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FILED

NOV 18 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-16-1049-McTaF

)

JACK C. PRYOR, ) Bk. No. 6:15-bk-19998-MH

)

Debtor. )

______________________________)

)

JACK C. PRYOR, )

)

Appellant, )

)

v. ) MEMORANDUM1

)

UNITED STATES TRUSTEE, )

)

Appellee. )

______________________________)

Argued and Submitted on October 21, 2016

at Pasadena, California

Filed - November 18, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Mark Houle, Bankruptcy Judge, Presiding.

_____________________________

Appearances: Stephen R. Wade argued for Appellant Jack C.

Pryor; Russell Clementson argued for Appellee

U.S. Trustee.

 

Before: MCKITTRICK,2 TAYLOR and FARIS, Bankruptcy Judges.

FILED

NOV 18 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have, see Fed. R. App. P. 32.1, it has no precedential value,

see 9th Cir. BAP Rule 8024-1.

2 The Honorable Peter C. McKittrick, United States

Bankruptcy Judge for the District of Oregon, sitting by

designation.
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Debtor Jack Pryor (“debtor”) appeals the bankruptcy court’s

order converting his individual chapter 113 case to a case under

chapter 7. He argues that he did not have adequate notice and

an opportunity to be heard before the court converted his case. 

We AFFIRM.

FACTS

Debtor filed an individual chapter 11 case in October 2015. 

He had two earlier cases filed and dismissed in the previous

year.

Debtor’s schedules show that he owned 1,000 shares of stock

in Diversified Products Industries (“DPI”) and 1,000 shares of

stock in Access Solar, Inc., which is 100 percent ownership of

both businesses. The Statement of Financial Affairs described

the businesses and indicated “Present” for the ending date for

each business. Debtor valued his interest in DPI at $1,100,000,

based on accounts receivable. Debtor’s Schedule I listed DPI as

the employer for both debtor and his non-filing spouse and

stated that his spouse received a monthly salary of $2,975 from

DPI. Debtor also disclosed that he owned various parcels of

real property, including some parcels of bare land.

The Bankruptcy Auditor for the United States Trustee

(“UST”), Herman Au, conducted an initial debtor interview on

October 27, 2015, at which both debtor and his counsel appeared. 

At the interview, Au gave debtor the UST’s Notice of

3 Unless otherwise indicated, all chapter, section, and

rule references are to the Bankruptcy Code, 11 U.S.C.

§§ 101-1532, and to the Federal Rules of Bankruptcy Procedure,

Rules 1001-9037.

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Requirements and Guidelines for Chapter 11 Debtors in

Possession. The guidelines detailed the information that was

required to be filed with the UST within seven days of the

petition date, including proof of insurance (“the 7-Day

Package”). Au discussed DPI and Access Solar with debtor. 

Debtor did not indicate that either business had ceased

operating. Au informed debtor that he was required to provide

proof of liability insurance for DPI and Access Solar. Debtor

did not challenge that requirement.

Debtor failed to submit to the UST any of the 7-Day Package

documents. As a result, on November 4, 2015, the UST filed a

Motion to Dismiss or Convert debtor’s case, which listed the

following missing documents:

a. Real property questionnaire;

b. Copy of the recorded petition;

c. Proof of closing of pre-petition bank accounts;

d. Proof of opening of Debtor-in-Possession accounts;

e. Proof of insurance;

f. Proof of required certificates and licenses (if any);

g. Statement of Major Issues and Timetable Report; and

h. A copy of the most recently filed tax returns.

Motion to Dismiss or Convert at 4:19-23. The UST’s memorandum

in support of the motion described “cause” for dismissal or

conversion under § 1112(b)(4)(C), (F), and (H): failure to

maintain insurance; failure to provide information requested by

the UST; and failure to satisfy timely reporting requirements. 

The UST’s argument in the memorandum focused on the need for

proof of insurance on debtor’s real property, arguing that

without insurance there could be significant liability if a

person were injured on debtor’s premises. The motion was

supported by Au’s declaration.

