Hall v. Vance
| Citation | 887 F.2d 1041 |
| Decision Date | 16 October 1989 |
| Docket Number | No. 89-5079,89-5079 |
| Parties | , Bankr. L. Rep. P 73,127 Jeffrey Raleigh HALL and Suzanne C. Hall, Plaintiffs-Appellants, v. Katheryn VANCE, Assistant United States Trustee, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (10th Circuit) |
Jeffrey Raleigh Hall and Suzanne C. Hall, pro se.
Stuart E. Schiffer, William Kanter, Carol Park Wood, and Richard A. Wieland of the U.S. Dept. of Justice, Wichita, Kan., and John E. Logan of the U.S. Dept. of Justice, Washington, D.C., for defendant-appellee.
Before LOGAN, MOORE and ANDERSON, Circuit Judges.
After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed.R.App.P. 34(a); 10th Cir.R. 34.1.9. The cause is therefore ordered submitted without oral argument.
Jeffrey and Suzanne Hall appeal a decision of the United States District Court for the Northern District of Oklahoma affirming the bankruptcy court's dismissal of their Chapter 11 petition. The Halls, appearing pro se, pose numerous challenges to the decisions of the bankruptcy and district courts. Upon review, we find that only one of these assignments of error has merit. We hereby affirm the district court's holding that the bankruptcy court properly dismissed the case but reverse the district court's affirmance that the dismissal be with prejudice.
The Halls filed a petition for Chapter 11 reorganization in the bankruptcy court for the Northern District of Oklahoma on October 21, 1987. Shortly after the exclusive 120-day period for filing a debtor's reorganization plan had expired, the United States Trustee (the Trustee) filed a motion to dismiss. Among the alleged grounds for dismissal was the Halls' failure to file a plan or disclosure statement within the 120-day period. Approximately one month later, AACO Automotive, a creditor of debtor Jeffrey Hall, also filed a motion to dismiss based on, among other grounds, the debtors' failure both to supply sufficient information with which a creditor could draw up a reasonable plan and to propose a plan or file a disclosure statement.
At a status conference held on March 31, 1988, the bankruptcy judge set deadlines for filing proof of claims, for the debtors' filing of objections, and for the debtors' submission of a disclosure statement and plan of reorganization. He also set a hearing for June 24, 1988, to consider approval of the disclosure statement and the two motions to dismiss.
The Halls failed to meet their deadlines, filing their objections three days late and their reorganization plan (the Plan) and disclosure statement (the Statement) one day late. They also filed their required monthly reports after the deadlines set by the Trustee. Both the Trustee and Sooner Federal, the Halls' largest secured creditor, filed objections to the Halls' Statement, claiming that it lacked adequate financial information, such as rental income flow, a description of assets and liabilities, and accrued administrative expenses.
At the hearing, the bankruptcy judge suggested to the Halls that he appoint a trustee to value the assets and income of their estate and manage the income generated. When Jeffrey Hall objected to the appointment of a trustee, the judge dismissed the case with prejudice.
In its order of dismissal, the bankruptcy court relied on 11 U.S.C. Secs. 1112(b)(2), (3) and (4), holding that the Halls' failure to meet the court's deadlines for filing objections to proofs of claim and for filing the Plan and Statement as well as their failure to meet the Trustee's deadlines for filing monthly reports supported dismissal under Sec. 1112(b)(4). Dismissal under Sec. 1112(b)(2) was justified because of the inadequacies of the Statement, including failure to provide a description of the debtors' business with an enumeration of assets and liabilities, accounts receivable, the condition of the property, the maintenance required and the values associated with each parcel of real property; failure to provide to creditors a reason for the debtors' financial difficulty; failure to provide the creditors with debtors' cash requirements for operating the properties; and failure to denominate the claimants into classes and identify their treatment under the Plan. The court concluded that these omissions in the Statement constituted unreasonable delay which was prejudicial to the creditors and warranted dismissal under Sec. 1112(b)(3).
The Halls appealed the dismissal to the district court which referred the case to a magistrate for an advisory hearing. The Halls objected to the referral and did not appear at the hearing. The district court affirmed the magistrate's recommended dismissal, holding that the bankruptcy court's findings of fact were not clearly erroneous. The district court failed to address the Halls' other assignments of error. The Halls here seek review of that decision.
