In Re: Geberegeorgis v. ( 2004 )

ELECTRONIC CITATION: 2004 FED App. 0005P (6th Cir.)
File Name: 04b0005p.06
BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT
In re: SIRAK W. GEBEREGEORGIS, )
)
Debtor. )
_______________________________ )
)
SIRAK W. GEBEREGEORGIS, )
)
Debtor-Appellee, )
)
v. ) No. 03-8007
)
AL GAMMARINO, )
)
Creditor-Appellant. )
________________________________)
Appeal from the United States Bankruptcy Court
for the Southern District of Ohio, Western Division at Cincinnati
No. 00-11047
Submitted: February 4, 2004
Decided and Filed: May 24, 2004
Before: LATTA, RHODES, and WHIPPLE, Bankruptcy Appellate Panel Judges.
_______________
COUNSEL
ON BRIEF: Al Gammarino, Cincinnati, Ohio, for Appellant. Eric W. Goering, Cincinnati,
Ohio, for Appellee.
OPINION
MARY ANN WHIPPLE, Bankruptcy Appellate Panel Judge. Creditor Al Gammarino
(Gammarino) appeals the bankruptcy court’s order granting Debtor Sirak W.
Geberegeorgis’ (Debtor) motion to vacate its prior order dismissing Debtor’s Chapter 13
case and allowing him to resume performance of his confirmed Chapter 13 plan. The
bankruptcy court determined that cause existed for vacating the dismissal order because
the conditions that resulted in dismissal, namely Debtor’s illness and failure to make plan
payments, had been resolved, and Gammarino would not be prejudiced by reinstatement
of the case. The Panel finds that the bankruptcy court did not abuse its discretion in
vacating the prior order of dismissal and AFFIRMS the bankruptcy court’s order.
I. ISSUE ON APPEAL
The issue is whether the bankruptcy court abused its discretion by vacating its order
of dismissal and allowing Debtor to resume performance of his confirmed Chapter 13
plan.
II. JURISDICTION AND STANDARD OF REVIEW
The Panel has jurisdiction to decide this appeal from a final order of the bankruptcy
court. The United States District Court for the Southern District of Ohio has authorized
appeals to the Bankruptcy Appellate Panel. 28 U.S.C. § 158 (b). The “final order” of a
bankruptcy court may be appealed by right under 28 U.S.C. § 158(a)(1).
For purposes of appeal, the Supreme Court defines an order as final if it “ends the
litigation on the merits and leaves nothing for the court to do but execute the judgment.”
Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct.. 1494, 1497 (1989)
(internal quotations and citations omitted). Courts view the concept of finality in a more
pragmatic and flexible way in bankruptcy proceedings than in other civil proceedings, “[t]o
avoid the waste of time and resources that might result from reviewing discrete portions
of the action only after [a bankruptcy case concludes or] a plan of reorganization is
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approved.” Lindsey v. O’Brien, Tanski, Tanzer &Young Health Care Providers of Conn. (In
re Dow Corning Corp.), 86 F.3d 482, 488 (6th Cir. 1996); see Cottrell v. Shilling (In re
Cottrell), 876 F.2d 540, 541-42 (6th Cir. 1989). Accordingly, an order that concludes a
particular adversarial matter within the larger case should be deemed final and reviewable
in a bankruptcy setting. Lindsey, 86 F.3d at 488; In re James Wilson Assocs., 965 F.2d
160, 166, (7th Cir. 1992); Martin Bros. Toolmakers, Inc. v. Indus. Dev. Bd. (In re Martin
Bros. Toolmakers, Inc.), 796 F.2d 1435, 1437-38 (11th Cir. 1986).
Upon dismissal of the case, Gammarino was permitted to pursue his collection
rights and remedies free of the automatic stay and Debtor’s confirmed Chapter 13 plan.
