Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-06072/USCOURTS-ca8-06-06072-0/pdf.json

Parties Involved:
Richard Fink
Appellee
Tenny Shikaro Zahn
Appellant

Document Text:

United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

______

No. 06-6072WM

______

In re: *

 *

Tenny Shikaro Zahn, formerly known *

as Tenny Shikaro Garner, *

 *

Debtor. *

 * Appeal from the United States

Tenny Shikaro Zahn, * Bankruptcy Court for the Western

 * District of Missouri

Debtor–Appellant, *

 *

v. *

 *

Richard Fink, *

 *

Trustee–Appellee. *

______

Submitted: January 25, 2007

Filed: March 20, 2007

______

Before KRESSEL, Chief Judge, MAHONEY and McDONALD, Bankruptcy Judges.

______

KRESSEL, Chief Judge.

Appellate Case: 06-6072 Page: 1 Date Filed: 03/20/2007 Entry ID: 3289915
1

 The Honorable Jerry W. Venters, Chief Judge, United States Bankruptcy

Court for the Western District of Missouri. 

2

The debtor appeals from a bankruptcy court1 order which confirmed her second

amended chapter 13 plan. We dismiss the appeal for lack of jurisdiction.

BACKGROUND

The debtor filed her chapter 13 petition on April 11, 2006. On April 25, 2006,

she filed her statement of current monthly income along with her schedules. The

statement of current monthly income did not include the distribution that her nonfiling spouse had taken from his IRA account. Without the inclusion of the money

from the IRA distribution in the debtor’s income calculation, her income was below

the applicable median income and the applicable plan length was 36 months. See 11

U.S.C. § 1325(b)(4)(A). The debtor’s plan required her to pay the trustee $2,265 per

month for 36 months. The plan provided that the non-priority unsecured creditors

would receive a dividend of 0% over the duration of the plan. 

On May 23, 2006, the trustee objected to confirmation of the debtor’s plan. The

basis for the trustee’s objection was the debtor’s omission from her statement of

current monthly income of the distribution that her husband took from his IRA

account during the six months preceding the bankruptcy. The trustee contended that

the distribution should have been included in the debtor’s income report. If the

distribution were included in the income report, then the debtor’s income would be

above the applicable median income for a family of three in Missouri. The applicable

plan commitment period for a debtor with above median income is 60 months versus

36 months for a debtor with below median income. See 11 U.S.C. § 1325(b)(4)(A).

On July 13, 2006, the bankruptcy court denied confirmation of the debtor’s

plan. The court ruled that the debtor needed to include her husband’s IRA distribution

in her current monthly income, which would require her to file a plan with a

Appellate Case: 06-6072 Page: 2 Date Filed: 03/20/2007 Entry ID: 3289915
2

 The actual title of the order is “Order Confirming Chapter 13 Plan as Filed

or Amended on or About 8/30/06 & 8/17/06.” We assume this means that the

order confirmed the second amended plan. 

3

commitment period of 60 months. The court granted the debtor 20 days in which to

file an amended plan. The debtor filed an appeal, but we dismissed it as interlocutory.

On August 17, the debtor filed an amended statement of current monthly

income, which included her husband’s IRA distribution, and an amended plan. The

sole change in the amended plan was that the plan length was 60 months instead of 36.

Unsecured, non-priority creditors would still receive nothing. The debtor also filed

an objection to her own plan. After the trustee objected to confirmation of the first

amended plan, the debtor submitted a second amended plan which lowered the

monthly payment from $2,265 to $2,190. The plan still had a commitment period of

60 months and the unsecured, non-priority creditors still received nothing. The debtor

also filed an objection to the second amended plan on the grounds that the IRA

distributions should not be treated as income for purposes of determining plan length.

On September 11, 2006, the court overruled the debtor’s objection to her own

plan and on October 12, 2006, the court confirmed the debtor’s second amended plan.2

The debtor appealed the order confirming her plan.

DISCUSSION

Orders Denying Confirmation of Plans Are Not Final Orders.

We have jurisdiction over final judgments of the bankruptcy courts. See 28

U.S.C. § 158(a)(1). While an order denying confirmation of a plan would seem to be

a final order because it is a final determination of the proceeding regarding

confirmation of that plan, under Eighth Circuit precedent, a bankruptcy court order

which denies confirmation of a plan, but which does not dismiss the underlying case

is not a final order. Lewis v. United States Farmers Home Administration 992 F.2d

Appellate Case: 06-6072 Page: 3 Date Filed: 03/20/2007 Entry ID: 3289915
4

767, 772 (8th Cir. 1993); Moix-McNutt v. Coop 212 B.R. 953, 954 (B.A.P. 8th Cir.

1997). However, a party may still appeal a non-final order if we grant leave to appeal.

See 28 U.S.C. § 158(a)(3).

