RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0131p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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IN RE: RONALD J. SMITH,
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Debtor. │
___________________________________________ │ No. 20-3150
RONALD J. SMITH, >
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Appellant, │
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v. │
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U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR │
CERTIFICATE HOLDERS OF BEAR STERNS ASSET- │
BACKED SECURITIES LLC ASSET-BACKED │
CERTIFICATE SERIES 2004-HE5, │
Appellee. │
┘
Appeal from the United States District Court for the Northern District of Ohio at Youngstown;
No. 4:19-cv-02682—Benita Y. Pearson, District Judge.
United States Bankruptcy Court for the Northern District of Ohio at Youngstown
No. 4:19-bk-40227—Russ Kendig, Judge.
Decided and Filed: June 9, 2021
Before: GIBBONS, KETHLEDGE, and MURPHY, Circuit Judges.
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COUNSEL
ON BRIEF: David A. Wallace, CARPENTER LIPPS & LELAND LLP, Columbus, Ohio, for
Appellee. Ronald J. Smith, Canfield, Ohio, pro se.
No. 20-3150 Smith v. U.S. Bank N.A. Page 2
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OPINION
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KETHLEDGE, Circuit Judge. Among the several requirements for the rule of law is that
the law be reasonably certain. Certainty in the law is what allows citizens to plan their actions
knowing that neither the state nor other individuals will interfere with them. That same
certainty is what constrains government officials to exercise their coercive powers according to
rules—rather than according to their own will, which is what the Founding generation called
arbitrary action, or a “government . . . of men.” John Adams, “The Constitution of
Massachusetts,” in The Political Writings of John Adams 98 (George A. Peek, Jr. ed. 1954). And
when those rules take statutory form, the courts must apply them, regardless of whether a court
likes the results of that application in a particular case. Otherwise all statutory law becomes
discretionary, and the law itself is rendered uncertain.
At issue in this case is a straightforward statutory rule: that, subject to one condition, if
the debtor in a Chapter 13 bankruptcy moves to dismiss his case, “the court shall dismiss” it.
11 U.S.C. § 1307(b). Here, on three separate occasions, Ronald Smith filed a Chapter 13
bankruptcy petition shortly before a scheduled foreclosure sale of his home—thereby preventing
the sale—only to move for the dismissal of his bankruptcy case shortly afterward. The
bankruptcy court granted those motions and dismissed Smith’s cases, notwithstanding his bad
faith, because 11 U.S.C. § 1307(b) plainly commanded the court to dismiss them. A few months
later, however, the bankruptcy court invoked its putative equitable powers and reinstated Smith’s
most recent bankruptcy case. But a court may exercise those powers only in furtherance of the
Bankruptcy Code’s provisions, not in circumvention of them. The court’s order here did the
latter. We reverse.
In 2004, Ronald Smith obtained a $528,500 loan to purchase a home on Gully Top Lane
in Canfield, Ohio. Smith defaulted on the loan about a year later. The mortgage holder sued
him, and a state court eventually scheduled a foreclosure sale for August 7, 2007. But Smith
filed for bankruptcy under Chapter 13 four days before the sale, thereby triggering an “automatic
No. 20-3150 Smith v. U.S. Bank N.A. Page 3
stay” against any collection activity against him. See 11 U.S.C. § 362(a). After the sale date
passed Smith filed a motion to dismiss his Chapter 13 case, which the bankruptcy court granted.
Smith employed the same tactic in 2017, when the state court again scheduled a
foreclosure sale for his home. Again Smith filed a Chapter 13 petition shortly before the sale,
and again he successfully moved to dismiss the case after the sale was cancelled.
By early 2019, U.S. Bank had purchased the mortgage for Smith’s home. The state court
scheduled a sheriff’s sale for the property on February 19, 2019. On the day of the sale,
however, Smith filed a third Chapter 13 petition and obtained yet another automatic stay. Six
days later, Smith again filed a motion to dismiss his case, which the court granted.
At no point, apparently, did the bankruptcy court exercise its power to sanction Smith for
filing all these bankruptcy petitions in patent bad faith. See Fed. R. Bankr. P. 9011(b)(1), (c).
Nor did U.S. Bank promptly move for relief from the automatic stay, which U.S. Bank plainly
could have obtained on the ground that “the filing of the petition was part of a scheme to delay,
hinder, or defraud creditors[.]” 11 U.S.C. § 362(d)(4)(B). Instead, in June 2019, the bankruptcy
court granted U.S. Bank’s motion under Civil Rule 60(b) (as incorporated by Bankruptcy Rule
9024) to vacate its order dismissing Smith’s most recent bankruptcy case. The court also lifted
the automatic stay in Smith’s case for a period of two years. Smith appealed to the district court,
where he sought a stay of the bankruptcy court’s order reinstating his case. The district court
denied that motion but certified for interlocutory appeal the question whether the reinstatement
of Smith’s case was contrary to law. Our court then granted Smith leave to bring this appeal.
We review the district court’s denial of Smith’s motion for a stay for an abuse of
discretion. Beacon J. Publ’g Co. v. Blackwell, 389 F.3d 683, 684 (6th Cir. 2004). A district
court abuses its discretion when it commits a legal error. See United States v. Holden, 557 F.3d
698, 703 (6th Cir. 2009). Here, the merits concern only the legality of the bankruptcy court’s
June 2019 order reinstating Smith’s Chapter 13 case.
