In re Nicholes
| Decision Date | 23 June 1995 |
| Docket Number | BAP No. ID-94-1188-RuMeJ. Bankruptcy No. 93-02824. |
| Citation | 184 BR 82 |
| Parties | In re Preston Neil NICHOLES, Debtor. Preston Neil NICHOLES, Appellant, v. JOHNNY APPLESEED OF WASHINGTON; John H. Krommenhoek, Chapter 13 Trustee, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Marc S. Tanner, Boise, ID, for Preston Neil Nicholes.
Timothy J. Carlson, Yakima, WA, for Johnny Appleseed.
Before RUSSELL1, MEYERS and JONES, Bankruptcy Judges.
A Chapter 13 debtor appeals the bankruptcy court's summary order denying confirmation of his Chapter 13 plan.
The debtor, Preston Neil Nicholes, is the president, director, and sole shareholder of Boss Fruit & Vegetable, Inc. ("Boss Fruit"). Boss Fruit is an Idaho corporation and a licensee under the Perishable Agricultural Commodities Act ("PACA") codified at 7 U.S.C. §§ 499a et seq.
On September 28, 1993, the debtor filed his petition for Chapter 13 relief, listing himself in the caption as "dba Boss Fruit & Vegetable, Inc." His schedule of unsecured nonpriority claims consisted of 13 pages of debts which totalled $4,103,290.80. All of the claims, with the exception of the first one listed for trucking in the amount of $8,400.10, were listed as contingent debts.2 Other than the trucking claim, seven (7) claims which totalled $81,506.50 denominated as being for "freight," and a claim for legal fees in the amount of $26.40, the debtor did not list the consideration for any of the claims. The debtor contended that the debts were contingent because they were incurred by Boss Fruit and were not owed by the debtor.
The debtor's plan provided that he would pay $143 per month to the Chapter 13 trustee for 36 months. In the first year of the plan, $135.32 of the $143 payment would be paid on administrative (primarily debtor's attorney's fees) and priority claims. The debtor's plan proposed to pay holders of secured claims directly.
Appellee, Metropolitan Life Insurance Company dba Johnny Appleseed of Washington ("Johnny Appleseed"), timely filed a proof of claim in the debtor's case in the amount of $475,667.27. Johnny Appleseed also objected to confirmation of debtor's plan on three grounds: 1) the debtor was ineligible for Chapter 13 relief because his noncontingent, liquidated unsecured debts exceeded the $100,000 limit for Chapter 13 relief3 then set forth in 11 U.S.C. § 109(e)4; 2) the plan was not filed in good faith; and, 3) the plan was not feasible.
The bankruptcy court held a hearing on confirmation of the plan at which counsel for the debtor and Johnny Appleseed argued their respective positions. No testimony was taken during the hearing.
Thereafter the bankruptcy court entered a summary order denying confirmation of the debtor's plan. The court found that the listing of every debt as contingent was not credible and that claims for freight already incurred were not contingent because they were not obligations dependent upon the occurrence of a future event. The court then found that the remaining unsecured debts fell into the same noncontingent category. The debtor filed a timely notice of appeal.
1. Is the order denying confirmation of a Chapter 13 plan appealable?
2. Did the bankruptcy court err in denying confirmation of the debtor's plan on the grounds that the debtor was ineligible to be a Chapter 13 debtor under 11 U.S.C. § 109(e)? To reach this issue, the court must consider the effect of disputes on the distinction between contingent and noncontingent debts and liquidated and unliquidated debts in the context of Chapter 13 eligibility determinations.
The question of whether a debt is contingent or liquidated is an issue involving interpretation of the Bankruptcy Code and, thus, is a question of law subject to de novo review. See In re Goralnick, 81 B.R. 570, 571 (9th Cir. BAP 1987). However, the "contingent" or "liquidated" amount of a debt is a question of fact which cannot be reversed unless clearly erroneous. See Fed. R.Bankr.P. 8013.
A preliminary issue is whether the summary order of the bankruptcy court denying confirmation of the debtor's Chapter 13 plan is a final order for purposes of appeal. Jurisdiction over an appeal from a bankruptcy court order is governed by 28 U.S.C. § 158. Section 158 authorizes district courts and bankruptcy appellate panels to hear appeals from final judgments, orders and decrees. 28 U.S.C. § 158(a), (b). This is often referred to as the "final judgment rule." Ordinarily, interlocutory orders are not appealable without leave of court. 28 U.S.C. § 158(a)(3). Courts have held that orders denying plan confirmation are interlocutory when the petition itself has not been dismissed. In re Simons, 908 F.2d 643 (10th Cir.1990); Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d Cir.1982).
