Ferrell v. Countryman
| Citation | 398 B.R. 857 |
| Decision Date | 06 January 2009 |
| Docket Number | Civil Action No. 4:08-CV-330. |
| Parties | Ronald C. FERRELL, Jr., and Sharon L. Ferrell, Appellants, v. Janna L. COUNTRYMAN, Chapter 13 Trustee, Appellee. |
| Court | U.S. District Court — Eastern District of Texas |
Pending before the court is an appeal of a decision rendered by United States Bankruptcy Judge Brenda T. Rhoades ("Judge Rhoades") denying Appellants Ronald C. Ferrell, Jr., and Sharon L. Ferrells' (collectively, "the Ferrells") Motion to Alter or Amend Dismissal Order Entered on May 21, 2008, Motion for Relief from the Egregious Effect of the Agreed Order Entered in this Case on February 9, 2006, Request for Attorney Fees and Sanctions Against the Chapter 13 Trustee, Motion to Reinstate Debtor's Chapter 13 Case with Notice of Hearing. See In re Ferrell, No. 04-40048, 2008 WL 2857141 (Bankr. E.D.Tex. July 21, 2008). Having reviewed the opinion, the record, the submissions of the parties, and the applicable law, the court is of the opinion that the decision of the bankruptcy court should be affirmed.
The Ferrells initiated this bankruptcy proceeding by filing a voluntary petition for relief under Chapter 13 of the Bankruptcy Code on January 5, 2004. Subsequently, Janna L. Countryman ("the Trustee") was appointed Trustee. On August 4, 2004, the bankruptcy court entered an order confirming the Ferrells' Chapter 13 Plan ("the Plan"), which required that the Ferrells make six monthly payments of $421.00 and 54 monthly payments in the amount of $502.00, for a total payment of $29,634.00 over 60 months.
On March 31, 2005, following the Ferrells' failure to make the required payments, the Trustee filed a motion to dismiss the case. A hearing was held on October 19, 2005, at which time the motion was withdrawn. On October 20, 2005, the bankruptcy court entered an Agreed Order Approving Modified Plan and Limiting Notice, in which the Plan was modified to require the Ferrells to pay the sum of $316.38 per month for 19 months beginning February 19, 2004, and then $515.90 per month for 41 months beginning September 19, 2005, for a total payment of $27,163.12 over 60 months.
On January 20, 2006, the Trustee filed another motion to dismiss the case based on the Ferrells' failure to make the required payments under the modified Plan, which, as of January 19, 2006, left them in default in the amount of $1,546.42. On February 9, 2006, prior to a hearing on the motion, the parties submitted an Agreed Order on Trustee's Motion to Dismiss ("Agreed Order"), in which the parties agreed and the bankruptcy court ordered that:
1. In addition to the regular monthly plan payments, the Chapter 13 Trustee's office must receive all past due Chapter 13 plan payments that are owed through January 19, 2006, in the total amount of $1,546.42 to be paid as follows:
a. $515.47 delinquency payment due by February 3, 2006, and monthly plan payment of $515.90 due February 19, 2006;
b. $515.47 delinquency payment due by March 3, 2006, and monthly plan payment of $515.90 due March 19, 2006;
c. $515.48 delinquency payment due by April 3, 2006, and monthly plan payment of $515.90 due April 19, 2006; and 2. The Debtors shall remain current on the monthly plan payments until this case is completed.
3. In the event the Debtors fail to make any of the payments referenced in Paragraphs 1 and 2 hereinabove, the Trustee will submit a Certificate of Non-Compliance and the Court will enter the Dismissal Order submitted therewith without further motion.
On May 8, 2008, the Trustee filed a Certificate of Non-Compliance with the bankruptcy court, stating that the Ferrells "failed to make the required monthly payment amount, and thus failed to bring the Chapter 13 Plan payments current in accordance with the Conditional Dismissal Order." The Ferrells filed a Motion to Modify Chapter 13 Plan on May 15, 2008.
On May 21, 2008, pursuant to the Agreed Order and the Certificate of Non-Compliance, the bankruptcy court entered an Order Dismissing Chapter 13 Case with Retention of Jurisdiction ("Dismissal Order"), dismissing the Ferrells' case. Subsequently, on May 27, 2008, the Ferrells filed a Motion to Alter or Amend Dismissal Order Entered on May 21, 2008, a Motion for Relief from the Egregious Effect of the Agreed Order Entered in this Case on February 9, 2006, a Request for Attorney Fees and Sanctions against the Chapter 13 Trustee, and a Motion to Reinstate Debtor's Chapter 13 Case with Notice of Hearing pursuant to Federal Rules of Civil Procedure 59(e) and 60(b). In their motions, the Ferrells argue that they entered into the Agreed Order without the benefit of attorney representation. They further assert that the Trustee failed to perform her statutory duties because she did not disclose that the Agreed Order waived all future opportunities to file a modified plan under 11 U.S.C. § 1329 and that they were misled by the Trustee's representative, who allegedly stated that the Trustee would file a motion to dismiss as opposed to a Certificate of Non-Compliance.
