Opinion
NOT FOR PUBLICATION
Submitted Without Argument, May 17, 2006
Appeal from the United States Bankruptcy Court for the Eastern District of California. BK. No. 04-23582. Honorable Thomas C. Holman, Bankruptcy Judge, Presiding.
Before: ALBERT, [ BRANDT and PAPPAS, Bankruptcy Judges. Brandt, Bankruptcy Judge, dissenting.
Hon. Theodor C. Albert, United States Bankruptcy Judge for the Central District of California, sitting by designation.
MEMORANDUM
Cau Huu Tran (" Appellant" or " Debtor") appeals a final order dismissing the bankruptcy case entered by the Bankruptcy Court on May 16, 2005. We AFFIRM.
FACTS
Cao Huu Tran (" Appellant" or " Debtor") filed a chapter 13 petition on April 7, 2004. Debtor's bankruptcy filing was prompted by large gambling debts incurred within only a few months of the petition, which Debtor was unable to repay. Apparently, Debtor also borrowed heavily from family members to repay other gambling debts but lost yet further sums. As of the petition date, Debtor owed casinos and family members just under $150,000, many times his annual earnings, all lost in gambling. Debtor acknowledges having a gambling problem.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date (October 17, 2005) of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat. 23.
Debtor filed the first of three successive chapter 13 plans on April 7, 2004. Objections to confirmation were filed by creditors Harrah's Operating Company, Inc. (" Harrah's"), Harvey's Tahoe Management Co., Inc. (" Harvey's"), The Golden 1 Credit Union, and the Chapter 13 Trustee. At the initial hearing on confirmation on August 6, 2004, the Bankruptcy Court, the Honorable Michael McManus presiding, identified Debtor's gambling problem as a major obstacle to confirmation concerning the element of plan feasibility. At the August 6 hearing, the Court specifically requested an evidentiary showing that the gambling problem would not recur. The hearing on confirmation was continued by Judge McManus to August 24, 2004. At the continued hearing on August 24, 2004, the only additional evidence offered by Debtor was his own declaration and those of his family members indicating Debtor's intention to attend Gamblers' Anonymous meetings. In the " Supplemental Declaration of Debtor Cao Huu Tran..." Debtor acknowledged the importance of stopping his gambling and reported his intention to attend regular Gamblers' Anonymous meetings.
Confirmation of that plan was denied. In its opinion, filed October 8, 2004, the Court held that Debtor did not satisfy his burden of showing that his plan was feasible and proposed in good faith. In his Memorandum Opinion, Judge McManus cited to Debtor's large gambling losses incurred just months prior to the bankruptcy filing, the fact that Debtor borrowed money from friends and family members and lost it gambling, and that Debtor admitted to gambling even after filing his bankruptcy petition. The Bankruptcy Court had before it the " Supplemental Declaration of Cao Huu Tran..." referenced above. Judge McManus, however, stated that he had no confidence that Debtor would not gamble while his case was pending, which would render him unable to perform his plan. Judge McManus stated that he did not believe Debtor's claims that he had remedied his gambling problem and so denied confirmation.
On October 15, 2004, the Chapter 13 Trustee filed a Motion to Dismiss, citing " unreasonable delay that is prejudicial to creditors" as cause for dismissal of Debtor's bankruptcy case. The Bankruptcy Court, the Honorable Thomas Holman presiding, conditionally denied the Motion to Dismiss after a hearing on November 3, 2004, because Debtor had in the meantime filed a Second Amended Chapter 13 Plan. Judge Holman also stated that the dismissal motion was denied conditioned upon the Debtor obtaining " confirmation of a plan by December 21st" (the " conditional dismissal"). Further, in the Court's November 3 minute order, it was provided that the Chapter 13 Trustee could file a declaration setting forth the failure to meet the condition and submit an order dismissing the case without further notice.
Debtor filed a Second Amended Plan on October 18, 2004. Harrah's, Harvey's, and the Chapter 13 Trustee (collectively, " Appellees") filed objections to confirmation of that plan. Debtor filed his " Declaration of Debtor Cao Huu Tran in Support of Debtor's Response..." where again he declares that he had attended " either weekly or else every two weeks..." Gamblers' Anonymous meetings. He further declares his determination to resist further gambling. A confirmation hearing was held on December 21, 2004. At that hearing Debtor asked for a continuance to submit an additional plan. The Bankruptcy Court allowed Debtor an additional 10 days to file a further amended plan. The deadline to confirm the plan was extended to March 1, 2005, and the conditional dismissal order was modified accordingly. In its minute order dated December 21, 2004, the Court indicated that the Debtor had failed again to prove feasibility, among other grounds.
