In re Stevenson
| Decision Date | 18 December 1992 |
| Docket Number | Bankruptcy No. 90-00480.,Civ. No. 92-0220-S-HLR |
| Citation | 148 BR 592 |
| Parties | In re Lynn E. STEVENSON, Debtor. |
| Court | U.S. District Court — District of Idaho |
James L. Kennedy, Jr., Ketchum, Idaho, Gary D. Babbitt, Hawley, Troxell, Ennis & Hawley, Boise, ID, for appellant/debtor Stevenson.
Ron Kerl, Service, Gasser & Kerl, Pocatello, ID, for appellee Farm Credit Bank of Spokane.
ORDER AFFIRMING BANKRUPTCY COURT AND DISMISSING APPEAL
This matter is currently before the court on appeal from an Order and Memorandum of Decision entered by the United States Bankruptcy Court for the District of Idaho on April 3, 1992. Pursuant to the express request of appellant, this matter was set to come on for hearing on December 14, 1992. On that date, being fully prepared for the hearing, the court was advised by its Deputy Clerk that appellant's counsel had a family emergency to attend to and would not be able to appear for the hearing. Therefore, the hearing was vacated.
Having fully reviewed the record herein in preparation for the hearing, the court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this court without oral argument. Bankruptcy Rule 8012.
On April 3, 1992, the United States Bankruptcy Court for the District of Idaho entered an order which precluded the debtor from modifying his Chapter 11 plan based on a finding that the plan had been substantially consummated as contemplated by 11 U.S.C. § 1127(b). In re Stevenson, 138 B.R. 964 (Bankr.D.Idaho 1992).1 Rather than restate the entire factual record and all of the reasoning underlying the bankruptcy court decision, the text of In re Stevenson, 138 B.R. 964 (Bankr.D.Idaho 1992), is hereby incorporated by reference. However, to the extent some factual development will facilitate a better understanding of this court's reasoning as it conducts an appellate review, a brief summary of facts is as follows.
On October 31, 1990, Debtor's First Modified Chapter 11 Reorganization Plan was confirmed by the bankruptcy court. The major creditor affected by Stevenson's plan was Farm Credit Bank2 (hereinafter "FCB") whose treatment under the plan was to be in accordance with a stipulation which was specifically incorporated into the plan as confirmed. See Stipulation for Compromise and Treatment of Claim (hereinafter Stipulation), filed Aug. 16, 1990.3
This appeal arises from a ruling by the bankruptcy court which, pursuant to a motion for a declaratory ruling filed by Appellee FCB, effectively disallowed the debtor's attempts to modify his plan based on a finding that the plan had been "substantially consummated." On appeal, Appellant Stevenson essentially contends: (1) that the bankruptcy court erred as a matter of law when it entered its decision precluding modification because the debtor had not explicitly filed a document entitled "Motion to Modify" and a confirmation hearing had not been held regarding the proposed modification; and (2) that the bankruptcy court erred as a matter of fact in determining that such modification was barred by a finding of "substantial consummation" pursuant to 11 U.S.C. §§ 1127(b) and 105(a).
Having fully reviewed the record, together with the applicable provisions of the Bankruptcy Code and relevant case authorities, this court finds that the bankruptcy court's decision was well reasoned and should not be disturbed. Consequently, based on the analysis to follow, the decision of the bankruptcy court shall be affirmed.
By way of this appeal, appellant essentially asks this court to find that, despite the fact that the record clearly demonstrated that the debtor was unequivocally attempting to modify his plan, the bankruptcy court was required to wait for an express oral or written motion captioned as a "Motion to Modify." Absent such an express motion, the debtor contends that the matter was not properly before the bankruptcy court; and, therefore, the bankruptcy court's ruling should be reversed as a matter of law. This court does not agree.