In re Hill, 305 B.R. 100, 105 (Bankr. M.D. Fla. 2003) (“Although a case may remain open
after dismissal, the automatic stay of § 362 of the Bankruptcy Code terminates when the
case is dismissed.”). Vacation of the dismissal order reinstated Debtor’s Chapter 13 case,
and Gammarino’s rights under the confirmed Chapter 13 plan. At that point, all that was
left to do was Debtor’s performance and the Chapter 13 Trustee’s administration of
Debtor’s already confirmed Chapter 13 plan. Absent separate future defaults or other
disputes related to the confirmed Chapter 13 plan, there were no further orders required
by the bankruptcy court and Gammarino was again bound by the terms of the plan.
11 U.S.C. § 1327(a). The order vacating the dismissal concluded the dispute over
dismissal such that it is a final order immediately appealable by Gammarino without waiting
until completion of the Chapter 13 plan and Debtor’s discharge. See 11 U.S.C. §§ 1322(d),
1328.
In addition, the procedural basis for the bankruptcy court’s order was ultimately
Fed. R. Civ. P. 60(b), which applied to Debtor’s Chapter 13 case through Fed. R. Bankr. P.
9024. The Sixth Circuit has held that an order ruling on a Rule 60(b) motion is appealable.
Mallory v. Eyrich, 922 F.2d 1273, 1277 (6th Cir. 1991) (citing Browder v. Director, Illinois
Dept. of Corrections, 434 U.S. 257, 263 n. 7 (1978); Honneus v. Donovan, 691 F.2d 1, 2
(1st Cir. 1982)).
The granting of relief under Fed. R. Civ. P. 60(b) is reviewed for abuse of discretion.
Mallory, 922 F.2d at 1279; Cincinnati Ins. Co. v. Byers, 151 F.3d 574, 578 (6th Cir. 1998).
Therefore, the Panel will affirm the order presently on appeal unless the Panel has “a
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definite and firm conviction that the court below committed a clear error of judgment in the
conclusion it reached upon a weighing of the relevant factors.” Union Oil Co. of Cal. v.
Serv. Oil Co., 766 F.2d 224, 227 (6th Cir. 1985); Cincinnati Ins. Co.,151 F.3d at 578. “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.” Barlow v. M.J. Waterman & Assocs.
(In re M.J. Waterman & Assocs.), 227 F.3d 604, 608 (6th Cir. 2000) (citations omitted).
III. FACTS
Debtor filed his Chapter 13 petition in the United States Bankruptcy Court for the
Southern District of Ohio on March 1, 2000. Among his assets is his business, a Dairy
Mart, located in Cincinnati, Hamilton County, Ohio. The business property is subject to a
first mortgage held by Provident Bank and a second mortgage held by Gammarino. The
bankruptcy court confirmed Debtor’s Chapter 13 plan on March 22, 2001, overruling
Gammarino’s objections.
Debtor was hospitalized for congestive heart failure in September of 2002. Debtor
fell behind in his plan performance obligations, missing payments outside of the plan on
the first mortgage to Provident Bank; monthly plan payments to the Chapter 13 Trustee
due in August, September and October, 2002; and payment of post-petition real property
taxes. As a result, the bankruptcy court granted Provident Bank relief from stay on
September 24, 2002. The Chapter 13 Trustee also filed on September 18, 2002, and
properly noticed and served, a motion to dismiss the case due to Debtor’s failure to make
plan payments. Debtor did not oppose the Chapter 13 Trustee’s motion to dismiss, and
on October 17, 2002, the bankruptcy court granted the motion.
Shortly thereafter, on October 28, 2002, Debtor filed a motion to reopen the case,
vacate the dismissal order and resume payments. Gammarino filed a written objection
to Debtor’s motion. The Chapter 13 Trustee also initially opposed Debtor’s motion. Prior
to the hearing, Debtor, Provident Bank, and the county taxing authorities reached an
agreement whereby Debtor could bring his delinquent post-petition payments current.