Debtor filed his Third Amended Plan on January 3, 2005. Once again, Appellees filed objections to confirmation. Debtor filed his additional " Declaration of Cao Huu Tran in Support of Debtor's Reply..." wherein again he declares he had attended Gamblers' Anonymous approximately weekly and again vows his determination to resist gambling.
At the confirmation hearing held on March 1, 2005, the Court heard from Harrah's and Harvey's that the principal objection was that Debtor " still has not cured the concerns of Judge McManus back in August upon which he based his denial of Debtor's original plan. Debtor still has a gambling problem which has not been addressed, and there is a feasibility issue based on that." At the hearing, Debtor told Judge Holman that he had been attending the Gamblers' Anonymous meetings " two or three times a month." At the request of the objectors, the court continued the matter " for an evidentiary hearing and attest (sic) the accuracy and credibility of Mr. Tran's claim that he has stopped gambling and that he is in fact attending his Gamblers' Anonymous meetings." After quizzing Debtor about the identity of persons who could vouch for his attendance at the Gamblers' Anonymous meetings, and after hearing Debtor's testimony about the existence of possible written records, the Court afforded the objectors an opportunity to conduct limited discovery. At the hearing, the Court informed Debtor about its skepticism concerning his alleged steps to curb his gambling.
The Court further told Debtor's counsel " I'm particularly interested in whether Mr. Tran has been attending his gambling - Gamblers' Anonymous meetings. I know he submitted information along those lines. The creditors don't believe it. They think it's self serving. And so that's, I think, the issue that got us to the point of them wanting to do some discovery and set this for evidentiary hearing." The Court set the evidentiary hearing for approximately 60 days later and set a discovery cutoff deadline of April 29, 2005. The Court specifically requested that the parties be prepared to name their witnesses and documents to be introduced for the continued hearing on May 3, 2005. No formal further extensions were made of the Court's earlier conditional dismissal.
On April 22, 2005, Harvey's and Harrah's filed their " Creditor's Pre-Evidentiary Hearing Statement" wherein, among other things, it was claimed that discovery requests had been propounded on the gambling issue but no response had been, as of that date, timely given by Debtor.
A continued confirmation hearing was held on May 3, 2005. Harrah's and Harvey's argued that they had not received timely responses to their discovery requests from Debtor, and that Debtor did not produce any other evidence to support his plan beyond his self-serving statements contained in his earlier declarations. When asked by the Court if Debtor had submitted any other evidence to support confirmation, Debtor stated nothing further was submitted, although, apparently, an unnamed declarant had come forward at 7:00 p.m. the night before but was unwilling to come to court and was only willing, in any event, to testify as to dates of (presumably Debtor's) attendance (at the Gamblers' Anonymous meetings). The Court was unwilling to accept this declaration or offer of proof in absence of the witness' attendance to testify. Moreover, since Debtor did not know the witness' address, Debtor did not think he could be subpoenaed either. Debtor acknowledged that if the unnamed witness could not be persuaded to testify, then Debtor could not produce any witnesses. The Bankruptcy Court denied confirmation, holding that Debtor failed to submit evidence establishing that his Third Amended Plan was feasible and submitted in good faith, although " debtor has had every opportunity to try and substantiate this plan."
Apparently, some answers were given on the day before the discovery cutoff. Debtor admits these were untimely.
This mystery declaration was not included in the record on appeal.
In its order of May 3, 2005, the Court noted:
This matter was continued from March 1, 2005, to allow the parties an opportunity to engage in discovery and to specifically allow the debtor an opportunity to present evidence of his good faith and the feasibility of his proposed amended plan. The debtor did not timely respond to a discovery request made by objecting creditors, and has not filed supplemental evidence. The trustee's Harrah's Operating Company's and Harveys Tahoe Managment's objections are sustained and the motion to confirm is denied.
