Wenegieme v. Macco et al

Filing 12

MEMORANDUM AND OPINION. For the reasons set forth herein, after de novo review, Wenegieme's appeal of the Bankruptcy Court's dismissal is denied. The Court affirms the rulings of the Bankruptcy Court in all respects. The Clerk of the Court shall close the case. Ordered by Judge Joseph F. Bianco on 1/9/2018. (Baum, Sabrina)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 17-CV-1218 (JFB)
_____________________

CELESTINE WENEGIEME,
Appellant,
VERSUS

MICHAEL J. MACCO, ET AL.,
Appellees.
___________________
MEMORANDUM AND ORDER
January 9, 2018
___________________

JOSEPH F. BIANCO, District Judge:
The instant case involves an appeal from
the January 13, 2017 Order dismissing the
voluntary bankruptcy proceeding (the
“Dismissal Order”) of debtor Celestine
Wenegieme (“appellant” or “Wenegieme”),
pursuant to Chapter 13 of the Bankruptcy
Code, in the United States Bankruptcy Court
for the Eastern District of New York (the
“Bankruptcy Court”), against Chapter 13
Trustee Michael Macco1 (“Macco”) and the
United States Trustee (“U.S. Trustee,” and
together with Macco, “the trustees” or
“appellees”).
Wenegieme appeals from
1

In Chapter 13 cases, the U.S. Trustee appoints a
private trustee, the “Chapter 13 Trustee” (in this case,
Macco), to oversee the debtor’s performance under a
court-affirmed plan to pay creditors and discharge of
his debts. 11 U.S.C. § 1302.

Bankruptcy Judge Robert E. Grossman’s
Dismissal Order, which granted the U.S.
Trustee’s motion to dismiss pursuant to 11
U.S.C. § 1307(c) (“Section 1307(c)” or
“§ 1307(c)”). (In re Wenegieme, Bkr. Dkt.
No. 58.)2 Judge Grossman dismissed the case
with prejudice to filing for one year from the
entry of his Order without a further order of
the court. (Id.)
As set forth below, after a de novo review,
the Court finds appellant’s arguments on
appeal to be without merit and affirms the
January 13, 2017 Order of the Bankruptcy
Court.
2

Docket entries for filings in Wenegieme’s underlying
bankruptcy proceeding, In re Celestine Wenegieme,
Bankr. E.D.N.Y., Case No. 8-16-74079 (REG), are
cited as “In re Wenegieme, Bkr. Dkt. [docket item
number].”

I. BACKGROUND

2014, which was dismissed on October 2,
2014 (Bkr. Case No. 14-16790 (NVA), Dkt.
No. 42), and the other in the Southern District
of New York on April 27, 2015, which was
dismissed on March 11, 2016 (Bkr. Case No.
15-11075 (JLG), Dkt. No. 30).

The Court assumes the parties’
familiarity with the full facts and procedural
history of this action and summarizes the
facts and history relevant to the instant appeal
based on the Bankruptcy Record on Appeal
(ECF No. 3)3, filings in Wenegieme’s
bankruptcy proceeding, and the parties’
affidavits and exhibits in this case.

On September 6, 2016, appellant filed a
Chapter 13 bankruptcy petition in the
Bankruptcy Court. (In re Wenegieme, Bkr.
Dkt. No. 1.) Appellant sought to preserve his
interest in real property located at 215 West
134th Street, New York, New York 10030
(the “Property”). (R-2 at 13, 25, 45-56.)
Creditor
Goldstein
Group
Holding
(“Goldstein Group”) was the holder of a
mortgage encumbering the Property and
sought to proceed with a foreclosure action in
New York State court (the “Foreclosure
Action”)4 to enforce its rights against the
Property, which appellant and other family
members obstructed through a series of
filings in different bankruptcy proceedings.
(R-2 at 45-56.) Appellant’s bankruptcy
petition resulted in an automatic stay of the
Foreclosure Action.5 Prior to filing the
September 6, 2016 bankruptcy petition,
appellant had previously filed two others:
one in the District of Maryland on April 28,