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The court held the initial hearing on the motion on

December 8, 2015. Debtor appeared pro se; his counsel had

withdrawn due to medical issues. By the time of that hearing,

debtor had provided proof of insurance for his real properties

and his automobiles. The court granted the UST’s request for a

continuance to allow debtor time to retain new counsel. It

directed debtor to file a status report regarding engagement of

counsel by January 27 and directed the UST to supplement its

motion if there were any remaining or new deficiencies. All

parties waived notice of the continued hearing.

Later in December, debtor retained new counsel, who

appeared with debtor at the February 2 continued hearing on the

motion to dismiss or convert. Debtor did not file a status

report and the UST did not supplement his motion before the

February 2 hearing.

At the February 2 hearing, the UST reported that there were

still several outstanding items of compliance as of the hearing

date, including that debtor had failed to provide proof that he

had liability insurance coverage for some of the real properties

and that he had recorded the petition for some of his real

properties, and that debtor had failed to submit real property

questionnaires for some of the properties, a final bank

statement for debtor’s prepetition bank account, and the major

issues and timetable report. The UST also reported that debtor

had not paid the quarterly UST fees. The parties agreed to a

continuance of the hearing for a short time to allow debtor’s

counsel to address the UST’s position that there were still

compliance items missing.

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The court set the hearing over for one week. It stated

that, but for the UST’s agreement to the continuance, the court

would have dismissed or converted the case that day. It said

that it intended to dismiss or convert because, despite the fact

that debtor had retained counsel more than a month before, the

case was four months old and the UST was still missing

significant requested items. The court then directed counsel

for the UST to review the UST files and to file a statement of

any items still missing by February 8. It set the continued

hearing for February 9. The court indicated that this would be

debtor’s “last shot.” All parties waived notice of the

February 9 hearing.

Late in the day of the February 2 hearing, counsel for the

UST sent email correspondence to debtor’s counsel listing

10 compliance items debtor still had not provided:

1) Real Property Questionnaire for 2 lots in Twenty Nine

Palms, California;

2) Real Property Questionnaire for 35 acres in Rice,

California;

3) Property/Liability Insurance for commercial property

located at 19024 Ruppert Street, N. Palm Springs, CA;

4) Liability insurance for single family home located at

49965 Fuller Ave., Cabazon, CA;

5) Liability insurance for debtor’s two business

entities: Diversified Product Industries LTD and

Access Solar Inc.;

6) Copy of final bank statement for pre-petition bank

account (Wells Fargo #0182);

7) Proof of recorded petition in county (Los Angeles, San

Bernardino, & Riverside);

8) Major Issues & Timetable Report;

9) File and serve monthly operating reports for October,

November and December 2015; and 

10) Proof of payment of quarterly fees of $325 for the 4th

quarter of 2015.

UST Supplemental Statement in Support of Motion to Dismiss or

Convert, Exh. 1 to Declaration of Everett Green. Debtor’s

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counsel responded with an email sent at 3:50 p.m. on February 8

that provided many of the items requested. With regard to proof

of liability insurance for the businesses, counsel indicated

that he was “waiting on client to provide us with proof of

documents.” Id. at Exh. 2. He also said that he was “waiting

on client to provide proof of payment” of the UST quarterly

fees. Id.

The hearing was held the next day at 2:00 p.m. At

11:53 a.m. that day, debtor’s counsel filed a declaration in

opposition to the UST’s motion to dismiss or convert. In his

declaration, counsel stated that neither of debtor’s businesses

maintains insurance because neither had conducted business since

before the petition date.

Debtor’s counsel appeared at the continued hearing on the

motion to dismiss; debtor did not attend.4 The UST reported

that there were two outstanding items of non-compliance: proof

of insurance for debtor’s two businesses, DPI and Access Solar,

and payment of the quarterly UST fees for the fourth quarter of

2015, which was due by the end of January 2016 and was

delinquent on February 1. The UST acknowledged that debtor’s

counsel had tendered an untimely payment of the UST fees earlier

in the day of the hearing. He also pointed out that, although

many of the compliance items had been provided, they had not

been provided by the deadline set by the court.