The debtor failed to carry the burden of establishing the requirements of 11 U.S.C. § 1325(a)(3) and (6). Specifically, the debtor failed in his burden of submitting sufficient evidence establishing that his plan is feasible and submitted in good faith, particularly in light of his admission of post-petition gambling. The court also relies on Judge McManus' findings that the debtor's prior actions in and out of this court show a lack of his good faith in providing for his debts. The debtor's actions subsequent to Judge McManus' ruling do not show his good faith and cure the impact of his prior actions. In fact, his failure to respond to discovery regarding his post-petition gambling activities (by timely responding or objecting to Harrah's and Harvey's interrogatories) shows his lack of good faith in proposing and supporting this plan.
Plan confirmation can be denied for failing to satisfy one or more of the prerequisites of 11 U.S.C. § 1325. In re Padilla, 213 B.R. 349, 352 (9th Cir. BAP 1997); Keith M. Lundin, Chapter 13 Bankruptcy, 3d. Ed. § 217.1 (2000 & Supp 2004).
Harrah's and Harvey's request for dismissal is denied. These creditors did not request this relief in their original moving papers.
However, nothing was further said concerning the already entered order of the Court from December 21, 2004 conditionally dismissing the case.
After confirmation of Debtor's Third Amended Plan was denied on May 3, 2005, the Chapter 13 Trustee submitted a declaration of Edna Froloff, his assistant, in support of his earlier Motion to Dismiss, consistent with the Bankruptcy Court's direction at the November 3, 2004 hearing and its conditional dismissal. In the declaration, Ms. Froloff states that the Bankruptcy Court entered an order requiring Debtor to confirm a plan by December 21, 2004, and that Debtor had not confirmed a plan within that time (or within the further extended deadline of March 1, 2005).
The Bankruptcy Court entered an order dismissing the case on May 16, 2005. Debtor appeals the order dismissing his bankruptcy case.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and § 157(b)(1). We have jurisdiction under 28 U.S.C. § § 158(b) and (c).
ISSUES PRESENTED
Whether the bankruptcy court erred in granting the Chapter 13 Trustee's Motion to Dismiss.
STANDARD OF REVIEW
This panel reviews the Bankruptcy Court's decision to dismiss a case for abuse of discretion. See Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999). A bankruptcy court abuses its discretion if it bases its ruling upon an erroneous view of the law or a clearly erroneous assessment of the evidence. In re Beatty, 162 B.R. 853, 855 (9th Cir. BAP 1994). The panel also finds abuse of discretion if it has a definite and firm conviction that the trial court committed a clear error of judgment in the conclusion it reached upon weighing the relevant factors. U.S. v. Finley, 301 F.3d 1000, 1007 (9th Cir. 2002). The standard of review for a denial of confirmation is two part: (1) factual questions are reviewed for clear error; and (2) legal questions are reviewed de novo. In re Warren, 89 B.R. 87, 90 (9th Cir. BAP 1988).
DISCUSSION
Debtor argues that the Bankruptcy Court erred when it denied confirmation of Debtor's Third Amended Plan because the only remaining issue was feasibility, and the plan was proposed in good faith. Debtor claims that he provided evidence that he was not gambling in the form of his own declaration, and that Appellees did not produce any contrary evidence. Debtor also argues that it was an abuse of discretion to dismiss the case without an evidentiary hearing to test his credibility on the issue of whether he was still gambling.
Debtor appears to be under the impression that this appeal is of both the order denying confirmation and the order dismissing the case. Fed.R.Bankr.P. 8002(a) provides, in part, that a notice of appeal " shall be filed with the clerk within 10 days of the date of the entry of the judgment, order, or decree appealed from." The order denying confirmation of Debtor's Third Amended Plan was entered on May 11, 2005. Debtor filed a notice of appeal on May 26, 2005. While the notice of appeal was not filed within 10 days of the denial of confirmation as required by Rule 8002(a), this Panel may still consider the confirmation issues raised in this appeal.
