Whaley v. City of Chicago

Filing 43

MEMORANDUM Opinion and Order: Signed by the Honorable John Robert Blakey on 8/23/2018. Mailed notice. (bg, )

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 1 of 8 PageID #:791

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Kennith L. Whaley,
Appellant,

Case Nos. 17-cv-7341, 18-cv-3397

v.

Judge John Robert Blakey

City of Chicago, et al.,
Appellees.

MEMORANDUM OPINION AND ORDER
In this bankruptcy appeal, Appellant Kennith Whaley argues that this Court
should overturn three orders rendered by the bankruptcy court, including one
refusing to vacate an earlier ruling dismissing Whaley’s Chapter 13 petition on the
basis that he filed it in bad faith. For the reasons set forth below, this Court affirms
the bankruptcy court.
I.

Standard of Review
Pursuant to 28 U.S.C. § 158(a)(1), this Court has jurisdiction to hear appeals

from final judgments, orders, and decrees of the bankruptcy court.

This Court

reviews the bankruptcy court’s legal findings de novo and its factual findings for clear
error. In re Miss. Valley Livestock, Inc., 745 F.3d 299, 302 (7th Cir. 2014).
This Court reviews dismissal of a debtor’s bankruptcy petition for abuse of
discretion. In re Hall, 304 F.3d 743, 746 (7th Cir. 2002). A court “abuses its discretion
when its decision is premised on an incorrect legal principle or a clearly erroneous
factual finding, or when the record contains no evidence on which the court rationally

1

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 2 of 8 PageID #:792

could have relied.” FCC v. Airadigm Commc’ns, Inc., 616 F.3d 642, 652 (7th Cir.
2010) (quoting Corp. Assets, Inc. v. Paloian, 368 F.3d 761, 767 (7th Cir. 2004)).
II.

Facts and Procedural History
A.

Whaley’s Chapter 13 Petition

In May 2017, Whaley, an Uber driver, filed a voluntary petition under Chapter
13 of the Bankruptcy Code. [Bankr. 1]. 1 In his petition, Whaley listed the “Law
Offices of Arnold Scott Harris” as one of his creditors. Id. at 9. Harris is the City of
Chicago’s outside counsel, and both Harris and the City are appellees in this case.
[25] at 7, 13. Whaley also names the Chapter 13 trustee as an appellee. See [1].
B.

The Parties’ Motions

In June 2017, the Chapter 13 trustee filed two motions to dismiss. The first
motion to dismiss sought dismissal on the basis that Whaley did not timely provide
relevant tax information as required under 11 U.S.C. § 521(e)(2)(A). [Bankr. 16] at
1. The second motion sought dismissal for Whaley’s failure to timely provide payment
advices as required under § 521(a)(1). [Bankr. 17] at 1.
Two weeks later, the Chapter 13 trustee filed his third motion to dismiss,
arguing that Whaley’s petition should be dismissed pursuant to 11 U.S.C. § 1307(c)(1)
for unreasonable delay caused by Whaley’s failures to: (1) appear at the creditors’
meeting; and (2) make payments to the trustee. [Bankr. 20] at 1.

1

The bankruptcy case is In re Whaley, 17-bk-16255 (Bankr. N.D. Ill.) (Schmetterer, J.). This Court cites to filings in
the bankruptcy case using “Bankr.” followed by a docket number, and to filings in this case using only a docket
number.

2

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 3 of 8 PageID #:793

In July 2017, Whaley filed a “Motion for extention [sic] of time and contempt
and sanctions” against Harris (the Harris motion). [Bankr. 21].

