KLINETTE H. KINDRED, Bankruptcy Judge.
Before the Court is Philip Jay Fetner's ("Fetner" or "debtor") Motion to Approve Debtor's Motion for Recusal ("Recusal Motion"). (Docket. No. 98). Creditor Hotel Street Capital, LLC has filed an Objection to the recusal motion. (Docket. No. 103). For the reasons that follow, this motion will be DENIED.
Mr. Fetner filed a petition under Chapter 11 of the Bankruptcy Code on Sept. 7, 2017. His schedules list $7,629,496 in assets, including $2,498,996 in claims against third parties and a $5,000,000 equitable interest in a limited partnership he controls that owns the property known as Coachman Farms where the debtor resides.
On February 5, 2018, the Court entered an Order which granted the debtor's uncontested motion to extend the exclusivity period to file a plan of reorganization to June 5, 2018. Mr. Fetner's second motion to extend the exclusivity period was hotly contested by his creditors and on July 16, 2018, the Court entered an Order denying the debtor's request.
On August 14, 2018, a creditor in the case filed a disclosure statement and plan that was never confirmed. (Docket No. 114). Eight months later, Mr. Fetner filed a disclosure statement and plan. (Docket No. 197). On May 30, 2019, the Court entered an Order denying approval of the disclosure statement filed by the debtor because it: (1) proposed to modify the terms of loans secured by the debtor's principal residence; (2) provided for an improper release of a federal tax lien; and (3) failed to provide proper treatment of administrative claims in the case.
The Court held a hearing on the U.S. Trustee's Motion to Convert this case to a chapter 7 case on June 11, 2019 and determined that the debtor lacked sufficient monthly income to support the projected plan payments that would begin if the plan were confirmed. The Court also found that the timeline for future income streams was obscure and that the debtor had grossly mismanaged his estate. For these reasons, the Court entered an Order converting the case to chapter 7 on June 13, 2019.
While the bankruptcy was still pending under chapter 11, Mr. Fetner filed a state court action against several parties and their counsel, including parties that are creditors in this case. The Complaint included claims for legal malpractice, breaches of contract, conspiracy, defamation, fraud, RICO violations and other tort claims. That matter was removed to this Court on March 25, 2019. (Adversary Proc. ("AP") No. 19-1039, Docket 1). At the conclusion of hearings on motions to dismiss the Complaint filed by several defendants, this Court dismissed Counts XIII and IV of the Complaint and took the remaining twelve Counts under advisement. (AP Docket Nos. 36-42). Thereafter, on August 30, 2019, the Court entered an Order Granting Motion to Substitute Kevin McCarthy, Chapter 7 Trustee as Plaintiff in the adversary proceeding.
28 U.S.C.A. §455(b) provides that any judge of the United States shall disqualify himself where he has a personal bias or prejudice concerning a party, or personal knowledge of disputed evidentiary facts concerning the proceeding.
When considering a motion to recuse brought under 28 U.S.C. § 455, a court must apply the objective standard of whether a reasonable observer "with knowledge of all of the circumstances might reasonably question the judge's impartiality."
Several pertinent cases address the issue of recusal. In
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When the debtor filed this case, the mortgage payments owed to the lender in the first position on the property he occupies were nearly four years in arrears. (Proof of Claim No. 2-1). While in Chapter 11, Mr. Fetner's monthly operating reports indicate he made no payments to that lender. Throughout this case, the debtor has maintained that, even though he controls the entities that own his residence, he has no more than an equitable interest in Coachman Farms and therefore it should not be treated as property of the bankruptcy estate. However, he treated the property as his own when, in his disclosure statement he proposed to offer the property as security for his promise to pay the creditors whose claims he continues to dispute. In other words, the debtor intended to keep enjoying all of the benefits of owning Coachman Farms without acknowledging in his plan the rights of those creditors and without a firm commitment to pay for his residence. This behavior is inconsistent with the conduct of the poor but honest debtor that the Bankruptcy Code is designed to protect.
To his credit, Mr. Fetner admits in his recusal motion that he has no suspicion or evidence of "hard" corruption by this Court. Instead, he accuses the Court of "soft corruption", "soft bias", and manipulating the bankruptcy process to achieve a predetermined result, that of liquidating the only tangible asset of value in this estate to pay his creditors. However, in retrospect his argument fails. There was no rush to liquidate. In fact, even though the assets of this case are no longer under the debtor's control, Coachman Farms remains a part of the estate, and to date, the trustee has made no attempt to market the property while he pursues other potential assets. Ultimately, Mr. Fetner had more than one and one-half years to show his creditors and the Court that he could propose a confirmable plan that would allow him to pay his just debts. He simply failed to do so, and the consequence of his failure was conversion of the case to chapter 7.
Finally, even though the debtor has exercised his right to appeal several Orders of this Court, those Orders have been affirmed or his appeals have been dismissed by the U. S. District Court. It remains to be seen whether the 4th Circuit Court of Appeals will reverse any of the District Court's decisions.
In conclusion, Mr. Fetner presents no facts or objective arguments that reasonably demonstrate this Court's prejudice or bias in this case. "[W]hen there is no reasonable basis for questioning a judge's impartiality, it is improper for the presiding judge to recuse himself."
The Court will enter an order consistent with this memorandum opinion.