In re Than
| Decision Date | 24 October 1997 |
| Docket Number | Bankruptcy No. 94-55036 JRG.,BAP No. NC-96-1782-ORYR |
| Citation | 215 BR 430 |
| Parties | In re Nguyen Hong THAN, Debtor. MAX RECOVERY, INC., Appellant, v. Nguyen Hong THAN; Duncan H. Kester, Chapter 13 Trustee; United States Trustee, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Sblend A. Sblendorio, Levy, Greenfield & Davidoff, L.L.P., San Jose, CA, for Appellant.
David A. Boone, Law Offices of David A. Boone, San Jose, CA, for Appellee.
Before: OLLASON, RYAN and RUSSELL, Bankruptcy Judges.
Max Recovery, Inc. ("Appellant") is a collection agency and postconfirmation assignee of unsecured creditors' claims in Nguyen Hong Than's ("Than") Chapter 13 bankruptcy case.1 No creditor opposed confirmation of Than's percentage plan. When fewer claims than anticipated were filed, the Chapter 13 trustee noticed interested parties that Than's plan would be completed in 32 months instead of the original estimate of 38 months. Appellant sought to increase the plan duration to at least 36 months, thus requiring a larger payout to the unsecured creditors. The bankruptcy court denied the motion, concluding that the Code did not require a disposable income analysis including plan length as a factor for modification. Although we agree with the bankruptcy court's legal conclusion as applied to these facts, we VACATE and REMAND to allow the court to consider the subsequently decided case of In re Powers, 202 B.R. 618 (9th Cir. BAP 1996).
Than filed his Chapter 13 bankruptcy petition on August 2, 1994. His schedules listed unsecured, nonpriority claims totaling $84,093.17. Two of the allowed unsecured claims were those of Chemical Bank and Bank of America.
Than's Chapter 13 plan provided for monthly payments of $300 "for 38 months or until all allowed claims are paid." The plan provided that unsecured claims would receive 11% on the dollar. Thus, it was a "percentage plan."2
The plan did not contain a "best efforts" or "disposable income" provision stating that all of Debtor's projected disposable income calculated for at least 36 months would be applied to the plan payments. Such provision is required following an objection to plan confirmation by § 1325(b):
11 U.S.C. § 1325.
Than's plan was confirmed on October 17, 1994, without objection by any creditor. The trustee, however, objected to confirmation because Than failed to provide certain information on his income. The objection was resolved and did not trigger § 1325(b)(1).3
The bar date for filing proofs of claim was January 1, 1995, about 75 days after plan confirmation. On February 22, 1995, the Chapter 13 trustee filed a motion which indicated that the allowed claims that were filed totaled only $73,065.85 instead of the anticipated $84,093.17. Thirteen percent of the anticipated claims, representing $11,037.32, were not filed. As a result of the reduction, the trustee stated that the plan would pay the 11% to the unsecured creditors in 32 months instead of 38.
On September 22, 1995 and October 24, 1995, respectively, Appellant filed notices of assignment to it of the Chemical Bank and Bank of America claims.4
On November 17, 1995, nine months after the trustee's motion, and a year after plan confirmation, Appellant filed a motion to modify the Chapter 13 plan to increase the plan length to not less than 36 months. This modification, purportedly, would change the percentage plan to a "pot" plan and increase the payout to the unsecured creditors.5
Appellant contended that it need not show a change in the debtor's financial condition to justify modification. Appellant cited In re Witkowski, 16 F.3d 739 (7th Cir.1994), for a more lenient standard for modification, and alleged that the standard was satisfied by the failure of some creditors to file claims, which affected Debtor's ability to pay. See id. at 743-44.
Than opposed the motion. He argued that: (1) Appellant lacked standing and had not proven its status as a creditor; (2) Appellant was prevented from objecting to the plan by res judicata or laches; (3) Appellant's motion to modify was brought in bad faith to harass him; (4) the bankruptcy court was not entitled to conduct a disposable income or best efforts test for modification purposes; (5) the "unanticipated and substantial change" test for modification applied and was not met in this case; and (6) in any event, his financial circumstances had changed so that he could not afford to pay out a higher percentage, so modification should be denied.