A hearing was held, and on July 21, 2008, the bankruptcy court entered an order denying the Ferrells' motions. Based on the Ferrells' failure to make their Plan payment obligations, Judge Rhoades found that cause existed to dismiss their bankruptcy case at the time the dismissal order was entered pursuant to United States Bankruptcy Code § 1308(c)(6). On July 30, 2008, the Ferrells filed their Notice of Appeal regarding the bankruptcy court's memorandum and order. On September 2, 2008, they submitted Appellants' Designation of Record and Statement of Issues on Appeal, setting forth the following issues for review by this court:
A. Entry of the Dismissal Order on May 21, 2008, constituted clear error of law in that the Modification filed by Debtors on May 15, 2008, and before completion of their plan payments changed the plan terms whereby Debtors were in fact current on their plan payments under the modification when the Court entered the Dismissal Order.
B. Striking of the Debtors' Motion to Modify filed on May 15, 2008, constituted clear error of law in that 11 U.S.C. § 1329 provides an absolute right for Debtors to file an amendment of their plan after confirmation and before the end of payments under the plan.
C. Entry of the conditional Agreed Order constituted clear error of law and an abuse of discretion in that the Agreed Order modified the terms of Debtors' plan without determining under 11 U.S.C. § 1329(b)(1) and 11 U.S.C. § 1325(a)(6) whether it was feasible for the Debtors to make the payments required under the Agreed Order.
D. Entry of the conditional Agreed Order constituted clear error of law and an abuse of discretion in that the Agreed Order modified the terms of Debtors' plan without giving the twenty-day negative notice to the parties as required by FRBP 3015(g).
E. Entry of the conditional Agreed Order constituted clear error of law and an abuse of discretion in that the application of the "drop dead" clause to all future payments under the plan conflicts with 11 U.S.C. § 1329, which gives the Debtors an absolute right to file a plan modification at any time after confirmation of the plan but before the completion of payments under such plan.
F. When the Chapter 13 Trustee advised Debtors that they could either sign the Agreed Order or pay their entire deficiency in one lump sum prior to the dismissal hearing, the Trustee failed to perform her statutory duties under 11 U.S.C. § 1302(b)(4) in that she failed to advise Debtors that they also had the option of filing a modification of their plan under 11 U.S.C. § 1329 and she thereby failed properly to advise, other than on legal matters, and assist the Debtors in performance under the plan.
G. Presenting the proposed Agreed Order to Debtors and to the Court constituted clear error of law in that the Chapter 13 Trustee through the Agreed Order contractually abrogated her 11 U.S.C. § 1302(b)(4) duties to advise, other than on legal matters, and assist the Debtors in performance under the plan.
This court has jurisdiction of this appeal pursuant to 28 U.S.C. § 158(c)(2), which provides that an appeal from the bankruptcy court to the district court "shall be taken in the same manner as appeals in civil proceedings generally are taken to the courts of appeals from the district courts . . ." Therefore, "when reviewing a bankruptcy court's decision in a `core proceeding,' a district court functions as a[n] appellate court."1 In re Webb, 954 F.2d 1102, 1103-04 (5th Cir.1992). In reviewing a decision of the bankruptcy court, Rule 8013 of the Federal Rules of Bankruptcy Procedure requires the court to accept the bankruptcy court's findings of fact unless clearly erroneous and to examine de novo the conclusions of law. See Drive Fin. Servs., L.P. v. Jordan, 521 F.3d 343, 346 (5th Cir.2008); In re Soileau, 488 F.3d 302, 305 (5th Cir.2007); Carrieri v. Jobs.com Inc., 393 F.3d 508, 517 (5th Cir. 2004); In re Homeowners Mortgage & Equity, Inc., 354 F.3d 372, 375 (5th Cir. 2003). A finding of fact is clearly erroneous when although there is evidence to support it, the reviewing court is left with a firm and definite conviction that a mistake has been committed. See Wilson v. Huffman (In re Missionary Baptist Found. of Am.), 712 F.2d 206, 209 (5th Cir.1983); see also In re Perry, 345 F.3d 303, 309 (5th Cir.2003) (quoting In re Dennis, 330 F.3d 696, 701 (5th Cir.2003)).
In December 2007, the Ferrells' payment patterns became erratic.2 As a consequence, on May 8, 2008, the Trustee filed a Certification of Non-Compliance, stating:
Upon the Debtors' failure to make Chapter 13 Plan payments, the Trustee filed a Motion to Dismiss. At the hearing on same, the...
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