After dismissal of her first appeal, the debtor was faced with the choice of

proposing a new plan consistent with the bankruptcy court’s decision or having her

case dismissed and appealing from the dismissal order. We recognize that this is a

Hobson’s choice. However, we think that the choice is the necessary result of the

Eighth Circuit’s decisions holding orders denying confirmation to be interlocutory and

think that by proposing a new plan the debtor has effectively abandoned her old one.

Interlocutory Orders Do Not Later Become Final.

“The prohibition against immediate appeal of most pretrial and trial orders

established by the final judgment rule is offset by the rule that once appeal is taken

from a truly final judgment that ends the litigation, earlier rulings generally can be

reviewed.” 15A CHARLES ALAN WRIGHT,ARTHUR R.MILLER &EDWARD H.COOPER,

FEDERAL PRACTICE AND PROCEDURE § 3905.1 (2d ed. 1992); see Franklin v. District

of Columbia, 163 F.3d 625, 630 (D.C. Cir. 1998). An appeal from a final judgment

permits the appeal of previously entered non-final orders that shaped the scope of that

judgment. David v. Fulton County, Arkansas, 90 F.3d 1346, 1354 (8th Cir. 1996). 

The debtor suggests that the order denying confirmation of her first plan

“became final” when the confirmation order was entered. Clearly the order which

confirmed the debtor’s second amended plan is a final order from which the debtor

may appeal. As part of that appeal, we may review any of the orders which led up to

the final order. However, the order which denied confirmation of the debtor’s original

plan did not become final, and thus appealable in its own right, as the debtor contends.

The order remains an interlocutory order and may be reviewed only as part of an

appeal of a final order, provided that the interlocutory order in some way led to error

Appellate Case: 06-6072 Page: 4 Date Filed: 03/20/2007 Entry ID: 3289915
3

In addition, the debtor did not appeal from the order denying confirmation

as part of this appeal and even if she had, such an appeal would have been late in

the extreme.

5

in the final order.3 But, as we will see in the next section, such review is predicated on

an erroneous final order.

The Debtor May Not Appeal From Judgment Entered in Her Favor.

In order to have standing to appeal the decision of the bankruptcy court, an

appellant must be a person aggrieved. O’Brien v. Vermont (In re O’Brien), 184 F.3d

140, 142 (2nd Cir. 1999). “[A] ‘person aggrieved’ . . . must be directly and adversely

affected pecuniarily by the order of the [bankruptcy] referee which is challenged.”

Hartman Corp. of America v. United States, 204 F.2d 429, 430 (8th Cir. 1962). “It is

an abecedarian rule that a party cannot prosecute an appeal from a judgment in its

favor.” Elkin v. Metropolitan Prop. & Cas. Ins. (In re Shkolnikov), 470 F.3d 22, 24

(1st Cir. 2006). “[A] party may not appeal from a judgment or decree in his favor, for

the purpose of obtaining a review of findings he deems erroneous which are not

necessary to support the decree.” Electrical Fittings Corp. v. Thomas & Betts Co., 207

U.S. 241, 242 (1939); see In re Public Service Co. of New Hampshire, 898 F.2d 1, 2

(1st Cir. 1990).

The debtor is not an aggrieved party. In fact she alleges no error in the order

from which she has appealed. She concedes that her quarrel is not with the order she

has appealed but with the earlier order denying confirmation of her original plan. Even

her own objection to her plan did not contend that it was not confirmable. She simply

preferred her original plan.

In addition, the debtor received all of the relief that she requested. The debtor

proposed her second amended plan to the court in order to obtain its confirmation.

When the court confirmed her plan, the debtor got all the relief for which she asked.

Appellate Case: 06-6072 Page: 5 Date Filed: 03/20/2007 Entry ID: 3289915
6

Because a party may not appeal a judgment that grants all of the relief requested, the

debtor may not appeal the order confirming her plan.

The debtor refers us to several cases which, she contends, allow us to review the

denial of confirmation of her original plan as part of the appeal of confirmation of her

second amended plan. See Lewis, 992 F.2d 767; Pleasant Woods Assocs. Ltd. P’ship

v. Simmons First Nat’l Bank (In re Pleasant Woods Assocs. Ltd. P’ship), 2 F.3d 837

(8th Cir. 1993); Moix-McNutt, 212 B.R. 953; Vincent v. Fairbanks Capital Corp. (In

re Vincent), 301 B.R. 734 (B.A.P. 8th Cir. 2003); McConnell v. NWA Credit Union (In

re McConnell), 202 B.R. 169 (B.A.P. 8th Cir. 2003). However, in all of these cases

the courts did not decide the merits of the appeal. Instead, they dismissed the appeals

for lack of jurisdiction because no final order had been entered. The courts did state,

in dicta, that the debtors could appeal the orders denying confirmation after dismissal

of their cases or confirmation of their plans. However, none of the cases involved a

debtor who appealed an order confirming a plan that the debtor proposed. Although

we sympathize with the debtor’s reliance on these cases, like so much dicta, they do

not hold up to actual analysis and we think are contrary to law. We decline to follow

the dicta in these cases, particularly when to do so would lead us to exceed our

jurisdiction.

