Hansmeier v. McDermott (In re Hansmeier)

558 B.R. 299, 2016 WL 5417740
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedSeptember 29, 2016
DocketNo. 15-6035
StatusPublished
Cited by6 cases

This text of 558 B.R. 299 (Hansmeier v. McDermott (In re Hansmeier)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hansmeier v. McDermott (In re Hansmeier), 558 B.R. 299, 2016 WL 5417740 (bap8 2016).

Opinion

NAIL, Bankruptcy Judge.

Debtor Paul Hansmeier appeals the December 3, 2015 order of the bankruptcy court1 converting Debtor’s chapter 13 case to chapter 7. We affirm.

BACKGROUND

Debtor filed a petition for relief under chapter 13 of the bankruptcy code. The United States Trustee filed a motion under 11 U.S.C. § 1307(c) to convert Debtor’s case to chapter 7.2 The United States Trustee’s motion was verified.3

Debtor objected to the United States Trustee’s motion. Debtor’s objection was unverified and was not supported by an affidavit.4

The matter came before the bankruptcy court in due course. Following a hearing, at which no additional evidence was offered or received, the bankruptcy court ruled from the bench and memorialized its decision in an order granting the United States Trustee’s motion and converting Debtor’s chapter 13 case to chapter 7. Debtor timely appealed.

STANDARD OF REVIEW

We review the bankruptcy court’s decision to convert a chapter 13 case to chapter 7 for cause within the meaning of § 1307(c) for an abuse of discretion. See Paulson v. Wein (In re Paulson), 477 B.R. 740, 744 (8th Cir. BAP 2012) (applying abuse of discretion standard to our review of a bankruptcy court’s decision to dismiss a debtor’s chapter 13 case for cause within the meaning of § 1307(c)).

A court abuses its discretion when a relevant factor that should have been given significant weight is not considered; when an irrelevant or improper factor is considered and given significant weight; or when all proper factors and no improper ones are considered, but the court commits a clear error of judgment in weighing those factors.

[301]*301City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 702 F.3d 1147, 1152 (8th Cir.2013).

DISCUSSION

On appeal, Debtor’s principal argument is the bankruptcy court erred in “refusing” to hold an evidentiary hearing on the United States Trustee’s motion.5 In support of his argument, Debtor directs our attention to Fed.R.Bankr.P. 9014(d), which provides: “Testimony of witnesses with respect to disputed material factual issues shall be taken in the same manner as testimony in an adversary proceeding.”

Debtor did not raise this issue before the bankruptcy court, either in his objection to the United States Trustee’s motion6 or at the hearing on the United States Trustee’s motion. “[IJssues raised for the first time on appeal are ordinarily not considered by an appellate court as a basis for reversal.” Wendover Fin. Servs. v. Hewey (In re Hewey), 252 B.R. 763, 767 (8th Cir. BAP 2000) (citing Von Kerssenbrock-Praschma v. Saunders, 121 F.3d 373, 375-76 (8th Cir. 1997). An exception may be made in “exceptional cases where the obvious result would be a plain miscarriage of justice or inconsistent with substantial justice.” Kelley v. Crunk, 713 F.2d 426, 427 (8th Cir.1983) (per curiam) (emphasis added).

We do not believe this to be such an exceptional case. Debtor did not request and was thus not denied an evidentiary hearing: He did not give the bankruptcy court any reason to even suspect he wanted an evidentiary hearing. He did not support his objection to the United States Trustee’s motion with an affidavit, as he was required by local rule to do if he believed facts were at issue. He did not identify any proposed witnesses in his objection, as he was required by local rule to do if he anticipated offering oral testimony. He did not offer, or request an opportunity to offer, anything other than the argument of his attorney at the hearing on the United States Trustee’s motion. And he remained silent when the bankruptcy court proceeded to issue its bench ruling. Under the circumstances, “[t]he only injustice that would occur here is if we were to consider [his] argument ].” Hervey, 252 B.R. at 768.

Moreover, Debtor’s reliance on Rule 9014(d) is misplaced. Rule 9014(d) does not require an evidentiary hearing on every motion. Rather,

[subdivision (d) [was] added to clarify that if [a] motion cannot be decided without resolving a disputed material issue of fact, an evidentiary hearing must be held at which testimony of witnesses is taken in the same manner as testimony is taken in an adversary proceeding or at a trial in a district court civil case.

Fed.R.Bankr.P. 9014, advisory committee’s note to 2002 amendment (emphasis added).

In this case, the bankruptcy court was not called upon, much less required, to resolve any disputed material issues of fact. Debtor’s objection to the United States Trustee’s motion purported to dispute some — but not all — of the facts proffered by the United States Trustee. However, as previously noted, Debtor’s [302]*302objection was not supported by an affidavit. This left the bankruptcy court with only those facts proffered by the United States Trustee: “[T]he [bankruptcy court] cannot take cognizance of fact assertions that are not under oath.” In re Johnson, 207 B.R. 878, 879 n. 1 (Bankr.D.Minn. 1997). And this left the bankruptcy court with no disputed material issues of fact to resolve. Rule 9014(d) is therefore inap-posite.7

Debtor’s remaining argument focuses on his belief that his proposed “100% plan”8 demonstrates his good faith. This argument is without merit, for at least two reasons.

First, while we agree a confirmable “100% plan” would be evidence of a debt- or’s good faith, we do not agree such evidence would necessarily “trump” other evidence of cause and leave the bankruptcy court with no choice but to deny a motion to convert a debtor’s chapter 13 case to chapter 7. In any event, Debtor offered no evidence to demonstrate his plan was in fact confirmable. Debtor’s attorney argued (and continues to argue) Debtor would prevail on his objections to three large unsecured claims and his proposed plan would then be confirmable. However, as discussed above, argument is not evidence. And we agree with the bankruptcy court: The evidence presented by the United States Trustee called into serious doubt Debtor’s ability to confirm a plan.

Second, the bankruptcy court did not premise its decision to convert Debtor’s chapter 13 case to chapter 7 solely on its concerns regarding Debtor’s proposed plan.9 The bankruptcy court found, inter alia, Debtor had been found by a federal district court judge in the Southern District of Illinois to have exhibited a serious and studied disregard for the orderly process of justice and a relentless willingness to lie to the court on paper and in.

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Bluebook (online)
558 B.R. 299, 2016 WL 5417740, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hansmeier-v-mcdermott-in-re-hansmeier-bap8-2016.