In response to counsel’s assertion that debtor’s businesses

4 Counsel represented to the court that debtor had left

because he was distraught at the prospect of losing 40 years of

work.

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were not operating, the UST called its analyst, Mr. Au, to

testify. Au testified that, at the initial debtor interview, he

discussed the two businesses with debtor. With regard to DPI,

debtor had told him that the business sold steel construction

products, that it had been unprofitable, and that they were

trying to collect some accounts from a vendor. Debtor had not

indicated that the business had ceased operations. As to Access

Solar, debtor had told Au that the company installed and sold

solar panels and had an office operating out of one of debtor’s

commercial properties. Au testified that neither debtor nor his

counsel at the initial debtor interview had objected when Au

indicated that the UST needed proof of liability insurance for

the two businesses.

Debtor’s counsel then testified as a witness that he had

checked the status of Access Solar and that its license with the

California Contractors License Board had expired before the

chapter 11 petition was filed. He also stated that he had

visited the Access Solar offices and saw no employees or

product. He had reviewed the company records, which showed no

business activity since sometime before bankruptcy.

Counsel also testified that he had inspected the DPI

facility and saw no inventory of steel products or employees. 

To his knowledge, DPI’s only postpetition activity was its

prosecution of an appeal in a case in which it was seeking a

million-dollar recovery.

Counsel did not request a continuance to allow debtor to

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testify about whether the businesses were active.5 He argued

that insurance should not be required because the businesses

were not active.

At the close of the hearing, the court concluded that the

case would be dismissed or converted. First, it found that

debtor failed “to maintain appropriate insurance that poses a

risk to the estate or to the public.” Transcript of February 9,

2016 hearing at 97:7-8. It noted that debtor’s schedules and

Statement of Financial Affairs indicated that the businesses

were continuing to operate, that Schedule B showed an account

receivable for DPI in the amount of $1.1 million, and that

debtor had said at the initial debtor interview that the

businesses continued to operate.

Second, it found a failure timely to provide information

reasonably requested by the UST, including failure to provide

information about insurance until approximately four months into

the case. 

Third, the court found that debtor had failed timely to pay

the quarterly UST fees, which were due nine days earlier.

The court then considered whether to dismiss or convert to

chapter 7 and concluded that conversion to chapter 7 was the

better alternative.

ISSUE

Whether the bankruptcy court abused its discretion in

converting the case from chapter 11 to chapter 7.

5 He did ask to leave the record open to provide evidence

to challenge Au’s credibility.

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JURISDICTION

The bankruptcy court had jurisdiction over this matter

pursuant to 28 U.S.C. § 157(b)(2) and § 1334(a). This panel has

jurisdiction under 28 U.S.C. § 158(c).

STANDARD OF REVIEW

The panel reviews a court’s decision to convert a

chapter 11 case to chapter 7 for an abuse of discretion. 

Pioneer Liquidating Corp. v. U.S. Tr. (In re Consol. Pioneer

Mortg. Entities), 264 F.3d 803, 806 (9th Cir. 2001). The court

abuses its discretion if it applies the wrong legal standard or

if its application of the correct legal standard is “illogical,

implausible, or without support in inferences that may be drawn

from the facts on the record.” United States v. Hinkson,

585 F.3d 1247, 1263 (9th Cir. 2009) (en banc).

Whether the court’s procedure complies with due process is

a legal question reviewed de novo. Beneficial Cal., Inc. v.

Villar (In re Villar), 317 B.R. 88, 92 (9th Cir. BAP 2004). 

Debtor must show that he was prejudiced by any violation of due

process. See Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764,

776 (9th Cir. 2008); Rule 9005 (incorporating Fed. R. Civ. P.

61) (“court must disregard all errors and defects that do not

affect any party’s substantial rights”).

