of appeal was filed on April 12, 2006. We AFFIRM.

I. FACTS

A. The State Court Judgment

On December 2, 1999, debtor Rodolfo Velasquez (“Debtor”) and
Alberto Carrillo (“Carrillo”) filed a complaint in the Alameda
County Superior Court (“state court”) against Juan Jose Tellechea
(“decedent”) seeking reimbursement for $14,150.36 in property
taxes they had paid for related to decedent’s residence.* The
complaint was amended several times and ultimately sought only to
quiet title of the residence in Debtor and Carrillo based upon

adverse possession.

3 Unless otherwise indicated, all chapter, section and rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and
to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as
enacted and promulgated pursuant to The Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005, Pub. L. 109-8,
Apr. 20, 2005, 119 Stat. 23.

* In September 1996, decedent passed away and left his
estate to his siblings. Maria Tellechea was appointed as the
executor, but opted out and nominated a California resident to
act for her. In late 2000, she learned of the nominee’s
mismanagement of the estate. This led to Jose Tellechea’s
(“Appellee”) appointment as the special administrator of the
estate in February 2001.

Prior to Appellee’s appointment, Carrillo moved into
decedent’s residence at 1550 Pacific Avenue, San Leandro,
California, and began to occupy it illegally. Carrillo and
Debtor learned that property taxes were owed on the property,
which they paid.

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In early 2001, while the quiet title action was pending,
Appellee filed an unlawful detainer action against Debtor and
Carrillo. Thereafter, the two cases were consolidated. The
quiet title action was dismissed pursuant to Appellee’s
demurrer®, and an unlawful detainer judgment for possession was
entered against Carrillo and Debtor.

In addition to the quiet title action, Carrillo and Debtor
had filed various lawsuits and motions against Appellee including
(1) a creditor’s claim for $220,000 for the value of the
decedent’s residence; (2) a will contest; (3) a petition for
suspension of powers and removal of administrator; and (4) a
motion for reconsideration, consolidation, and leave to file a
cross complaint. The state court either denied or dismissed all
of these lawsuits and motions for lack merit.

On March 12, 2002, the state court addressed Appellee’s
request for attorneys’ fees and costs incurred in defending
against the quiet title action and the various other motions and
pleadings filed by Debtor and Carrillo. Several years earlier,
Debtor had been designated a vexatious litigant by another
court. Because he did not notify the state court of the

designation or obtain the requisite pre-filing orders before

5 The Court of Appeal affirmed the state court’s decision in
the quiet title action. This opinion can be found at Velasquez
v. Tellechea, 2003 WL 1875462 *1 (Cal. App. 1st Dist. 2003)
(unpublished opinion).

6 In 1996, an order was entered in Solano County Superior
Court which declared Debtor to be a vexatious litigant and
required him to obtain a pre-filing order prior to filing any
pleadings in a California state court. Debtor successfully moved
to set aside the vexatious-litigant order on January 27, 2002;
however, the Solano County Court subsequently retracted that

decision on September 30, 2002.

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filing any of the lawsuits and motions against Appellee, the
state court imposed sanctions against him in the amount of
$31,895.’ The state court also found Debtor to be a vexatious
litigant within the meaning of California Code of Civil Procedure
("C.C.P.”) § 391 (b) (3).

On August 18, 2004, in an effort to set aside the sanctions
order and the order dismissing his quiet title action, Debtor
filed a complaint in district court requesting that it 1) declare
the state court’s sanction order a violation of his civil rights,
2) reduce the sanction amount to $1,000, and 3) remove Appellee’s
judgment lien against his property. The district court dismissed
the complaint.

Following the dismissal of the federal action, Appellee
levied on Debtor’s non-exempt real property located at 426 Idora
Avenue, Vallejo, California, and obtained an assignment order for
rents under C.C.P. § 708.510.

B. The Bankruptcy

In November 2005, less than a month after Appellee began to
levy on his property, Debtor filed a chapter 13 petition.
Thereafter, he filed his proposed chapter 13 plan, which provided
for payments of $50 per month to Appellee for three years.

Believing Debtor had filed for bankruptcy in bad faith,
Appellee filed a motion to dismiss the case pursuant to § 1307(c)

(the “dismissal motion”) and objected to confirmation of the plan

7 Carrillo had not been declared a vexatious litigant when
the various lawsuits and motions were filed. Thus, the state
court only entered sanctions against Debtor.

