Court Opinion

ID: 3034041
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:50:26.6582+00
Date Added: 2024-06-11T11:48:28.718264
License: Public Domain

United States Bankruptcy Appellate Panel
                        FOR THE EIGHTH CIRCUIT

                                  No. 03-6076NI
                                  ___________

In re:                                 *
                                       *
Vincent William Michels,               *
a/k/a Vince Michels,                   *
d/b/a Vincent W. Michels,              *
                                       *
            Debtor.                    *
                                       *
Vincent William Michels,               *
                                       *   Appeal from the United
            Debtor - Appellant,        *   States Bankruptcy Court
                                       *   for the Northern District of
            v.                         *   Iowa
                                       *
Maynard Savings Bank;                  *
Internal Revenue Service,              *
                                       *
            Creditors - Appellees.     *
                                       *

                            Submitted: March 2, 2004
                             Filed: March 16, 2004

Before KRESSEL, Chief Judge, DREHER and FEDERMAN, Bankruptcy Judges.

DREHER, Bankruptcy Judge.
      This is an appeal from an order of the bankruptcy court1 dated September 19,
2003, which denied confirmation of Appellant's Chapter 12 plan and dismissed the
case. For the reasons stated below, we affirm the decision of the bankruptcy court.

I.    FACTS AND PROCEDURAL HISTORY

      This is the tale of two bankruptcy cases: the first, a Chapter 13 case filed on
April 23, 2001, and dismissed on January 9, 2003, and the second, a Chapter 12 case,
filed on February 5, 2003, and dismissed on September 19, 2003, by the order subject
to this appeal. In his Chapter 13 case, Appellant, Vincent Michels, (“Debtor”) filed
his first Chapter 13 plan after obtaining an extension of time from the bankruptcy
court to file a plan. Appellee Maynard Savings Bank (“MSB”) filed an objection to
confirmation of the plan. The Chapter 13 trustee (“trustee”) also filed an objection
to the plan and sought dismissal of the case. The Internal Revenue Service joined the
trustee’s objection and motion for dismissal. At the time of Debtor’s filing, MSB
held a security interest in Debtor’s 200 acre farm, a business establishment called
Shooky's Bar, and a blanket first lien on all farm equipment, crops, crop proceeds,
and miscellaneous vehicles which served as collateral for an obligation with an
outstanding balance of $193,531.40.

      In response to these objections, Debtor amended his plan on July 30, 2001, and
a day later amended his schedules. The creditors and the trustee renewed their
objections. Subsequently, the bankruptcy court denied confirmation of the plan, but

      1
       The Honorable Paul J. Kilburg, Chief Judge, United States Bankruptcy
Court for the Northen District of Iowa.
                                         2
allowed Debtor to further amend his plan. Debtor filed a second amended plan on
September 17, 2001, to which the same creditors and the trustee objected. Debtor
then filed “technical amendments” to the second amended plan on October 31, 2001.

      Debtor’s Chapter 13 plan provided, in part, that 1) if the bar was sold, MSB
would be paid the first $100,000.00 of sales proceeds in return for the release of its
mortgage and security interest in the contents of the bar and that monthly payments
to MSB would then be reduced to reflect the payments; 2) Debtor would keep his
vehicles and farm equipment and, if they were sold, MSB would release its lien in
return for payment to it of one-half of the net proceeds; 3) the other one-half of the
proceeds from the sale of the vehicles and from equipment would be used to fund the
plan; 4) MSB would terminate its lien on Debtor's crops; and 5) Debtor would pay
the remaining balance of MSB's claim in a balloon payment at the end of the 48
month plan.

      The bankruptcy court did not find that the above plan provision, standing
alone, would prevent confirmation, but on other grounds found the plan not
confirmable. During the confirmation hearing of the second amended plan as further
amended, however, a dispute arose concerning the timeliness of MSB’s claim. The
bankruptcy court held that, if MSB’s claim were allowed, the second amended plan
would not be feasible and the case would be dismissed. On the other hand, if an
objection were filed to the late filed claim of MSB, the claim would be disallowed
and the plan confirmed. Eventually, the bankruptcy court denied MSB’s motion to
allow it an informal proof of claim, disallowed MSB’s claim and confirmed Debtor’s
plan. MSB appealed and we reversed, holding that MSB’s claim was a timely filed

                                          3
informal proof of claim. Since the bankruptcy court already concluded, and the
parties agreed, that Debtor's plan could not be confirmed if the MSB claim was
included, we also held that denial of confirmation of Debtor’s plan was appropriate.
See Maynard Savings Bank v. Michels (In re Michels), 286 B.R. 684, 693 (B.A.P. 8th
Cir. 2002). On January 9, 2003, the bankruptcy court dismissed Debtor’s Chapter 13
case.

