Shain v. Barnett

Filing 8

MEMORANDUM OPINION and ORDER by Judge John G. Heyburn, II on 9/22/2011;, Case Terminated; For the reasons stated, Court affirms the decision of theBankruptcy Court; IT IS HEREBY ORDERED that the decision of the Bankruptcy Court is AFFIRMED and this appeal is DISMISSED.This is a final order.cc:counsel (JSS)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:11-CV-00231-H
W. CURTIS SHAIN

APPELLANT

V.
TERESA L. BARNETT

APPELLEE

MEMORANDUM OPINION AND ORDER

This is an appeal from the United States Bankruptcy Court’s Order denying W. Curtis
Shain’s application to proceed in forma pauperis and dismissing his adversary proceeding
brought against Appellee Teresa L. Barnett. The Honorable David T. Stosberg denied Shain’s
application to proceed in forma pauperis and ordered Appellant to pay the required filing fee in
order to pursue his claim. Upon failure to tender payment, Judge Stosberg dismissed Shain’s
adversary proceeding. For the reasons stated below, this Court affirms the decision of the
Bankruptcy Court.
I.
The history of this case is fairly straightforward. Appellant filed an adversary proceeding
against Appellee and included within the complaint an application to proceed in forma pauperis.
The adversary proceeding arose from Appellee’s alleged unpaid debt to Cardinal Holdings &
Investments, Inc. (“Cardinal”), a corporation of which Appellant was the sole incorporator and
agent.
The Bankruptcy Court denied Appellant’s application to proceed in forma pauperis and
ordered Appellant to pay the required filing fee before proceeding. After granting Appellant an

extension to tender payment, denying Appellant’s renewed application to proceed in forma
pauperis, and watching the extended deadline pass without payment of the filing fee, Judge
Stosberg dismissed the adversary proceeding.
Shain appeals both the denial of his application to proceed in forma pauperis and the
dismissal of his adversary proceeding.
II.
This Court hears this appeal pursuant to 28 U.S.C. § 158(a). A district court should not
set aside the factual findings of a bankruptcy court “unless clearly erroneous, and due regard
shall be given to the opportunity of the bankruptcy court to judge the credibility of the
witnesses.” Fed. R. Bankr. P. 8013. “The question is not how the reviewing court would have
ruled, but rather whether a reasonable person could agree with the bankruptcy court's decision; if
reasonable persons could differ as to the issue, then there is no abuse of discretion.” In re Gasel
Transp. Lines, Inc., 326 B.R. 683, 685-86 (6th Cir. 2005). A bankruptcy court abuses its
discretion only when it relies upon clearly erroneous findings of fact, or when it improperly
applies the law or uses an erroneous legal standard. Id. The Appellant has the burden to show
factual findings are clearly erroneous. Lerch v. Fed. Land Bank, 94 B.R. 998 (N.D. Ill.1989).
The legal conclusions of the bankruptcy court are reviewed de novo. In re Gardner, 360 F.3d
551, 557 (6th Cir. 2004).
III.
Although the Bankruptcy Court did not exhaustively explain its decision, it’s
determination was straightforward and just, and it hardly constituted an abuse of discretion. 28
U.S.C. § 1915, which both confers the right and mandates the procedure for proceeding in forma

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pauperis, explicitly applies to “persons.” The United States Supreme Court has interpreted
“persons” to include “natural persons only,” a description which “artificial entities do not fit.”
Rowland v. Cal. Men’s Colony, 506 U.S. 194, 203 (1993).
Appellant’s adversary proceeding against Appellee was based on Appellee’s contract
with Cardinal, a corporation. Because corporations are not natural persons, they fall outside the
purview of 28 U.S.C. § 1915 and are not eligible to proceed in forma pauperis. Accordingly, the
Bankruptcy Court properly denied Shain’s application, since his claim of action purported to
assert the rights of a corporation. Upon denial, Appellant’s payment of the filing fee was
essential to pursue his claim. Since he failed to pay the filing fee, even after receiving an
extended deadline, dismissal of the adversary proceeding was proper. For these reasons, it
appears the Bankruptcy Court’s decision was not an abuse of discretion.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that the decision of the Bankruptcy Court is AFFIRMED
and this appeal is DISMISSED.
This is a final order.

September 22, 2011

cc:

Counsel of Record & Bankruptcy Court

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