After appellant filed his petition in the
most recent bankruptcy proceeding (the
proceeding underlying this appeal), on
September 13, 2016, Goldstein Group moved
for an order dismissing the bankruptcy
proceeding or, in the alternative, terminating
the automatic stay of sale, nunc pro tunc, of
the Property. (In re Wenegieme, Bkr. Dkt.
Nos. 10-13.) Appellant did not oppose
Goldstein Group’s motion. (See In re
Wenegieme, Bkr. Dkt.) The Bankruptcy
Court held a hearing on Goldstein Group’s
motion on September 19, 2016 (see id.), at
which Judge Grossman determined that
Goldstein Group had standing to file its
motion, and that relief from the automatic
stay was warranted for cause pursuant to 11
U.S.C. § 362(d)(1) (see Wenegieme v.
Goldstein Grp. Holding, E.D.N.Y., Case No.
16-cv-05368-JFB, “Tr. of Sept. 19, 2016
Hr’g,” ECF No. 19-1 at 19-20). Specifically,
Judge Grossman found “abuse of the
bankruptcy process” by appellant and that
there was “no question . . . based upon the
evidence that ha[d] been put before the
[Bankruptcy] Court that there [was] ample
cause for the relief from the stay that”
appellee sought. (Id.)

3

5

A. Facts

Unless otherwise noted, the “ECF No. [docket
number]” citations are citations to the record in the
instant case, Wenegieme v. Macco, E.D.N.Y., Case
No. 2:17-cv-01218-JFB.

Pursuant to 11 U.S.C. § 362, which governs
automatic stays in bankruptcy cases, filing a
bankruptcy petition under 11 U.S.C. § 301 (governing
voluntary cases) results in an immediate stay of a
foreclosure action. 11 U.S.C. § 362 (“[A] petition
filed under section 301 . . . operates as a stay,
applicable to all entities, of . . . any act to obtain
possession of property of the estate or of property from
the estate.”).

The “ECF No. 3” filings containing the Bankruptcy
Record on Appeal were divided into four parts, which
the Court identifies as “R-1” through “R-4.”
4

The Foreclosure Action is Bayview Loan Servicing,
LLC v. Alleyne Sylvester, Index No. 810056/11, New
York Supreme Court for the County of New York.

2

U.S. Trustee moved to dismiss the appeal for
failure to prosecute on May 8, 2017. On July
10, 2017, this Court ordered appellant to
submit his brief. After receiving an extension
of time to file, on October 30, 2017,
Wenegieme filed a brief in support of his
appeal. The U.S. Trustee filed a brief in
opposition on November 16, 2017.
Wenegieme did not file a reply brief. The
Court has fully considered all of the
submissions of the parties.

Accordingly, Judge Grossman issued the
Order Granting Motion for Relief from Stay
(“Stay Order”) on September 23, 2016,
granting appellee’s motion and directing that:
The automatic stay imposed by [the
Bankruptcy] Court pursuant to 11
U.S.C. § 362(d)(1) is terminated,
nunc pro tunc, to the date of filing, for
cause as to [appellee]’s interest in the
Property to allow [appellee]’s
enforcement of its rights and
remedies in and to the Property,
including the finalization of a
foreclosure sale held September 7,
2016, against the Property.

II. STANDARD OF REVIEW
This Court has jurisdiction to hear
appeals from bankruptcy courts under 28
U.S.C. § 158(a), which provides that “[t]he
district courts of the United States shall have
jurisdiction to hear appeals . . . from final
judgments, orders, and decrees . . . [and]
with leave of the court, from other
interlocutory orders and decrees . . . of
bankruptcy judges.” 28 U.S.C. § 158(a). Part
VIII of the Federal Rules of Bankruptcy
Procedure outlines the procedure governing
such appeals. Fed. R. Bankr. P. 8001.

(In re Wenegieme, Bkr. Dkt. No. 24 at 1-2.)
As authorized by the Stay Order, the Property
was sold to a third party at a September 7,
2016 public auction held in the Foreclosure
Action, and the Property deed was transferred
to that party. (Wenegieme v. Goldstein Grp.
Holding, “Order Granting Mot. Dismiss,”
ECF No. 27 at 2.) Appellant appealed the
Stay Order to this Court on September 27,
2016 (id., ECF No. 1), and the Court granted
the motion to dismiss the appeal of the Stay
Order on April 27, 2017 (id., ECF No. 27).

