Appeal from the United States Bankruptcy Court for the District of Nebraska.
The opinion of the court was delivered by: Schermer, Bankruptcy Judge
Submitted: April 20, 2010
Before KRESSEL, Chief Judge, SCHERMER and VENTERS, Bankruptcy Judges
Debtor Steven Gerard Lapke (the "Debtor") appeals from the bankruptcy court's*fn1 order dismissing his case under 11 U.S.C. § 707(b)(1) and (3). We have jurisdiction over this appeal from the final orders of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons stated herein, we affirm.
The main issue on appeal is whether debt owed by the Debtor in connection with loans on his home constitutes consumer debt, even though the Debtor did not sign some of the underlying loan documentation. Since we find that the debt qualifies as the Debtor's consumer debt, we also consider whether the bankruptcy court correctly decided that the Debtor's bankruptcy filing was an abuse of the provisions of Chapter 7. We agree with the bankruptcy court's determination that the Debtor's filing of this case was abusive.
On February 15, 2009, the Debtor filed his voluntary petition for relief under Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code"). This is the second Chapter 7 case filed by the Debtor in the past two years. The Debtor filed his first case, Case No. BK07-81140-TJM, in 2007 as a joint case with his wife. In response to motions to dismiss filed by the United States Trustee and Nebraska State Bank, which is now known as Mutual of Omaha Bank, the bankruptcy court dismissed the Debtor's 2007 bankruptcy case under section 707(b)(3) of the Bankruptcy Code. It determined that (1) the debts of the Debtor and his wife were primarily consumer debts; and (2) their Chapter 7 case should be dismissed as an abuse of the provisions of Chapter 7. See In re Lapke, No. BK 07-81140-TJM, 2008 WL 901846 (Bankr. D. Neb. Mar. 31, 2008); In re Lapke, No. BK 07-81140-TJM, 2008 WL 355575 (Bankr. D. Neb. Jan. 23, 2008).
The Debtor is a medical doctor who earned a significant income. Prior to both of his bankruptcy filings, the Debtor did business as a professional corporation under the name "Family Health & Wellness, P.C." Thereafter, he practiced medicine as an independent contractor. The Debtor's expenses are high, evidencing a comfortable lifestyle for himself and his family.
In 2004, the Debtor and his wife purchased a home. As of the petition date, two Wells Fargo entities ("Wells Fargo") held three notes, each secured by the Debtor's home. The Debtor and his wife financed the original home purchase with a loan from another institution, which was later refinanced with Wells Fargo. They both signed a deed of trust securing the first loan from Wells Fargo, but the Debtor did not sign the promissory note evidencing the debt ("Note 1"). Wells Fargo was also the holder of a second promissory note ("Note 2"), secured by a second deed of trust ("DOT2") on the Debtor's home. The Debtor did not sign Note 2 or DOT 2. In addition, Wells Fargo was the holder of a third promissory note secured by a third deed of trust encumbering the Debtor's home, both of which were signed by the Debtor and his wife.
In the Debtor's first bankruptcy case, the Debtor and his wife treated the debts owed to Wells Fargo as consumer debt. After dismissal of their joint case, the Debtor and his attorney discovered that the Debtor did not sign Notes 1 and 2. The Debtor then filed his individual Chapter 7 case. The Debtor bases his ability to proceed in his individual case on a mere technicality. According to the Debtor, since he had not signed Notes 1 and 2 and DOT 2, he was not personally liable for such obligations and they were not consumer debts. He admitted that the third home loan constitutes consumer debt. The Debtor argued further that, even if his debts were primarily consumer debts, his bankruptcy filing was not an abuse of the provisions of Chapter 7.
Mutual of Omaha Bank filed its Motion to Dismiss the Debtor's case under Bankruptcy Code section 707(b), claiming that the Debtor has primarily consumer debt and that the issue of abuse was res judicata in accordance with the proceedings in the Debtor's first Chapter 7 case. The bankruptcy court examined the Debtor's calculation of his consumer debt and his business or other debt. It explained that the Debtor improperly included the debt owed to Wells Fargo for Note 1 and Note 2 in his calculation of business or other debt, when such debt should be classified as consumer debt. It also examined the circumstances of the Debtor's financial condition in light of its finding of abuse in the Debtor's first Chapter 7 case. Accordingly, the bankruptcy court granted the Bank's Motion to Dismiss, determining that: (1) the amount owed to Wells Fargo under Notes 1 and 2 was consumer debt; (2) the Debtor had predominantly consumer debt; and (3) the Debtor's bankruptcy filing was an abuse of the provisions of Chapter 7.
We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. First Nat'l Bank of Olathe, Kan. v. Pontow, 111 F.3d 604, 609 (8th Cir. 1997). A finding that a debt secured by real property is a consumer debt is a finding of fact that will only be reversed for clear error. Cox v. Fokkena (In re Cox), 315 B.R. 850, 854 (B.A.P. 8th Cir. 2004). "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." Anderson v. Bessemer City, N.C., 470 U.S. 564, 573 (1985)(quoting U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). We review a ...