In re Fricker
| Decision Date | 26 July 1990 |
| Docket Number | Bankruptcy No. 89-11904S. |
| Citation | 116 BR 431 |
| Parties | In re Robert P. FRICKER and Dolores A. Fricker, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Mark Kravitz (prior atty.), David M. Still, Norristown, Pa., for debtors.
Stephen Raslavich, Philadelphia, Pa., for Acceptance Associates of America, Inc. and "line banks".
Ross Weiss, Elkins Park, Pa., for Frank P. Lalley in his capacity as Sheriff of Montgomery County.
Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.
Joel Friedman, Media, Pa., for Herman Neumann.
Ellen McDowell, Philadelphia, Pa., for Meritor Sav. Bank.
The present posture of this case causes us to consider two general issues: (1) Whether the only Chapter 13 Plan of Reorganization which the Debtors have filed in this case can be confirmed; and (2) If not, whether we should dismiss the case sua sponte, as we indicated, in a prior order, we would do if the plan could not be confirmed at this time.
The first issue causes us to analyze the relative burdens of proof of Chapter 13 debtors and objectors to their Chapter 13 plan when objections to the confirmation of the plan are raised under 11 U.S.C. §§ 1325(a)(3), (a)(5), and (a)(6). We hold that, while the objector bears the burden of clearly articulating the nature of any objection on these grounds, the ultimate burden of proof is upon debtors to establish an entitlement to confirmation, rather than upon objectors to establish the validity of their objections. In the instant case, we conclude that the Debtors have failed to establish their entitlement to confirmation under §§ 1326(a)(3), (a)(5), and (a)(6). Therefore, confirmation must be denied. We also find that we have the power to dismiss this case and that it is appropriate to exercise that power in the context of the instant factual situation. We will, however, keep the case open to, inter alia, allow the trustee to pursue recovery of compensation improperly paid to the Debtors' counsel.
On April 6, 1990, we filed an Opinion in an adversary proceeding arising in this Chapter 13 bankruptcy case, Adv. No. 89-0704S, reported as In re Fricker, 113 B.R. 856 (Bankr.E.D.Pa.1990) ("Fricker I"), in which we set aside a pre-petition sheriff's sale of the home of ROBERT P. FRICKER and DOLORES A. FRICKER, the Debtors ("the Debtors"), conducted in execution of a confessed judgment obtained against them by a secured creditor, Acceptance Associates of America, Inc. ("AAA"). Id. at 864-66. In that Opinion, we also considered at length the attacks by the Debtors, in that proceeding, against AAA's right to make any claim against them. Id. at 866-73. Ultimately, we determined that, in light of our reordering of the parties' positions by the invalidation of the sale, we should give AAA and the purchaser at the sale, Herman Neumann ("Neumann"), an opportunity to file proofs of claim which would result in our fixing the amounts of their claims, in order that the Debtors could have a firm basis on which to present a Plan of Reorganization for confirmation. Id. at 873. Accord, e.g., In re Orsa Associates, 99 B.R. 609, 618, 624 (Bankr.E.D.Pa. 1989); and In re Corbett, 80 B.R. 32, 38 (Bankr.E.D.Pa.1987).
In a second, presently unreported Opinion of June 11, 1990 ("Fricker II"), having previously established that Neumann had no valid claim, slip op. at 3-5, we held that AAA's secured claim should be fixed at $40,000. Id. at 20-42. Then, having expressed concern that the Debtors and their counsel were utilizing this bankruptcy case "as a vehicle for delay, with no real agenda for or prospect for a successful reorganization," id. at 44, we ordered that the Debtors must file any necessary Amended Plan by July 6, 1990; that any interested parties were obliged to file any Objections thereto by July 17, 1990; and that a final hearing to consider confirmation and whether this case should be dismissed be scheduled on July 19, 1990. By way of emphasis, we concluded our Order with the following paragraph:
7. No continuances of the time deadlines set forth herein or of the hearings scheduled . . . shall be permitted, and this case may be dismissed if no plan can be confirmed on July 19, 1990.
On June 28, 1990, following appeals by the Debtors and Neumann from our Orders in Fricker I, see Fricker II, slip op. at 4-5, AAA filed an appeal to the district court from the Order of June 22, 1990. However, there was no response from the Debtors to this Order until they filed a cross-appeal and a request for a stay of the Order of June 22, 1990, pending appeal in the late afternoon of July 6, 1990, the very day that any amended Plan was to be filed. Since our Order of June 22, 1990, expressly indicated our desire to preclude any sort of delay and we did not wish the parties to have any doubt that the time-restrictions established in that Order would not be altered, we immediately denied that request. The Debtors took no further action until July 17, 1990, when they filed a Motion for Leave to Appeal Pursuant to Bankruptcy Rule 8003(c) and/or for Writ of Mandamus, and Stay Pending Review/Appeal, in the district court at C.A. No. 90-4334, which was assigned to the Honorable Clifford Scott Green.
No order was issued in that proceeding as of the morning of July 19, 1990, and, at the confirmation hearing, we were advised that Judge Green had scheduled a hearing on the motion at 4:00 P.M. that day. Accordingly, we proceeded with the confirmation/dismissal hearing scheduled in our Order of June 22, 1990, staying the entry of any Order until we learned, in the late afternoon, that Judge Green had taken the motion under advisement, presumably to wait to see whether our disposition would render that proceeding and all of the accompanying appeals moot.
Not having filed an Amended Plan, the Debtors, at the July 19, 1990, hearing, were forced to attempt to procure confirmation of their only Plan of Reorganization ever filed of record in the case, which had been filed on July 6, 1990. The terms of this Plan, which we find in several instances to be sufficiently vague as to cause us to be reluctant to paraphrase it, were as follows:
Objections to this Plan were filed by AAA and Neumann, invoking 11 U.S.C. §§ 1325(a)(3), (a)(5), and (a)(6), which provide as follows:
Most of the texts of the respective Objections were consumed with a litany of the alleged misdeeds of the Debtors' present counsel, David M. Still, Esquire, over the course of these proceedings. The most serious, chronicled in Fricker II, slip op. at 6-7, concerned the disposition of the Debtors' "escrow deposits" with their counsel during the course of this case which, in testimony in the adversary proceeding, the Debtors indicated were being saved to make current payments to Meritor. On May 8, 1990, after a series of efforts by the Debtors' counsel to evade this disclosure, see id., it was discovered that, while the Debtors had deposited $21,087.88 with their counsel since the commencement of the case, part of which was paid to the trustee, the better part of it, i.e., $12,474.72, was withdrawn by the Debtors' counsel for unapproved counsel fees and costs, and only $19.66 potentially payable to Meritor remained...
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