Case Name: In re Thomas N. BAYER, Debtor. Thomas N. BAYER, Appellant, v. Patricia HILL, Appellee
Court: United States Bankruptcy Appellate Panel for the Eighth Circuit
Jurisdiction: United States
Decision Date: 1997-08-12
Citations: 210 B.R. 794
Docket Number: BAP No. 97-6017
Parties: In re Thomas N. BAYER, Debtor. Thomas N. BAYER, Appellant, v. Patricia HILL, Appellee.
Judges: Before ROGER, SCHERMER and SCOTT, Bankruptcy Appellate Panel Judges.
Reporter: West's Bankruptcy Reporter
Volume: 210
Pages: 794–799

Head Matter:
In re Thomas N. BAYER, Debtor. Thomas N. BAYER, Appellant, v. Patricia HILL, Appellee.
BAP No. 97-6017.
United States Bankruptcy Appellate Panel of the Eighth Circuit.
Submitted July 1, 1997.
Decided Aug. 12, 1997.
Barbara J. May, Arden Hills, MN, for appellant.
Gordon Solo, Minneapolis, MN, for appellee.
Before ROGER, SCHERMER and SCOTT, Bankruptcy Appellate Panel Judges.

Opinion:
SCHERMER, Bankruptcy Judge.
Thomas N. Bayer (the "Debtor") appeals from a bankruptcy court order dismissing his chapter 13 case for lack of good faith. For the following reasons, we remand to the bankruptcy court for further findings on the issue of whether the Debtor proposed his plan in good faith.
I
Debtor filed a chapter 13 petition listing $226,400 in assets and $27,600 in liabilities of which $22,500 are attorney's fees. Of his assets, Debtor claimed $134,000 in the Winona State University Pension and Teacher's Fund Pension as exempt property. Debtor-listed no secured or priority claims.
Debtor proposed a plan in which he would pay $159.50 monthly for sixty (60) months. The monthly payment is the disposable income of the Debtor and his wife after subtracting monthly expenses ($2,542.50) from monthly income ($2,702.00).
Patricia Hill filed a $100,000 proof of claim in Debtor's bankruptcy. Hill's claim originates from a suit she filed against Debtor in state court claiming assault, sexual battery and intentional and negligent infliction of emotional distress. In that suit, Hill alleges that Debtor made inappropriate and sexually suggestive remarks to her while she was a student at Winona State University. The Debtor has not responded to the suit nor has the state court entered any findings. Ms. Hill further alleges that Debtor had non-consensual sex with her. The state court lawsuit was pending when Debtor filed his chapter 13 petition.
Ms. Hill objected to confirmation of Debt- or's proposed plan on the grounds that it was not proposed in good faith. The bankruptcy court held a hearing on confirmation and ruled that when a creditor alleges conduct like that alleged by Ms. Hill and the debtor proposes to pay a small percentage of debt arising from that conduct, the plan is proposed in bad faith. The bankruptcy court stated:
. [Rjecognizing what the Eighth Circuit did in LeMaire and Noreen was annunciating public policy, binding precedent here, I think once you end up having conduct . being so abusive, whether ultimately it is physically abusive or abusive of a special confidential relationship as was the case in the Sitarz decision, and if the debtor is not proposing through a plan to make the claimant substantially whole financially then bankruptcy affords no remedy. The debtor has to be in bad faith, the plan can't be confirmed and the case should be dismissed .
Debtor appeals the dismissal of his chapter 13 case. On appeal, the Debtor argues that the bankruptcy court erred in concluding that the plan was not proposed in good faith as a matter of law.
II
A bankruptcy appellate panel shall not set aside findings of fact unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witness. Fed. R.Bankr.P. 8013. We review the legal conclusions of the bankruptcy court de novo. First Nat'l Bank of Olathe, Kansas v. Pontow, 111 F.3d 604, 609 (8th Cir.1997); Estate of Sholdan v. Dietz (In re Sholdan), 108 F.3d 886, 888 (8th Cir.1997). "A finding is 'clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985)(quoting U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). The determination of good faith in proposing a chapter 13 plan is a factual finding reviewed under the clearly erroneous standard. Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1350 (8th Cir.1990).
III
As a requirement of confirmation, a bankruptcy court must find that a chapter 13 plan "has been proposed in good faith and 'not by any means forbidden by law." 11 U.S.C. § 1325(a)(3). This good faith inquiry turns on "whether the debtor has stated his debts and expenses accurately; whether he has made any fraudulent misrepresentations to the bankruptcy court; or whether he has unfairly manipulated the Bankruptcy Code." Education Assistance Corp. v. Zellner, 827 F.2d 1222, 1227 (8th Cir.1987) see also Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1350 (8th Cir.1990).
In the instant case, there is no evidence in the record that Debtor misstated his expenses or debts nor is there any evidence (or .even accusations) of misrepresentations to the bankruptcy court. Further, there was no objection by Ms. Hill that the Debtor's plan would not pay unsecured creditors more than they would receive in a chapter 7 case. See § 1325(a)(4)(the "best intei'est of creditors test"). Instead, the bankruptcy court determined that Debtor sought to unfairly manipulate the Bankruptcy Court by using chapter 13 to mitigate the financial impact of Ms. Hill's claim.
We cannot agree with the dissent's position that thwarting state court litigation is manifestly bad faith constituting unfair manipulation of the Bankruptcy Code. It is common for Debtors to seek refuge in bankruptcy court from a variety of state court proceedings including foreclosure actions, garnishments and tort actions. Nor can we agree that there are no special circumstances that warrant the Debtor's chapter 13 filing. Indeed, the Debtor has spent in excess of $22,000 defending himself against Ms. Hill's claims while his monthly income is $2,702.
Although we agree that the bankruptcy court properly considered Debtor's pre-petition conduct in the good faith analysis, the evidence in the record does not support a finding that the plan was not proposed in good faith. The bankruptcy court considered only the unanswered allegations of Ms. Hill's state court lawsuit. There has never been any hearing or presentation of evidence with respect to her charges. We conclude that, absent an adjudication of culpability by the state court of competent jurisdiction, the bankruptcy court must hold an evidentiary hearing to determine if Ms. Hill's allegations against the Debtor have a basis in fact.
IV
Accordingly, this ease is remanded to the bankruptcy court for further findings on the issue of whether Debtor proposed his plan in good faith.
. After filing his notice of appeal, the bankruptcy court granted Debtor's motion for stay pending appeal. That stay is conditioned upon Debtor making his $159.50 monthly payments. The stay further provides that Ms. Hill may pursue her claim in state court but prevents her from enforcing any judgement.