True, the impetus for the bankruptcy court's order at issue on appeal was not an express "motion to modify" filed by the debtor, but rather, a Motion for Declaratory Ruling filed by the creditor, FCB. Nevertheless, a review of the record clearly shows that the debtor was taking steps to modify his plan, that such modifications would materially affect the rights of FCB, and that FCB had a right to seek a determination regarding whether or not modification should be permitted under Sections 1127(b)4 and 105(a).5
Indeed, the debtor's arguments maintaining that the issue of modification was not properly before the bankruptcy court are completely discredited by the record and by the debtor's own statements.
For example, on December 30, 1991, Stevenson filed a Motion for an Order Regarding Plan Modification and Conditionally Suspending Plan Execution (emphasis added). Although the bankruptcy court did not suspend execution of the plan, Stevenson was permitted to file his proposed modification and proceed with modification on its merits under the provisions of 11 U.S.C. § 1127. In re Stevenson, 138 B.R. at 966.
And, in response to FCB's Motion for Declaratory Ruling, the debtor never disputed that he sought to modify his plan, but rather, he specifically stated that "debtor proposes under § 1127(b) and related statutes and rules to obtain confirmation of certain modifications of the plan, affecting only FCB and otherwise enhancing the feasibility of the plan." Mem. Constituting Debtor's Written Response, filed Feb. 24, 1992, at 2 (emphasis added).
In light of the fact that FCB would be the only creditor affected by the proposed modification, and in view of the terms of the prior Stipulation between FCB and Stevenson, it seems entirely appropriate to this court that FCB would seek a declaratory ruling regarding whether or not the attempted modification should be permitted under 11 U.S.C. §§ 1127(b) and 105(a). Therefore, this court finds that the bankruptcy court did not err as a matter of law when it entertained and ruled on FCB's motion and entered its order,6 thereby determining that "the proposed modification is not authorized under the provisions of 11 U.S.C. § 1127(b) or 11 U.S.C. § 105(a). . . ." In re Stevenson, 138 B.R. at 968.
Based on the record, Stevenson clearly attempted to modify Debtor's First Modified Chapter 11 Reorganization Plan. However, pursuant to 11 U.S.C. § 1127(b), a plan can only be modified before it is substantially consummated. In pertinent part, Section 1127(b) provides the following:
The proponent of a plan or the reorganized debtor may modify such plan at any time after confirmation of such plan and before substantial consummation of such plan, but may not modify such plan so that such plan as modified fails to meet the requirements of sections 1122 and 1123 of this title. . . .
11 U.S.C.S. § 1127(b) (Law.Co-op. 1987) (emphasis added).
11 U.S.C.S. § 1101(2) (Law.Co-op. 1987) (emphasis added).
As noted by appellant, the decision of In re Jorgensen, 66 B.R. 104 (9th Cir. BAP 1986), makes clear that the determination regarding substantial consummation of a plan turns on the facts of each case. Id. at 106 (citation omitted). Appellant contends that this proposition alone warrants a reversal and remand to the bankruptcy court. Once again, this court does not agree.
First of all, based on the briefing, the only element of Section 1101(2) which the appellant appears to dispute the satisfaction of is element (C) which requires a finding of commencement of distribution under the plan. As noted in the case of In re Bedford Springs Hotel, Inc., 99 B.R. 302 (Bankr.W.D.Pa.1989), which appellant himself as cited, "Subsection (C) of Section 1101(2) requires only that such a distribution be commenced." Id. at 303 (emphasis in original) (citations omitted).
In this case, the bankruptcy court properly concluded that the debtor "has commenced distribution of the payments provided for under the plan . . . and that the only act remaining to be performed by the debtor over the remaining term of the plan is to make the remaining cash payments as provided for by the plan." In re Stevenson, 138 B.R. at 967. And, the bankruptcy court went on to note that:
The conclusion of substantial consummation is buttressed by the materiality of the proposed modification. If the modification is allowed, a new plan would be created as far as the treatment of the allowed secured claim of Farm Credit Bank is concerned. Of further note is the fact the Farm Credit claim treatment in the confirmed plan was based on an agreement between the parties. To allow the debtor to unilaterally rescind that agreement...
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