Baker v. Salamone

Filing 9

MEMORANDUM-DECISION and ORDER - That the judgment of the Bankruptcy Court is AFFIRMED. Signed by Chief Judge Gary L. Sharpe on 4/2/2012. (jel, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
___________________________________
ARTHUR L. BAKER,
Appellant,

1:11-cv-1423
(GLS)

v.
KENNETH SALAMONE,
Appellee.
___________________________________
APPEARANCES:
OF COUNSEL:
FOR THE APPELLANT:
Richard Croak & Associates
314 Great Oaks Boulevard
Albany, NY 12203
FOR THE APPELLEE:
Deily, Mooney Law Firm
8 Thurlow Terrace
Albany, NY 12203-1006

RICHARD CROAK, ESQ.

LEIGH A. HOFFMAN, ESQ.

Gary L. Sharpe
Chief Judge
MEMORANDUM-DECISION AND ORDER
I. Introduction
Appellant Arthur L. Baker appeals from an October 14, 2011 order of
the Bankruptcy Court (Robert E. Littlefield, Jr., Chief Judge), dismissing his
Chapter 13 case with prejudice and barring him from refiling for “relief
under the bankruptcy code” for 180 days. (See Dkt. No. 1, Attachs. 2-3.)

Baker argues that the Bankruptcy Court’s decision was inconsistent with its
own rules, due process and fundamental fairness. (See Dkt. No. 6 at 1.)
For the reasons that follow, the Bankruptcy Court’s order is affirmed.
II. Background
On July 29, 2011, appellant-debtor Baker filed a voluntary petition
under Chapter 13 of the Bankruptcy Code and listed appellee Salamone as
a secured creditor. (See Dkt. No. 4 ¶ 14; Dkt. No. 2, Attach. 9 at 13.)
However, this was the not the first time that Salamone was involved in a
bankruptcy proceeding with Baker. (See Dkt. No. 4 ¶ 6.) Prior to
commencing the instant action, Baker was either associated with, or the
debtor in, three separate bankruptcy proceedings; the second of
which—another Chapter 13 case filed in May 2010—also involved
Salamone’s secured claim. (See id. ¶¶ 1-11; Dkt. No. 2, Attach. 9 at 2.)
With respect to the events leading up to this appeal, Salamone filed a
motion to dismiss with prejudice on September 13, 2011, citing numerous
inaccuracies in Baker’s petition. (See Dkt. No. 4 at 5-10.) At the
conclusion of the motion hearing, Chief Judge Littlefield found that because
of Baker’s intentional lack of candor with respect to the disclosure of his
interests in corporate, real and personal property, cause for dismissal
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under 11 U.S.C. § 1307(c) existed. (See Tr.1 at 135:23-137:2, Dkt. No. 3.)
Calling it a “deliberate manipulation of schedules and petitions,” Chief
Judge Littlefield granted Salamone’s motion and dismissed Baker’s petition
with prejudice. (Id. at 137:1; see Dkt. No. 1, Attach. 2.)
III. Standard of Review
District courts have jurisdiction to hear both interlocutory and final
appeals from orders of the bankruptcy court. See 28 U.S.C. § 158(a). In
exercising its appellate jurisdiction, the district court distinguishes between
findings of fact and conclusions of law; reviewing the former under the
“clearly erroneous” standard, and the latter de novo. See, e.g., Midland
Cogeneration Venture Ltd. P’ship v. Enron Corp (In re Enron), 419 F.3d
115, 124 (2d Cir. 2005); see also United States v. U.S. Gypsum Co., 333
U.S. 364, 395 (1948) (“A finding is ‘clearly erroneous’ when although there
is evidence to support it, the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake has been committed.”).
Where a finding is mixed—i.e., contains both law and fact—the de novo
standard applies. See Travellers Int’l A.G. v. Trans World Airlines, Inc., 41
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“Tr.” refers to the transcript from Baker’s motion to dismiss hearing
on October 5, 2011. (See generally Dkt. No. 3.) Pincites to the transcript
are to the page numbers in the top right corner of the pages.
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F.3d 1570, 1575 (2d Cir. 1994). After applying these standards to the
questions of law and fact, the district court “may affirm, modify, or reverse a
bankruptcy judge’s judgment, order, or decree or remand with instructions
for further proceedings.” Fed. R. Bankr. P. 8013.
IV. Discussion
Baker’s principal argument is that dismissal under section 1307 was
not the appropriate remedy for the errors in his petition and schedules.2
(See Dkt. No. 6 at 4-8.) Salamone counters that Chief Judge Littlefield was
justified in dismissing Baker’s case for cause under 11 U.S.C. § 1307(c).
(See Dkt. No. 7 at 7-11.) The court agrees with Salamone.
“Full disclosure is the cornerstone and capstone of any bankruptcy
case and is necessary for the successful administration of a bankruptcy
estate.” Goodmar, Inc. v. Hamilton (In re Hamilton), 306 B.R. 575, 585