Orders denying plan confirmation are interlocutory when the petition itself has not been dismissed. Nicholes v. Johnny Appleseed of Wash. (In re Nicholes), 184 B.R. 82, 86 (9th Cir. BAP 1995). The denial of confirmation was therefore not a final appealable order. Debtor's Notice of Appeal was filed 10 days after the order dismissing the bankruptcy case was entered and clearly states that Debtor " appeals...from the Entry of Order of Dismissal by the bankruptcy judge...on May 16, 2005." The order dismissing the case was a final order. However, an appeal from a final judgment draws in question all earlier non-final orders and all rulings which produced the judgment. Munoz v. Small Bus. Admin., 644 F.2d 1361, 1364 (9th Cir. 1981). Because the Bankruptcy Court's decision to dismiss the case relied upon Debtor's third and last failure to confirm a plan, the parties briefed the issues, and no prejudice is apparent, the order denying confirmation can properly be considered here. Wall Street Plaza, LLC v. JSJF Corporation (In re JSJF Corporation), 344 B.R. 94 (9th Cir. BAP 2006). Based upon the record presented, however, this Panel does not find any basis for disturbing that ruling.
Section 1307(c) provides, in pertinent part:
Except as provided in subsection (e) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause, including -
(1) unreasonable delay by the debtor that is prejudicial to creditors; ....
11 U.S.C. § 1307(c). The list of " causes" in section 1307(c) is not exhaustive. Valenti v. Valenti (In re Valenti), 310 B.R. 138, 151 (9th Cir. BAP 2004), citing, Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224 (9th Cir. 1999).
The Chapter 13 Trustee's Motion to Dismiss cited " unreasonable delay that is prejudicial to creditors" as the basis for the request to dismiss Debtor's case. The " Declaration of Edna Froloff in Support of Motion to Dismiss" filed on May 11, 2005 states that Debtor did not obtain confirmation of a plan within the time required by the Bankruptcy Court. By the time Debtor's case was dismissed, plan confirmation had been denied three times and Debtor had received several opportunities to provide evidence regarding correction of his gambling compulsion in support of the feasibility of the plan, and to show that the plan was proposed in good faith.
After the Chapter 13 Trustee filed his Motion to Dismiss, the Bankruptcy Court set a deadline by which Debtor was to confirm a plan. That deadline was extended twice to give Debtor every opportunity to comply with the requests of the Court. At the May 3, 2005 hearing, Debtor's counsel admitted that Debtor's responses to the Appellee's interrogatories were untimely, and also that Debtor was unable to produce any other evidence in support of his plan. Moreover, this failure to timely respond to discovery, or to produce any further evidence or witnesses concerning Debtor's gambling must be viewed with the Bankruptcy Court's admonition from the March 1 hearing in mind.
The further continued hearing of May 3 was to have been the evidentiary hearing wherein Debtor's credibility was to be tested. Debtor was already on clear notice that the self-serving declarations of Debtor were not adequate because they were not believed. For Debtor to still have provided untimely responses, and to have not been prepared with witnesses or other evidence at the May 3 hearing, sought more indulgence than the court was prepared to give. Nor can Debtor reasonably argue that the Court did not make perfectly clear at the March 1 hearing that the May 3 hearing was to be an evidentiary hearing wherein Debtor's claims of forbearance from gambling were to be tested. See, Khachikyan v. Hahn (In re Khachikyan), 335 B.R. 121, 126-28 (9th Cir. BAP 2005). The parties were expected to be ready to proceed at the May 3 hearing. Id. at 127.
In Vomhof v. U.S., 207 B.R. 191 (D. Minn. 1997), the Bankruptcy Court denied confirmation of the debtors' plan, continued a motion to dismiss and gave the debtors time to file income tax returns that were needed to determine whether debtors' plan would be feasible. The Bankruptcy Court provided that if debtors failed to comply with its order to file the tax returns by a certain date, the case would be dismissed without further notice. When the debtors did not comply with the Court's order, the case was dismissed. Id. at 192. The debtors appealed to the District Court, which affirmed the dismissal. The District Court found that the debtors were clearly required to produce the tax returns, and that they did not produce those returns. The District Court stated that the tax returns were " necessarily helpful for determining the feasibility of a proposed plan, " and the debtor's failure to provide the returns was prejudicial. Id. at 193. The Vomhof court stated that " [f]ailure to supply crucial information required by a court order is proper grounds for dismissal under section 1307(c)(1)." Id.; See also, Howard v. Lexington Invs., Inc., 284 F.3d 320 (1st Cir. 2002). In this case, definitive evidence concerning Debtor's gambling addiction was " crucial information" on the central issues of good faith and feasibility, particularly where Debtor admitted to gambling post petition.
