Court Opinion

ID: 2799688
Source: CourtListenerOpinion
Date Created: 2015-05-08 23:01:32.898704+00
Date Added: 2024-06-11T11:29:33.152252
License: Public Domain

FILED
                                                             MAY 08 2015
 1                         NOT FOR PUBLICATION
                                                         SUSAN M. SPRAUL, CLERK
 2                                                         U.S. BKCY. APP. PANEL
                                                           OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )        BAP No.   NV-14-1359-JuKuD
                                   )
 6   DEBRA SUE PHILLIPS,           )        Bk. No.   NV-11-29783-LED
                                   )
 7                   Debtor.       )
     ______________________________)
 8                                 )
     DEBRA PHILLIPS,               )
 9                                 )
                     Appellant,    )
10                                 )
                                                                    1
     v.                            )        M E M O R A N D U M
11                                 )
     KATHLEEN A. LEAVITT,          )
12   Chapter 13 Trustee,           )
                                   )
13                   Appellee.     )
     ______________________________)
14
                     Argued and Submitted on March 19, 2015
15                            at Las Vegas, Nevada
16                            Filed - May 8, 2015
17               Appeal from the United States Bankruptcy Court
                           for the District of Nevada
18
             Honorable Laurel E. Davis, Bankruptcy Judge, Presiding
19                          ________________________
20   Appearances:     Max Couvillier, III for appellant Debra Phillips;
                      Lauren Anne Peña for appellee Kathleen A.
21                    Leavitt, Chapter 13 Trustee.
                           ________________________
22
     Before: JURY, DUNN, and KURTZ, Bankruptcy Judges.
23
24
25
26       1
          This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
   have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8024-1.

                                      -1-
 1           Debtor Debra Phillips appeals from the bankruptcy court’s
 2   order granting the chapter 13 trustee’s motion to dismiss under
 3   § 1307(c).2    At the time the order was entered, Debtor’s
 4   chapter 13 case was pending without a confirmed plan for more
 5   than two years.     Because the bankruptcy court did not abuse its
 6   discretion in finding cause for dismissal, we AFFIRM.
 7                                 I.   FACTS
 8           Debtor filed both her chapter 13 petition and first plan on
 9   December 30, 2011.     In her schedules, Debtor listed
10   302 Butterworth Ct., Henderson, Nevada (302 Butterworth) as her
11   principal residence and 303 Butterworth Ct., Henderson, Nevada
12   (303 Butterworth) as a rental property.     During the pendency of
13   the case, the bankruptcy court authorized a sale of
14   302 Butterworth.
15           As to 303 Butterworth, on July 16, 2012, Debtor objected to
16   the claim (the Claim) filed by the first trust deed holder, Bank
17   of New York Mellon (Creditor), as untimely.     On October 16,
18   2012, the Court entered an order sustaining Debtor’s objection;
19   the Claim was allowed to the extent that it was secured by the
20   fair market value of 303 Butterworth and disallowed as to any
21   arrears and unsecured debt.     On July 19, 2013, Debtor filed a
22   motion to determine and amend the Claim, requesting that the
23   Claim be deemed amended to state the mortgage balance owed as
24   $180,000, the fair market value of 303 Butterworth.      The Court
25
26       2
          Unless otherwise indicated, all chapter and section
27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
   “Rule” references are to the Federal Rules of Bankruptcy
28 Procedure.

                                        -2-
 1   granted the motion by order entered on August 28, 2013. Based on
 2   this valuation of the secured claim, under § 1325(a)(5)(B)(ii),
 3   Debtor was allowed to propose a plan that provided for full
 4   payment of the Claim in the amount of $180,000 with appropriate
 5   interest over the course of the plan.     Although Debtor filed
 6   seven proposed plans, she never proposed to pay the $180,000
 7   claim over the life of the plan as required by statute.
 8           On October 23, 2013, Debtor amended her schedules to
 9   reflect the sale of 302 Butterworth and the change of her
10   principal residence to 303 Butterworth.     On the same date Debtor
11   filed the fifth plan, which addressed the Claim by providing for
12   monthly payments of $904.91 at a fixed interest rate of 3.5%
13   over thirty-six months and extended the maturity date to July
14   2038.     Creditor initially objected on the ground that Debtor
15   could not modify 303 Butterworth’s secured loan because the
16   property had become Debtor’s principal residence.3    Creditor
17   filed a second supplemental objection arguing that even if
18   303 Butterworth was classified as rental property, Debtor did
19   not have sufficient income to pay the $180,000 value over the
20   proposed thirty-six month plan and that the plan did not provide
21   for the required treatment of the Claim.     The treatment provided
22   in the sixth plan was substantially similar to that in the fifth
23   plan except the monthly payments would be made over thirty-seven
24
25       3
          Our panel in Benafel v. One West Bank, FSB
26 (In re Benafel), 461 B.R. 581 (9th Cir. BAP 2011), held that the
   relevant date for determining whether real property is debtor’s
27 principal residence for the purposes of the Bankruptcy Code’s
   anti-modification provision is the petition date, so this ground
28 for objection was not persuasive.