DISCUSSION

1. The court did not abuse its discretion in finding cause

based on lack of insurance for the business entities

Debtor argues that the bankruptcy court abused its

discretion in converting his case to chapter 7, because he did

not have adequate notice of the basis for the motion or an

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adequate opportunity to be heard on the motion, in violation of

both the Bankruptcy Code requirement of notice and a hearing and

his due process rights under the Fifth Amendment to the United

States Constitution. He does not argue that the court erred in

finding, based on the evidence, that debtor had failed to

provide proof of insurance for DPI and Access Solar, that lack

of proof of insurance provides cause under § 1112(b), or that,

having found cause, the court abused its discretion in

converting rather than dismissing the case.6

Section 1112(b)(1) provides that, with exceptions not

applicable here, “on request of a party in interest, and after

notice and a hearing, the court shall convert” a chapter 11 case

to one under chapter 7, or dismiss, “whichever is in the best

interests of creditors and the estate, for cause[.]” “Cause”

includes:

(C) failure to maintain insurance that poses a risk to the

estate or to the public;

. . . 

(H) failure timely to provide information or attend

6 After oral argument in this appeal, the UST submitted

supplemental authority pursuant to Rule 8014(f). He cites a

November 4, 2016, decision from the District of Massachusetts

that addressed whether there is cause for dismissal of a

chapter 11 case when the debtor fails to maintain insurance on

assets of a company wholly owned by the debtor. See Dickey v.

Harrington (In re Dickey), Case No. 16-10649-TSH, 2016 WL

6584905 (D. Mass. Nov. 4, 2016). We have reviewed the decision

in Dickey. Because the issue discussed in that case relates to

the merits of the court’s finding in this case that liability

insurance on debtor’s business entities was appropriate, and

debtor does not challenge the merits of the court’s decision on

that point in this appeal, the Dickey decision does not affect

our conclusion in this case.

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meetings reasonably requested by the United States trustee

. . . ;

. . . 

(K) failure to pay any fees or charges required under

chapter 123 of title 28; . . . .

§ 1112(b)(4). “[T]he bankruptcy court has wide discretion in

determining what constitutes cause adequate for conversion under

§ 1112(b).” Khan v. Rund (In re Khan), BAP No. CC-11-1542-HPaD,

2012 WL 2043074, at *5 (9th Cir. BAP 2012).

The UST, as the moving party, has the burden to demonstrate

that cause exists to dismiss or convert; if the UST establishes

cause, the court must convert or dismiss, unless an exception

applies. 7 Collier on Bankruptcy ¶ 1112.04[4] (Alan N. Resnick

& Henry J. Sommer, eds., 16th ed. 2011) (“Collier”).7

Procedurally, § 1112(b) requires notice and a hearing. See

§ 1112(b). Substantively, § 1112(b) establishes “a

two-step analysis for dealing with questions of conversion

and dismissal.” Nelson v. Meyer (In re Nelson), 343 B.R.

671, 675 (9th Cir. BAP 2006). The first step is a

determination whether cause exists for conversion or

dismissal. The second step requires the court to apply a

“balancing test” to choose between conversion and dismissal

based upon the “best interests of the creditors and the

estate.” Id.

Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R.

721, 729 (9th Cir. BAP 2008) (footnote omitted). 

Section 1112(b) requires “notice and a hearing.” 

§ 1112(b)(1). “After notice and a hearing” is construed to mean

7 Debtor argues that “the harshness of dismissal mandates

that it result only upon a strong evidentiary showing[,]” and

that the panel should closely scrutinize a dismissal. 

Appellant’s Brief at 12-13. Any special scrutiny for dismissals

without prejudice is not applicable here, where the court did

not dismiss but instead converted the case to chapter 7.

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“after such notice as is appropriate in the particular

circumstances, and such opportunity for a hearing as is

appropriate in the particular circumstances[.]” § 102(1)(A).

“[N]otice is not only a statutory requirement, but a

constitutional requirement as well.” Great Pac. Money Markets,

Inc. v. Krueger (In re Krueger), 88 B.R. 238, 241 (9th Cir. BAP

1988).

An elementary and fundamental requirement of due process in

any proceeding which is to be accorded finality is notice

reasonably calculated, under all the circumstances, to

apprise interested parties of the pendency of the action

and afford them an opportunity to present their objections.

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314

(1950). The purpose of notice under the Fifth Amendment “is to

apprise the affected party of, and permit adequate preparation

for, an impending hearing.” GMAC Mortg. Corp. v. Salisbury

(In re Loloee), 241 B.R. 655, 661 (9th Cir. BAP 1999).