The Court will review the Bankruptcy
Court’s legal conclusions de novo and its
factual findings for clear error. In re
Bayshore Wire Prods. Corp., 209 F.3d 100,
103 (2d Cir. 2000) (“Like the District Court,
we review the Bankruptcy Court’s findings
of fact for clear error, its conclusions of law
de novo, and its decision to award costs,
attorney’s fees, and damages for abuse of
discretion.” (internal citations omitted));
accord In re Ionosphere Clubs, 922 F.2d 984,
988-89 (2d Cir. 1990). In addition, “[t]he
Court may affirm on any ground that finds
support in the record, and need not limit its
review to the bases raised or relied upon in
the decisions below.” In re Miller, Nos. 08–
cv–4305 (JGK), 08–cv–4306 (JGK), 2009
WL 174902, at *1 (S.D.N.Y. Jan. 26, 2009);
Bristol v. DeRosa, No. 09-CV-3730 (JFB),

Prior to the close of the appeal of the Stay
Order, on January 13, 2017, the Bankruptcy
Court issued the Dismissal Order, dismissing
the bankruptcy proceeding in its entirety with
prejudice to re-filing for one year from entry
of the Dismissal Order. (In re Wenegieme,
Bkr. Dkt. No. 58.) Appellant then filed this
appeal of the Dismissal Order on March 3,
2017. (ECF No. 1.)
B. Procedural History
As stated supra, on March 3, 2017,
Wenegieme filed his notice of appeal from
the Bankruptcy Court’s January 13, 2017
Order dismissing his bankruptcy case. The
3

re Ward, 423 B.R. 22, 34 (Bankr. E.D.N.Y.
2010). When a “[d]ebtor has not complied
with a number of [his] obligations imposed
by the Bankruptcy Code, relief under
§ 1307(c) is appropriate.” Id.

2010 WL 3924911, at *2 (E.D.N.Y. Sept. 30,
2010).
III. DISCUSSION
A. Dismissal for Cause

The Supreme Court has also held that a
debtor’s bad faith conduct qualifies as cause
to dismiss pursuant to Section 1307(c).
Maramma, 549 U.S. at 373-74. Although
bad faith is not explicitly enumerated in
Section 1307(c), “it is well established that
lack of good faith may also be cause for
[conversion or] dismissal under § 1307(c).”
In re Prisco, 11-CV-00474 (LEK), 2012 WL
4364311, at *4 (N.D.N.Y. Sept. 24, 2012)
(quoting In re Dixon, No. 08-10510, 2009
WL 151688, at *2 (Bankr. E.D. Pa. Jan. 20,
2009), aff’d, No. 09-1451, 2009 WL 1798819
(E.D. Pa. June 24, 2009)); see also In re
Plagakis, No. 03 CV 0728 (SJ), 2004 WL
203090, at *4 (E.D.N.Y. Jan. 27, 2004); In re
Charles D. Eatman, 182 B.R. 386, 392
(Bankr. S.D.N.Y. 1995). “[D]ebtors who
lack good faith cannot be rewarded with the
benefits of the bankruptcy process.” In re
Tornheim, 239 B.R. 677, 686 (Bankr.
E.D.N.Y. 1999) (citing In re Natural Land
Corp., 825 F.2d 296, 297-98 (11th Cir.
1987)). “A bankruptcy court’s determination
of ‘bad faith’ is a question of fact, and thus is
reviewable under the clearly erroneous
standard.” In re Plagakis, 2004 WL 203090,
at *4 (citing In re Barbieri, 226 B.R. 531, 535
(Bankr. E.D.N.Y. 1998), rev’d on other
grounds, 199 F.3d 616 (2d Cir. 1999); U.S.
Fidelity & Guar. Co. v. DJF Realty &
Suppliers, 58 B.R. 1008, 1011 (Bankr.
N.D.N.Y. 1986)).