Following a hearing, the bankruptcy court entered its order denying the motion on June 6, 1996. At the hearing, the bankruptcy court assumed, without reaching the issue, that Appellant had standing. The court held that § 1325(b) did not apply in the modification proceeding; thus, plan length was not a factor for determining modification of the confirmed percentage plan. Without further analysis, the court held that no grounds existed for modification.
1. Whether Appellant has standing.
2. Whether Appellant's motion to modify was barred by the doctrines of res judicata or laches.
3. Whether the bankruptcy court abused its discretion by finding no grounds to modify Than's plan.
4. Whether the disposable income test of § 1325(b)(1) applied to the modified plan where Appellant was the proponent and Than was the only objecting party.
Standing is a question of law reviewed de novo. Sahni v. Am. Diversified Partners, 83 F.3d 1054, 1057 (9th Cir.1996), cert. denied, ___ U.S. ___, 117 S.Ct. 765, 136 L.Ed.2d 712 (1997). The applicability of res judicata is a legal question, reviewed de novo. Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir.1988). We review the bankruptcy court's interpretation of the Code de novo. In re Harrell, 73 F.3d 218, 219 (9th Cir.1996).
Modification under § 1329 is discretionary; therefore, the Panel reviews the bankruptcy court's refusal to confirm a modified plan for an abuse of discretion. Powers, 202 B.R. at 620. Under the abuse of discretion standard, the Panel will not reverse unless it has a definite and firm conviction that the bankruptcy court committed a clear error of judgment in the conclusion it reached upon weighing the relevant factors. United States v. Plainbull, 957 F.2d 724, 725 (9th Cir.1992).
Modification of a confirmed Chapter 13 plan is governed by § 1329, which provides, in pertinent part:
11 U.S.C. § 1329.
Modification is essentially a new plan confirmation and must be consistent with the statutory requirements for confirmation. Powers, 202 B.R. at 623 (citing In re Louquet, 125 B.R. 267, 268 (9th Cir. BAP 1991)). Section 1329(b)(1) specifies which Code provisions apply to the modified plan:
(b) (1) Sections 1322(a), 1322(b), and 1323(c)6 of this title and the requirements of section 1325(a)7 of this title apply to any modification under subsection (a) of this section.
11 U.S.C. § 1329. Absent from the above language is a reference to § 1325(b), the disposable income provision.
Appellant sought to modify the plan to increase its length from 32 months to at least 36 months. Appellant bore the burden of proof to show facts supporting modification after Than objected to the motion. See In re Anderson, 21 F.3d 355, 358 (9th Cir. 1994); In re O'Brien, 181 B.R. 71, 78 (Bankr. D.Ariz.1995). Before reviewing the merits of Appellant's contentions, the Panel will address Than's threshold defenses.
Than contends that Appellant lacked standing to modify the confirmed plan. Standing is a jurisdictional requirement which is open to review at all stages of litigation. Nat'l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 253, 114 S.Ct. 798, 800, 127 L.Ed.2d 99 (1994). The burden to establish standing remains with the party claiming that standing exists. See E.F. Hutton & Co., Inc. v. Hadley, 901 F.2d 979, 984 (11th Cir.1990).
Appellant contends that it is the successor-in-interest to the unsecured claimants and the "holder of an allowed unsecured claim," therefore it is entitled to seek plan modification pursuant to § 1329(a). Than disputes the bona fides of Appellant's claim assignment and contends that Appellant did not comply with Federal Rule of Bankruptcy Procedure 3001.
Rule 3001 provides that the transferee of a claim after a proof of claim has been filed must file evidence of the transfer with the Clerk's Office. The Clerk then notifies the alleged transferor, who is given an opportunity to object. Appellant contends that it has complied with Rule 3001. The bankruptcy court agreed and at the hearing stated: "MAX RECOVERY, INC. filed notices of assignment to it of the Chemical Bank and Bank of...
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