Whaley stated in

the Harris motion that Uber canceled his driving permit because Harris informed it
that Whaley had outstanding parking tickets to the City. Id. at 1–2. Thus, Whaley
contended, Harris violated the automatic stay under 11 U.S.C. § 362(a) and should
face sanctions. Id. at 3. Whaley also requested an extension to complete his Chapter
13 plan and pay his filing fees. Id.
Several weeks later, the Chapter 13 trustee filed his fourth motion to dismiss,
arguing that Whaley’s petition should be dismissed because he failed to timely file a
proper plan. [Bankr. 33] at 1.
Finally, in August 2017, Whaley filed an “Emergency motion to release
property” (the City motion). [Bankr. 42]. In the City motion, Whaley stated that the
City, because of his outstanding parking tickets, booted a vehicle that he leased from
an entity named Health Information Technology Support NFP. Id. at 1. Whaley
argued that the City’s actions violated the automatic stay and asked the bankruptcy
court to enter an order releasing the vehicle. Id.
C.

The Bankruptcy Court’s Rulings

The bankruptcy court held a hearing on all of the motions on August 16, 2017.
See [20]. As for the Harris and City motions, the bankruptcy court found that both
hinged upon whether the automatic stay applied to protect Whaley’s leased vehicle
from the City’s parking enforcement. Id. at 47–48. Finding that Whaley did not own

3

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 4 of 8 PageID #:794

the vehicle, the bankruptcy court concluded that the automatic stay did not apply.
Id. The bankruptcy court thus denied both the Harris and City motions. Id.
The bankruptcy court next granted the trustee’s second motion to dismiss,
finding that Whaley’s failure to file payment advices warranted dismissal. See id. at
48–50. The bankruptcy court noted, however, that “all the grounds” set forth in the
trustee’s four motions to dismiss bore upon its reasoning. Id. at 50.
About a month later, Whaley moved to vacate these three orders. [Bankr. 67,
68, 69].

The bankruptcy court denied the motions to vacate in open court on

September 27, 2017, [22] at 2–10, and entered orders denying the motions on the
docket, see [Bankr. 70, 71, 72].

This Court now addresses Whaley’s appeal of the

orders denying his motions to vacate. 2
III.

Analysis
A.

The Bankruptcy Court Did Not Abuse its Discretion When
Dismissing the Petition

The bankruptcy court granted the trustee’s second motion to dismiss based
upon Whaley’s failure to timely file payment advices, finding that Whaley filed his
Chapter 13 petition in bad faith. See [20] at 50.
Section 521 of the Bankruptcy Code requires debtors to file “copies of all
payment advices or other evidence of payment received within 60 days before the date
of the filing of the petition, by the debtor from any employer of the debtor.” 11 U.S.C.
§ 521(a)(1)(B)(iv). The Bankruptcy Court may dismiss a petition “for cause” if, upon
a trustee’s motion, it finds after notice and a hearing that the debtor failed to file his
2

Appellees agree that all three orders are final and appealable under 28 U.S.C. § 158(a). See [25] at 8.

4

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 5 of 8 PageID #:795

payment advices within 15 days of filing his petition. 11 U.S.C. § 1307(c)(9). It is
well-established that filing a petition in bad faith is sufficient cause for dismissal
under Chapter 13.

See In re Smith, 286 F.3d 461, 465 (7th Cir. 2002). The

bankruptcy court can look at several factors in determining whether a Chapter 13
petition was filed in good faith, including but not limited to: “the nature of the debt .
. . ; the timing of the petition; how the debt arose; the debtor’s motive in filing the
petition; how the debtor’s actions affected creditors; the debtor’s treatment of
creditors both before and after the petition was filed; and whether the debtor has been
forthcoming with the bankruptcy court and the creditors.” Matter of Love, 957 F.2d
1350, 1357 (7th Cir. 1992). This Court reviews the bankruptcy court’s bad faith
finding for clear error. Id. at 1354.
Here, the bankruptcy court looked to several of the factors listed in Love in
concluding that Whaley filed in bad faith. It detailed Whaley’s recalcitrant conduct
following the filing of his Chapter 13 petition, including his failures to: (1) appear at
his meeting of creditors; (2) provide copies of tax returns, or alternatively provide
proof that he had no obligation to file tax returns; and (3) file his payment advices.
[20] at 48–49. And the bankruptcy court specifically found that Whaley had an
improper motive for filing for bankruptcy, concluding that, as Whaley did not put
forth any proof of income, he filed his petition only to invoke the protections of the
automatic stay. See id. (“This is a case which we get occasionally, which is, people
don’t show they have income but nonetheless think they can come into Chapter 13