                                      -3-
 1   months, “starting from the 24th month.”       The Chapter 13 Trustee
 2   (Trustee) opposed confirmation on the following grounds: the
 3   plan was not feasible as to its treatment of the Claim; the
 4   post-petition payments to secured creditors were delinquent; and
 5   the plan failed to accurately provide for the Debtor’s
 6   disposable income.   The seventh plan filed on January 4, 2014,
 7   was blank as to the Claim.     Creditor opposed the seventh plan.
 8        At a continued hearing on plan confirmation on February 19,
 9   2014, the bankruptcy court denied confirmation of all seven
10   plans.   After more than thirty days passed with no new plan
11   proposed, Trustee filed a motion to dismiss under § 1307(c) on
12   March 26, 2014 (Motion to Dismiss).       The Motion to Dismiss
13   requested as relief only dismissal, not conversion as allowed by
14   the statute.   At the May 1, 2014 hearing on the Motion to
15   Dismiss, the bankruptcy court noted that all seven plans were
16   previously denied at the February 19, 2014 hearing and a new
17   plan had not been filed.   Citing little progress since the case
18   filing in 2011, the bankruptcy court granted dismissal.       The
19   order granting the Motion to Dismiss was entered on May 8, 2014.
20   Debtor filed a timely notice of appeal.
21                            II.   JURISDICTION
22        The bankruptcy court had jurisdiction over this proceeding
23   under 28 U.S.C. §§ 1334 and 157(b)(2)(A).       We have jurisdiction
24   under 28 U.S.C. § 158.
25                                III.    ISSUES
26   1.   Whether the bankruptcy court erred when it found “cause”
27        under § 1307(c) to dismiss the chapter 13 case; and
28   2.   Whether the bankruptcy court erred when it did not consider

                                         -4-
 1        conversion based on the best interests of creditors and the
 2        estate.
 3                         IV.   STANDARD OF REVIEW
 4        The bankruptcy court’s dismissal of a chapter 13 case is
 5   reviewed for abuse of discretion.        Leavitt v. Soto
 6   (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999).
 7        The bankruptcy court abuses its discretion when it applies
 8   the incorrect legal rule or when its application of the law to
 9   the facts is: (1) illogical; (2) implausible; or (3) without
10   support in inferences that may be drawn from the facts in the
11   record.    United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir.
12   2009) (en banc).
13                               V.   DISCUSSION
14        Section 1307(c) provides that the bankruptcy court may
15   either dismiss or convert a chapter 13 case to chapter 7 for
16   cause, “whichever is in the best interests of creditors and the
17   estate.”   This provision first requires the bankruptcy court to
18   consider “cause” based on a list of nonexclusive items
19   designated in § 1307(c)(1)-(11).        Nelson v. Meyer
20   (In re Nelson), 343 B.R. 671, 674-75 (9th Cir. BAP 2006).   If
21   “cause” exists, the bankruptcy court then decides between
22   conversion and dismissal based on the best interests of
23   creditors and the estate.    Id.; de la Salle v. U.S. Bank, N.A.
24   (In re de la Salle), 461 B.R. 593, 605 (9th Cir. BAP 2011).
25   A.   The bankruptcy court did not err in finding cause to
26        dismiss Debtor’s chapter 13 case.
27        1) 11 U.S.C. § 1307(c)(5)
28        Two elements must be satisfied to constitute “cause” under

