Caldwell, In re

Decision Date14 July 1988
Docket NumberNos. 87-5577,87-5578,s. 87-5577
Citation851 F.2d 852
Parties19 Collier Bankr.Cas.2d 328, Bankr. L. Rep. P 72,358 In re Albert H. CALDWELL, Debtor. James E. HARDIN, James C. Hardin and Ralph Majors, Plaintiffs-Appellees, Cross-Appellants, v. Albert H. CALDWELL, Defendant-Appellant, Cross-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Wade M. Boswell (argued), Knoxville, Tenn., for defendant-appellant, cross-appellee.

Herbert S. Moncier, Ann C. Short (argued), Knoxville, Tenn., for plaintiffs-appellees, cross-appellants.

Before KRUPANSKY and BOGGS, Circuit Judges, and BROWN, Senior Circuit judge.

BOGGS, Circuit Judge.

Three unsecured creditors of a debtor in bankruptcy under Chapter 7 of the bankruptcy code obtained a judgment from the bankruptcy court that their debt was nondischargeable under 11 U.S.C. Sec. 523(a)(6). 1 60 B.R. 214 (Bkrtcy.E.D.Tenn.1986). Less than two months later (and approximately four months after the debtor's bankruptcy had been discharged under Chapter 7, subject to the outcome of the dischargeability proceeding under section 523) the debtor moved to reopen his bankruptcy and to convert it to Chapter 13.

The bankruptcy court allowed the conversion. In considering whether to approve the debtor's plan to repay the unsecured creditors (the only creditors affected by the plan), the bankruptcy court extensively analyzed whether the plan met the requirements for confirmation listed in 11 U.S.C. Sec. 1325. Among the requirements particularly discussed were the debtor's good faith in proposing the plan (1325(a)(3)), whether the unsecured creditors would receive an amount under the plan which is not less than the amount they would receive under a Chapter 7 liquidation (1325(a)(4)), and whether all of the debtor's "projected disposable income" would be used to make payments under the plan (1325(b)(1)(B)). 2 The bankruptcy court, after making findings of fact and conclusions of law, determined that all of the requirements for confirmation were satisfied and confirmed the plan. 67 B.R. 296.

The creditors appealed to the district court. The district court did not conclude that any of the bankruptcy court's findings of fact were clearly erroneous or that any of the bankruptcy court's conclusions of law were incorrect. However, the district court expressed its doubt concerning, inter alia, the debtor's motivation in seeking bankruptcy, the debtor's good faith in proposing the plan and the propriety of approving a plan which "did not provide for eventual payment of the entire judgment and interest to the date of the chapter 7 filing." Thus, because of the district court's "impression that the confirmed plan may constitute an abuse of the provisions and purposes of chapter 13," it vacated the bankruptcy court's confirmation of the plan and ordered that the case be remanded to the bankruptcy court for reconsideration.

The debtor then appealed the district court's decision to this court and the creditors cross-appealed in order to preserve their objections to the plan. We conclude that the district court's decision in its present form is unreviewable. Accordingly, we vacate the decision of the district court and remand to that court for an explicit determination of whether the bankruptcy court's confirmation of the plan is based on clearly erroneous findings of fact, erroneous conclusions of law, or is neither factually nor legally in error.

I

We summarize briefly the facts attendant to this bankruptcy which most likely prompted the district court's "impression." James E. Hardin, James C. Hardin and Ralph Majors (respectively, father, son, and son-in-law, and collectively referred to as "the judgment creditors") obtained a state court judgment against Albert Caldwell, the debtor, for false arrest, false imprisonment and malicious prosecution. The total amount of the judgment, after the Tennessee Court of Appeals modified the judgment due to Caldwell's financial condition, is $40,000.

The judgment is the result of what became known in Knoxville, Tennessee, as the "Santa Claus Caper." During the 1978 Christmas holidays, Ralph Majors observed a man running away with a plastic Santa Claus which had been on the front porch of the Hardin home. The man later was identified as Larry Caldwell, Albert Caldwell's son.

The judgment creditors chased Larry Caldwell and his accomplice, Robert Campbell. When they caught up with the thieves, an altercation ensued involving a sawed-off shotgun taken from Campbell's automobile and a pistol taken from Larry Caldwell's coat pocket. Although the shotgun went off, no one was injured. After the police arrived at the scene, they found another loaded gun in Larry Caldwell's possession, a spring-loaded switchblade knife on Campbell, and a second shotgun in Campbell's automobile.