The statutory and constitutional notice and hearing

requirements are similar and, for purposes of this case, will

not be discussed separately.

Debtor’s arguments distill to two major points: (1) he did

not have adequate notice that lack of proof of insurance on his

business entities was a basis for the UST’s motion to dismiss or

convert and (2) the February 9 hearing procedure was flawed. As

a result, he argues, the only basis for the court’s decision to

convert the case was his failure to pay the UST fees on time,

which is not sufficient alone to justify converting the case.

A. Notice was sufficient

The record supports the bankruptcy court’s conclusion that

debtor had sufficient notice that he needed to provide proof of

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insurance on his two businesses or face possible dismissal or

conversion. First, the UST’s auditor conducted an initial

client interview in late October 2015, at which time he

discussed the two businesses with debtor and advised him that he

needed to provide proof of liability insurance on those

businesses. Neither debtor nor his then-counsel objected to

that requirement or told the auditor that the businesses were

not operating. The auditor gave debtor and his counsel a copy

of the UST Guidelines, which also notified debtor of the

requirement to provide proof of insurance coverage within seven

days of the petition date.

Second, the UST’s motion to dismiss or convert, filed on

November 4, 2015, alleged that debtor had not provided specific

items that were required to be provided within seven days,

including proof of insurance. The motion was accompanied by

Au’s declaration in which he says that, at the initial debtor

interview, he asked debtor whether he had liability insurance

and that debtor said he was unsure.

Motions “must state with particularity the grounds

therefor, and the relief or order sought.” 10 Collier at 

¶ 9013.03 (2013) (footnote omitted); Rule 9013. This

requirement is flexible, and lack of specificity is allowed

“where the opposing party knew or had notice of the particular

grounds being relied upon.” 10 Collier at ¶ 9013.03 (2013)

(footnote omitted). “Proof of insurance” was specific enough to

provide notice that debtor needed to provide proof of the

insurance discussed at the initial debtor interview, including

insurance on his business entities. Certainly by the time of

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the final hearing on February 9, as discussed below, debtor knew

that the UST sought dismissal or conversion based in part on

lack of proof of insurance on those entities. 

Third, after the court held an initial and then a continued

hearing, on February 2, 2016, the UST sent to debtor’s

replacement counsel via email a list of items still out of

compliance, including both proof of liability insurance for

debtor’s two business entities and proof of payment of the UST’s

quarterly fees.

This email was sent after business hours on February 2; the

continued hearing was February 9, and debtor knew that the court

had required the UST to file a declaration detailing any

continuing compliance issues by the close of business on

February 8. Further, the court had told debtor at the

February 2 hearing that this continuance was his last shot at

compliance. The UST filed the February 8 declaration, which

advised the court that debtor had failed to provide proof of

insurance on the entities and had failed to pay the UST

quarterly fees.

Under the circumstances, any lack of specificity in the

motion did not deprive debtor of notice that he was required to

provide proof either that his two business entities were insured

or that insurance was not required. That specificity was

provided at the earliest in late October 2015 and the latest by

February 2, 2016, which was a week before the final hearing on

the motion. Under the circumstances, where the case was four

months old and debtor had failed timely to provide many items

required by the UST until shortly before the February 9 hearing,

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a week’s notice was sufficient to allow debtor to prepare and

respond to the UST’s request.

Debtor points out that the bankruptcy court sustained an

objection to a question put to Au, asking his “understanding of

the nature of the insurance that’s required” of a debtor in

possession. Transcript of February 9, 2016 hearing at 47:13-14. 

If the question was too vague for testimony, debtor argues, how

could it be sufficient to give debtor notice of what insurance

was being required?

The question asked for the “nature” of the insurance that

was required; debtor had been told at the initial debtor

interview that he needed to provide proof of liability insurance

on the business entities, and failure to provide proof of

insurance was listed in the motion to dismiss or convert. 

Debtor was again advised in the February 2 email of the need to

prove insurance on the business entities. Even if the question

to Au was vague, the notice to debtor was not.

