In re Pertuset

Decision Date18 December 2012
Docket NumberNo. 12–8014.,12–8014.
PartiesIn re Carl PERTUSET; Vera Pertuset, Debtors.
CourtBankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Sixth Circuit

OPINION TEXT STARTS HEREAppeal from the United States Bankruptcy Court for the Southern District of Ohio, No. 11–15607.

ON BRIEF: William B. Logan, Jr., Kenneth M. Richards, Christian D. Donovan, Farm Credit Services of Mid–America, Columbus, OH, Susan M. Argo, Cara R. Hurak, Graydon Head & Ritchey LLP, Cincinnati, OH, Elizabeth Brown Alphin, Mapother & Mapother P.S.C., Louisville, KY, for Appellees. Carl Pertuset, Vera Pertuset, McDermott, OH, pro se.

Before: FULTON, HARRIS, and SHEA–STONUM, Bankruptcy Appellate Panel Judges.

OPINION

THOMAS H. FULTON, Bankruptcy Appellate Panel Judge.

This appeal arises from two orders entered by the Bankruptcy Court for the Southern District of Ohio. The first order dismissed Carl E. Pertuset and Vera Pertuset's (“the Debtors”) Chapter 12 case with prejudice for a period of two years and denied confirmation of their proposed Chapter 12 plan. This order also denied the Debtors' oral motion to continue the confirmation hearing and several of the Debtors' pro se evidentiary requests. The second order denied the Debtors' motion to reconsider pursuant to Federal Rules of Civil Procedure 59(e) and 60(b).

I. ISSUES ON APPEAL

The issues in this appeal are (1) whether the Debtors' objection to proofs of claim stripped the claims of their presumptive validity pursuant to 11 U.S.C. § 502(a); (2) whether the creditors had standing to file claims or seek relief in the Debtors' Chapter 12 bankruptcy proceeding; (3) whether the bankruptcy court erred in denying several of the Debtors' pro se evidentiary requests; (4) whether the bankruptcy court erred in denying the Debtors' oral motion to continue the confirmation hearing; (5) whether the bankruptcy court erred in dismissing the Debtors' case with prejudice for a period of two years pursuant to 11 U.S.C. §§ 105(a), 349(a), and 1208©; (6) whether the bankruptcy court erred in denying confirmation of the Debtors' proposed Chapter 12 plan; and (7) whether the bankruptcy court erred in denying the Debtors' motion to reconsider.

For the following reasons, we affirm (1) the March 5, 2012 order dismissing the Debtors' case with prejudice for a period of two years, denying confirmation of the Debtors' proposed Chapter 12 plan, denying the Debtors' pro se evidentiary requests, and denying the Debtors' oral motion to continue the confirmation hearing, and (2) the March 30, 2012 order denying the Debtors' motion to reconsider.

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the Panel, and neither party has timely elected to have this appeal heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S.Ct. 1494, 1497 (1989) (citations omitted).

The bankruptcy court's order denying confirmation of the Debtors' plan and dismissing the case with prejudice is a final, appealable order. Raynard v. Rogers ( In re Raynard ), 354 B.R. 834, 836 (B.A.P. 6th Cir.2006). An order denying a motion for reconsideration under Federal Rule of Civil Procedure 59(e) or 60(b) is also a final order for purposes of appeal. Hamerly v. Fifth Third Mortg. Co. (In re J & M Salupo Dev. Co.), 388 B.R. 795, 800 (B.A.P. 6th Cir.2008). Once final judgment is entered on all claims, pre-trial orders relating to discovery are final orders. In re Gray, 447 B.R. 524, 531 (E.D.Mich.2011).

The bankruptcy court's denial of the Debtors' motion to reconsider is reviewed for an abuse of discretion. In re J & M Salupo Dev. Co., 388 B.R. at 805. An abuse of discretion is established when the reviewing court is left with a “definite and firm conviction that the trial court committed a clear error of judgment.” Mich. Div.-Monument Builders of N. Am. v. Mich. Cemetery Ass'n, 524 F.3d 726, 739 (6th Cir.2008). “An abuse of discretion occurs only when the [trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or uses an erroneous legal standard.” Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288, 296 (B.A.P. 6th Cir.2008) (citation omitted) (internal quotation marks omitted).

The bankruptcy court's dismissal of the Debtors' case with prejudice presents a mixed question of law and fact. Cusano v. Klein ( In re Cusano ), 431 B.R. 726, 730 (B.A.P. 6th Cir.2010). When a mixed question of law and fact arises in the bankruptcy context, the reviewing court “must break it down into its constituent parts and apply the appropriate standard of review for each part.” Bank of Montreal v. Official Comm. of Unsecured Creditors (In re Am. Home Patient, Inc.), 420 F.3d 559, 563 (6th Cir.2005) (citation omitted).

