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In re Klisivitch

United States District Court, M.D. Florida, Fort Myers Division

July 15, 2019

IN RE: WILLIAM JOSEPH KLISIVITCH aka William J Klisivitch aka Bill Klisivitch aka William Klisivitch Debtor.
v.
COLETTE PANEBIANCO, Appellee. WILLIAM JOSEPH KLISIVITCH, Appellant,

          OPINION AND ORDER

          JOHN E. STEELE SENIOR UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on appeal from the Bankruptcy Court's Order Denying Debtor's Amended Motion for Reconsideration of Order Granting Motion to Dismiss (Doc. #6-2)[1]. Appellant filed an Initial Brief (Doc. #15), appellee filed a Brief of Appellee (Doc. #17), and appellant filed a Reply Brief (Doc. #20). For the reasons set forth below, the Order of the Bankruptcy Court is affirmed.

         I.

         The United States District Court functions as an appellate court in reviewing decisions of the United States Bankruptcy Court. 28 U.S.C. § 158(a); In re Colortex Indus., Inc., 19 F.3d 1371, 1374 (11th Cir. 1994). The legal conclusions of the bankruptcy court are reviewed de novo, while findings of fact are reviewed for clear error. In re Globe Mfg. Corp., 567 F.3d 1291, 1296 (11th Cir. 2009). A finding of fact is clearly erroneous when, “although there is evidence to support it, the reviewing court on the entire record is left with a definite and firm conviction that a mistake has been committed.” Crawford v. W. Electric Co., Inc., 745 F.2d 1373, 1378 (11th Cir. 1984)(citing United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)); In re Walker, 515 F.3d 1204, 1212 (11th Cir. 2008). The Court's jurisdiction over the appeal from the dismissal of debtor's Chapter 13 case is undisputed.

         II.

         On May 18, 2019, William Joseph Klisivitch (debtor) filed a voluntary petition under Chapter 13 of the Bankruptcy Code along with a Chapter 13 Plan proposing payments of $722 per month to the Trustee. (Docs. ## 6-6; 6-7.) Under Schedule A/B, debtor listed as property a 2012 Mercedes E350 and an Ericson E38 Sailboat worth $27, 500. (Doc. #6-6, p. 10.) Debtor also listed a retirement account with a $206, 036.10 balance. (Id., p. 13.) The attached Schedule E/F lists unsecured claims, including two for Colette Trotto-Klisivitch, debtor's ex-wife and primary creditor. These debts are for $218, 527.91 and $6, 500, and represent the majority of the debts.[2] (Id., p. 20.) Both amounts arise from a Divorce Judgment in a case pending appeal from the New York City Supreme Court. (Id., p. 33.) Under debtor's proposed plan, his ex-wife creditor would receive virtually nothing.

         On July 11, 2018, the Trustee issued an Unfavorable Recommendation and Objection to Confirmation of the Plan (Doc. #6-9) because the debtor had not dedicated all disposable income to the proposed Plan and the Plan did not pay unsecured creditors the value they would receive in a Chapter 7 case. On August 10, 2018, creditor Colette Panebianco filed a Motion to Dismiss or Convert Case Pursuant to 11 U.S.C. § 1307(c) (Doc. #6-14). On August 23, 2018, Creditor Panebianco filed an Objection to Confirmation of the Debtor's Chapter 13 Plan (Doc. #6-28), and on August 29, 2018, creditor filed a Motion to Take Judicial Notice (Doc. #6-29) of the dockets from the previous divorce and bankruptcy cases. A Notice of Hearing (Doc. #6-27) was issued and a hearing scheduled for August 30, 2018. On August 29, 2018, debtor filed an Omnibus Objection in response to the creditor's Motion to Dismiss or Convert Case Pursuant to 11 U.S.C. § 1307(c), Objection to Confirmation of the Debtor's Chapter 13 Plan, and Motion to Take Judicial Notice (Doc. #6-30).

         At the scheduled hearing the U.S. Trustee testified that he was still waiting for an accounting of all the property debtor listed as sold in the two years prior to filing for bankruptcy protection. As a result, the Bankruptcy Court continued the hearing. (Doc. #7, pp. 19-20.)

         On September 18, 2018, the Trustee issued an Amended Unfavorable Recommendation and Objections to Confirmation of the Plan (Doc. #6-32). On September 27, 2018, the hearing took place on the pending motions and on the issue of confirmation. (Doc. #6-34.) On October 1, 2018, the Bankruptcy Court issued an Order Granting Creditor, Collette Panebianco's Motion to Dismiss or Convert Case Pursuant to 11 U.S.C. § 1307(c) (Doc. #6-33) for the reasons stated on the record at the hearing.