2

Baker also argues that the Bankruptcy Court’s expedited
proceedings and the Chapter 13 trustee’s decision to join Salamone’s
motion at the conclusion of the hearing violated, inter alia, his due process
rights. (See Dkt. No. 6 at 1-4.) Though Baker objected to the trustee’s
action at the proceeding as “irregular,” (Tr. at 135:7), the record is devoid
of any reference to a due process violation. Moreover, Baker failed to
show that he raised any of these concerns with the Bankruptcy Court.
Because these grounds were not preserved for review, no further
discussion is required. See, e.g., Greene v. United States, 13 F.3d 577,
586 (2d Cir. 1994).
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(Bankr. W.D. Ky. 2004). To this end, 11 U.S.C. § 1307(c) provides, in
relevant part, “on request of a party in interest or the United States trustee
and after notice and a hearing, the court may . . . dismiss a case under this
chapter . . . for cause.” In evaluating a dismissal under section 1307(c),
courts “apply a totality of circumstances test,” which considers, among
other things, “whether the debtor has stated his debts and expenses
accurately . . . [or] has made any fraudulent representation to mislead the
bankruptcy court.” In re Armstrong, 409 B.R. 629, 634 (Bankr. E.D.N.Y.
2009) (internal quotation marks and citation omitted). Though not explicitly
articulated in the text of section 1307(c), “fraudulent conduct by the atypical
litigant who has demonstrated that he is not entitled to the relief available to
the typical debtor” is cause for dismissal. Marrama v. Citizens Bank of
Mass., 549 U.S. 365, 374-75 (2007).
Here, the Bankruptcy Court held that the “deliberate manipulation of
schedules and petitions” was cause for dismissal under section 1307(c).
(Tr. at 135:23-137:2.) Indeed, in his summation, Chief Judge Littlefield
noted the following discrepancies: a mischaracterization of Baker’s real
property; a failure to disclose the existence of at least one checking
account, and his interests in an insurance policy and corporate assets; an
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omission of his real property income; and issues with a payment to his
attorney and the transfer of a luxury vehicle. (See id. at 135:23-136:16.)
Moreover, Baker, who now claims that his erroneous filings were the result
of a “disagreement on how assets are to be listed,” (Dkt. No. 6 at 6), has
yet to offer a genuine explanation for the inconsistencies Salamone
highlighted in his 2010 and 2011 petitions, (see Dkt. No. 4 at 5-10). Had
this been Baker’s first filing in bankruptcy court, such “disagreements”
would be conceivable. However, this was not only the fourth bankruptcy
case Baker was associated with, but he was also represented by the same
counsel in both the 2010 and 2011 cases. (See, e.g., id. ¶¶ 1-11; Tr. at
125:19-126-3.) Thus, the totality of circumstances unequivocally support
the Bankruptcy Court’s decision to dismiss Baker’s case. See In re
Armstrong, 409 B.R. at 634.
Having reviewed the Bankruptcy Court’s findings of fact for clear
error, and its conclusions of law de novo, the court concludes that Baker
disregarded his fundamental duty of full disclosure, see In re Hamilton, 306
B.R. at 585, and exemplifies the “atypical litigant who has demonstrated
that he is not entitled to the relief available to the typical debtor.” Marrama,
549 U.S. at 374-75. As such, the Bankruptcy Court’s decision to dismiss
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the petition with prejudice under 11 U.S.C. § 1307(c) is affirmed.
V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that the judgment of the Bankruptcy Court is AFFIRMED;
and it is further
ORDERED that the Clerk enter judgment and provide copies of this
Memorandum-Decision and Order to the parties.
IT IS SO ORDERED.
April 2, 2012
Albany, New York

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