VIRGINIA EMERSON HOPKINS, District Judge.
This matter is before the court as an appeal from the bankruptcy court, pursuant to 28 U.S.C. § 158. The parties have filed appellate briefs, which the court has reviewed. The court finds, in accordance in Fed.R.Bankr.P. 8012, that the facts and legal arguments are adequately presented in the briefs and record and the decisional process will not be significantly aided by oral argument.
The appellant appeals from the bankruptcy court's Order converting his Chapter 13 Petition into a Chapter 7 proceeding. Under the Federal Rules of Bankruptcy Procedure, the bankruptcy court's findings of fact will not be set aside unless they are clearly erroneous. Fed.R.Bankr.P. 8013.
This appeal challenges various rulings made by Bankruptcy Judge Jack Caddell, including the finding that confirmation of the Chapter 13 plan of plaintiff Mohammad Ali Naderi ("Naderi") should be submitted on summary judgment, and culminating in the conversion of that plan into one under Chapter 7.
On August 19, 2014, Judge Caddell ruled that, in accordance with the instructions provided in open court the previous day, Naderi was to file a motion for summary judgment. (Doc. #1-1).
This court reviews the bankruptcy court's findings of fact under the clearly erroneous standard of review and conclusions of law under the de novo standard of review. In re Piazza, 719 F.3d 1253, 1260 (11th Cir. 2013), citing In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996). A finding is "clearly erroneous" when, in light of all of the evidence, the reviewing court is left with the definite and firm conviction that a mistake has been committed. In re Int'l Pharmacy & Discount, II, Inc., 443 F.3d 767, 770 (11th Cir. 2005). The proper construction of the Bankruptcy Code by the bankruptcy court is a matter of law; accordingly, such interpretations are subject to de novo review. In re Colortex Industries, Inc., 19 F.3d 1371, 1374 (11th Cir. 1994); In re Taylor, 3 F.3d 1512, 1514 (11th Cir. 1993).
Although Naderi lists five grounds for appeal, these arguments fall into two categories: (1) did the bankruptcy court commit error in ordering confirmation be submitted by motion for summary judgment; and (2) did the bankruptcy court commit error in ordering Naderi's Chapter 13 petition be converted to Chapter 7? The court addresses each of these in turn.
Naderi argues that a bankruptcy court cannot use summary judgment motions to consider confirmation of a Chapter 13 Plan. (Doc. #5, p. 14). The Trustee responds that the court was wholly correct in ordering that confirmation and that the Trustee's motion to convert or dismiss be submitted by summary judgment motion. (Doc. # 6, pp. 8-10). According to the Trustee, Rule 9014, "Contested Matters," Fed.R.Bankr.P., resolves this issue completely. That Rule states in relevant part:
Federal Rules of Bankruptcy Procedure, Rule 9014 (a)-(c).
The Advisory Committee Notes to this Rule include the instruction that "[w]hen the rules of Part VII are applicable to a contested matter, reference in the Part VII rules to adversarial proceedings is to be read as a reference to a contested matter." Advisory Committee Notes (1983), Rule 9014, Fed.R.Bankr.P.
At the time the bankruptcy court ordered that confirmation of the Chapter 13 Plan be addressed through summary judgment, the Trustee's motion to convert or dismiss was already pending. See e.g., transcript of Aug. 18, 2014, hearing. (Doc. #2). Hence, confirmation of the Chapter 13 Plan was a contested matter. See e.g., In re Parra, 2014 WL 3616209, at *1 (Bkrtcy. D.N.M. 2014) ("Confirmation of a Chapter 13 Plan is a contested matter and is therefore governed by Fed.R.Bankr.P. 9014. Pursuant to Rule 9014(c), Fed.R.Bankr.P. 7056 is applicable to contested matters. Thus, the Motion [for Summary Judgment] is properly before the Court."); Matter of Dues, 98 B.R. 434, 440 (Bkrtcy. N.D. Ind. 1989) (Confirmation becomes a contested matter once an objection to a Chapter 13 plan is asserted).