        Immediately on the heals of that dismissal, Debtor changed his tactics and on
February 5, 2003, filed a case under Chapter 12 of the Bankruptcy Code. On April
7, 2004 he filed his Chapter 12 plan. Paragraph 3.04(g) of Debtor’s Chapter 12 plan
provided that "[c]onfirmation of this Chapter 12 Plan will terminate [MSB's] blanket
lien on Chapter 12 Debtor Michels' farm machinery, equipment, crops, livestock,
contract rights, general intangibles, proceeds and all other farm related collateral."
Debtor’s plan also provided for a balloon payment, but in 10 years, not 48 months as
provided in his Chapter 13 plan. As with the Chapter 13 plan, MSB, the Internal
Revenue Service and the trustee,2 along with the Iowa Department of Revenue, all
filed objections to confirmation. MSB’s objection was essentially the same as it had
been in the earlier Chapter 13 case: that the plan failed to provide for MSB retaining
its lien, paid MSB an inadequate rate of interest, was not feasible and was not filed
in good faith. The hearing on confirmation of the plan was originally scheduled for
May 21, 2003, but was rescheduled to June 18, 2003.

        2
            Carol F. Dunbar served as both Debtor’s Chapter 13 trustee and Chapter 12
trustee.
                                            4
      On June 5, 2003, the bankruptcy court held a hearing on the use of cash
collateral. It is apparent from the transcript of that hearing that the bankruptcy court’s
patience with Debtor was wearing thin. At the hearing the bankruptcy court made
patently clear that Debtor would not be allowed a series of amendments or
modifications to the plan, but left open the possibility that Debtor would be granted
the opportunity to file an amended plan if circumstances warranted.

      On June 18, 2003, a confirmation hearing was held. At that hearing the
bankruptcy court denied confirmation of Debtor’s plan, granted Debtor permission
to file an amended Chapter 12 plan, but allowed him only 10 days to do so. On June
30, 2003, Debtor filed an amended plan, but he did not change the language contained
in paragraph 3.04(g). The bankruptcy court set August 26, 2003, for the “final”
confirmation hearing. The trustee did not object to confirmation of the amended plan.
But, both MSB and the Internal Revenue Service renewed their objections. MSB also
asked the court to dismiss the case if confirmation was denied. On July 24, 2003,
Debtor filed another amendment, characterized by Debtor as an amendment to correct
a "scrivener error."

      A confirmation hearing was held on August 26, 2003, and on September 19,
2003, the bankruptcy court issued an order denying confirmation of Debtor’s plan
because the plan proposed to avoid the liens held by MSB on Debtor's farm
machinery in violation of section 1225(a)(5)(B)(i) of the Bankruptcy Code, the plan
failed to provide MSB with the present value of its secured claim as required by
section 1225(a)(5)(B)(ii), and because the plan was not filed in good faith and was
not feasible. See 11 U.S.C. §§ 1225(a)(3) and (6). The bankruptcy court also

                                            5
dismissed the case pursuant to section 1208(c) for a variety of reasons including the
fact that it had denied confirmation of debtor's plan and its view that failure to dismiss
would invite "unreasonable delay" and "diminution of the estate" in the "absence of
a reasonable likelihood of rehabilitation." In re Michels, 301 B.R. 9, 18 (Bankr. N.D.
Ia. 2003); see 11 U.S.C. § 1208(c). Debtor filed a timely appeal. Since the appeal
is from an order which both denied confirmation and dismissed the bankruptcy case,
the appeal is from a final appealable order. See Pleasant Woods Ass’n. Ltd. P’ship
v. Simmons First Nat’l Bank (In re Pleasant Woods Associates Ltd. Partnership), 2
F.3d 837, 838 (8th Cir. 1993).3

II.    ISSUES

       Debtor contends that the bankruptcy court erred in denying confirmation of the
plan, arguing that the plan was feasible, paid MSB’s secured claim its present value
and was filed in good faith. Debtor also contends that dismissal of the case was
improper and that he should have the opportunity to again amend his plan.
Debtor does not contend, however, that the bankruptcy court erred in finding that the
plan failed to provide that MSB retain its liens.

III.   STANDARD OF REVIEW

       In determining whether the bankruptcy court properly denied confirmation of
Debtor’s Chapter 12 plan, we review the court’s legal conclusions de novo and

       3
       Debtor subsequently requested and obtained an order granting a stay
pending appeal, subject to his making regular monthly payments to MSB.
                                            6
factual findings under a clearly erroneous standard. Harmon v. U.S. Through Farmers
Home Admin., 101 F.3d 574, 583 (8th Cir. 1996). "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 City, 470 U.S. 564, 573 (1985). The
decision to dismiss a case for cause is within the sound discretion of the bankruptcy
court. See Brown v. I.R.S. (In re Brown), 82 F.3d 801, 806 (8th Cir. 1996); Davis
v. Case (In re Davis), 275 B.R. 864, 866 (B.A.P. 8th Cir. 2002), aff'd 55 Fed. Appx.
789 (8th Cir. 2003).