Section 1307(c) of the Bankruptcy Code
provides that “on request of a party in interest
or the United States trustee and after notice
and a hearing, the court may convert a case
under this chapter . . . or may dismiss a case
under this chapter, whichever is in the best
interests of creditors and the estate, for
cause.” 11 U.S.C. § 1307(c); see also
Maramma v. Citizens Bank of Mass., 549
U.S. 365, 373-74 (2007). Section 1307(c)
provides a non-exhaustive list of examples of
grounds for “for cause” dismissal, including:
(1) unreasonable delay by the debtor
that is prejudicial to creditors [or] . . .
(4) failure to commence making
timely payments under section 1326
of this title.
11 U.S.C. § 1307(c); see also In re Campora,
Nos. 14–CV–5066 (JFB), 14–CV–7123
(JFB), 2015 WL 5178823, at *10 (E.D.N.Y.
Sept. 3, 2015) (setting forth the standard for
timely payments under 11 U.S.C.
§ 1326(a)(1)(A) (“Section 1326”), which
provides that “[u]nless the court orders
otherwise, the debtor shall commence
making payments not later than 30 days after
the date of the filing of the plan or order for
relief, whichever is earlier,” and finding that
“[a]ppellant’s failure to commence making
timely payments qualifie[d] [as] a valid
ground for dismissal under § 1307(c)(4)”).

Evaluation of whether a debtor had “bad
faith in filing and maintaining a Chapter 13
case requires a careful examination of the
totality of the circumstances on a case-bycase basis.” In re Tornheim, 239 B.R. at 686
(citing In re Klevorn, 181 B.R. 8, 11 (Bankr.

“Bankruptcy is a privilege and not a
right,” In re Sochia, 231 B.R. 158, 160
(Bankr. W.D.N.Y. 1999), and in seeking
protection under the Bankruptcy Code, a
debtor “has the responsibility to inform
[himself] of [his] duties” under the Code, In
4

background of the debtor’s filing we
actually see what the purpose is. This
particular instant Chapter 13 is not the
debtor’s first foray into the
bankruptcy world.

N.D.N.Y. 1995)). Courts have determined
that debtors had bad faith in Chapter 13 cases
including where “the debtor has previously
filed for bankruptcy,” and where “the debtor
filed solely to obtain an automatic stay,”
among other circumstances. In re Plagakis,
2004 WL 203090, at *4.

(Id., Bkr. Dkt. No. 71 at 4:22-5:12.) The
attorney for the U.S. Trustee also discussed
appellant’s previous bankruptcy filings,
stating that “[b]oth those cases were
dismissed for 521 violations because no plan
payments were made, and the court found
unreasonable delay prejudicial to the debtor’s
creditors.” (Id. at 15:15-17.)

In this case, the Bankruptcy Court found
that, based on the record and the trustees’
information regarding appellant’s conduct at
a December 22, 2016 hearing, the case should
be dismissed as a matter of law. The court
stated in its Dismissal Order that “after due
deliberation and for good cause shown it is
hereby ORDERED, that the Motion is
granted and the Case is dismissed.” (In re
Wenegieme, Bkr. Dkt. No. 71, “Transcript &
Notice Regarding Dec. 22, 2016 Hearing,” at
14:2-15 (emphasis added).)

Discussing the grounds for dismissal on
the basis of bad faith, the attorney for the U.S.
Trustee stated:
It is submitted that these filings were
concocted to delay and frustrate the
secured lender’s ability to realize on
its collateral. This tactical use is an
abuse of the bankruptcy process, and
. . . constitutes bad faith. Based on the
debtor’s bad faith, as evidenced by
the serial filings, the filing in this case
which is going nowhere, this case
should be dismissed.

The court made its ruling in part based on
the U.S. Trustee’s information regarding
appellant’s failure to make payments—
evidencing a lack of intent to ever make
payments—and repeat bankruptcy filings,
both indicating bad faith. (Id., Bkr. Dkt. No.
58 at 1-2.) As to appellant’s failure to make
payments, the attorney for the U.S. Trustee
stated that:

(Id. at 6:3-9.)
A review of [the docket and the
filings] that were filed indicated that
they’re incomplete, incorrectly put
together,
and
basically
incomprehensible. . . . The debtor
filed on September 30th of this year a
Chapter 13 plan . . . indicat[ing] that
the debtor is unable to make any
payments. . . . The debtor has also
filed an amended plan . . . [that was]
basically blank. . . . [B]ased on the
debtor’s admissions in those plans the
Chapter 13 serves no purpose for
reorganizing the debtor’s financial
affairs. However, if we look to the