In light of the foregoing, the court finds no error in the bankruptcy court's instruction to the parties that confirmation of the Chapter 13 would be considered upon Motion for Summary Judgment. For the same reason, Naderi's argument that the bankruptcy court erred on August 18, 2014, in ordering him to file a motion for summary judgment rather than holding a confirmation hearing also has no merit. (Doc. #5, p. 16). Naderi asserts that because he was present with counsel and ready to proceed, the only proper course of action for the bankruptcy court was to hold a confirmation hearing. (Id.). However, this argument is directly refuted by Rule 9014, Fed.R.Bankr.P., which allowed the bankruptcy court to proceed in the exact manner it did here. Similarly, Naderi's argument that "the Court must take evidence" fails because written evidence properly may be submitted in support of a summary judgment motion.
As the Second Circuit ruled,
In re Blaise, 219 B.R. 946, 949 (2nd Cir. 1998).
Given that the Federal Rules of Bankruptcy Procedure allow the bankruptcy court to proceed in the exact manner it did, the court finds that the bankruptcy court did not err in doing so.
Naderi argues that, assuming a Chapter 13 Plan can be confirmed by way of summary judgment motion, the bankruptcy court erred in not confirming his plan because he submitted 148 pages of affidavits and exhibits, the Trustee did not respond to his motion, he followed all rules and, if nothing else, the bankruptcy court should have allowed him additional time to submit a confirmable plan. (Doc. #5, pp. 18-24). However, Naderi provides no authority to this court to support a ruling that, in considering confirmation of a plan submitted by summary judgment, a bankruptcy court can only consider the evidence submitted in support of or in opposition to that very motion.
During the September 2, 2014, hearing concerning confirmation of Naderi's proposed Plan, the following argument was made by the Trustee:
Hearing Transcript, Sept. 2, 2014. (Doc. # 3, pp. 2-3 ). Naderi's counsel responded:
Id., pp. 3-6.
Naderi asserts that the bankruptcy court was wrong to find an appraisal of the businesses necessary because they had no ongoing value. (Doc. # 5, p. 18-19). However, this court has no basis to conclude otherwise. The law is well established that "the district court in reviewing the decision of a bankruptcy court functions as an appellate court." In re Colortex Industries, Inc., 19 F.3d 1371, 1374 (11th Cir. 1994). The district court is not authorized to make independent factual findings, In re Lett, 632 F.3d 1216, 1225 (11th Cir. 2011), but may only consider whether the factual findings made by the bankruptcy court are "clearly erroneous." In re Piazza, 719 F.3d at 1260. A finding is clearly erroneous when, although there is evidence to support it, the reviewing court upon examining the entire evidence is left with the definite and firm conviction that a mistake has been committed. United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). Here, the merit of having an appraisal of the businesses, possible under Chapter 7 but not Chapter 13, was a factual determination left to the discretion of the bankruptcy court. This court has no basis to find it "clearly erroneous."
Appellant's argument that the bankruptcy court lacked "cause" under 11 U.S.C. § 1307 to convert the Plan to Chapter 7 does not assist him. Pursuant to § 1307, a bankruptcy judge may dismiss a case for cause under Chapter 13 or convert it to Chapter 7, whichever is in the best interests of creditors and the estate. In re Page, 519 B.R. 908, 912 (Bkrtcy. M.D.N.C. 2014). Additionally, a Chapter 13 Plan must be proposed in good faith in order to be confirmed. 11 U.S.C. § 1325(a)(3). The Trustee asserts — and Naderi does not dispute — that this was the second Chapter 13 petition filed by Naderi. (Doc. # 6, p. 17). The amount of proposed payments and the failure to value the businesses both cast doubts on whether the proposed plan met the best interest of the creditors test under 11 U.S.C. § 1325(a)(4).