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At the hearing, Gammarino opposed vacating the dismissal order and reinstating
the case. His primary objections were that 11 U.S.C. § 350 did not support the relief
requested and that he would be prejudiced by reinstating Debtor’s Chapter 13 case. A
representative of the Chapter 13 Trustee’s office reported that Debtor had provided
requested business reports and had been able to make two of the missed plan payments,
each in the amount of $3,650.00, immediately before the hearing. With a permitted
suspension of the missed payments, which the bankruptcy court also granted, Debtor’s
plan could still be completed within the statutory maximum of sixty months.
11 U.S.C. § 1322(d). The Chapter 13 Trustee’s report also showed that Gammarino had
been paid $39,429.45 through the plan prior to dismissal. As a result, at the hearing, the
Chapter 13 Trustee’s representative orally withdrew her objection to Debtor’s motion.
By the time of the hearing, testimony and proffered evidence showed that Debtor
was current on his post-petition real property tax payments to the Hamilton County
treasurer and to the first mortgage holder, Provident Bank. Neither objected to vacating
the dismissal order. With the liens ahead of his second mortgage brought current, the
bankruptcy court offered Gammarino, the sole remaining objector, the opportunity to
explain how he would be prejudiced by vacating the dismissal order. Gammarino said that
he wanted finality, and the ability to proceed with a foreclosure proceeding in state court
on his second mortgage. He had not, however, commenced a foreclosure proceeding in
the months between the dismissal and the time of the hearing.
The bankruptcy court considered the evidence and found that cause, including
benefit to Debtor and his creditors, existed to reinstate the case. The court entered an
order vacating the dismissal on January 13, 2003. The order states:
For the reasons stated at the hearing, including the fact that the Chapter 13
Trustee withdrew her objection at the hearing and the fact that the Debtor
made arrangements to bring his payments current with both the first
mortgage holder, Provident Bank, and the Hamilton County Treasurer, we
hereby find the Debtor’s motion to be well-taken.
The bankruptcy court’s order specifically states that the portion of Debtor’s motion
requesting that the court “reopen” the case is moot because the case was never closed.
This appeal timely followed.
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IV. DISCUSSION
The Panel will first address Gammarino’s procedural argument. Debtor’s motion
was titled “Motion to Reopen Case, Vacate Order of Dismissal and Resume Payment.”
Debtor’s written motion cited only 11 U.S.C. § 350(b) and Local Bankruptcy Rule 5010 as
authority for the relief he sought, although he orally cited both 11 U.S.C. § 105 and Fed.
R. Civ. P. 60(b) at the hearing. Both § 350(b) and Local Bankruptcy Rule 5010 address
reopening of closed cases. In bankruptcy, case closing is a concept distinct from case
dismissal. Armel Laminates, Inc. v. The Lomas & Nettleton Co. (In re Income Property
Builders, Inc.), 699 F.2d 963, 965 (9th Cir. 1982). Under § 350(a), the court shall close a
case “[a]fter an estate is fully administered and the court has discharged the trustee.”
Section 350(b) in turn provides that “[a] case may be reopened in the court in which such
case was closed to administer assets, to accord relief to the debtor, or for other cause.”
But a case can only be reopened if it was first closed. Id.1 The record shows that Debtor’s
case was dismissed, not closed, by the time Debtor filed his motion. Therefore, Debtor’s
request to reopen the case was unnecessary and the bankruptcy court so noted by finding
that much of the requested relief moot.
The record shows that the bankruptcy court did not “reopen” the case and did not
rely on § 350(b). Debtor’s motion was also clearly styled as a motion to vacate the order
of dismissal, in addition to seeking what was unnecessary relief in reopening a case that
was not closed. And the bankruptcy court’s statements on the record demonstrate that it
was deciding Debtor’s motion insofar as it sought vacation of the dismissal order, not his
moot request to reopen the case. So while Gammarino is technically correct in his
argument that § 350 does not provide authority for vacating the dismissal order, he
completely misconstrues what the bankruptcy court actually decided and the basis upon
1
“After an order of dismissal, the debtor’s debts and property are subject to the general laws, unaffected by
bankruptcy concepts.” In re Inco me Property Builders, In c., 699 F.2d at 965. The debtor is treated as if he had never
been subject to bankruptcy. “On the other hand, a bankruptcy is usually closed after the bankruptcy proceedings are
com pleted .... A ba nkrup tcy is reopened under 11 U .S.C. § 350(b), not to restore the prebankruptcy status, but to continue
the bankruptcy proceedings.” Id.