It is well established that neither this court nor the district court can disturb a bankruptcy court's findings of fact unless they are clearly erroneous. In re Branding Iron Motel, 798 F.2d 396, 399 (10th Cir.1986); Fed.R.Bankr.P. 8013. A factual finding is clearly erroneous " 'when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). This court, however, may exercise de novo review over the bankruptcy court's conclusions of law. In re Branding Iron Motel, 798 F.2d at 399-400.
The Halls claim that the bankruptcy court's findings of fact were clearly erroneous. They focus in particular on the court's enumeration of the omissions in their Statement. While the Statement does address some of the areas which the bankruptcy court found the debtors had omitted, the information which was disclosed simply does not meet the standard of adequacy which 11 U.S.C. Sec. 1125(a)(1) requires. That section states:
"[A]dequate information" means information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor's books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan....
The bankruptcy court properly concluded that this information had not been provided.
The bankruptcy court found that the Statement failed: (1) to enumerate the assets and liabilities, accounts receivable, physical condition and maintenance required for each parcel of real property; (2) to provide the reason for debtors' financial difficulty; (3) to provide the creditors with the cash requirements needed by the debtors to operate the properties; (4) to identify any escrowed funds held on behalf of the debtors' tenants; (5) to reveal the status of any pending litigation against the debtors and their assets; and (6) to identify the tax consequences which may arise as a result of the debtors' reorganization. These failures are clearly contrary to Sec. 1125(a)(1); therefore, we must reject the Halls' contention that the bankruptcy court's findings of fact were clearly erroneous.
The bankruptcy code (the Code) 1 enumerates ten grounds upon which a bankruptcy court may dismiss a Chapter 11 case or convert it into a case under Chapter 7. 11 U.S.C. Sec. 1112(b)(1)-(10). This list is not exhaustive. H.R.Rep. No. 595, 95th Cong., 1st Sess. 405-06, reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6361-62; In re Larmar Estates, Inc., 6 B.R. 933, 936 (Bankr.E.D.N.Y.1980). Dismissal or conversion must be at the request of a party, after notice and a hearing, and for cause. 11 U.S.C. Sec. 1112(b); 5 Collier on Bankruptcy p 1112.03, at 1112-14 (15th ed. 1979). The bankruptcy court has broad discretion under Sec. 1112(b). S.Rep. No. 989, 95th Cong., 2d Sess. 117, reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5903; In re Koerner, 800 F.2d 1358, 1367 (5th Cir.1986).
Under Sec. 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. Moody v. Security Pacific Business Credit, Inc., 85 B.R. 319, 345 (W.D.Pa.1988), vacated on other grounds sub nom. Moody v. Simmons, 858 F.2d 137 (3d Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 1529, 103 L.Ed.2d 835 (1989); In re Economy Cab & Tool Co., 44 B.R. 721, 725 (Bankr.D.Minn.1984). While the courts have generally applied this ground where the debtor is a corporate shell, In re Economy Cab, 44 B.R. at 725, they have also granted dismissals or conversions under Sec. 1112(b)(2) where the debtor is an individual and the estate creditors continue to suffer losses as a result of the delay. See In re Koerner, 800 F.2d at 1368; Fossum v. Federal Land Bank, 764 F.2d 520, 521-22 (8th Cir.1985); In re McDermott, 77 B.R. 384, 386 (Bankr.N.D.N.Y.1987). In Koerner, for example, the Fifth Circuit held that conversion under Sec. 1112(b)(2) was appropriate where the individual debtor had submitted only a "nebulous plan" over a sixteen-month period. 800 F.2d at 1368. Similarly, in In re Cassavaugh, 44 B.R. 726 (Bankr.W.D.Mo.1984), the bankruptcy court dismissed a Chapter 11 petition under Sec. 1112(b)(2) because the farm debtors had failed to present an acceptable plan within eight months of the petition.
The Halls contend that the bankruptcy court's findings of fact do not support dismissal under Sec. 1112(b)(2) because the...
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