In another case, the court heard the case on the merits, but only because it held

that given the circumstances, the order under review was a final order. Broken Bow

Ranch, Inc. v. Farmers Home Admin. (In re Broken Bow Ranch, Inc.), 22 F.3d 1005

(8th Cir. 1994). It recites the dicta from the previous cases–that the court may review

denial of confirmation of a debtor’s plan upon either dismissal of the case or

confirmation of a final plan–but does not rely on it because the appeal is not from

confirmation of a plan or dismissal. Id. at 1008. In Broken Bow Ranch, the debtor

appealed a bankruptcy court order which denied the debtor discharge in a chapter 12

plan unless the debtor paid all of its disposable income to its unsecured creditors. Id.

Broken Bow Ranch is not applicable here.

Appellate Case: 06-6072 Page: 6 Date Filed: 03/20/2007 Entry ID: 3289915
7

CONCLUSION

Because the debtor prevailed in the bankruptcy court, she lacks standing to

appeal and her appeal is dismissed.

MAHONEY, Bankruptcy Judge, joined by Kressel, Chief Judge , concurring

I agree with the opinion of the majority because of the current state of the law

in the Eighth Circuit regarding the finality of bankruptcy court orders which deny

confirmation of a chapter 13 plan. I write separately to suggest that the Court of

Appeals should revisit the issue of whether an order denying confirmation of a chapter

13 plan is a final order for appeal purposes.

As the majority recites, as a result of the decision in Lewis v. U.S. Farmers

Home Admin., 992 F.2d 767 (8th Cir. 1993), the law in the Eighth Circuit is that an

order denying confirmation of a debtor’s plan is interlocutory and not a final order. If

the district court, sitting in an appellate capacity, or the Bankruptcy Appellate Panel

refuses to permit the appeal of the interlocutory order such order will most likely never

receive appellate review.

Rather than considering the appeal of an order denying confirmation of a plan

to be a final order, Lewis requires that if the debtor chooses not to file an amended plan

to conform to the bankruptcy judge’s view of what is necessary to be contained in a

confirmable plan, the case should be dismissed and the dismissal order will then be

considered the final appealable order. The position of the Eighth Circuit is consistent

with the position of the majority of circuits that have faced the issue. See Watson v.

Boyajian (In re Watson), 309 B.R. 652 (B.A.P. 1st Cir. 2004), aff’d, 403 F.3d 1 (1st Cir.

2005); In re Massey, 21 Fed. Appx. 113, 2001 WL 1241039 (4th Cir. 2001)

(unpublished) (per curiam); Lievsay v. W. Fin. Sav. Bank (In re Lievsay), 118 F.3d

661(9th Cir. 1997) (per curiam); Flor v. Bot Fin’l Corp. (In re Flor), 79 F.3d 281 (2d

Appellate Case: 06-6072 Page: 7 Date Filed: 03/20/2007 Entry ID: 3289915
8

Cir. 1996) (per curiam); Simons v. FDIC (In re Simons), 908 F.2d 643 (10th Cir. 1990)

(per curiam). In re Salem, 465 F.3d 767,771 (7th Cir. 2006) (“A judgment affirming a

bankruptcy court's decision to deny confirmation of a Chapter 13 plan and dismiss a

case is typically a final order of the bankruptcy court, as there are no proceedings left

to occur.”); But see: In re Armstrong World Indus., Inc., 432 F.3d 507 (3d Cir. 2005)

(finality is construed more broadly in bankruptcy cases than in other civil cases; Third

Circuit’s policy is to quickly resolve issues central to a bankruptcy case’s progress);

Bartee v. Tara Colony Homeowners Ass’n (In re Bartee), 212 F.3d 277 (5th Cir. 2000)

(“Recognition that the denial of a Chapter 13 plan can be a final order is all but

compelled by considerations of practicality.”); and Hardy v. Cinco Fed. Credit Union

(In re Hardy), 755 F.2d 75 (6th Cir. 1985) (court considered an appeal from a denial of

the confirmation of a debtor’s chapter 13 plan with no acknowledgment of a

jurisdictional problem).

