Opinion
NOT FOR PUBLICATION
ORDER DENYING DEBTOR'S MOTION FOR ORDER PURSUANT TO 11 U.S.C. § 363 SETTING BUDGET FOR INTERIM USE OF ESTATE PROPERTY AS DEFINED IN 11 U.S.C. § 1115
ROBERT KWAN, Bankruptcy Judge.
On May 11, 2015, Debtor filed the instant "Motion in Individual Chapter 11 Case for Order Pursuant to 11 U.S.C. § 363 Setting Budget for Interim Use of Estate Property as Defined in 11 U.S.C. § 1115" (Docket No. 16) (the "Motion). On May 29, 2015, Debtor filed a Declaration of Non-Opposition pursuant to Local Bankruptcy Rule 9013-1(o).
Having reviewed and considered the Motion, the court hereby denies the motion without prejudice and with leave to amend subject to the conditions set forth herein.
The motion is denied because it is not supported by admissible and credible evidence and legal authority to support findings of facts and conclusions of law that the proposed use of estate funds for the personal living expenses of Debtor in the amount of $45,318 per month is authorized under 11 U.S.C. § 363, which governs the use, sale and lease of property of a bankruptcy estate, or any other provision of the Bankruptcy Code, 11 U.S.C. In re Villalobos, 2011 WL 4485793, slip op. at **8-9 and n. 13 (9th Cir. BAP 2011)(unpublished memorandum opinion). Although no opposition or objection to the Motion has been filed, and Local Bankruptcy Rule 9013-1(h) authorizes the court to deem such failure to be consent to granting the motion, the court is not obligated to do so. The court cannot grant a motion that has not made a prima facie case establishing that the moving party is entitled to the relief sought in the motion based on admissible evidence under the applicable law.
Debtor only provides his conclusory declaration as evidence in support of the Motion containing form language, "In order for the Debtor to reorganize effectively, Debtor must pay for reasonable actual household and/or business expenses." Motion at 3. Unless the court orders otherwise, a trustee or a debtor-in-possession may use, sell or lease estate property in the "ordinary course of business" without court approval pursuant to 11 U.S.C. § 363(c)(1). See also, 3 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, ¶ 14:25 at 14(I)-2 (2014); In re Seely, 492 B.R. 284, 289-291 and nn. 4-6 (Bankr. C.D. Cal. 2013). The court notes that 11 U.S.C. § 1115, as added to the Bankruptcy Code in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), includes as property of the estate of a Chapter 11 debtor all earnings of the debtor after the commencement of the case before the case is closed, dismissed or converted, but that section does not refer to the use of such property while the case is pending. 11 U.S.C. § 1115(a)(2); In re Villalobos, 2011 WL 4485793, slip op. at **8-9 and n. 13.
In filing the Motion, Debtor seeks court approval of his proposed use of estate funds from his postpetition earnings in accordance with his budget for personal living expenses attached to the Motion, apparently because he believes that his proposed budget for use of estate funds is outside the ordinary course of business. The proposed budget to use estate funds of $45,318 per month for personal living expenses of Debtor, a single person with no dependents, on first blush does seem to be outside the ordinary course of business, and Debtor makes no showing that his proposed use of estate funds meets the standard of ordinary course of business under 11 U.S.C. § 363. In re Dant & Russell, Inc., 853 F.2d 700, 704-705 (9th Cir. 1988) (setting forth a two-part legal standard for ordinary course of business under 11 U.S.C. § 363); accord, In re Straightline Investments, Inc., 525 F.3d 870, 879 (9th Cir. 2008).
Debtor's personal living expenses on his proposed budget in the Motion appear to be anything but ordinary for a single individual with no dependents: (1) $24,657 per month (not per year) for housing; (2) $2,500 per month for food; (3) $1,000 per month for entertainment; (4) $2,770 per month for his leased vehicle (a 2015 Porsche Carrera 911 4S Cabriolet 2D as shown on his Schedule D of his petition, Docket No. 13, leased on January 14, 2015 (indicated by the date claim was incurred on the schedule), just over three months before the petition date of April 20, 2015); and (5) $10,500 per month for payment of domestic support obligations (no supporting documentation submitted in the Motion). Exhibit B to Motion; Schedule D to Petition; see also, In re Wood, 68 B.R. 613 (Bankr. D. Haw. 1986)(large expenditures for unreasonable personal living expenses when other legitimate debts are not being paid may signify gross management of individual debtors' business affairs for purposes of 11 U.S.C. § 1112(b) to warrant conversion or dismissal of Chapter 11 case).
If the proposed use of estate funds for personal living expenses is not within the ordinary course of business, a trustee or debtor-in-possession may use, sell or lease estate property only after notice and a hearing and upon a showing of the exercise of reasonable business judgment for such use outside the ordinary course of business under 11 U.S.C. § 363(b)(1). See also, 3 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, ¶¶ 14:75 and 14:595 at 14(I)-6 and 14(I)-49, citing inter alia, In re Lionel Corp., 722 F.2d 1063, 1071 (2nd Cir. 1983) and In re Ernest Home Ctr., Inc., 209 B.R. 974, 979 (Bankr. W.D. Wash. 1997).
Because the evidence in support of the Motion is insufficient to show that Debtor's proposed use of estate funds is within the ordinary course of business or that Debtor has demonstrated reasonable business judgment for such use, the Motion will be denied. Other courts apparently have not articulated a specific and different standard for use of estate funds of an individual Chapter 11 debtor for personal living expenses under 11 U.S.C. § 363 or another Bankruptcy Code provision other than the standards laid out in In re Dant & Russell, Inc., 853 F.2d at 704-705, In re Straightline Investments, Inc., 525 F.3d at 879, or In re Lionel Corp., 722 F.2d at 1071. See also, In re Villalobos, 2011 WL 4485793, slip op. at **8-9 and n. 13. In Villalobos, the Bankruptcy Appellate Panel of the Ninth Circuit reversed the order of the bankruptcy court approving the individual Chapter 11 debtor's personal living expenses on grounds that the bankruptcy court failed to issue sufficient findings of fact and conclusions of law to support approval or disapproval of the expenses in the debtor's proposed budget as well as to support approval of the debtor's budget nunc pro tunc to the petition date. Id. In Villalobos, the Bankruptcy Appellate Panel stated, "[g]iven the uncertainty in this area of the law [i.e., post-BAPCPA], the identification of the proper Bankruptcy Code section for approval of personal expenses of individual Chapter 11 debtors, it is all the more important for the bankruptcy court to articulate the legal rule being applied and the explicit findings of fact that support the legal rule." Id. at *9.
IT IS HEREBY ORDERED as follows:
1. The Motion is denied without prejudice.
2. Debtor is granted leave to file an amended motion which addresses the concerns raised in this order, if he wishes. If Debtor files an amended motion, the court expects that he will submit admissible and credible evidence and briefing to support findings of fact and conclusions of law on the approval or disapproval of the use of estate funds to pay his personal living expenses under the Bankruptcy Code as outlined by the Bankruptcy Appellate Panel in Villalobos and by this court in this order.
3. Debtor may not use the "negative notice" provisions of Local Bankruptcy Rule 9013-1 for such an amended motion.
IT IS SO ORDERED.