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which it ultimately granted relief. The bankruptcy court simply did not base vacation of the
dismissal order on § 350(b).
With Gammarino’s procedural argument of no moment, the Panel will next address
whether the bankruptcy court otherwise had authority to vacate the dismissal order and
whether it abused its discretion in exercising that authority. Motions to vacate dismissal
orders, or motions to reinstate cases as they are colloquially called, are frequent
procedural requests under Chapter 13. As Debtor’s counsel cited at the hearing,
bankruptcy courts are authorized to set aside a final judgment or order, including case
dismissal orders, under Fed. R. Bankr. P. 9024, which incorporates Fed. R. Civ. P. 60(b)
into practice under the Bankruptcy Code. In re King, 214 B.R. 334, 336 (Bankr. W.D.
Tenn. 1997); In re Woodhaven, Ltd., 139 B.R. 745, 749 (Bankr. N.D. Ala. 1992). Rule
60(b) sets forth six reasons that justify granting relief from a final judgment or order:
On motion and upon such terms as are just, the court may relieve a party or
a party’s legal representative from a final judgment, order, or proceeding for
the following reasons: (1) mistake, inadvertence, surprise, or excusable
neglect; (2) newly discovered evidence which by due diligence could not
have been discovered in time to move for a new trial under Rule 59(b); (3)
fraud (whether heretofore denominated intrinsic or extrinsic),
misrepresentation or misconduct of an adverse party; (4) the judgment is
void; (5) the judgment has been satisfied, released, or discharged, or a prior
judgment upon which it is based has been reversed or otherwise vacated, or
it is no longer equitable that the judgment should have prospective
application; or (6) any other reason justifying relief from the operation of the
judgment.
Fed. R. Civ. P. 60(b). The bankruptcy court did not specify which clause of Rule 60(b) it
was relying upon in vacating the dismissal order. Nor have other bankruptcy courts
addressing situations involving vacation of Chapter 13 dismissal orders stated which clause
of Rule 60(b) was applied, beyond noting generally that Bankruptcy Rule 9024 and Rule
60(b) authorize the relief requested. See, e.g., Hill, 305 B.R. at 108; Diviney v.
Nationsbank of Texas (In re Diviney), 211 B.R. 951, 962 (Bankr. N.D. Okla. 1997). In this
case, clauses (2), (3), (4), and (5) of Rule 60(b) are clearly inapplicable. The Panel will
therefore analyze whether either clause (1) or clause (6) of Rule 60(b) authorized the
bankruptcy court to vacate its dismissal order.
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The original dismissal order was entered by default. Although Chapter 13 cases are
different in goal, interim events and duration than conventional lawsuits between plaintiffs
and defendants, there is no reason that the standards applied more generally to vacating
default entries in civil contexts do not apply with equal force in this bankruptcy case.
Where Rule 60(b) is invoked to set aside a default judgment, a trial court is directed to
consider three equitable factors derived from Fed. R. Civ. P. 55 jurisprudence as to “good
cause” for setting aside default entries: (1) whether plaintiff will be prejudiced if the
judgment is vacated; (2) whether the defendant had a meritorious defense; and (3) whether
culpable conduct of the defendant led to the default. United Coin Meter Co. v. Seaboard
Coastline R.R., 705 F.2d 839, 845 (6th Cir. 1983). In addition to considering the equitable
factors enumerated in United Coin Meter, the court must also find that one of the specific
requirements of Rule 60(b) is met. Thompson v. American Home Assurance Co., 95 F.3d
429, 433 (6th Cir. 1996). The record shows that the bankruptcy court considered all of the
United Coin Meter factors, even if not denominated as such.