Here, the Bankruptcy Court conditionally dismissed the case subject to a final opportunity to confirm a plan. The deadline for confirmation was extended by nearly six months. Debtor also did not timely comply with discovery requirements directed to this issue despite a deadline set by the Court, and despite the great emphasis placed by the Court at the March 1 hearing that the continued date was to be an opportunity to test Debtor's self-serving testimony.
Debtor argues that it was an abuse of discretion to deny confirmation on the basis of skepticism regarding Debtor's possibly continued gambling " since no evidence was presented to controvert Debtor's sworn statement to the contrary..." Appellant's Brief p. 16-17. However, Debtor misconstrues the operation of a burden of proof. Debtor clearly had the burden of proving both feasibility, In re Wagner, 259 B.R. 694 (8th Cir. BAP 2001), and good faith. In re Soost, 290 B.R. 116 (Bankr. D. Minn. 2003).
" Burden of proof" is defined as " a party's duty to prove a disputed assertion or charge." Black's Law Dictionary, 8th Ed. (1999). The burden of proof includes both the burden of production and the burden of persuasion. Christopher B. Mueller, Laird C. Kirkpatrick, 1 Federal Evidence § 62 (2d ed. 2005). To satisfy the burden of production, a party must introduce sufficient evidence to make out a prima facie case. 150 N. St. Assoc. Ltd. P'ship v. City of Pittsfield, 184 B.R. 1, 7 (Bankr. D. Mass. 1995). A party carries the burden of production by introducing evidence sufficient to support the findings of fact that are necessary to prevail. Id., citing, Federal Evidence, § 64 at 317 (2d ed. 1994). The burden of persuasion is met by introducing evidence that persuades the judge to find the facts necessary if the party is to prevail. 1 Federal Evidence § 65 (2d ed. 2005).
Here, the problem is that the Court made very clear that it did not believe Debtor's declaration that he had cured his gambling problem. Therefore, when it developed at the May 3 hearing that the Debtor had no other witnesses or admissible evidence to lend support to Debtor's assertion, the Court, as trier of fact, was not persuaded that Debtor had proved the key element of feasibility, irrespective of what evidence Appellees did or did not offer.
The Bankruptcy Court is within its power to set reasonable deadlines for the Debtor to accomplish goals in the reorganization, and failure to meet these deadlines can be " cause" for dismissal based on unreasonable delay. See, In re Dilley, 125 B.R. 189, 193-94, 198 (Bankr.N.D.Ohio 1991); In re Gomes, 26 B.R. 124, 126 (Bankr. D.R.I. 1983). Moreover, section 105(a) provides that the court may " issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." Howard, 284 F.3d at 323. Delays in achieving confirmation should not be limitless. Debtor has cited no authority which would suggest that three opportunities to confirm a plan and three extensions of the deadline to obtain confirmation were not ample under the circumstances, nor that a year and a month from the petition date was not an unreasonable delay prejudicial to creditors. Therefore, " cause" to dismiss pursuant to section 1307(c)(1) was shown, and the Bankruptcy Court did not abuse its discretion.
CONCLUSION
The order dismissing the case is AFFIRMED.
Brandt, Bankruptcy Judge, dissenting.
Although I don't disagree with the practicality of the bankruptcy judge's, or the majority's, ruling, I must respectfully dissent: an opposed chapter 13 confirmation is a contested matter governed by Rule 9014, Fed. R. Bankr. P., In re Hull, 251 B.R. 726, 731 (9th Cir. BAP 2000), and there are disputed material factual issues: feasibility, good faith, and underlying these, whether debtor now (at the time of confirmation) has his gambling problem under control, and his credibility. Those issues require an evidentiary hearing, Rule 9014(d); In re Khachikyan, 335 B.R. 121, 126-127 (9th Cir. BAP 2005), and debtor didn't get one. That debtor previously had a gambling problem does not necessarily indicate that he still does, and the only evidence on that point is his uncontradicted declaration. His credibility is untested, and the lack of corroboration, without a determination that he is not credible, is not sufficient.
Nor are there any findings to support what were essentially terminating discovery sanctions, imposed without notice or motion, see In re Shubov, 253 BR 540 (9th Cir. BAP 2000).
Thus I would reverse the denial of confirmation, and, because the dismissal was predicated on the failure to confirm, that order as well.
Finally, although it is of no legal significance, one cannot help but marvel at the irony (and chutzpah) of two casinos objecting to confirmation of a debtor's plan on the ground that he has a gambling problem.