# U ni t e d S t a t e s B a n kr u p t c y A p p e ll a t e P a n e l For the Eig hth Circu it

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No . 2 0 -6 0 14

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In re: J effrey D. Bro o k s

Deb t o r

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J effrey D. Bro ok s

Deb t o r - Ap p el l a n t

v

.

Fi rs t Cen tral Ban k M cCo o k

Cr ed i t o r - Ap p el l ee

_ __ _ _ __ _ __ _ _ Ap p eal fro m

Un i t ed St at es Ban k ru p t cy Co u rt fo r t h e Di s t ri ct o f Neb ras k a - Li n co l n

_ __ _ _ __ _ __ _ _
Su b m i t ted : Oct o ber 2 3, 2 0 20 Fi l ed : No v em

b er 2 5 , 2 02 0

_ __ _ _ __ _ __ _ _
Befo re SCHERM E R, NAIL, an d DOW , Ban k ru p t cy J u d g es

.

_ __ _ _ __ _ __ _ _ NAIL, Ban k ru p t cy

J u d g e.J effrey D. Bro o k s (" Deb t o r" ) ap p eal s t h e M ay 2 7
, 2 0 20 ord er o f t h e b an k ru p t cy

co u rt 1 g ran t i ng Fi rs t Cen t ral Ban k M cCo o k (" Ban k" ) rel i ef fro m t h e au to m at i c s t ay

. W e h av e ju ri s d i ct i o n o v er t hi s ap p eal p u rs u an t t o 2 8 U.S.C. § 1 5 8 (b ). W e affi rm

.

BACKGROUND

Deb t o r fi l e d a p et i t i o n fo r rel i ef u n der ch ap t er 12 of th e b an k ru p t cy co de.
Th e b an kru p t c y co u rt co n fi rm ed Deb to r's t h i rd am en d ed pl an 2 (" Deb t o r's p l an "),
wh i ch o bl i g at ed Deb t o r to pay Ban k $ 8 7 ,0 7 7 .5 6– co m p ri s i n g a $ 5 0 ,8 6 1 .1 8 p ay m en t

o n a l o an g u aran t eed b y Farm Serv i ce Ag en cy (" t h e FSA-g u aran t eed l o an " ) an d a $ 3 6 ,2 1 6 .3 8 p ay m en t o n a l o an n o t g u aran t eed b y Farm Serv i ce A g en cy

– o n J an u ary 1 5
, 2 0 2 0

. 3 Deb t o r p ai d Ban k $ 5 5 ,0 0 0

. 0 0 b u t fai l ed t o p ay th e rem ai n i ng $ 3 2 ,0 7 7 .5 6
b y t h e J an u ary

1 5 d ead l i n e.

Deb t o r's p l an i n cl u d ed t h e fo l lo wi n g d efau l t p ro v i si o n s :

2 5. In t h e ev en t an y p ay m en t o wed t o Ban k i s n o t m a de wi t h in t en (1 0 ) d ay s o f t h e d at e it i s du e, t h e D eb t o rs [ s i c ]

s h al l b e " i n d efau l t " u n d er t h e t erm s o f t h is Pl an

. . . .

1 Th e Ho n o rab le Th om as L. Sal ad i n o , Ch i ef J u d g e, Un it ed St at es Ban k ru p t cy Co u rt fo r t he Di st ri ct o f Neb ras k a.

2 Th ree earl i er i terat i o n s o f Deb t o r's p l an had n o t b een co n fi rm ed

. W i t h cert ai n

ex cep t i o n s , t h e p ro p o n en t o f a ch ap t er 1 2 p lan m ay m o d i fy h i s o r h er p l an at an y t i m e ei t h er b efo re o r aft er co n fi rm at i o n

. 1 1 U.S.C. § § 1 2 2 3 (m od i fi cat i o n o f p lan b efo re

c o n f i r m at i o n ) an d 1 2 2 9 (m o d i fi cat i o n o f pl an aft er co n fi rm at i o n ). In s o m e ju ri s d i ct i o n s , s u ch m o di fi ed p l an s are referred t o as am en ded p l an s

.

3 Th e FSA-g u aran t eed l o an i s s ecu red b y real es tat e d es cri b ed i n Deb t o r's p l an

as " [Deb t o r's ] FSA real es t a t e

. " (Bk

. Do c. 2 0 6

, p

. 7 ). Th e ot h er lo an i s s ecu red by real es t at e d es cri b ed i n Deb t o r's p l an as " [Deb t or's ] Rea l E s t at e." (Bk

. Do c. 2 0 6,
p . 4 ).

-2

-2 6. In t h e ev en t t h e D eb t o rs [ s i c ] are " i n d efau l t " f o r t he

reas o n s s et fo rt h a b o v e, t hen Ban k s h al l b e en t i t l ed t o an O r d e r f o r Rel i ef fro m th e A ut o m at i c St ay in th i s cas e

. . . wi t h ou t fu r t h e r n o t i ce o r h eari n g u p o n t he fi l i n g of an Affi d av i t wi t h t h e B a n k r u p tcy Co urt s p eci fy i n g t h at a d e f a u l t h as o ccu rred

, t h at th e Deb t o rs [ s i c ] fai l ed t o cu r e t h e d efau l t , t hat Ban k h as co m p li ed wi t h th e t erm s o f t h e Pl an , an d t h at Ban k i s en t i tl ed t o t h e en t ry o f an Ord er fo r Rel i ef wi t h o ut t h e n eces s i t y o f a h eari n g.