(Doc. #1-11, pp. 3-4).
Naderi argues that no grounds existed for the court to convert his petition to one under Chapter 7. (Doc. # 5, pp. 21-22). In Kitchens v. Georgia Railroad Bank and Trust Co. (In re Kitchens), 702 F.2d 885 (11th Cir. 1983), the Eleventh Circuit provided guidance for determining a debtor's good faith within the context of a Chapter 13 plan by listing factors to be considered. This non-exclusive list includes the debtor's motivations and sincerity in seeking relief, the circumstances under which the debtor contracted with creditors, whether the debtor dealt with creditors in good faith, the debtor's income, the debtor's ability to earn and the likelihood of fluctuation in his earnings, the debtor's and his dependents' living expenses, the frequency with which he has sought bankruptcy relief, and special circumstances such as inordinate medical expense. Id. at 888-89. Factors suggested by other jurisdictions include the percentage of proposed repayment, the nature and amount of unsecured claims, and the debtor's honesty in representing facts. See, e.g., Deans v. O'Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982). A debtor's good faith or lack thereof is properly determined by examining the totality of the circumstances. In re Brown, 742 F.3d 1309, 1317 (11th Cir. 2014).
In response to Naderi's arguments that the bankruptcy court could not have found he was proceeding in bad faith, the Trustee sets forth the bases for the motion to dismiss or convert which was granted by the bankruptcy court. (Doc. # 6, pp. 12-16). In essence, the Trustee asserted that Naderi had previously filed a similar Chapter 13 Plan in 2010 and failed to make payments; that Naderi's valuation of the businesses was belied by his 2013 tax returns; and that the payments proposed to unsecured creditors were too uncertain to warrant confirmation. Id. After close review of the record and the totality of the circumstances, this court cannot conclude that the bankruptcy court's findings were clearly erroneous.
Finally, Naderi asserts that he should have been allowed to submit a modified plan prior to the bankruptcy court's decision to convert his case to Chapter 7. (Doc. #5, p. 23). The sole case relied on by Naderi for this proposition, In Re Nelson, 343 B.R. 671 (9th Cir. 2006), has never been addressed by a court within the Eleventh Circuit. However, of the courts that have considered the underlying proposition, namely that a debtor must be given time to submit an amended plan before the bankruptcy court may dismiss or convert the plan to Chapter 7 pursuant to 11 U.S.C. § 1307(c)(5), none have reached the conclusion offered by Naderi. See e.g., Dean v. Suntrust Bank, 2007 WL 1953151, at *4 (N.D. Ga. 2007) (affirming bankruptcy court ruling that there was no reason to allow debtor additional time to file another modification of his plan because, there existed no legitimate bankruptcy purpose for debtor to remain in Chapter 13); Simmons v. Townson, 2007 WL 656591, at *2-3 (N.D.Ga. 2007) (holding no error in bankruptcy court ruling that, because, based on "[t]he economics of this case . . . [i]t appears that creditors could be paid a substantial portion of their claims in a Chapter 7 case if a trustee liquidated some or all of the non-exempt assets," conversion to Chapter 7 was appropriate). See also In re Jackson, 2007 WL 1188202, at *4 (Bkrtcy. E.D. Pa. 2007).
(". . . because this was not her first bankruptcy case, the standard for evaluating the reasonableness of her efforts is necessarily more stringent than if this case were her first bankruptcy filing") (citing In re Yeager, 2004 WL 422049, at *3 (Bkrtcy. E.D. Pa. 2004) (court may hold a Chapter 13 plan filed after the failure of prior bankruptcy cases to higher standard of feasibility in making decision whether to confirm the plan)).
Upon consideration of the record on appeal, including the briefs, appendices and other documents filed by the parties, the court is of the opinion that the bankruptcy court's holdings are correct and that the decision is due to be
Having considered the foregoing, the bankruptcy court's rulings are due to be