Debtor argues that the notice was not sufficient because he

was misled by the UST, who changed his position regarding what

was required. At the December 8 hearing, counsel for the UST

advised the court that debtor had provided proof of liability

coverage for his real properties and automobiles, which counsel

said was “the bulk of our concerns in terms of our motion.” 

Transcript of December 8, 2015 hearing at 6:22-23. At the

February 2 continued hearing, after first reporting that debtor

had not provided proof of insurance, counsel said that they had

“seen a few of the compliance items, most critically, proof of

insurance coverage for the Rupert property.” Transcript of

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February 2, 2016 hearing at 18:4-7. Then, after the close of

business that same day, the UST sent the email to debtor’s

counsel showing the need for proof of insurance on debtor’s two

business entities.

There is no doubt that the motion and the UST’s comments to

the court could have been more specific as to what insurance

coverage debtor needed to show. However, there is no dispute

that by the end of the day on February 2, a week before the

continued hearing, debtor was reminded of the need to prove that

his business entities had liability insurance, a requirement of

which he had been advised at the initial debtor interview in

October. Debtor did not argue to the bankruptcy court that

additional time would solve the problem; in fact, counsel told

the court that more time would not matter. 

Debtor had sufficient notice of what was required under the

circumstances to apprise him of the basis for the UST’s motion

to dismiss or convert and to allow him an adequate opportunity

to respond.

B. Debtor had an adequate opportunity to be heard

Although he did not raise the issue in his brief, at oral

argument debtor argued that he was denied an adequate

opportunity to be heard with regard to the insurance on the

business entities. He mentioned two bankruptcy court actions at

the February 9 hearing that he claims denied him due process:

(1) the court’s denial of a continuance to allow debtor to

appear and testify; and (2) the court’s denial of debtor’s

attempts to question Au regarding the nature of insurance that

was appropriate for the two business entities.

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We have carefully reviewed the transcript of the February 9

hearing and do not find that debtor’s counsel made a request to

continue the hearing so debtor could testify as to the level of

business activity of the two business entities. Early in the

hearing, after the court said that it would take testimony from

Au as to whether or not debtor had represented to Au at the

initial debtor interview that the businesses were still

operating, counsel said that “Mr. Pryor should have an

opportunity to attend” the hearing. Transcript of February 9,

2016 hearing at 25:8-9. Our review of the transcript does not

show any time when debtor’s counsel told the court that the

hearing should be continued so debtor could testify. Without

such a request, the court did not deny debtor due process by

concluding the hearing. In fact, debtor’s counsel told the

court that he was fine with the court’s decision to allow Au to

testify and with the court’s comment that it would have taken

testimony from debtor if debtor had been there.

Debtor had appeared at the first and second hearings on the

motion to dismiss. He did not attend the final hearing, even

though the court had made it clear at the February 2 hearing

that, but for the agreement of the UST to a short continuance,

the court would have dismissed or converted at the February 2

hearing.

Debtor’s counsel was surprised by the court’s decision to

take live testimony at the February 9 hearing. In fact, the

court’s local rules provide that the court may allow live

testimony at a hearing on a motion, but that, “[w]hen the court

intends to take such testimony, it will give the parties 2 days

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notice of its intention, if possible, or may grant such a

continuance as it may deem appropriate.” LBR 9013-1(i)(1). The

record does not show that notice was given.

However, when the hearing was continued to February 9, the

parties waived notice of the hearing. Further, advance notice

of the evidentiary hearing was not possible in this case. The

court explained that it was taking testimony as a result of

debtor’s assertion for the first time the morning of the hearing

that his businesses were not operating and therefore did not

need to be insured. Thus, the court allowed Au to testify as to

debtor’s representations at the initial debtor interview

regarding the activity of the businesses and would have allowed

debtor to testify about the businesses had he been there. 

Because debtor did not raise the factual issue of whether the

businesses were operational until the morning of the hearing,

the bankruptcy court did not err in taking evidence on the issue

without two days’ notice.