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under § 1324.8 Appellee complained that Debtor had filed for the
sole purpose of interfering with Appellee’s collection efforts.
Further, according to Debtor’s schedules and statement of
affairs, he had approximately $500,000 in non-exempt assets
(consisting primarily of equity held in two pieces of real
property) that could be used to pay Appellee’s judgment.
Finally, Debtor had not identified any other claim on his
petition that would justify the need for bankruptcy relief.
Based on Debtor’s solvency, ability to pay his creditors by
simply refinancing one of his properties, and his improper
purpose for filing, Appellee urged the court to dismiss the case.
Debtor responded that it was Appellee who was acting in bad
faith by trying to collect on a judgment Debtor believed violated
his constitutional rights and by failing to inform the court that
Appellee owed Debtor nearly $20,000 for reimbursement of property
taxes. Debtor also urged the bankruptcy court to defer any
ruling on Appellee’s request until the Ninth Circuit Court of

Appeals renders its decision in Wolfe v. George, No. 05-16674

(9th Cir. filed Sept. 1, 2005), a case concerning the
constitutionality of the sanctions provision of the California
vexatious litigant statute. According to Debtor, a favorable
decision in Wolfe would render Appellee’s judgment against him
unconstitutional. Therefore, Debtor suggested that the

bankruptcy court direct Appellee to accept the monthly $50 plan

8 In the motion, Appellee objected to the confirmation of
the proposed chapter 13 plan on the basis that 1) Debtor’s
petition did not evidence any disposable income that could be
used to make the monthly payments provided for under the plan;
and 2) Debtor had not proposed the plan in good faith in light of
the equity he held in his real property which be could use to pay
Appellee’s secured claim in full.

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payments until the Ninth Circuit rules in Wolfe’ or, in the
alternative, until he runs out of further avenues to attack the
validity of Appellee’s judgment. He also maintained that the
bankruptcy filing had been filed in good faith for the proper
purpose of providing him with immediate relief from the pressure
occasioned by Appellee’s attempt to levy on what Debtor
considered a non-final judgment.

The dismissal motion was heard on March 15, 2006. In its
oral ruling, the bankruptcy court agreed with Appellee that
Debtor had filed his petition in bad faith and had abused the
bankruptcy system by 1) filing for the improper purpose of
frustrating Appellee’s collection efforts; and 2) failing to
disclose assets on his schedules and to the chapter 13 trustee.
The court recognized that Appellee held a final state court
judgment against Debtor, and that Debtor could not use the
bankruptcy process to thwart Appellee’s relatively modest
judgment when he had assets worth hundreds of thousands of
dollars to pay it. Taking into account Debtor’s financial
situation, the amount Appellee was owed, and the minimal affect
payment of Appellee’s judgment would have on other creditors, the
court found dismissal to be warranted.

Debtor appeals.

II. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334
and §§ 157(b) (1), (b) (2) (A), and (2) (B). We have jurisdiction

under 28 U.S.C. §§ 158(b) (1) and (c) (1).

7 As of this date, the Ninth Circuit has not issued a
decision in Wolfe.

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III. ISSUE*®
Whether the bankruptcy court abused its discretion in
dismissing the bankruptcy based on a finding of bad faith.
IV. STANDARD OF REVIEW
We review for clear error a bankruptcy court’s finding of

bad faith. Eisen v. Curry (In re Eisen), 14 F.3d 469, 470 (9th

Cir. 1993). “However, dismissal of a bankruptcy case for lack of
good faith is a matter in the sound discretion of the bankruptcy

court and is reviewed for an abuse of discretion.” Greatwood v.

I.R.S. (In re Greatwood), 194 B.R. 637, 639 (9th Cir. BAP 1996).

V. DISCUSSION

Debtor complains that the bankruptcy court abused its
discretion in dismissing his bankruptcy because he was 1) willing
to amend his schedules to include the undisclosed assets; and 2)
entitled to a judicial determination as to the dischargeability
of Appellee’s debt pursuant to § 523(a) (6) and as to Appellee’s
liability to Debtor.

Section 1307(c) authorizes the bankruptcy court to dismiss a
case for cause. Although not specifically listed as one of the
enumerated circumstances, bad faith may constitute “cause” for

dismissal. Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224

(9th Cir. 1999). In determining whether a chapter 13 debtor

10 Debtor requests that the panel decide issues which go
beyond the scope of this appeal, i.e., his right to a jury trial
to determine the liability of Debtor and Appellee and the
validity of Appellee’s state court judgment. Because our
jurisdiction is limited to issues concerning the dismissal order,
we decline to consider any issue not related thereto. See Kalt
v. Hunter (In re Hunter), 66 F.3d 1002, 1005 (9th Cir.

1995) (“Federal courts are courts of limited jurisdiction. They
possess only that power authorized by Constitution and statute,
which is not to be expanded by judicial decree.”); Birting

Fisheries, Inc. v. Huse-Sporsem (In re Birting Fisheries, Inc.),

300 B.R. 489, 504 n.15 (9th Cir. BAP 2003).

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filed his or her petition in bad faith, a court must apply a
totality of the circumstances test, taking into account the
following factors:
(1) whether the debtor “misrepresented facts in his
[petition or] plan, unfairly manipulated the Bankruptcy
Code, or otherwise [filed] his Chapter 13 [petition or]
plan in an inequitable manner,”

(2) “the debtor’s history of filings and dismissals,”

(3) whether “the debtor only intended to defeat state
court litigation,” and

(4) whether egregious behavior is present.