III. DISCUSSION

      A.     DENIAL OF CONFIRMATION

      Debtor must establish all six elements contained in section 1225 of the
Bankruptcy Code in order to have a plan confirmed. 11 U.S.C. § 1225;           In re
Szudera, 269 B.R. 837, 842 (Bankr. D.N.D. 2001). Although the bankruptcy court
found Debtor’s plan violated several elements of section 1225, we need only
determine that one of these findings support the bankruptcy court's denial of
confirmation and we need not address Debtor's remaining arguments in support of
confirmation. See Ames v. Sundance State Bank (In re Ames), 973 F.2d 849, 851
(10th Cir. 1992). Specifically, section 1225(a)(5)(B)(i) requires that a plan provide
that the holder of an allowed secured claim “retain the lien securing such claim.” 11

                                         7
U.S.C. § 1225(a)(5)(B)(i);4 see also Abbott Bank-Thedford v. Hanna (In re Hanna),
912 F.2d 945, 951-52 (8th Cir. 1990).

      Paragraph 3.04(g) of Debtor’s Chapter 12 plan provided that "[c]onfirmation
of this Chapter 12 Plan will terminate [MSB's] blanket lien on Chapter 12 Debtor
Michels' farm machinery, equipment, crops, livestock, contract rights, general
intangibles, proceeds and all other farm related collateral." The bankruptcy court
found that this provision violated section 1225(a)(5)(B)(i). Debtor has not even
argued that it does not. Therefore, Debtor has conceded that the plan he proposed is
not confirmable. Accordingly, the bankruptcy court did not err in declining to
confirm Debtor’s amended Chapter 12 plan. See Hanna, 912 F.2d at 952.

      4
          with respect to each secured claim provided for by the plan-

               (A) the holder of such claim has accepted the plan;
               (B)(i) the plan provides that the holder of such claim retain the
               lien securing such claim; and
               (ii) the value, as of the effective date of the plan, of property to
               be distributed by the trustee or the debtor under the plan on
               account of such claim is not
               less than the allowed amount of such claim; or
               (C) the debtor surrenders the property securing such claim to
               such holder....

      11 U.S.C. § 1225(a)(5).
                                             8
      B.     DISMISSAL OF THE CASE

      After the bankruptcy court denied confirmation of the plan it granted MSB’s
motion to dismiss the case. Debtor appeals the dismissal of the case as an abuse of
discretion by the bankruptcy court. Debtor contends that he should have been granted
additional time to modify his plan once again. The bankruptcy court found three
reasons to dismiss the case

      for cause, including--(1) unreasonable delay... by the debtor that is
      prejudicial to creditors;... (5) denial of confirmation of a plan under
      section 1225 of this title and denial of a request made for additional time
      for filing another plan or a modification of a plan;... and (9) continuing
      loss to or diminution of the estate and absence of a reasonable likelihood
      of rehabilitation.

Michels, 301 B.R. at 18 (citing 11 U.S.C. § 1208(c)). Since section 102(3) provides
that the term "including" is not limiting, the list set forth at section 1208(c)(1)-(9) is
non-exclusive. 11 U.S.C. §§ 102(3), 1208(c)(1)-(9); Barger v. Hayes County
Non-Stock Co-Op (In re Barger), 233 B.R. 80, 84-5 (B.A.P. 8th Cir. 1999); In re
Henson, 289 B.R. 741, 750-51 (Bankr. N.D. Cal. 2003). The decision to dismiss a
case is within the sound discretion of the bankruptcy court. Brown, 82 F.3d at 806.
And, we may affirm on any basis supported by the record. See Cooksey v. Delo, 94
F.3d 1214, 1218 (8th Cir. 1996).

      At the June 5, 2003, hearing on cash collateral the bankruptcy court expressed
in no uncertain terms that it would not tolerate a continual parade of plan
modifications. While Debtor disagrees with the bankruptcy court’s actual count of

                                            9
the number of plans filed, Debtor filed no less than three plans in his Chapter 13 case
and two in his Chapter12, not counting “technical” or “scrivener” amendments. The
bankruptcy court also made it clear that failure of Debtor to expeditiously confirm a
plan of reorganization would result in dismissal of the case, even going so far as to
term the August 26, 2003, confirmation hearing as the “final” hearing on
confirmation on the bankruptcy court’s notice of hearing. By the bankruptcy court’s
actions in this case, Debtor should have known, and we can imply, that after denial
of confirmation of Debtor’s "final plan," any further attempt at modification would
be denied.

       In Bentson, the bankruptcy court considered the following types of factors in
determining whether an extension of time to file a modified plan should be granted:
“when the first chapter 12 plan was filed, how comprehensive and complete the first
plan was, the reasons for denial of confirmation of the first plan, the likelihood of
successful confirmation of a new plan, and how long an extension is requested.” In
re Bentson, 74 B.R. 56, 57-8 (Bankr. D. Minn. 1987);
see also Novak v. DeRosa, 934 F.2d 401, 403 (2nd Cir. 1991). Considering that
Debtor had been in bankruptcy for over two years and had unsuccessfully proposed
at least five plans, and further considering the bankruptcy court’s determination that
Debtor had a sufficient opportunity to confirm a plan, but failed to do so, we find no
abuse of discretion in dismissing the case. On the contrary, the bankruptcy court
properly dismissed the case pursuant to section 1208(c)(5) which provides that denial
of confirmation and “denial of a request made for additional time for filing another
plan or modification of a plan” constitutes grounds for dismissal. 11 U.S.C. §
1208(c)(5).

      ACCORDINGLY, we affirm the decision of the bankruptcy court.

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