Debtor also argues that the court erroneously cut off his

questioning of Au, thereby denying him due process. Au

testified that he had advised debtor at the initial debtor

interview of the need for liability insurance on the businesses,

but he was not certain whether he had sent a follow-up email to

debtor listing that requirement. Although debtor’s argument is

not clear, it appears that debtor wanted to question Au about

the necessity of liability insurance for these two business

entities as opposed to casualty or other types of insurance.

There is no prejudice shown from the court’s failure to

allow the additional testimony. Debtor must show prejudice from

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any procedural deficiencies. See Rosson, 545 F.3d at 776-77;

Rule 9005. The court found that liability insurance was

appropriate; debtor did not have liability insurance or any

other insurance on the businesses. The court did not deprive

debtor of due process in failing to allow additional questioning

on this issue.

2. The panel may affirm on any basis supported by the record 

Even if there were error in the court’s finding that debtor

failed to maintain appropriate insurance on his businesses,

which constituted cause for dismissal or conversion under

§ 1112(b)(4)(C), the panel can affirm on any basis supported by

the record. See Brown v. State Bar of Ariz. (In re Bankruptcy

Petition Preparers), 307 B.R. 134, 140 (9th Cir. BAP 2004) (a

reviewing court may affirm on any basis supported by the

record); Khan, 2012 WL 2043074, at *7.

The UST presented ample evidence to support a finding of

cause for dismissal or conversion. First, there is no dispute

that debtor failed timely to make his UST quarterly fees

payment; in fact, he did not tender payment until the day of the

hearing. Debtor had been advised on January 6, 2016, that the

fees were due; he was advised at the February 2, 2016, hearing

that the fees were not paid; he was advised again in an email on

February 2, 2016, that the fees needed to be paid. By late in

the day on February 8, 2016, debtor’s counsel advised the UST

that he was still “waiting on client to provide proof of

payment.” UST’s Supplemental Statement in Support of Motion to

Dismiss or Convert, Exh. 2 to Declaration of Everett L. Green.

Even if, as debtor argues, the court had granted an

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extension of time for payment, debtor still did not get the

payment to the UST by that deadline, instead waiting to deliver

the check to the UST at the February 9 hearing. 

That failure timely to pay the UST fees alone is cause for

dismissal or conversion under § 1112(b)(4)(K) and supports the

decision to convert. The court could have raised failure to pay

the quarterly fees sua sponte. Leeward Subdivision Partners,

LLC v. GDR Lending, LLC (In re Leeward Subdivision Partners,

LLC), BAP No. WW-10-1060-HRuJu, 2010 WL 6259983 (9th Cir. BAP

2010); § 105(a) (court may, sua sponte, take any action

“necessary or appropriate to enforce or implement court orders

or rules”). The court did not err in finding cause for

conversion based on the failure timely to pay the UST quarterly

fees.

In addition, the court was concerned that debtor had two

failed bankruptcy cases in the year before he filed this

chapter 11 case. It was concerned that, despite the UST’s

motion to dismiss filed on November 4, 2015, debtor still had

not provided a number of items requested by the UST by the time

of the second hearing on the motion on February 2, 2016. This

included his monthly operating reports for October 2015,

November 2015, and December 2015, each of which was due by the

15th of the month following the month that was the subject of

the report. LBR 2015-2(b). Debtor did not provide a number of

the items, including the operating reports, until the eve of the

February 9 hearing, long after they were due.

That failure timely to provide information reasonably

requested by the UST, coupled with debtor’s history of failed

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cases, provided cause for dismissal or conversion under

§ 1112(b)(4)(H); failure to timely file the operating reports

provided cause for dismissal or conversion under

§ 1112(b)(4)(F). The fact that debtor finally, four months into

the case and on the eve of the final hearing, provided much of

the information does not mean that the information was timely

provided.

There were multiple grounds supporting the bankruptcy

court’s decision to convert this case for cause.

CONCLUSION

The bankruptcy court did not abuse its discretion in

converting debtor’s chapter 11 case to a case under chapter 7. 

Debtor was given adequate notice of the basis for and an

opportunity to be heard on the UST’s motion.

Therefore, we AFFIRM.

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