                                       -5-
 1   § 1307(c)(5): first, denial of confirmation of a plan under
 2   § 1325 and second, denial of a request made for additional time
 3   to file another plan.    § 1307(c)(5); Nelson, 343 B.R. at 675-76.
 4        The first element is met.    The bankruptcy court denied
 5   confirmation of all seven plans at the February 19, 2014
 6   hearing.   There was no current plan on file as of the May 1,
 7   2014 hearing on the Motion to Dismiss.
 8        The second element requires “at a minimum, that the court
 9   must afford a debtor an opportunity to propose a new or modified
10   plan following the denial of plan confirmation.”     Id. at 676.
11   Here, Debtor had ample opportunity to propose a new plan during
12   the ten-week period between February 19, 2014, when the prior
13   plans were denied, and May 1, 2014, the date of the hearing on
14   the Motion to Dismiss.   Because Debtor had additional time to
15   file an eighth plan after the denial of the prior plans, the
16   second element is satisfied here.      After seven ineffectual plan
17   attempts and a ten-week default in proposing an eighth plan,
18   Debtor had plenty of time to propose a viable plan and failed to
19   do so.   Accordingly, cause to dismiss exists under § 1307(c)(5).
20        2) 11 U.S.C. § 1307(c)(1)
21        A chapter 13 case may be dismissed based on a finding of
22   “unreasonable delay by the debtor that is prejudicial to
23   creditors.”   § 1307(c)(1).   “A debtor’s unjustified failure to
24   expeditiously accomplish any task required either to propose or
25   confirm a chapter 13 plan may constitute cause for dismissal
26   under § 1307(c)(1).”    Ellsworth v. Lifescape Med. Assocs., P.C.
27   (In re Ellsworth), 455 B.R. 904, 915 (9th Cir. BAP 2011);
28   de la Salle, 461 B.R. at 605 (finding unreasonable delay and

                                      -6-
 1   prejudice to creditors where debtors had sufficient time but
 2   repeatedly failed to provide for a claim in their plan).
 3        Here, Debtor unjustifiably delayed by not proposing a new
 4   plan following the denial of the prior plans in February.           The
 5   bankruptcy court also found that no real progress had been made
 6   since the case filing in 2011 and the last hearings in 2013.
 7   Debtor’s failure to propose a confirmable plan in more than two
 8   years supports a finding of cause for dismissal under
 9   § 1307(c)(1).
10        3) 11 U.S.C. § 1307(c)(3)
11        The failure to file a plan timely under § 1321 also
12   constitutes cause for dismissal.       § 1307(c)(3).    Rule 3015
13   provides that a plan is untimely unless it is filed within
14   fourteen days of the petition date.       Subsequent plans required
15   by the court are also subject to § 1307(c)(3).         Ellsworth,
16   455 B.R. at 916.
17        Here, Debtor failed to propose another plan after the prior
18   seven plans were denied.   Debtor only filed the eighth plan
19   after the bankruptcy court granted dismissal at the May 1, 2014
20   hearing.   Because Debtor failed to file a plan timely under
21   § 1321, cause for dismissal exists under § 1307(c)(3).
22   B.   The bankruptcy court did not err in not weighing the
23        alternatives of conversion or dismissal where Trustee
24        waived any request to consider conversion.
25        The bankruptcy court has a mandatory obligation under
26   § 1307(c) to determine whether dismissal or conversion would be
27   in the best interests of creditors and the estate.         Nelson,
28

                                      -7-
 1   343 B.R. at 674-75 (noting that the decisions under § 1112(b)4
 2   informs the analysis of § 1307(c)); Sullivan v. Harnisch
 3   (In re Sullivan), 522 B.R. 604, 612 (9th Cir. BAP 2014)
 4   (reversing for abuse of discretion where the bankruptcy court
 5   failed to consider conversion when it dismissed a chapter 11
 6   case under § 1112(b)).
 7           Here, Trustee did not request conversion as an alternative
 8   to dismissal when proceeding with her motion to dismiss.     In so
 9   doing, Trustee waived consideration of conversion in her motion
10   to dismiss.     Neither did Debtor request that the bankruptcy
11   court consider conversion as an option, and on appeal, Debtor
12   does not argue that conversion to chapter 7 should have been
13   considered, thereby waiving the issue. U.S. v. Ullah, 976 F.2d
14   509, 514 (9th Cir. 1992)(“We will not ordinarily consider
15   matters on appeal that are not specifically and distinctly
16   argued in appellant’s opening brief.”)(internal quotation marks
17   and citation omitted).     Accordingly, the bankruptcy court did
18   not abuse its discretion in not considering conversion as an
19   alternative.
20                              VI.   CONCLUSION
21           For the reasons stated above, we AFFIRM.
22
23
24
         4
          While the language in § 1307(c) parallels its chapter 11
25 counterpart, § 1112(b), § 1307(c) differs slightly in providing
26 that the court “may dismiss . . . or may convert” as opposed to
   § 1112(b)’s “shall convert . . . or dismiss.” This minor
27 variation is without significance because both provisions require
   that the court decide between conversion and dismissal based on
28 “whichever is in the best interests of creditors and the estate.”

                                       -8-