Thomas, et al v. USA

United States Court of Appeals
Fifth Circuit
F I L E D
March 1, 2007
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 06-20115
_______________
IN THE MATTER OF:
DONALD RAY THOMAS
AND
PAMELA JEAN PIPKINS-THOMAS,
Debtors.
DONALD RAY THOMAS
AND
PAMELA JEAN PIPKINS-THOMAS,
Appellants,
VERSUS
UNITED STATES OF AMERICA,
Appellee.
* * * * * * * * * * * * * * *

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2
_______________
m 06-20777
_______________
IN THE MATTER OF:
DONALD RAY THOMAS, SR.
AND
PAMELA JEAN PIPKINS-THOMAS,
Debtors.
DAVID W. BARRY, DONALD RAY THOMAS, SR.;
PAMELA JEAN PIPKINS-THOMAS,
Appellants,
VERSUS
UNITED STATES OF AMERICA INTERNAL REVENUE SERVICE;
UNITED STATES OF AMERICA,
Appellees.
_________________________
Appeals from the United States District Court
for the Southern District of Texas
m 4:05-CV-3322
__________________________

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3
Before SMITH, BARKSDALE, and DENNIS,
Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Through these two consolidated appeals,
chapter 13 debtors Donald Thomas and Pam-
ela Pipkins-Thomas challenge two district
court affirmances of bankruptcy court rulings
allowing a late-filed IRS proof of claim as an
amendment to an earlier claim and vacating the
confirmation of a chapter 13 plan. Their coun-
sel throughout the bankruptcy process, David
Barry, appeals the district court’s affirmance
of sanctions levied against him by the
bankruptcy court. Because the district court
correctly dismissed debtors’ first appeal, and
the bankruptcy court did not abuse its dis-
cretion by vacating the plan or imposing sanc-
tions, we affirm.
I.
In May 2003, the IRS informed debtors that
their 2001 tax return had been selected for au-
dit. In September 2003, the IRS issued debt-
ors a notice of deficiency for $27,109 in addi-
tional taxes and a $5,421.80 penalty; debtors
did not challenge this notice in Tax Court.
On October 1, 2003, debtors filed a chapter
13 petition listing the IRS as a creditor. On
October 20, 2003, debtors filed a sworn bank-
ruptcy schedule listing a priority unsecured
claim on behalf of the IRS for $20,000; the
schedule did not indicate that the claim was
disputed, liquidated, or contingent. On De-
cember 16, 2003, debtors filed an amended
chapter 13 plan summary showing an IRS pri-
ority unsecured claim of $5,000 and providing
for payment of that amount to the IRS.
On January 13, 2004, debtors’ chapter 13
plan was confirmed. The IRS was provided
timely notice of all the proceedings, and an
IRS representative was present at the confir-
mation hearing and did not object.1
On February 2, 2004, debtors filed a proof
of claim for $5,000 on behalf of the IRS. Bar-
ry later admitted that he intentionally had
failed to list details about the claim so that it
would appear ambiguous, intending to avoid
disclosure of the tax period, time, and amount.
On December 21, 2004, months after the
deadline for filing government proofs of claim,
the IRS filed a proof of claim showing an un-
secured nonpriority claim of $5,524.47 and an
unsecured priority claim of $29,724.20.
Debtors filed an objection to the claim, alleg-
ing that it had not been filed timely, and filed
an unopposed motion to sever the issue of the
timeliness of the IRS’s claims.
On April 13, 2005, the bankruptcy court
granted the motion and ruled that the IRS’s
proof of claim was a valid amendment to
debtors’ proof of claim filed on the IRS’s be-
half. The court noted that debtors’ proof of
claim had intentionally made the tax claim am-
biguous, despite debtors’ knowledge of the
source of the claim. The April order specified
that it was a “final order on the severed matter
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be pub-
lished and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
1 The IRS did not object at the confirmation
hearing or in response to notices of the debtors’
filings. In a case without an admission of affirma-
tive misrepresentation and fraud on the court, we
might not be sympathetic to a creditor that sat on
its rights.

