In re Hatem, CIV.A.01-077-CB-C.

• Decision Date: 07 June 2001
• Docket Number: No. CIV.A.01-077-CB-C.,CIV.A.01-077-CB-C.
• Citation: 273 B.R. 900
• Parties: In re Betty Lynn HATEM, Debtor. Betty Lynn Hatem, Appellant, v. Elizabeth Kennedy, Appellee.
• Court: U.S. District Court — Southern District of Alabama

Page 900

273 B.R. 900

In re Betty Lynn HATEM, Debtor Betty Lynn Hatem, Appellant, v. Elizabeth Kennedy, Appellee.

No. CIV.A.01-077-CB-C.

United States District Court, S.D. Alabama, Southern Division.

June 7, 2001.

Samuel M. McMillan, Herman D. Padgett, Mobile, AL, for Betty Lynn Kennedy Hatem.

George W. Finkbohner, Jr., The Finkbohner Law Firm, LLC, Mobile, AL, for Elizabeth L. Kennedy.

John C. McAleer, III, Mobile, trustee.

MEMORANDUM OPINION

BUTLER, Chief Judge.

I. INTRODUCTION

This case is before the Court on appeal from a decision of the United States Bankruptcy Court for the Southern District of Alabama, Case No. 00-14816-WSS-13. On January 4, 2001, the bankruptcy court issued an order denying confirmation of the debtor's Chapter 13 bankruptcy plan and dismissing debtor's Chapter 13 case with a 180-day injunction from filing for relief under any chapter of the Bankruptcy Code. (Bankruptcy Pleadings, Doc. 13). The debtor, Betty Lynn Kennedy Hatem, a/k/a Betty Derouen, a/k/a Betty Harvey ("Hatem"), appeals the bankruptcy court's decision to this Court pursuant to 28 U.S.C. § 158(a).

For the reasons stated below, the Court finds that the bankruptcy court's order is due to be AFFIRMED.

II. FACTUAL AND PROCEDURAL BACKGROUND

This case arises from Hatem's Chapter 13 bankruptcy proceedings. The events leading up to Hatem's Chapter 13 filing are important to an understanding of the case and are set forth briefly herein.

Prior to filing for Chapter 13 bankruptcy, Hatem had been involved in litigation in the Circuit Court of Baldwin County, Alabama, in an action styled Elizabeth L. Kennedy v. Betty Lynn Hatem and Leroy Hatem, CV-97-323, involving a dispute between Hatem and Elizabeth Kennedy, Hatem's mother and the appellee herein, concerning the ownership of 2.7 acres of land and a home located in Montrose, Alabama ("the property"). (Bankruptcy pleadings, Doc. 5, Ex. A). On March 31, 1999, the Circuit Court of Baldwin County set aside a deed executed by Kennedy, which transferred Kennedy's one-half interest in the property to Hatem, holding that the deed was void because it was the result of fraud, deception, and undue influence by Hatem and Hatem's then husband. (Bankruptcy pleadings, Doc. 5, Exs. A and B). The circuit court declared both Hatem and Kennedy once again one-half owners of the property. (Id.). On January 11, 2000, the circuit court issued an order of sale of the property requiring its appraisal, sale, and equitable division. (Bankruptcy pleadings, Doc. 5, Ex. B). The circuit court amended its order on May 11, 2000, in order to give both Kennedy and Hatem the exclusive right to bid on the property within thirty days from the date of filing of the appraisal. (Bankruptcy pleadings, Doc. 5, Ex. B). On October 27, 2000, following Hatem's appeal, the Alabama Court of Civil Appeals affirmed the circuit court's orders. (Bankruptcy pleading, Doc. 5, Ex. C). On November 6, 2000, the court-appointed appraiser filed its appraisal with the circuit court, establishing the value of the property at $410,000.00. (Plaintiff's trial exhibit 9). Pursuant to the circuit court's order of sale, Kennedy and Hatem had thirty days from that date to submit their bids on the property. (Bankruptcy pleadings, Doc. 5, Ex. B).

On November 29, 2000, one week before the expiration of the bid period, Hatem filed these proceedings for Chapter 13 bankruptcy. (Bankruptcy pleadings, Doc. 1). In the petition and accompanying schedules, Hatem indicated that she was the sole owner of the 2.7 acres of land and the home located in Montrose, Alabama, and that the property was subject to a mortgage in favor of Regions Bank in the amount of $54,623.00 and a vendor's lien in favor of Elizabeth Kennedy in the amount of $210,000.00, totaling $264,623.00 in secured claims on the property. (Bankruptcy pleadings, Doc. 1). Hatem also listed unsecured debt of $52,252.00,¹ bringing her total reported liabilities to $316,875.00. (Id.). Hatem listed the value of her interest in the property as $205,000.00 and her total assets, including personal property, as $215,403.00. (Id.). Hatem reported a monthly income of $1,582.00 and monthly expenditures of $1,572.00. (Id.).

Hatem's Chapter 13 plan proposed to pay the Trustee's commission, Hatem's attorney, and the unsecured property tax claim of $1,009.00 by making monthly payments to the Trustee of $50.00. (Bankruptcy pleadings, Doc. 2). The plan further proposed that Hatem would make monthly payments directly to Regions Mortgage, outside the plan, in the amount of $581.00 on its secured mortgage. (Id.). The plan proposed no payments to Hatem's unsecured nonpriority creditors on their claims totaling $51,243.00. (Id.).

