In Re Carol Freeman Marsch, Debtor (Two Cases). John D. Marsch, Claimant-Appellant v. Carol F. Marsch, (Two Cases)

Per Curiam; Partial Concurrence and Partial Dissent by Judge TROTT.

Before a state court could enter a restitution judgment against Carol Marsch (“debt- or”) in favor of her ex-husband, John Marsch, she filed a Chapter 11 petition. The bankruptcy court found that debtor, who was not in business, filed the petition to prevent entry of the judgment and avoid posting an appeal bond, even though debtor had sufficient assets to pay the judgment or post the bond. Consequently, the bankruptcy court dismissed the petition, holding that “[i]t is not the purpose of the bankruptcy code to allow a debtor to file Chapter 11 bankruptcy to avoid the posting of an appeal bond where the debtor has the clear ability to satisfy the judgment in full from nonbusiness assets.” Thus, the bankruptcy court characterized the petition as a “bad faith” filing and imposed sanctions pursuant to Bankruptcy Rule 9011. The Bankruptcy Appellate Panel (“BAP”) reversed both the dismissal for “bad faith” and the award of sanctions. We have jurisdiction pursuant to 28 U.S.C. § 158 (b), and we reverse.

I

In 1989, debtor obtained a judgment against John Marsch in state court. Pursuant to that judgment, John Marsch…

concurring in part and dissenting in part:

Were we writing on a clean slate, I might wholeheartedly concur across the board with my colleagues. But we are not. Thus, although I concur in most of the majority’s opinion, I must respectfully dissent from Part III regarding the imposition of Rule 9011 sanctions. In my judgment, our en banc holding in Townsend v. Holman Consulting Corp., 929 F.2d 1358 (9th Cir.1990) (en banc) precludes the approach to this issue taken by the majority.

The Townsend decision essentially reads out of Rule 11 plain language appearing to authorize an award of sanctions upon a showing only of improper purpose. As we said in that case, “with regard to complaints which initiate actions, ... such complaints are not filed for an improper purpose if they are non-frivolous.” Id. at 1362 . In other words, a court may not impose Rule 11 sanctions for a “bad faith” filing unless it also finds that the petition was frivolous, i.e., “[A] determination of improper purpose must be supported by a determination of frivolousness when a complaint is at issue.” Id. (emphasis added).

The language of Rule 9011(a) tracks the language of Rule 11. That is why we have said,…

36 F.3d 825 31 Collier Bankr.Cas.2d 1285 , 30 Fed.R.Serv.3d 585 , Bankr. L. Rep. P 76,093 In re Carol Freeman MARSCH, Debtor (Two Cases). John D. MARSCH, Claimant-Appellant, v. Carol F. MARSCH, Respondent-Appellee (Two Cases). Nos. 92-56442, 92-56443. United States Court of Appeals, Ninth Circuit. Argued and Submitted May 2, 1994. Decided Sept. 14, 1994. Michael L. Sandford and John P. Caviness, Hill & Sandford, Santa Barbara, CA, for claimant-appellant. Joseph M. Sholder, Michaelson, Susi & Michaelson, Santa Barbara, CA, for respondent-appellee. Appeals from the Ninth Circuit Bankruptcy Appellate Panel. Before KOZINSKI and TROTT, Circuit Judges, and WILLIAMS, District Judge. * Per Curiam; Partial Concurrence and Partial Dissent by Judge TROTT. PER CURIAM. 1 Before a state court could enter a restitution judgment against Carol Marsch ("debtor") in favor of her ex-husband, John Marsch, she filed a Chapter 11 petition. The bankruptcy court found that debtor, who was not in business, filed the petition to prevent entry of the judgment and avoid posting an appeal bond, even though debtor had sufficient assets to pay the judgment or post the bond. Consequently, the bankruptcy…