In the present case, the bankruptcy court denied confirmation of the debtor's plan after it found that the debtor was ineligible for Chapter 13 relief. The crux of the court's order was the ineligibility determination. While it is true that the debtor then could have converted his case to chapter 7 or even perhaps to chapter 11, it is clear from the pursuit of this appeal that the debtor desires to deal with his creditors in the context of a Chapter 13 plan. See In re Wenberg, 94 B.R. 631, 636 (9th Cir. BAP 1988), aff'd, 902 F.2d 768 (9th Cir.1990) (). Without an appellate determination as to the debtor's eligibility to file such a plan, the debtor would have no alternative but to convert or dismiss.
Although appellant did not file a motion for leave to appeal, we may treat the notice of appeal as a motion for leave to file an interlocutory appeal, if the standards set forth in 28 U.S.C. S 1292(b) are met. Fed. R.Bankr.P. 8003(c); In re Sperna, 173 B.R. 654, 658 (9th Cir. BAP 1994). It is appropriate to grant leave if the order on appeal involves a controlling question of law as to which there is a substantial basis for difference of opinion and an immediate appeal may materially advance the ultimate termination of the litigation. In re Sperna, supra, at 658. Here, the issue of which claims disqualify a debtor from Chapter 13 relief is a controlling question of law, and the definitions of some types of qualifying and disqualifying claims is still unsettled. Moreover, an immediate determination of appellant's qualification for Chapter 13 relief is necessary before the case can proceed to a conclusion.
We therefore grant leave to appeal the denial of confirmation.
Under Chapter 13, a debtor must complete plan payments within 36 months or, with leave of court, not later than 60 months. 11 U.S.C. § 1322(c). This time period begins running from the date at which the Chapter 13 debtor is first obligated to begin making payments to the trustee under the unconfirmed plan — i.e. within 45 days after the petition is filed5 — as opposed to the date at which the first payment becomes due under the confirmed plan. In re Duckett, 139 B.R. 6 (Bankr.E.D.Tex.1992); see also In re Woodall, 81 B.R. 17 (Bankr.E.D.Ark.1987). The Bankruptcy Act, superseded by the Bankruptcy Code in 1978, did not provide a limitations period on repayment; thus, the establishment of a 36-month/60-month repayment period in the Bankruptcy Code evidences Congressional intent to ensure expeditious administration of Chapter 13 cases. See House Report No. 95-595, 95th Cong., 1st Sess. 429 (1977). This objective guides our reasoning today.
When a party challenges a debtor's eligibility for Chapter 13 relief, the bankruptcy court needs to make a prompt and effective determination of a debtor's eligibility. Failure to promptly and effectively determine the debtor's eligibility results in a waste of judicial resources and inefficient administration of a case — contravening the legislative intent for expedient resolution of Chapter 13 cases.
When considering whether or not to confirm a Chapter 13 plan, a bankruptcy court must find that the plan complies with the provisions of Chapter 13 and with other applicable provisions of the Bankruptcy Code. 11 U.S.C. § 1325(a)(1). Thus, in the present case, the bankruptcy court properly considered the issue of the debtor's eligibility for Chapter 13 when raised by appellees at the plan confirmation stage.
Section 109(e) of the Bankruptcy Code sets forth the eligibility requirements for Chapter 13 relief. It provides in pertinent part:
Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $100,000 and noncontingent, liquidated, secured debts of less than $350,000 . . . may be a debtor under Chapter 13 of this title.
§ 109(e) (emphasis added). The Code defines a "debt" as a liability on a claim. § 101(12). A "claim" is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured."
§ 101(5)(A). The terms "debt" and "claim" are coextensive. In re Quintana, 107 B.R. 234, 237-38 (9th Cir. BAP 1989), aff'd, 915 F.2d 513 (9th Cir.1990).
When filing a petition for bankruptcy, a debtor must file a list of creditors and a schedule of assets and liabilities. § 521(1). A debtor must include in the schedule of liabilities all claims that fall within the definition of § 101(5). 3 Collier on Bankruptcy ¶ 521.062 (). Although § 101(5) expressly includes...
To continue reading
Request your trial