Trustee Macco discussed appellant’s
failure to appear for examinations at the
meetings of creditors, pointing to this
conduct as a ground for dismissal. (Id. at
9:10-10:19.) Section 341(a) requires that a
meeting of creditors be convened, at which
the trustee examines the debtor “within a
reasonable time after the order for relief.” 11
U.S.C. § 341(a). Trustee Macco told the
court that Wenegieme:
[Had] failed to show up at all three
scheduled 341’s, ha[d] failed to pay
one payment to the trustee’s office,
5

Based on the Court’s de novo review of this
evidence, the Court concludes that the
Bankruptcy Court correctly dismissed the
case pursuant to § 1307(c).

ha[d] failed to provide mandatory
disclosure under Local Bankruptcy
Rule 2003-1 . . . [and] absolutely was
not examined on 10/17 at a 341
meeting. The debtor appeared at a
341 meeting, but the debtor wasn’t
examined because . . . I can’t examine
the debtor regarding schedules that
weren’t filed yet.

B. Dismissal with Prejudice
The Court also concludes that the
Bankruptcy Court correctly dismissed this
action with prejudice. “Whether to dismiss a
case with prejudice is committed to the sound
discretion of the court.” In re Montalvo, 416
B.R. 381, 388-89 (Bankr. E.D.N.Y. 2009)
(dismissing a case with prejudice pursuant to
11 U.S.C. § 349(a) for one year after
concluding that debtor’s conduct amounted
to “part of a scheme to delay, hinder, and
defraud [the creditor]”)).
It is wellestablished that courts have discretion to bar
re-filing of a bankruptcy action for periods of
a year or longer, in particular in cases of serial
filings. In re Casse, 198 F.3d 327, 339 (2d
Cir. 1999) (joining other courts in finding
that, in order to “deal[] with serial filers and
their bad faith abuse of the bankruptcy
process,” 11 U.S.C. §§ 105(a) and 349(a)
authorize bankruptcy courts, “in an
appropriate case, to prohibit a serial filer from
filing petitions for periods of time exceeding
180 days”); In re Tornheim, 239 B.R. at 687
(dismissing a bankruptcy case with prejudice
for two years). The circumstances in this
case—particularly appellant’s tactic of serial
filing in an attempt to preserve his property,
without complying with debtors’ duties in
availing themselves of the privilege of
bankruptcy
actions—clearly
warrant
dismissal with prejudice to re-filing for a
year. Accordingly, the Court concludes the
Bankruptcy Court did not err in its decision
in the January 13, 2017 Dismissal Order.6

(In re Wenegieme, Bkr. Dkt. No. 71 at 9:1010:19.)
The Bankruptcy Court agreed with the
trustees’ position regarding appellant’s
failure to make payments and bad faith
conduct, stating that “[a]s a matter of law, the
Court should and will dismiss the case. The
reasons have all been set forth on the record.
The reasons have been set forth in the [U.S.
Trustee’s] motion. The reasons have been set
forth by the trustee [Macco]. The reasons
have been set forth by the Goldstein folks.”
(Id. at 14:2-6.)
Having carefully reviewed de novo the
record and arguments, this Court concludes
that the Bankruptcy Court properly dismissed
appellant’s bankruptcy proceeding for cause,
both in light of appellant’s failure to fulfill
debtors’ duties listed in Section 1307(c), and
in light of his serial filings. Appellant filed
his plan on October 27, 2016, but had still
made no payments as of the December 22,
2016 hearing. (Id. at 9:17-22.) Looking to
the Section 1326 standard for timely
payments, appellant failed to meet the 30-day
requirement. Further, as was made clear on
the record, appellant’s repeat filings, as well
as his failures to provide mandatory
disclosures, to appear at meetings, and to
make other payments, all evince bad faith.
6

Although not raised by the parties, the Court notes
that the Bankruptcy Court’s January 13, 2017 Order,
after dismissing with prejudice to filing another
petition for one year from the entry of that order, states

that “the Debtor may only file a bankruptcy case in the
Eastern District of New York upon further order of the
Court.” (In re Wenegieme, Bkr. Dkt. No. 58 at 2.) It
is clear from the record that Bankruptcy Judge

6