In re: Debra Sue Phillips

FILED MAY 08 2015 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK 2 U.S. BKCY.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. [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. [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-