The factual findings which support dismissal of the bankruptcy case, including determinations as to whether the Debtors acted in bad faith, are reviewed under the clearly erroneous standard. Riverview Trenton R.R. Co. v. DSC, Ltd. ( In re DSC, Ltd.), 486 F.3d 940, 944 (6th Cir.2007); Cusano, 431 B.R. at 730. [A] finding [of fact] is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Anderson v. City of Bessemer City, N.C., 470 U .S. 564, 573, 105 S.Ct. 1504, 1511 (1985) (citation omitted) (internal quotation marks omitted).

“The bankruptcy court's legal conclusions, including whether the bankruptcy court had authority to bar the Debtor from refiling ... for two years, are reviewed de novo. Cusano, 431 B.R. at 730 (citation omitted). “Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination.” Menninger v. Accredited Home Lenders (In re Morgeson ), 371 B.R. 798, 800 (B.A.P. 6th Cir.2007) (citation omitted).

The bankruptcy court's decision to deny confirmation of the Debtors' plan also presents a mixed question of law and fact. Raynard, 354 B.R. at 836. The legal conclusions underlying the bankruptcy court's decision are reviewed de novo. Id. A court's determination that a plan does not meet the “best interests of the creditors test” is a conclusion of law. Id. The factual findings underlying the bankruptcy court's decision are reviewed for an abuse of discretion. Id. The bankruptcy court's determinations that the plan was not proposed in good faith and that the plan is not feasible are factual findings reviewed under the clearly erroneous standard. Gen. Elec. Credit Equities, Inc. v. Brice Rd. Devs., L.L.C. ( In re Brice Rd. Devs., L.L.C.), 392 B .R. 274, 282 (B.A.P. 6th Cir.2008); In re Dow Corning Corp., 255 B.R. 445, 498 (E.D.Mich.2000).

A court's evidentiary decisions are reviewed for an abuse of discretion. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141, 118 S.Ct. 512, 517 (1997). This standard of review applies to decisions denying requests for a continuance and requests for an extension of the discovery deadlines. Woods v. McGuire, 954 F.2d 388, 391 (6th Cir.1992); Bennett v. Scroggy, 793 F.2d 772, 774–75 (6th Cir.1986). A court's determination on evidentiary matters “will be reversed only if the abuse of discretion caused more than harmless error.” Tompkin v. Philip Morris USA, Inc., 362 F.3d 882, 897 (6th Cir.2004) (citations omitted).

III. FACTS

The Debtors filed their voluntary Chapter 12 petition on September 14, 2011. The Debtors are family farmers who operate a timber business. At all times during the proceedings before the bankruptcy court, the Debtors were represented by counsel.

This is the Debtors' second Chapter 12 filing. They filed their first Chapter 12 petition on November 16, 2009. The bankruptcy court dismissed that case on April 9, 2010, pursuant to 11 U.S.C. § 1208(c)(3) for failure to file a plan timely and 11 U.S.C. § 1208(c)(9) for continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation. The bankruptcy court's decision to dismiss the first case under § 1208(c)(9) was based on the Debtors' inability to demonstrate they had sufficient income with which to fund a Chapter 12 repayment plan. On appeal, the BAP affirmed on both grounds. Pertuset v. Am. Sav. Bank, FSB ( In re Pertuset ), 438 B.R. 354 (B.A.P. 6th Cir.2010) (table). Throughout the pendency of that case, the Debtors were also engaged in the timber business.

According to Schedule I, Carl Pertuset's sole source of income is $989.00 per month from Social Security disability payments. Vera Pertuset's sole source of income is $2,000.00 per month from operation of the Debtors' timber business. The Debtors listed total monthly expenses of $2,985.00 on Schedule J. These expenses included a $1,000.00 monthly Chapter 12 plan payment but did not include any expenses associated with the timber farming business.

On their most recent bankruptcy petition, the Debtors listed a number of creditors on Schedule D, including Quality Car and Truck Leasing (“Quality Leasing”), Farm Credit Services of Mid–America (“FCS”), and American Savings Bank, FSB (“ASB”) (collectively Appellees). The Debtors did not formally indicate on Schedule D that any of the claims were contingent, unliquidated, or disputed.

Quality Leasing filed seven claims on September 21, 2011. All seven claims were secured by various pieces of equipment. Quality Leasing attached copies of the relevant security documents to each claim. These documents demonstrate that Quality Leasing was...

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