The bankruptcy court specifically asked Gammarino what prejudice he would suffer
if the dismissal order were vacated. The only detriment Gammarino identified was that he
would be deprived of the finality he desired. Gammarino was tired of dealing with the
Debtor and wanted to foreclose on the property–a common phenomenon in Chapter 13
cases, as the bankruptcy court aptly noted. Gammarino had, however, been paid
$39,429.45 through the plan prior to dismissal, and would receive $2,500 a month again
upon reinstatement. With the cure of the defaults in payments due to the creditors with
property interests ahead of his second mortgage interest, and through ongoing plan
performance thereafter, any arguable prejudice to Gammarino through reinstatement was
resolved. That Gammarino was unhappy with the terms of the confirmed plan is not a
proper basis for denial of the motion to vacate the dismissal. The bankruptcy court
ultimately found by vacating the dismissal order that Gammarino asserted no cognizable
prejudice resulting from the act of reinstatement itself, and the Panel agrees that it did not
abuse its discretion in so finding.
In the context of Chapter 13 case dismissals, Debtor also presented at the hearing
the equivalent of a meritorious defense, namely, that he had resolved the issues and
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defaults that resulted in dismissal of his case in the first instance and would be able to
perform the plan through to completion in the future. Most of the evidence at the hearing
was devoted to and supports this point. Debtor had reached agreements with the first
mortgage holder and the county property taxing authorities to bring his delinquent post-
petition payments current. The Chapter 13 Trustee’s formal objection to reinstatement of
the case was withdrawn because Debtor made two substantial plan payments that would
permit Debtor to complete the plan within the time required by § 1322(d). In this context,
these circumstances are analogous to there being a meritorious defense in conventional
civil lawsuits involving a plaintiff and a defendant.
Under the Sixth Circuit’s jurisprudence on vacating default judgments under Rule
60(b), “[t]o be treated as culpable, the conduct of a defendant must display either an intent
to thwart judicial proceedings or a reckless disregard for the effect of its conduct on those
proceedings.” Shepard Claims Serv., Inc. v. Darrah & Assocs., 796 F.2d 190, 194
(6th Cir. 1986).2 Debtor’s illness and hospitalization appear as significant factors in the
bankruptcy court’s decision. Debtor’s counsel proffered to the court evidence of Debtor’s
hospitalization due to heart problems in September 2002, which was the pivotal time frame
for all of the issues related to his ongoing plan performance.3 By the time of the hearing,
Debtor’s health had stabilized and he was then in a position to cure the plan defaults. The
bankruptcy court believed that the plan defaults and resulting failure to contest dismissal
resulted from health problems beyond Debtor’s control and did not result from the culpable
conduct of Debtor. Gammarino argued that the magnitude of Debtor’s defaults showed an
intent to thwart the judicial process and harass creditors. Rather than a basis for denying
2
In Wa iferson g, Ltd. v. Classic M usic Vending, 976 F.2d 290, 292 (6th C ir. 199 2), the S ixth Circuit refined its
United Coin M eter analysis in cases involving Rule 6 0(b)(1). A s later explained by the court, Waifersong clarifies “that
a party seeking to vacate a default judgment under Rule 6 0(b)(1) m ust dem onstrate first and forem ost that the default
did not result from his culpable conduct.” Weiss v. St. Paul Fire & Marine Ins. Co., 283 F.3d 79 0, 794 (6th Cir. 2002).
In the absence of such a demonstration, the court need not even analyze the other two United Coin Meter factors. Id.
3
Debtor was present at the hearing and prepared to testify about his hospitalization and health prob lems.
Gam marino d id not contest these problems, relying instead on his asserted desire for finality and the magnitude of the
default as determinative.
9
relief, however, the magnitude of the defaults and Debtor’s significant and concerted effort
to resolve them reinforces that the original default was not an abuse of the bankruptcy
system. Debtor was not just harassing and delaying his creditors, and the bankruptcy court
believed he sincerely intended and was likely to complete his confirmed plan. In a Chapter
13 case, significant health problems are simply not ”culpable” conduct with which a debtor
should be charged so as to deny reinstatement of a Chapter 13 case and plan through
vacation of a dismissal order.
