On April 26, 2011, Appellant Rudolph P. Prisco ("Appellant"), filed with the Court a Notice of Appeal, pro se, from an Order issued by the Honorable Robert E. Littlefield, Jr., United States Bankruptcy Judge on February 23, 2011, converting Appellant's Chapter 13 case to one under Chapter 7. For the following reasons, the February 23, 2011 decision of the Bankruptcy Court is affirmed.
On August 18, 2007, Appellant was injured while getting out of his vehicle. Debtor's Additional Response to Order to show cause (Dkt No. 3-11) ("Additional Response") at 11-12. The vehicle had been raised by a tow truck during a repossession. Id. According to Appellant, he did not believe that he had a potential claim against anyone due to the circumstances of the case. Id. at 3. However, Appellant received no-fault benefits due to this incident. Dkt. No. 2-1 ("Voluntary Petition") at 27.
On December 12, 2007, Appellant, proceeding pro se, filed a Voluntary Petition for bankruptcy under Chapter 13. Id. In the Petition, Appellant disclosed that he was receiving no-fault benefits. Id. In Schedule B of the Petition, which is for personal property, Appellant stated that there were no assets under the categories of "[o]ther contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims" and "[o]ther personal property of any kind not already listed." Id. at 10-11. Also, at a meeting held pursuant to 11 U.S.C. § 341 on January 8, 2008, Appellant responded that he did not have any other potential claims. Add. Resp. at 3.
Appellant asserts that he did not know that he had a potential claim because the injury occurred on his property while he was getting out of his vehicle. Id. at 3-4. Further, Appellant states that the police report implied that he was interfering in a valid repossession. Id. at 1-3, 11-12. He also asserts that at the time of filing he did not know the extent of his injuries and points to his statements at the 341 meeting, asserting that he hoped to go back to work soon. Id. at 3-4. He further argues that the Schedule B categories do not specifically call for disclosure of lawsuits. Debtor's Response to Order to show cause (Dkt. No. 3-8) ("Response") at 2-4. He argues that he did not understand the meaning of "other contingent and unliquidated claims of every nature," outside of the three examples that are given.*fn1 Id.
According to Appellant, sometime around August 2008, the insurance company tried to stop payment for medical bills and lost wages. Resp. at 4. At this point (on or about September 9, 2008), Appellant retained an attorney. Id.; Add. Resp. at 17. In order to avoid the lapse of the statute of limitations, a lawsuit was filed in the New York State Supreme Court in Saratoga County on or about August 11, 2010 by Appellant's attorney against a defendant who happened to be a creditor in the bankruptcy proceeding. Add. Resp. at 18. This lawsuit was not disclosed to the trustee or the Bankruptcy Court. Resp. at 6; see also Dkt. No. 3-4.
On August 7, 2008, Debtor's Chapter 13 Plan was confirmed. Dkt. No. 2-2. Payments under the plan were completed on March 20, 2009. Dkt. No. 2-13 at 1. A discharge was never issued by the Bankruptcy Court at the request of Appellant, who wanted to avoid a potential negative impact in a related proceeding by lifting the stay. Dkt. No. 6 ("Appellant's Brief") at 2. In late 2010, opposing counsel in the personal injury lawsuit told Appellant and his attorney that the lawsuit had never been disclosed to the trustee. Dkt. No. 4-1 at 5. On December 13, 2010, Appellant filed an amended Schedule B listing the lawsuit as an additional asset of unknown value under the category of "[o]ther personal property of any kind not already listed." Dkt. No. 3-4. Filed with the amendment, Appellant made the following statement:
Personal injury claim filed post completion of plan seeking an unstated amount in Saratoga County New York on August 2010 for prepetition [sic] injury. Value of potential asset - is [sic] not readily assessable due to No Fault Insurance Carrier having an apparent first lien against any potential recovery for Lost Wage benefits paid pre and post petition [sic] (Lost Wages were source of Plan Payments) as well as some or all unpaid, reimbursable and future medical bills. Any potential asset is outside the bankruptcy and reporting by debtor is for informational purposes only.
Id. Appellant argues that this statement that the potential asset is outside of bankruptcy meant that due to liens and future medical bills, the recovery would be minimal or nonexistent. Appellant's Br. at 7-8. Further, Appellant argues that the lapse of time between the filing of the Complaint and the Amended Schedules was due to the medical issues of various family members. Id. at 5-7.
The Bankruptcy Court issued an Order to show cause as to why the case should not be dismissed pursuant to 11 U.S.C. § 105. Dkt. No. 3-6. Three hearings were held on the issue. See Dkt. Nos. 4-1, 4-2, 4-3. To avoid further prejudice to creditors, the Bankruptcy Court issued an Order on February 23, 2011, converting the Chapter 13 case into one under Chapter 7.Dkt. No. 3-12; see also Dkt. No. 4-1at 12-13.The Bankruptcy Court based its decision on the following factors: (1) Appellant failed to disclose a pre-petition cause of action; (2) this was the fourth or fifth bankruptcy filing by Appellant; (3) Appellant's attorney indicated in an affidavit that Appellant should have disclosed the lawsuit in November, but it was not disclosed until mid-December; and (4) the language in his disclosure stating the asset was "outside" of bankruptcy. Id.; Dkt. No. 4-3 at 2-3.
In reviewing the rulings of a bankruptcy court, a district court applies the clearly erroneous standard to a bankruptcy court's conclusions of fact, and reviews de novo conclusions of law. Yarinsky v. Saratoga Springs Plastic Surgery, 310 B.R. 493, 498 (N.D.N.Y. 2004) (citing In re Manville Forest Prods. Corp., 209 F.3d 125, 128 (2d Cir. 2000)); In re Petition of Bd. of Dirs. of Hopewell Int'l Inst. Ltd., 275 B.R. 699, 703 (Bankr. S.D.N.Y. 2002); FED. R. BANKR. P. 8013. Mixed questions of law and fact are reviewed de novo. Deep v. Danaher, 393 B.R. 51, 54 (N.D.N.Y. 2008) (Kahn, J.) (citing Capital Commc'ns Fed. Credit Union v. Broodrow, 126 F.3d 43, 47 (2d Cir. 1997)). The scope of a court's authority under 11 U.S.C. § 105 is a question of law to be reviewed de novo. In re Myrvang, 232 F.3d 1116, 1124 (9th Cir. 2000). However, a bankruptcy court's exercise of its equitable powers under 11 U.S.C. § 105 is reviewed for abuse of discretion.
Deep, 393 B.R. at 54 (citation omitted); In re Globo Comunicacoes E Partcipacoes S.A., 317 B.R. 235, 245 ...