(Bk

. Do c. 2 0 6

, p . 1 2 ).

Rel y i n g o n t h i s " d ro p d ead " p ro v i s i on , Ban k s o ug h t rel i ef fro m th e au t o m at i c

s t ay

. 4 Deb t o r o b

ject e d

, a n d t h e m at t er was h eard

. Th e b an k ru p t cy co u rt

m em o ri al i zed i t s o ral ru li n g i n a " t ex t o rd er" t h at gran t ed Ban k t h e req u es t ed rel i ef. (Bk

. Do c. 2 3 9 ). Deb t o r t i m el y ap p eal ed

.

STANDARD OF REVIEW

W e rev i ew th e b an kru p t cy co u rt ' s d eci s i o n t o g ran t rel i ef fro m th e au t o m at i c

s t ay fo r an ab u s e o f di scret i o n. Ci t i Mo rt ga g e, In c. v. Bo r m ( I

n r e Bo r m ), 50 8 B.R.
1 0 4

, 1 0 6 (B.A.P. 8 t h Ci r. 2 0 1 4) (ci t at i o n o m i t ted ). We l i k ewi s e rev i ew t h e b an kru p t cy c o u r t ' s i n t erp ret at i o n o f Deb t o r's co n fi rm ed p l an fo r an ab u s e o f
d i s cret i o n

. JCB, In c. v. Un i o n P l a n ter s Ba n k, NA

, 5 3 9 F.3 d 86 2

, 8 6 9 (8 th Ci r. 2 0 0 8 ) (ci t at i o n o m i tt ed ).

A co urt ab u s e s i t s d is cret i o n wh en a rel ev an t fact o r t hat

s h o u l d h av e b een g i v en s ig n i f i can t wei gh t i s n o t

co n s i d ered ; w h e n a n i rrel ev an t o r im p ro p er fact o r i s

4 Fo r i t s o w n reas o n s , Ban k d eci d ed t o p r o c e e d b y m o t i o n rat h er t h an by affi d av i t o f d efau l t

. Deb t o r d o es n o t ch al l en g e Ban k ' s d eci s i o n t o d o s o

.
-3

-co n s i d ered an d g i v en signif i can t w ei g ht ; o r wh en al l p ro p er fact o rs an d n o i m

p ro p er o n es are co n s i d ered

, b u t th e co u rt

co m m it s a cl ear erro r o f ju dg m en t i n wei g h i n g t h o s e fact o rs

.

Ci t y o f D u l ut h v. Fo n d du La c Ba n d o f La ke S up er i o r Ch i

p p ewa , 7 0 2 F.3 d 11 4 7
, 1 1 5 2 (8 t h Ci r. 2 0 1 3 ).

In co n d u ct in g o u r rev i ew, we li b eral l y co n st ru e t he ban k ru p t cy co u rt 's o ral
fi nd i ng s an d co n cl u s i o n s

. Fo n d er v. U .S

. , 97 4 F.2 d 9 9 6

, 99 9 -1 0 00 (8 t h Ci r

. 1 9 9 2 ) (ci t at i o n o m i tt ed ).

DISCUSSION

Th e fi l i n g o f a p et i t i o n fo r rel ief u n d er th e b an k ru p t cy co de s t ay s a v ari et y o f

act s t o co l l ect o r ot h erwi s e e n fo rce a p re-p et i t i o n deb t

. 1 1 U .S.C. § 3 6 2 (a).

T hi s " au t o m at i c s t ay " m ay b e t erm i n at ed

, an n u l l ed

, m od i fi ed

, o r co n d i t i o n e d f o r

" cau s e." 1 1 U.S.C. § 3 6 2 (d )(1 ). Su ch cau s e i n cl u d es , b u t i s n o t l i m i t ed t o , a l ack o f
ad eq uat e p ro t ect io n o f t h e m o v i n g part y 's in t eres t i n p ro pert y

. Id

. ; 1 1 U.S.C. § 1 0 2 (3 ) (" 'i ncl u d es ' an d 'i n cl u d i n g ' are n o t l i m i t i n g " ).

Ho wev er, wh i l e Deb t o r s u g g es t s o t h erwi s e, t h is ap p eal i s n o t real l y ab o ut § 3 6 2

. It i s ab o ut Deb t o r's o b l i g at i o n s u n d er h i s p l an an d t he co n seq u en c e s o f h i s fai l u re t o m eet t h o s e o b l i g at i on s

.