As the record supports the propriety of relief based preliminarily on the United Coin
Meter equitable factors, the Panel will next address whether Debtor was entitled to relief
under either clause (1) or clause (6) of Rule 60(b). Clause (1) and clause (6) of Rule 60(b)
are mutually exclusive. Pioneer Inv. Servs. Co. v. Brunswick Assoc. Ltd. P’ship, 507 U.S.
380, 393, 113 S. Ct.. 1489, 1497 (1993). Specifically, clause (6) applies “only in
exceptional or extraordinary circumstances which are not addressed by the first five
numbered clauses of the Rule.” Olle v. Henry & Wright Corp., 910 F.2d 357, 365
(6th Cir. 1990); Cincinnati Ins. Co., 151 F.3d at 578; Hopper v. Euclid Manor Nursing
Home, Inc., 867 F.2d 291, 294 (6th Cir. 1989); see also Pierce v. United Mine Workers,
770 F.2d 449, 451 (6th Cir. 1985), cert. denied, 474 U.S. 1104 (1986); Ackermann v.
United States, 340 U.S. 193, 199, 71 S. Ct.. 209, 212 (1950). This point was reinforced
by the Sixth Circuit in McCurry v. Adventist Health System/SunBelt, Inc., 298 F.3d 586, 592
(6th Cir. 2002), where it held that a trial court erred in considering and granting relief to
plaintiffs under Rule 60(b)(6) before analyzing the propriety of relief under Rule 60(b)(1).
The Panel will therefore first address whether Rule 60(b)(1) authorized the bankruptcy
court to vacate the dismissal order.
The circumstances of this case do not fit within Rule 60(b)(1), which provides relief
based on “mistake, inadvertence, surprise or excusable neglect.“ Nothing in this case
raises any suggestion that Debtor’s plan defaults and the resulting dismissal occurred due
to mistake, inadvertence or surprise.
The focus is thus whether “excusable neglect” fairly describes what occurred in this
case. Although the issue determined by the Supreme Court in Pioneer was grounds for
permitting a late filed claim under Fed. R. Bankr P. 9006, it also extensively discussed
10
Rule 60(b)(1) and (6) and the concepts of “neglect” and “excusable neglect.” Quoting
Webster’s Ninth New Collegiate Dictionary 791 (1983), the Supreme Court identified the
ordinary meaning of “neglect” as ‘“to give little attention or respect” to a matter, or closer
to the point for our purposes, “to leave undone or unattended to esp[ecially] through
carelessness.”’ Pioneer, 507 U.S. at 388 (emphasis in original). And in comparing
“neglect” under Fed. R. Bankr. P. 9006 with “neglect” under Rule 60(b)(1), the Supreme
Court distinguished acts attributable to negligence from acts attributable to reasons beyond
a litigant’s control. Id. at 394-95. Citing Klapprott v. United States, 335 U.S. 601, 613-14,
69 S. Ct. 384, 389-90 (1949), the Supreme Court noted that under Rule 60(b)(1), the
former is “neglect” and the latter is not. Pioneer, 507 U.S. at 394-95. Specifically, “Justice
Frankfurter, although dissenting on other grounds, agreed that Klapprott’s allegations of
inability to comply with earlier deadlines took his case outside the scope of ‘excusable
neglect’ ‘because “neglect’’ in the context of its subject matter carries the idea of
negligence and not merely of non- action.’” Id. at 394 (quoting Klapprott, 335 U.S. at 630)
(emphasis in original). The instant record demonstrates not negligence, inattention or
careless disregard of the circumstances, but rather, Debtor’s inability to act. The
bankruptcy court plainly did not believe that Debtor was indifferent or careless as to his
failure to meet his plan obligations and to oppose dismissal. Rather, the bankruptcy court
focused on Debtor’s health issues as events beyond his control. According to the Pioneer
analysis, the circumstances of this case did not amount to “neglect” under Rule 60(b)(1),
whether excusable or otherwise. Accordingly, the Panel will analyze whether Rule 60(b)(6)
authorized the bankruptcy court to vacate the dismissal order.
