In re Potts, 09-6053.

• Decision Date: 12 January 2010
• Docket Number: No. 09-6053.,09-6053.
• Citation: 421 B.R. 518
• Parties: In re Lawrence C. POTTS, Jr.; Opal M. Potts, Debtors. Bank Northwest, Creditor-Appellant, v. Lawrence C. Potts, Jr.; Opal M. Potts, Debtors-Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

421 B.R. 518

In re Lawrence C. POTTS, Jr.; Opal M. Potts, Debtors.

Bank Northwest, Creditor-Appellant, v. Lawrence C. Potts, Jr.; Opal M. Potts, Debtors-Appellees.

No. 09-6053.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted: December 18, 2009.

Filed: January 12, 2010.

COPYRIGHT MATERIAL OMITTED

Jennifer Myers Snider, Jennifer M. Dunan, Platte City, MO, for appellant.

Joel Pelofsky, Kansas City, MO, for appellee.

Before KRESSEL, Chief Judge, MAHONEY and SALADINO, Bankruptcy Judges.

SALADINO, Bankruptcy Judge.

Bank Northwest appeals from an order of the United States Bankruptcy Court for the Western District of Missouri¹ dated August 19, 2009, overruling Bank Northwest's objections and confirming debtors' Chapter 13 plan. For the reasons stated below, we affirm.

FACTS AND PROCEDURAL HISTORY

On March 14, 2007, Lawrence C. Potts, Jr. and Opal M. Potts, husband and wife, together with their son, Steven C. Potts, executed a promissory note payable to Bank Northwest in the original principal amount of $341,479.03. The note is secured by two deeds of trust, each encumbering three tracts of real estate: tract 1 is a 109-acre parcel upon which Debtors live; and tracts 2 and 3 collectively make up a 210-acre parcel which is grazing and cropland. The note calls for annual payments, with the first payment being due on March 14, 2008, with an additional annual payment on March 14, 2009, and a third and final lump sum payment due on March 14, 2010, for the remaining balance due under the note. Together with interest and fees, the balance due under the note is in excess of $480,000.00. The 210-acre parcel was recently appraised at a value of $420,000.00. The 109-acre parcel was last appraised in 2006 at a value of $165,000.00.

Debtors defaulted on making the payments due to Bank Northwest, and on March 31, 2008, the note balance was accelerated. On February 4, 2009, Debtors filed this proceeding under Chapter 12 of the United States Bankruptcy Code. On March 3, 2009, the bankruptcy court granted Debtors' motion to convert their case from Chapter 12 to Chapter 13. Debtors have two primary creditors. BTC Bank is secured by a perfected security interest in cattle and has apparently consented to its plan treatment. The other is appellant Bank Northwest, which is secured by real estate. On March 13, 2009, Debtors filed their Chapter 13 plan which proposed to pay all unsecured claims in full by paying to the trustee the sum of $500.00 per month and to directly pay the indebtedness to Bank Northwest in annual payments with a balloon payment due in 2015.

On May 5, 2009, Bank Northwest filed a motion for relief from the automatic stay and an objection to confirmation of Debtors' Chapter 13 plan. BTC also objected to confirmation but its objection was later resolved. On July 2, 2009, an evidentiary hearing was held on Bank Northwest's objection and its motion for relief. The matters were continued for further hearing, and an amended plan was filed on July 22, 2009. The amended plan provided for payment of Bank Northwest's claim together with interest at 6% per annum with annual payments amortized over 20 years commencing no later than December 31 2009, and a balloon payment at the end of five years.

Bank Northwest continued to object to feasibility, and, after hearing further testimony and receiving further evidence on August 13, 2009, the court overruled the bank's objections to confirmation and thereafter confirmed Debtors' Chapter 13 plan. The bankruptcy court also entered a Conditional Denial of the bank's motion for relief from stay, the condition being that if Debtors defaulted in making any of the Chapter 13 plan payments owed to Bank Northwest, the bank would be entitled to relief from the automatic stay. That same relief language appears in the amended plan.

On appeal, Bank Northwest asserts: (1) that the plan does not meet the feasibility requirement of 11 U.S.C. § 1326(a)(6); (2) that confirmation of the plan was in error because the plan impedes the creditors' remedies subsequent to default; and (3) that confirmation was in error because it provides for bifurcation of a secured claim.

STANDARD OF REVIEW

The bankruptcy court's findings of fact shall not be set aside "unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." Fed. R. Bankr.P. 8013. The bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. First Nat'l Bank of Olathe v. Pontow, 111 F.3d 604, 609 (8th Cir.1997). "A finding 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." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948). The feasibility of a plan is a finding of fact. Gen. Motors Acceptance Corp. v. Gardner (In re Gardner), 25 B.R. 297, 299 (D.Ark.1982).

DISCUSSION

Bank Northwest's first assignment of error is that the plan should not have been confirmed because it is not feasible. The confirmation hearing occurred over the course of two days, July 2, 2009, and August 13, 2009. Bank Northwest is owed about $480,000.00 and admits that it is substantially over-secured. At the August hearing, Debtors introduced into evidence a revised budget which showed income adequate to pay expenses and to make...