Albert Caldwell, Assistant Chief of Police for Knoxville, Tennessee, who arrived on the scene after the struggle, spoke with Majors that night. Caldwell told Majors that he would take care of his son. Four days later, Caldwell had his son, Campbell and another individual, Mark Swaggerty, swear out complaints against the judgment creditors for assault and battery.

Caldwell then personally supervised the arrests of the judgment creditors. However, after a hearing in state court, all charges against the judgment creditors were dropped. (Campbell and Larry Caldwell eventually were indicted by a grand jury, and, after approximately three years of proceedings, entered into a plea agreement with the local district attorney.)

As a result of these events, the judgment creditors sued Caldwell for false arrest, false imprisonment and malicious prosecution. They obtained a judgment in their favor. As already noted, the judgment was modified but substantively affirmed by the Tennessee Court of Appeals. Caldwell applied for permission to appeal to the Tennessee Supreme Court but on August 12, 1985, permission was denied.

Less than two months later, Caldwell filed for bankruptcy under Chapter 7. The only unsecured creditors listed in his debt schedules were the three judgment creditors.

The judgment creditors had their debt deemed nondischargeable under the bankruptcy code. Thus, although Caldwell obtained a discharge under Chapter 7, he still was indebted to the judgment creditors for the full amount of their claim.

Two months after the judgment creditors' debt had been deemed nondischargeable, Caldwell sought to reopen the bankruptcy and to convert the case to Chapter 13. Although the judgment creditors opposed the motion, the bankruptcy court granted it. Caldwell then filed an updated schedule of his income and expenses and a proposed Chapter 13 plan to pay the judgment creditors. The plan proposed that Caldwell would pay to the trustee Caldwell's "projected disposable income" of $400 a month out of his wages for 36 months. Caldwell subsequently modified the plan, proposing that the monthly payment to the trustee be increased to $550 and that any tax refunds he might receive which were attributable to his earnings after conversion of the case to Chapter 13 also would be used to pay the judgment creditors.

The judgment creditors objected to the plan. A confirmation hearing was held on September 11, 1986. Caldwell testified at the hearing that he is 54 years old, in good health, married and has three grown children. His wife is not employed outside the home. He has been employed with the Knoxville Police Department since 1960. His gross monthly salary is $2,889.47 and his take-home pay is $2,177.92 per month. He stated that he does not intend to retire in the near future. He holds a current real estate license.

The bankruptcy court confirmed the modified plan, finding that it met the requirements for confirmation listed in 11 U.S.C. Sec. 1325, including the requirement of section 1325(a)(3) that "the plan has been proposed in good faith and not by any means forbidden by law." Although the bankruptcy court determined that the plan would pay the judgment creditors only about $20,000, approximately half of what they were due, the bankruptcy court calculated that the maximum amount available to the creditors if the estate were liquidated under Chapter 7 would be less than that, and, therefore, 11 U.S.C. Sec. 1325(a)(4) was satisfied.

The judgment creditors appealed to the district court. The district court agreed with the bankruptcy court that Caldwell had the right to have the Chapter 7 discharge revoked and his bankruptcy converted to proceedings under Chapter 13. As already noted, however, the district court stated:

the Court ... is left with the distinct impression that Mr. Caldwell is not the type of debtor the bankruptcy laws were intended to protect. While he faces a state court judgment in the amount of $40,000, and interest accrued at the time of his chapter 7 filing in the amount of $6,562, Mr. Caldwell is 54 years old, in good health, earning a gross income of approximately $35,000 a year, in possession of a current real estate license, and a tenant by the entirety of a home valued at over $72,000 with an equity estimated at $71,000. He has no unsecured debts other than this judgment and is in no apparent financial difficulty. He could easily satisfy this judgment by borrowing the money against the equity in his house and insuring the loan to protect his wife from having to pay in the event of his untimely death.

In addition, it would appear that the $500 value placed on the debtor's right of survivorship in a home with an equity of $71,000 is exceedingly low--although this Court recognizes that the bankruptcy court was dealing with the evidence placed before it.

The appellants urge this Court to consider whether the plan was proposed in good faith in light of the factors set forth in In re: Estus, 695 F.2d 311 (8th Cir.1982). They insist that it consider, among other things, that the debtor misrepresented his debts by claiming his wife's...

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