The problem that results from refusing to treat orders denying confirmation as

final orders for appeal purposes is that the debtor is left with two ineffective

alternatives. The debtor can comply with the findings of the bankruptcy court and file

a plan that contains provisions the debtor does not believe are required by the Code,

and lose, as in this case, the right to appeal. Alternatively, the debtor is forced to suffer

dismissal of the case and then request the bankruptcy court or the appellate court to

stay the order of dismissal during an appeal so that the automatic stay of 11 U.S.C. §

362(a) is not lost. Frequently, the purpose of filing a chapter 13 case is to save a house

from foreclosure or a vehicle from repossession and sale. The chapter 13 petition stays

the state law collection procedures. If the case gets dismissed as a result of the denial

of confirmation, the whole purpose of the case may be frustrated, especially if the

debtor cannot obtain a stay pending appeal. 

For “finality” purposes, a bankruptcy case is not the equivalent of a civil case

filed in the district court. The bankruptcy case may include several discrete

Appellate Case: 06-6072 Page: 8 Date Filed: 03/20/2007 Entry ID: 3289915
9

opportunities for litigation and the result of each litigated issue is final or should be

considered final as to that issue. 

28 U.S.C. § 157(a) differentiates a “case” under Title 11 and a “proceeding”

arising in a case under Title 11. 28 U.S.C. § 157(b) identifies various “proceedings”

that are “core proceedings” which bankruptcy judges may determine and enter

appropriate orders and judgments. Included in the list of core proceedings is 28 U.S.C.

§ 157(b)(2)(L), “confirmation of plans.” Denial of confirmation on the merits is a

determination of a proceeding that should be final and appealable. Such an order is

analogous to orders determining other core proceeding litigation which have been

found to be final orders for appeal purposes. Examples are Stuart v. Koch (In re Koch),

109 F.3d 1285 (8th Cir. 1997) ( an order denying dismissal of a case under 11 U.S.C.

§ 707(b) is final for appeal purposes); Huebner v. Farmers State Bank (In re Huebner),

986 F.2d 1222 (8th Cir. 1993) (an order granting or denying an objection to an

exemption is final for purposes of appeal), cert. denied, 510 U.S. 900 (1993); and

Aetna Life Ins. Co. v. Leimer (In re Leimer), 724 F.2d 744 (8th Cir. 1984) (an order

denying relief from the automatic stay is final for appeal purposes). In Martin v.

United States (In re Martin), 761 F.2d 472 (8th Cir. 1985), the court, without explicitly

addressing whether an order on the use of cash collateral is final for purposes of

appeal, did hear and decide the creditor’s appeal of the bankruptcy court’s order

granting the debtor’s motion for use of cash collateral.

In each of the cases discussed above the order appealed from terminated a

discrete piece of litigation, leaving nothing further for the bankruptcy judge to do with

regard to the litigated issue.

This case is a good example of the problems resulting from the current state of

the law in this circuit. Here, the bankruptcy court denied confirmation of a plan

proposed by the debtor because it did not extend for sixty months as the judge

determined was necessary as a matter of law. The debtor lost the litigation concerning

Appellate Case: 06-6072 Page: 9 Date Filed: 03/20/2007 Entry ID: 3289915
10

that proposed plan. She attempted to appeal the decision of the bankruptcy court, but

the Bankruptcy Appellate Panel refused to grant leave to appeal the interlocutory order.

Had the order denying confirmation been considered final, that initial appeal would

have allowed an appellate determination of the litigated issue,which was: “Was the

initial plan confirmable?” Instead, debtor, not willing to risk the downside of a

dismissal order, and relying on dicta from Eighth Circuit and B.A.P. cases that

appeared to sanction the procedure, filed a plan that conformed to the judge’s finding

but made it clear in the plan that filing of the plan was being done over debtor’s

objection. Since the objector to the original plan did not object to the new plan, it was

confirmed. The debtor appealed, and now has lost the appeal because we conclude that

the debtor has received all the relief the debtor is entitled to, i.e., confirmation of a

plan. So, the real issue, the litigated issue of whether the original plan was

confirmable, will never receive appellate review. (I seem to recall a book and a movie

entitled Catch-22.)

I believe that when a chapter 13 plan is proposed and objected to by any party

it becomes a contested matter with regard to that discrete issue, that is, the

confirmability of that particular plan. An order denying confirmation of that particular

plan is a final determination by the bankruptcy judge of the plan confirmation

proceeding and should be considered a final order for purposes of appeal. Such an

order should be considered final because it settles, once and for all, the particular issues

being litigated, even though it does not resolve all other issues which may arise in the

case. An order denying confirmation of a chapter 13 plan is in exactly the same

category as all of the other contested matters described above which the Court of

Appeals has agreed are final orders for appeal purposes. In addition to all of the

reasons discussed above, such an order should be considered as final for appeal

purposes to avoid the risks that dismissal of the case may cause the debtor and to avoid

situations such as this one, in which the debtor cannot obtain any appellate relief.

 

Appellate Case: 06-6072 Page: 10 Date Filed: 03/20/2007 Entry ID: 3289915