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4
that is adjudicated by this order.”
On September 13, 2005, the bankruptcy
court signed the parties’ “Agreed Order Deny-
ing Debtors’ Objection to IRS Claim.” The
order stated that “The IRS Proof of Claim
dated August 24, 2005, in the amount of
$34,822.67 is correct and ALLOWED as filed
. . . . Debtors’ objection to IRS Claim is DE-
NIED.” This order is signed by Barry as debt-
ors’ attorney and is marked “with permission”
and “[a]greed as to form and substance.”
Debtors appealed to the district court,
which dismissed the appeal with prejudice.
Meanwhile, the bankruptcy court held hearings
to determine whether Barry and debtors had
intentionally filed vague, misleading, and false
documents. The court concluded that the
bankruptcy schedules and proof of claim pre-
sented intentionally false statements and were
designed to mislead the court. The court va-
cated the plan confirmation and levied sanc-
tions on Barry. The district court affirmed
both these decisions.
II.
Debtors appeal the bankruptcy court’s deci-
sion to allow the IRS’s late-filed proof of
claim as an amendment to the earlier proof of
claim filed by debtors. Although that order
was entered on April 13, 2005, debtors did not
file a notice of appeal until after they had
signed the September 13, 2005, Agreed Order.
A party cannot appeal a judgment to which
he has consented.2 Although debtors now
claim that the September order was entered
into only to have a final order from which to
appeal, that assertion is belied by the face of
the order: There is no language suggesting
that any rights were preserved for appeal or
that there is any remaining controversy. The
debtors cite no cases in which courts have
heard appeals on the underlying merits of is-
sues stipulated in agreed judgments, nor have
debtors explained how they are aggrieved by a
judgment to which they agreed as to sub-
stance. Debtors are estopped from appealing
the September order.
Any claims the debtors may have had re-
garding the April order have been rendered
moot by the September order, which ratified
the bankruptcy court’s April rulings. Because
the debtors have no right to appeal from an or-
der to which they agreed, the district court
correctlydismissed their appealwith prejudice.
III.
Debtors appeal the bankruptcy court’s or-
der vacating the confirmed chapter 13 plan.
They argue that the court had no authority to
vacate the plan sua sponte 761 days after the
confirmation order was entered because, ac-
cording to the terms of the Bankruptcy Code,
a confirmed chapter 13 plan can be revoked
only if a party in interest makes a request with-
in 180 days.3
2 Swift & Co. v. United States, 276 U.S. 311,
323-24 (1928) (“[A] decree, which appears by the
record to have been rendered by consent is always
affirmed, without considering the merits of the
(continued...)
2(...continued)
cause.”).
3 The Bankruptcy Code provides a statutory
method of revoking a confirmation order in cases
of fraud:
On request of a party in interest at any time
within 180 days after the date of the entry of an
order of confirmation under section 1325 of this
(continued...)