Th e b an k ru p t cy c o u r t fo u n d t h e d efau l t p ro v i s i o n s set fo rt h ab o v e t o b e d i s p o s i t i ve o f Ban k 's m o t i o n :

[U ]n d e r t h e t erm s o f t h i s p l an , t h e d eb t o r h ad cert ai n

o bl ig at i o n s o n J an u ary 15 t h

, an d t h at w as t o m ak e t wo p ay m en t s t o t al i n g 8 0 s o m e t h o u s an d d ol l ars , i f I

-4

-u nd ers t an d i t ri g h t

. T h e fact is

, d eb t o r di d n o t m ak e t h o s e p ay m en t s

. Th ere i s n o ev i den ce t o t h e co n t rary

. So

, u nd er t h e ex p res s t erm s o f t h e p l an , . . . t he cred i t o r i s en t i tl ed t o rel i ef fro m

t he au t o m at i c s t ay

.

W e ag ree.

Deb t o r arg ues h e was n o t i n d efau l t becau s e u n d er a sep arat e p ro v is i on o f h i s
p l an , if Farm Serv i ce Ag en cy co n s en t ed

, Ban k ag reed t o at tem pt t o ren eg o t i at e t h e FSA-g u aran t eed l o an

. Si n ce t h at h ad n o t h ap pen ed

, D eb t o r b el i ev es t h e $ 5 0 ,8 6 1 .1 8

p ay m en t o n t h at l o an was n o t d u e o n J an u ary 1 5.

Th e p ro v is i o n o n wh ich Deb t o r rel ies p ro v i d es :

a. Th e t erm s o f t h e FSA l oan o n [Deb t o r's ] FSA real

es t at e 5 s h al l rem ai n u n ch an g ed

. In t h e ev en t FSA wi l l al l o w [Deb t o r] an d t h e Ban k t o ren eg o ti at e t h at l o an , t h en t h e part i es ag ree t o at t em

p t t o ren eg o ti at e t h e lo an o n t erm s

s i m i l ar t o t h e ter m s fo r rep ay m en t o f t h e b al an ce o f [Deb t o r's ] d eb t.

(Bk

. Do c. 2 0 6

, p . 7 ).

Th e b an k ru p t c y c o u r t co n s i d ered an d reject ed D eb t o r's arg u m en t : " [Deb t o r]

m ay h av e th o u g h t , w el l

, we're g o i n g to ren eg o t i at e th i s t h i n g

. B u t wh en i t was n 't

ren eg o ti at ed by J an u ary 1 5t h, t h o s e pay m en t s b ecam e d u e. Peri o d ." Th e b an k ru p t cy

co u rt was ri g h t t o d o s o

.

T h e ci t ed p ro v is i o n d o es n o t p l ace t h e o n us o n Ban k t o co m m en ce t h e

n eg ot i at i on s b et w een an d am o ng Deb t o r, Ban k

, an d Farm Serv i ce Ag en cy

. I t d o es

5 Th i s i s t h e FSA-g u aran t eed l o an

. See n .3

, s u p r a

.
-5

-n o t s et ei t h er a d ead l i n e by wh i ch s uch n eg o t i at io n s were t o co m m en ce o r a d ead l i n e b y wh ich s u ch n eg o t i at i o ns were to b e co m p l et ed

. M o s t i m

p o rt an t ly

, i t d o es n ot

co n di t i o n t h e J an u ary 1 5 p ay m en t o n t he s t at u s o f t ho s e n eg ot i at i o n s ; t o t h e co n t rary , i t s t at es u n am

b i g u o u s l y th e t erm s o f t h e FSA-g u a r a n t e ed l o an " s h al l rem ai n

u n ch an g ed ." Al l o f wh i ch is co n s i s t en t wi th t h e p l an 's defau l t p ro vi s i o n s , wh i ch d o

n o t ei t h er ex p res s l y o r i m pl i ed l y ex cu s e a fai l u re t o m ak e t h e J an u ary 1 5 p ay m en t in

t h e ev en t t h e p art i es were un ab l e t o ren eg o t i at e th e t erm s o f t h e FSA-g u aran teed l o an b y t h at d at e.

Deb t o r ad m i t s he ag r e e d t o m ak e cert ai n p ay m en t s o n J an u ary 1 5
, 2 0 2 0.
Deb to r ad m i t s h e m ad e o n l y a p o rt i o n o f t h o se p ay m en ts

. Co n s eq u en t ly

, Deb t o r was i n d efau l t u n d er h i s p l an , an d Ban k w a s e n t i t l ed t o rel i ef fro m t h e au t om at i c s t ay

. Un d er t he ci rcu m s t an ces , t h e b an k ru p t cy co u rt d i d n o t ab u se it s d i s cret i o n i n g ran t i n g
Ban k s uch rel ief. Cf

. Bo r m , 5 0 8 B.R. at 10 6 (b an k ru p t cy co u rt ab u sed i ts d i s cret i o n i n no t g ran ti n g rel ief fro m t h e au t o m at i c s t ay wh ere t h e d eb t o rs fai led t o co m p l y wi th

t h ei r o bl i g at i o n s u n d er t h ei r p l an ).

CONCLUSION

Fo r t h e reas o n s s tat ed

, we affi rm t h e b an k ru p t cy co urt 's M ay 2 7, 2 0 2 0 o rd er
g ran t i n g Ban k rel i ef fro m t he au t o m at i c s t ay

.

-6

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