Rule 60(b)(6) authorizes vacation of a judgement or order if a court determines, in
its sound discretion, that substantial justice would be served if relief were granted.
Cincinnati Ins. Co., 151 F.3d at 578. Although Rule 60(b)(6) does not particularize the
factors that justify relief, the Supreme Court has noted that it provides courts with authority
“adequate to enable them to vacate judgments whenever such action is appropriate to
accomplish justice,” Klapprott, 335 U.S. at 615, while also cautioning that it only be applied
in “extraordinary circumstances,” Ackermann, 340 U.S. at 199; Liljeberg v. Health Servs.
Acquisition Corp., 486 U.S. 847, 863-64, 108 S. Ct. 2194, 2204-5 (1988).
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Notably, Debtor is not contesting the original grounds for dismissal or that the
bankruptcy court was wrong in dismissing the case. Rather, Debtor is asserting both that
the circumstances that resulted in dismissal – his failure to make plan payments and to
object to the motion to dismiss – were excusable and that those circumstances have since
been resolved. See Metmor Fin., Inc. v. Bailey (In re Bailey), 111 B.R. 151, 153 (W.D.
Tenn. 1988) (”[W]hether cause existed for the initial order is a distinct issue from whether
to vacate the order under Rule 60(b)(6).”). Debtor proved he was in a position to fund the
remainder of the plan and had cured his post-petition payment defaults. As the bankruptcy
court accurately assessed, “the question is really whether there are prospects here for the
business to keep generating income and for debtor to pay creditors through this plan in a
meaningful way. It looks to me like he’s done–made great strides in the last few weeks to
settle with the taxing authorities and with the major lender in this case, which is an
accomplishment which is quite remarkable under the circumstances...And perhaps when
those repayment numbers start to get to substantial amounts, Mr. Gammarino even may
agree that this was probably the only way to get anything out of this situation considering
the circumstances.”
In the Chapter 13 bankruptcy context, substantial justice was served by reinstating
Debtor’s case, thus fostering the bankruptcy policies of promoting both reorganization and
equality of distribution to creditors. Where, as here, the inability to act resulted from
sickness and hospitalization beyond a party’s control, and where substantial justice will in
turn be served by vacating a dismissal order, other courts have found the type of
extraordinary circumstances within the ambit of Rule 60(b)(6). See Randall v. Merrill
Lynch, 820 F.2d 1317, 1321 (D.C. Cir. 1987) (comparing Ackermann with Klapprott, court
held that a combination of illness and financial hardship constituted extraordinary
circumstances justifying Rule 60(b)(6) relief); Beaman v. Levy (In re Levy), 75 B.R. 894
(Bankr. S. D. Ohio 1987). In this case, the bankruptcy court believed, and the Panel finds
that a reasonable person could certainly agree, that substantial justice was served for both
Debtor and his creditors in reinstating Debtor’s Chapter 13 case and plan.
In deciding a motion for relief under Rule 60(b), a court is given much discretion.
Bank of Montreal v. Olafsson, 648 F.2d 1078, 1079 (6th Cir. 1981), cert. denied,
12
454 U.S. 1084 (1981). The Panel declines to disturb the bankruptcy court’s decision
vacating its prior order of dismissal because it was authorized by Rule60(b)(6) to grant the
relief requested and it did not abuse its discretion in exercising that authority to reinstate
Debtor’s case.
V. CONCLUSION
Bankruptcy Rule 9024 and Fed. R. Civ. P. 60(b)(6) authorized the bankruptcy court
to grant Debtor’s Motion to Reopen Case, Vacate Dismissal and Resume Payments.
Based on Debtor’s pre-dismissal health problems and the post-dismissal cure of plan
defaults that occurred in this Chapter 13 bankruptcy case, the Panel is not left with a
definite and firm conviction that the bankruptcy court abused its discretion in vacating the
dismissal order and reinstating Debtor’s Chapter 13 plan. For the reasons set forth in this
opinion, the decision of the bankruptcy court is AFFIRMED.
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