On December 13, 2000, Kennedy filed a motion for relief from the automatic stay and to dismiss Hatem's Chapter 13 proceeding on the grounds that Hatem did not file the Chapter 13 petition in good faith; Hatem did not propose a Chapter 13 plan in good faith; and Hatem's sole purpose in filing the petition was to invoke the automatic stay provisions of the Bankruptcy Code to prevent the sale and division of the property by the state court. (Bankruptcy pleadings, Docs. 5 and 6).

On January 4, 2001, Hatem's Chapter 13 case came before the bankruptcy court for a confirmation hearing. (Bankruptcy pleadings, Doc. 13). The Honorable William S. Shulman, United States Bankruptcy Judge, considered Hatem's petition and the proffered evidence, including testimony from Hatem and Kennedy. At the conclusion of the evidence, the bankruptcy court found that the Chapter 13 petition and plan had been filed in bad faith and denied confirmation of the plan and dismissed Hatem's Chapter 13 case with a 180-day injunction against further bankruptcy filings. (R. 65; Bankruptcy pleadings, Doc. 13). On January 10, 2001, the bankruptcy court ruled as moot Kennedy's motions for relief from stay and to dismiss Hatem's Chapter 13 case. (Bankruptcy pleadings, Doc. 14).

On January 11, 2001, Hatem filed her notice of appeal to this Court. (Doc. 1).

III. STANDARD OF REVIEW

The district court sits as an appellate court in an appeal of a bankruptcy court decision. In re Williamson, 15 F.3d 1037, 1038 (11th Cir.1994). Sitting in its appellate capacity, the court makes no independent factual findings. Id. The bankruptcy court's findings of fact will not be set aside unless clearly erroneous. Id. A finding of fact is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire record is left with the definite and firm conviction that a mistake has been committed. General Trading, Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1494 (11th Cir.1997).

In contrast, a district court reviews de novo a bankruptcy court's conclusions of law. In re Simmons, 200 F.3d 738, 741 (11th Cir.2000); Williamson, 15 F.3d at 1038. Equitable determinations by a bankruptcy court are subject to review under an abuse of discretion standard. In re General Dev. Corp., 84 F.3d 1364, 1367 (11th Cir.1996).

IV. ISSUE

Hatem presents the following issue on appeal: whether the bankruptcy court erred in denying confirmation of her Chapter 13 plan, in dismissing her Chapter 13 case, and in refusing to allow her to amend her plan, all for failure to file in good faith. (Docs. 1 and 2).

V. DISCUSSION

On January 4, 2001, at the confirmation hearing on Hatem's Chapter 13 plan, the bankruptcy court found that neither Hatem's Chapter 13 petition nor her plan had been filed in good faith. (R. 64-65; Bankruptcy pleadings, Doc. 13). In addition, the bankruptcy court found that Hatem's purported amended plan, which was proposed by Hatem at the hearing, was not feasible and likewise lacked good faith. (R. 63-64). Based on those findings, the bankruptcy court denied confirmation of Hatem's plan and dismissed Hatem's Chapter 13 case with a 180-day injunction against further bankruptcy filings. (R. 65). It is the bankruptcy court's finding of bad faith that is at issue in this appeal.

Under the Bankruptcy Code, a Chapter 13 plan must be confirmed by the bankruptcy court if meets the six criteria set forth in 11 U.S.C. § 1325(a).² This appeal focuses on the third of these criteria found in § 1325(a)(3), requiring that the plan be proposed in good faith. A Chapter 13 plan cannot be confirmed if it fails to satisfy the good faith requirement. In re Waldron, 785 F.2d 936, 939 (11th Cir.1986) (quoting 11 U.S.C. § 1325(a)(3)). That requirement "is the only safety valve available through which plans attempting to twist the law to malevolent ends may be cast out." Id. (citations omitted).

Whether a Chapter 13 plan has been proposed in good faith is a question of fact subject to the "clearly erroneous" standard of review. In re Saylors, 869 F.2d 1434, 1438 (11th Cir.1989). While the Bankruptcy Code does not define the term "good faith," the Eleventh Circuit has interpreted "good faith" as "requiring that there is a reasonable likelihood that the plan will achieve a result consistent with the objectives and purposes of the Code." In re McCormick, 49 F.3d 1524, 1526 (11th Cir.1995). The petition may not be used as a device to serve some "unworthy purpose" of the petitioner. Waldron, 785 F.2d at 939 (citations omitted).

In analyzing the good faith of the debtor, the court looks to the "totality of the circumstances" surrounding the plan. See McCormick, 49 F.3d at 1526. In In re Kitchens, the Eleventh Circuit set forth a nonexclusive list of factors that the bankruptcy court should consider in making a determination of good faith:

(1) the amount of the debtor's income from all sources; (2) the living expenses of the debtor and his dependents; (3) the amount of attorney's fees; (4) the probable or expected duration of the debtor's Chapter 13 plan; (5) the motivations of the debtor and his sincerity in seeking relief under the provisions of Chapter 13; (6) the debtor's degree of effort; (7) the debtor's ability to earn and the...