Id. at 1224 (citations omitted). Fraudulent intent by the debtor
is not required for a finding of bad faith. Id.

We are not persuaded that the bankruptcy court committed a
clear error of judgment in finding that Debtor had filed his
petition in bad faith. In making the bad faith determination,
the court specifically articulated three different bases for its
findings: 1) by his own admission, Debtor filed the petition for
the purpose of preventing Appellee from enforcing the state court
judgment; 2) Debtor failed properly to disclose all of his assets
in his schedules; and 3) Debtor failed to disclose all of his
assets, including details concerning substantial assets he owned
in Mexico, to the chapter 13 trustee. In addition, the court
found that Debtor had a net worth of hundreds of thousands of
dollars that could be used to satisfy Appellee’s judgment.

The findings of the bankruptcy court are amply supported by
the record. First, Debtor admitted in his opposition to the
dismissal motion that he filed the bankruptcy case in order to
stall Appellee’s collection efforts. Second, a review of

Debtor’s schedules confirm that he failed to list any of his real

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property in Mexico and that he listed several assets as
“Trrelevant to Creditors.” Third, there is no dispute that
Debtor’s equity in real property exceeded $600,000 at the time of
the filing.

Notably, even if Debtor had been allowed to amend his
schedules to include the missing information, his purpose for
filing for chapter 13 relief still “violate[s] the spirit of the

chapter.” Chinichian v. Campolongo (In re Chinichian), 784 F.2d

1440, 1445 (9th Cir. 1986). Debtor in this case does not
represent “the poor, the oppressed and the unfortunate seeking a
fresh start.” Id. He admits to be “sitting down in a sea of
money” and that a liquidation of one of his properties would
cover payment of Appellee’s judgment. In addition, there is no
indication that he is having difficulty in meeting any of his
financial obligations. Instead, Debtor’s sole purpose in filing
his chapter 13 case was to defeat Appellee’s execution of the
judgment.

While we recognize the apparent sincerity of Debtor’s belief
that the sanctions judgment is unconstitutional, as well as his
frustration in not being able to collect the amount he claims to
be owed by Appellee for reimbursement of property taxes, the
circumstances of this case nevertheless fully support the factual
findings of the bankruptcy court. Consequently, the bankruptcy
court did not abuse its discretion in dismissing Debtor’s
bankruptcy for cause based on bad faith.

VI. CONCLUSION
For the foregoing reasons, we AFFIRM the order entered by

the bankruptcy court dismissing Debtor’s bankruptcy case.

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U.S. Bankruptcy Appellate Panel
of the Ninth Circuit
125 South Grand Avenue, Pasadena, California 91105
Appeals from Central California (626) 229-7220
Appeals from all other Districts (626) 229-7225

NOTICE OF ENTRY OF JUDGMENT

BAP No. NC-06-1150-SPaBu

RE: RODOLFO VELASQUEZ

A separate Judgment was entered in this case on 10/25/06

BILL OF COSTS:

Bankruptcy Rule 8014 provides that costs on appeal shall be taxed by the
Clerk of the Bankruptcy Court. Cost bills should be filed with the Clerk
of the Bankruptcy Court from which the appeal was taken.

9th Cir. BAP Rule 8014-1

ISSUANCE OF THE MANDATE:

The mandate, a certified copy of the judgment sent to the Clerk of
the Bankruptcy Court from which the appeal was taken, will be issued
7 days after the expiration of the time for filing a petition for
rehearing unless such a petition is filed or the time is shortened or
enlarged by order. See Federal Rule of Appellate Procedure 41.

APPEAL TO COURT OF APPEALS:

An appeal to the Ninth Circuit Court of Appeals is initiated by

filing a notice of appeal with the Clerk of this Panel. The Notice

of Appeal should be accompanied by payment of the $455 filing fee
(effective November 1, 2003) and a copy of the order or decision on
appeal. Checks may be made payable to the U.S. Court of Appeals for

the Ninth Circuit. See Federal Rules of Appellate Procedure 6 and the
corresponding Rules of the United States Court of Appeals for the Ninth
Circuit for specific time requirements.

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CERTIFICATE OF MAILING

The undersigned, deputy clerk of the U.S. Bankruptcy
Appellate Panel of the Ninth Circuit, hereby certifies that a copy
of the document on which this certificate appears was mailed this date
to all parties of record to this appeal.

By: Edwina Clay

Deputy Clerk: October 25, 2006

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