         Debtor moved for reconsideration, arguing that he was not granted an evidentiary hearing and therefore the Bankruptcy Court made a decision without the necessary testimonial evidence. (Doc. #6-35.) Debtor then filed an Amended Motion (Doc. #6-36) to specifically argue that an evidentiary hearing should have been granted before dismissing his case for bad faith. The creditor filed a response in opposition, Doc. #6-38, and on December 11, 2018, an Order denying Debtor's Amended Motion for Reconsideration of Order Granting Motion to Dismiss (Doc. #6-2). Debtor filed a Notice of Appeal (Doc. #1) from this Order.

         III.

         Appellant argues that the Bankruptcy Court erred in granting the motion to dismiss after determining that debtor's Chapter 13 bankruptcy case was filed in bad faith but without conducting an evidentiary hearing on disputed facts. Appellant also raises two sub-issues: Assuming an evidentiary hearing was not required, (1) whether the Bankruptcy Court inappropriately drew inferences in favor of the creditor when the legal standard required inferences to be drawn in debtor's favor; and (2) whether the Bankruptcy Court's “totality of the circumstances” analysis was flawed and/or incomplete.

         A. Underlying Basis For Motion to Dismiss

         Debtor's ex-wife filed a Motion to Dismiss or Convert Case Pursuant to 11 U.S.C. § 1307(c) (Doc. #6-14) alleging that debtor “has misrepresented his income and undervalued assets on his schedules.” (Doc. #6-14, p. 2.) The Motion stated that this was not debtor's first filing of a bankruptcy to avoid a judgment from an ex-wife. The Motion stated that creditor and debtor were married on February 3, 2006, and that in December of 2011, debtor commenced divorce proceedings in New York. The Motion further recited that debtor asserted a claim for maintenance in the divorce proceeding because he said he was poor, essentially unemployed, working as a retired consultant, and living off of social security. (Doc. #6-14, p. 4.) The divorce case was heard by a Special Referee, who issued a report rejecting debtor's claim for maintenance and finding that debtor was less than forthcoming about his income. (Id.) The Special Referee noted that debtor had a luxury apartment, luxury car, a sailboat, and belonged to a yacht club. (Id.) Based on the report, the presiding judge issued a Divorce Order adopting the findings of the Special Referee, and a Judgment was issued on August 28, 2017. (Id., p. 5.) The Motion further points out that while debtor claimed to be retired and receiving only $1, 521.00 in social security benefits and $620.00 in a Canadian pension, he pays $1, 900 per month in rent, and does so by taking one distribution a year from his IRA to cover the expense.

         In response to the motion to dismiss, debtor objected to any material from the divorce cases being used against him in the bankruptcy case, and sought to strike such factual allegations from the record. (Doc. #6-30.)

         B. Bankruptcy Court's Findings

         At the confirmation hearing, the Bankruptcy Court made the following factual findings in concluding that the debtor did not file the bankruptcy petition in good faith:

First, this is a two-party dispute. The parties' divorce has been pending since 2011. Second, the debt to Ms. Panebianco would be dischargeable only in a Chapter 13.
Third, there are minimal, if any, other debts.
Fourth, the parties have been litigating for years over the true amount of the Debtor's income and it would prejudice the ex-wife to have to relitigate that issue before this Court in the context of an objection to confirmation.
Fifth, Debtor's Plan is for him to keep a luxury sailboat while he has failed to disclose the expenditures necessary to maintain that boat, which means that he has the funds necessary to pay the alleged value of the boat into the Plan and the cost of upkeep of the boat, but is otherwise unwilling to give up the boat and pay those same amounts to creditors.

(Doc. #8, pp. 6-7.) The Court issued an Order (Doc. #6-33) finding that the case had not been filed in good faith, and the bankruptcy case was dismissed without prejudice to seeking to convert the case to a Chapter 7 proceeding.

         Upon motion for reconsideration, the Bankruptcy Court found that an evidentiary on the motion to dismiss was not warranted. (Doc. #6-2.) The Bankruptcy Court granted the request for judicial notice, but only to the extent that the Court took judicial notice of the existence of the filings in the prior Bankruptcy and Divorce cases. The Bankruptcy Court noted her findings as follows:

A. Debtor filed his Chapter 13 case in May 2018, while litigation with Creditor, that included Debtor's appeal of a ruling against him, had been pending in New York since 2011.
B. Debtor listed only a handful of creditors: Creditor, Creditor's attorney, Debtor's brother, two American Express accounts, and one H.H. Gregg account. Debtor listed American Express and H.H. Gregg as being “last active” in April and May 2018. These creditors did not file proofs of claim. Debtor's brother filed a proof of claim, and then an amended claim, but both were filed after the claims bar date. Another creditor, PYOD, LLC, filed a proof of claim for $918.00, to which Debtor objected as barred by statute of limitations. Debtor did not list any amounts owed to the attorney representing him in the Divorce Case.
C. The Plan proposed monthly plan payments of $722.00 per month for 60 months, that the Court calculated would result in the distribution to unsecured creditors of about $33, 588.00. The plan payments were based on the liquidation value of Debtor's assets, ...

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