Opinion
No. 11-03-14646 ML.
March 14, 2006
Leonard Martinez Metzgar, Office of the United States Trustee, Albuquerque, NM.
James Alford, Las Cruces, NM.
William L .Lutz, Attorney for Benjamin Boldt, Las Cruces, NM.
Kelly Albers, Attorney for the Greenwald Trusts, Las Cruces, NM.
ORDER CONVERTING CASE TO CHAPTER 7
THIS MATTER is before the Court on the United States Trustee's Motion to Dismiss or Convert to a Chapter 7 Proceeding ("Motion"). The Motion asserts that the Debtor's bankruptcy proceeding should either be dismissed or converted to Chapter 7 based on the Debtor's failure to file monthly operating reports, failure to pay quarterly United States Trustee's fees, and failure to file a Chapter 11 plan of reorganization for fourteen months after the date of the filing of the voluntary petition. Benjamin Boldt, by and through his attorneys of record, Martin, Lutz, Roggow, Hosford, Eubanks, P.C. (William L. Lutz), objected to the Motion on grounds that he had entered into a contract with the Debtor for the purchase of the primary asset of the Debtor's bankruptcy estate, and that the sale should be considered in lieu of dismissing or converting the bankruptcy proceeding.
The Court held a final hearing on the Motion to Convert on March 13, 2006 and took the matter under advisement. The Debtor appeared at the hearing, pro se, and requested that his case not be dismissed or converted in light of a recently filed motion to sell which the Debtor asserts would leave him will more funds after payment in full to all creditors than the sale to Benjamin Boldt. After considering the Motion, and being otherwise sufficiently informed, the Court finds that sufficient grounds exist upon which to dismiss or convert the Debtor's Chapter 11 bankruptcy proceeding, and that conversion, rather than dismissal is in the best interest of creditors and the estate. In reaching this conclusion, the Court FINDS:
The proposed purchasers are The Bennet Greenwald Trust and The Michael Greenwald Trust (together, "the Greenwald Trusts"). The Greenwald Trusts appeared by and through their attorney of record, Kelly P. Albers, as interested parties at the final hearing on the Motion to Convert.
1. Debtor filed a voluntary petition under Chapter 11 of the Bankruptcy Code on June 9, 2003.
2. As of March 13, 2006, thirty-three months after the filing of the petition, Debtor has not filed a plan of reorganization.
3. On December 27, 2005, the Court entered a Stipulated Order Approving Motion of Ben Boldt to Approve Sale of Property ("Stipulated Order") which authorized the sale of the Debtor's principal asset, certain real property located at 1701 N. Valley Drive, Las Cruces, New Mexico ("Property") for the terms set forth in the Motion to Approve Sale of Property, and the contract for sale attached thereto.
4. The sale of the Property to Ben Boldt authorized by the Stipulated Order has not closed. The Stipulated Order has not been set aside.
5. On March 9, 2006, the Debtor filed a motion to approve a sale of the Property to the Greenwald Trusts. No notice of objection deadline for that motion has been sent to creditors.
6. Dismissal and conversion of Chapter 11 bankruptcy proceedings is governed by 11 U.S.C. § 1112(b) which provides, in relevant part:
Except as provided in subsection (c) of this section, on request of a party in interest or the United States trustee or bankruptcy administrator, 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 interest of creditors and the estate, for cause, including —
. . . .
(2) inability to effectuate a plan;
7. "The bankruptcy court has broad discretion under § 1112(b)" within which to determine whether dismissal or conversion is appropriate. Hall v. Vance, 887 F.2d 1041, 1044 (10th Cir. 1989).
8. The list of causes contained in 11 U.S.C. § 1112(b), is not exhaustive, and any one of the enumerated grounds may serve as sufficient cause for dismissal or conversion. See In re Tirey Distributing Co., 242 B.R. 717, 723 (Bankr.E.D.Okla. 1999) ("The ten (10) grounds enumerated in § 1112(b) are not exhaustive.") (citing Hall v. Vance, 887 F.2d at 1044)); In re Sunflower Racing, Inc., 226 B.R. 665, 669 (D.Kan. 1998) ("Any one of these grounds would be sufficient to convert the case.").
9. "Under § 1112(b)(2), the bankruptcy court may dismiss or convert a Chapter 11 case if the debtor is unable to effectuate a plan, which means that the debtor lacks the ability to formulate a plan or to carry one out." Hall v. Vance, 887 F.2d at 1044.
The facts enumerated above constitute sufficient cause to convert or dismiss the Debtor's bankruptcy proceeding in accordance with 11 U.S.C. § 1112(b), and indicate that conversion, rather than dismissal is in the best interest of creditors and the bankruptcy estate. The Debtor has had nearly three years within which to file and confirm a proposed plan of reorganization. He has failed to do so. The estate has a significant asset, the sale of which is likely to realize sufficient funds with which to pay all creditors of the bankruptcy estate in full. Conversion of the Debtor's bankruptcy proceeding and the consequent appointment of a Chapter 7 trustee to administer the bankruptcy estate best serves the interests of the bankruptcy estate and its creditors.
WHEREFORE, IT IS HEREBY ORDERED that this case is converted to Chapter 7.