The interpretive question in this case is simple. Section 1307(b) provides in full:
On request of the debtor at any time, if the case has not been converted [from a
case under Chapter 7, 11, or 12], the court shall dismiss a case under this chapter
No. 20-3150 Smith v. U.S. Bank N.A. Page 4
[i.e., Chapter 13]. Any waiver of the right to dismiss under this subsection is
unenforceable.
By its plain terms, this provision is mandatory: upon the debtor’s request, subject to one
exception not applicable here (namely that the case was not converted to Chapter 13 from
another chapter), the court “shall dismiss” a Chapter 13 case. See Me. Cmty. Health Options v.
United States, 140 S. Ct. 1308, 1320 (2020). The debtor’s right to dismiss a Chapter 13 case
comports with § 303(a), which makes clear that Chapter 13 is a “wholly voluntary alternative to
Chapter 7[.]” Harris v. Viegelahn, 575 U.S. 510, 514 (2015). Meanwhile, § 1307(c) provides
that, at the “request of a party in interest or the United States trustee,” the court “may dismiss” a
Chapter 13 case “for cause[.]” Congress thus specified the circumstances in which a bankruptcy
court “may dismiss” a Chapter 13 case, and those in which it “shall” do so. The circumstances
here were undisputedly those that mandated dismissal under § 1307(b).
U.S. Bank identifies nothing in § 1307 that renders § 1307(b) discretionary in cases
where the debtor filed the bankruptcy petition in bad faith. Instead, U.S. Bank reads the
Supreme Court’s decision in Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007),
to effect that result. In Marrama, the bankruptcy court had denied a different kind of motion
under the Bankruptcy Code—namely, a debtor’s motion under 11 U.S.C. § 706(a) to convert his
Chapter 7 case to a case under Chapter 13. See id. at 369–70. Section 706(a) provides that
“[t]he debtor may convert” a Chapter 7 case to one under Chapter 13 if (among other conditions)
the debtor is eligible to be a Chapter 13 debtor. The bankruptcy court properly denied the
debtor’s motion to convert, the Supreme Court held, because the debtor’s bad faith could
preclude him from qualifying as a debtor under Chapter 13. Id. at 372–73; see 11 U.S.C.
§ 706(d). More to the point here, the Court also stated in dictum that the bankruptcy court could
have denied the motion by invoking 11 U.S.C. § 105(a), which provides bankruptcy courts with
equitable power to take any action “that is necessary or appropriate to carry out the provisions of
this title” or “to prevent an abuse of process.” Two other circuits have cited that dictum to hold
that a bankruptcy court may deny a debtor’s motion to dismiss a Chapter 13 case if the debtor
filed her petition in bad faith. See Jacobsen v. Moser (In re Jacobsen), 609 F.3d 647, 660 (5th
Cir. 2010); Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 773–74 (9th Cir. 2008).
U.S. Bank argues that we should do the same here.
No. 20-3150 Smith v. U.S. Bank N.A. Page 5
But the Supreme Court itself largely rejected that dictum in Law v. Siegel, 571 U.S. 415
(2014). There, a unanimous Court flatly rejected the idea that § 105(a) vests in the bankruptcy
courts equitable power to disregard the Code’s provisions when they lead to results that seem
unfair. Instead, the Court held that those powers are interstitial, meaning they “must and can
only be exercised within the confines of the Bankruptcy Code.” Id. at 421 (internal quotation
marks omitted). And the Court specifically stated that, “[a]t most, Marrama’s dictum suggests
that in some circumstances a bankruptcy court may be authorized to dispense with futile
procedural niceties in order to reach more expeditiously an end result required by the Code.” Id.
at 426. The command of § 1307(b) is no mere procedural nicety, which is likely why no circuit
court has accepted U.S. Bank’s argument since Law was decided in 2014. We reject that
argument here.
U.S. Bank also argues that Civil Rule 60(b)(3) authorized the bankruptcy court to vacate
its dismissal of Smith’s bankruptcy case. Rule 60(b)(3) (as incorporated by Bankruptcy Rule
9024) allows a court to “relieve a party” from a final order due to fraud, “misrepresentation, or
misconduct by an opposing party.” Fed. R. Civ. P. 60(b)(3). But “any conflict between the
Bankruptcy Code and the Bankruptcy Rules must be settled in favor of the Code.” United States
v. Chavis (In re Chavis), 47 F.3d 818, 822 (6th Cir. 1995). Here, as shown above, the
Bankruptcy Code directs bankruptcy courts to dismiss a Chapter 13 case on a debtor’s request.
See 11 U.S.C. § 1307(b). That command would be meaningless if a bankruptcy court could then
vacate its dismissal under Rule 60(b). The district court therefore abused its discretion when it
held that the bankruptcy court could reinstate Smith’s Chapter 13 case under that Rule.
* * *
The district court’s order denying Smith’s motion for a stay is reversed, and the case is
remanded with instructions for the bankruptcy court to dismiss Smith’s most recent Chapter 13
case. The bankruptcy court need not take any action to restore the status quo prior to its June
2019 reinstatement of Smith’s case.