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“Bankruptcy Courts are courts of equity,”
Nikoloutsos v. Nikoloutsos (In re Nikoloutsos),
199 F.3d 233, 236 (5th Cir. 2000), and “a
court of equity is enabled to frustrate fraud
and work complete justice.” Tex. Co. v. Mil-
ler, 165 F.2d 111, 116 (5th Cir. 1947). The
Bankruptcy Code grants broad statutory pow-
er to bankruptcy courts:
The court may issue any order, process,
or judgment that is necessary or appropri-
ate to carry out the provisions of this title.
No provision of this title providing for the
raising of an issue by a party in interest
shall be construed to preclude the court
from, sua sponte, taking any action or mak-
ing any determination necessary or appro-
priate to enforce or implement court orders
or rules, or to prevent an abuse of process.
11 U.S.C. § 105(a). From the face of the stat-
ute, the fact that the Bankruptcy Code may al-
low parties in interest to request revocation of
a confirmed plan does not prevent the court
from taking the action sua sponte.
In Nikoloutsos, this court considered a case
in which a debtor owed a $800,000 personal
injury judgment that he did not appeal. He
filed a chapter 13 petition despite the fact that
chapter 13 is not available to debtors with over
$250,000 in debts. See 11 U.S.C. § 109(e).
He also listed his debt to the judgment creditor
as zero. When the judgment creditor objected,
the bankruptcy and district courts found that
she had failed to file a timely proof of claim.
On review, we first reversed the lower court’s
findings that the proof of claim was not timely.
Nikoloutsos, 199 F.3d at 236. We then found
that the debtor had obtained a chapter 13 con-
firmation through “a materially false
representation which was either known by him
to be false or made with reckless disregard for
the truth.” Id. at 238. We remanded with
instruction to the bankruptcy court to “vacate
its order confirming the chapter 13 plan.” Id.
The facts of this case are strikingly similar
to those in Nikoloutsos. Debtors, through
their counsel, intentionally misrepresented
their debt to the IRS in their chapter 13 filings
and, by their fraud, obtained a confirmed chap-
ter 13 plan. On these facts, it was well within
the equitable authority of the bankruptcy court
to vacate debtors’ confirmed chapter 13 plan,
just as we instructed in Nikoloutsos.
Additionally, debtors cannot claim that the
vacatur of the plan has deprived them of any
right to which they are entitled.4 The bank-
ruptcy court’s order provided the debtors an
opportunity to file an amended plan, and coun-
sel at argument admitted that a new chapter 13
plan has been confirmed with the sole
alteration that the entire debt to the IRS is in-
cluded. Debtors have no right to the discharge
of a debt that is included in their plan only
through fraudulent and misleading filings with
the bankruptcy court. That court need not aid
and abet debtors’ fraud.
3(...continued)
title, and after notice and a hearing, the court
may revoke such order if such order was pro-
cured by fraud.
11 U.S.C. § 1330(a).
4 See, e.g., Meyer v. Lenox (In re Lenox), 902
F.2d 737, 739-40 (9th Cir. 1990) (“[B]ankruptcy
courts, as courts of equity, have the power to re-
consider, modify or vacate their previous orders so
long as no intervening rights have become vested in
reliance on the orders.”).

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IV.
Barry appeals sanctions. We review the im-
position of sanctions under Federal Rule of
Bankruptcy Procedure 9011 for abuse of dis-
cretion. Krim v. First City Bancorporation
Inc. (In re First City Bancorporation Inc.),
282 F.3d 864, 867 (5th Cir. 2002) (per cur-
iam).
The bankruptcy court found the following:
Because Counsel has prepared, signed, and
filed a false petition, an improper chapter
13 plan summary and chapter 13 plan, an
objection to claim and related memoranda
without factual or legal basis, and a proof
of claim and has advocated all of those for
improper purpose and knowing that they
were factually incorrect, the Court con-
cludes that counsel has violated FRBP
9011(b).
These are factual findings that we review for
clear error, and Barry has provided no basis
for disturbing them.
The bankruptcy court imposed three sanc-
tions. First, because Barry in open court twice
refused to recognize a duty of candor, the
court imposed ethics instruction. Second, be-
cause making a false representation in a bank-
ruptcy proceeding is a federal crime under 18
U.S.C. § 157(3), the court forwarded the
memorandum opinion to the appropriate Unit-
ed States Attorney. Third, under authority of
Canon 3(B)(3) of the Code of Conduct for
United States Judges, the court forwarded a
copy of the opinion to the State Bar of Texas.
Although these sanctions are strong, they
are not an abuse of discretion. Bankruptcy
courts are courts of equity and rely on the
good faith of parties to function efficiently.
See, e.g., 11 U.S.C. § 1325(a)(3). Barry
signed documents containing intentional mis-
representations in an attempt to abuse the
bankruptcy process by discharging debts his
clients could not challenge in good faith.
Strong sanctions are necessary to deter this
type of behavior.
The judgment of the district court, affirm-
ing the decisions of the bankruptcy court, is
AFFIRMED.

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