5

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 6 of 8 PageID #:796

and get protection from the automatic stay even though they’ve got no apparent
money or income.”).
This Court cannot conclude that the Bankruptcy Court clearly erred in finding
that Whaley filed in bad faith. To the contrary, Whaley’s post-petition conduct, which
included his various failures to timely file required documents and attend his
creditors’ meeting, prejudiced the creditors and burdened the bankruptcy court.
Moreover, because Chapter 13 requires debtors to have “regular income,” 11 U.S.C. §
109(e), this Court agrees with the bankruptcy court that Whaley’s failure to timely
provide proof of income suggested an improper motive to file for bankruptcy just to
take advantage of the automatic stay.
As the Appellant, Whaley bears the burden to demonstrate that the
bankruptcy court made clearly erroneous factual findings. See In re Kutrubis, 486
B.R. 895, 900 (N.D. Ill. 2013), aff’d, 550 F. App’x 306 (7th Cir. 2013). Far from
carrying his burden, Whaley fails to even address the bankruptcy court’s bad faith
determination, much less controvert its findings concerning his post-petition failings.
See generally [23]; [35].
Because bad faith constitutes sufficient cause to dismiss a Chapter 13 petition,
see Smith, 286 F.3d at 465, this Court concludes that the bankruptcy court did not
abuse its discretion in dismissing Whaley’s petition. This Court thus affirms the
bankruptcy court’s denial of Whaley’s motion to vacate the order dismissing his
petition.

6

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 7 of 8 PageID #:797

B.

The Motions Concerning the Automatic Stay Are Moot

The bankruptcy court also declined to vacate its denials of the City and Harris
motions, which both sought relief because the City and/or Harris allegedly violated
the automatic stay protections of the Bankruptcy Code. See [Bankr. 21; 42]. The
bankruptcy court denied these motions (as well as the motions to vacate) on the basis
that the automatic stay did not apply to protect Whaley’s leased vehicle. [20] at 47–
48.
Because this Court affirmed the dismissal of Whaley’s petition, Whaley’s
challenge to any purported violations of the automatic stay became moot. See Matter
of Statistical Tabulating Corp., Inc., 60 F.3d 1286, 1290 (7th Cir. 1995) (“Because the
stay is dependent on the existence of the bankruptcy, the dismissal of the case
disposed of any dispute about the stay.”); accord Olive St. Inv., Inc. v. Howard Sav.
Bank, 972 F.2d 214, 216 (8th Cir. 1992) (“Once the bankruptcy proceeding is
dismissed, neither the goal of a successful reorganization nor the debtor’s right to the
automatic stay continues to exist. Accordingly, it no longer serves any purpose to
determine whether the bankruptcy court properly lifted the automatic stay; the
appeal has become moot.”). Thus, this Court need not consider Whaley’s appeal of
the bankruptcy court’s denial of his motions to vacate the Harris and City Motions. 3

3

This Court consolidated the appeal pending before it with another that Whaley filed in 2018, Whaley v. City of
Chicago, 18-cv-3397, (N.D. Ill.) (Norgle, J.) (2018 appeal). See [33]. In the 2018 appeal, Whaley purported to
challenge the bankruptcy court’s April 2018 order denying his motion for reconsideration of an order denying his
motion to reinstate an automatic stay. See 2018 appeal [1]. Whaley filed both of these motions long after the
bankruptcy court originally dismissed his petition, and after he filed his original appeal. See [Bankr. 103; 108]. This
Court need not reach the merits of the 2018 appeal because it concerns the automatic stay, and any disputes related to
the automatic stay are moot.

7

Case: 1:17-cv-07341 Document #: 43 Filed: 08/23/18 Page 8 of 8 PageID #:798

IV.

Conclusion
This Court affirms the bankruptcy court. All dates and deadlines are stricken.

Civil case terminated.
Dated: August 23, 2018
Entered:

____________________________
John Robert Blakey
United States District Judge

8