FILED NOV 7 2013 1 SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. EC-13-1072-PaJuKi ) EC-13-1249-PaJuKi 6 BOBBY DEAN HARDCASTLE and ) (related appeals) MICHELLE LYNN HARDCASTLE, ) 7 ) Bk. No. 12-34187-RB Debtors. ) 8 ______________________________) ) 9 BOBBY DEAN HARDCASTLE; ) MICHELLE LYNN HARDCASTLE ) 10 ) Appellants, ) 11 ) v. ) M E M O R A N D U M1 12 ) RUSSELL D. GREER, chapter 13 ) 13 trustee,2 ) ) 14 Appellee. ) ______________________________) 15 Argued and Submitted on October 18, 2013 16 at Sacramento, California 17 Filed - November 7, 2013 18 Appeal from the United States Bankruptcy Court for the Eastern District of California 19 Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding 20 Appearances: Mark J. Hannon argued for appellants Bobby Dean 21 Hardcastle and Michelle Lynn Hardcastle. 22 Before: PAPPAS, JURY and KIRSCHER, Bankruptcy Judges. 23 24 1 This disposition is not appropriate for publication. 25 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 26 See 9th Cir. BAP Rule 8013-1. 27 2 Appellee Greer did not appear or file a brief in this 28 appeal. 1 Appellants Bobby Dean Hardcastle and Michelle Lynn 2 Hardcastle (the “Hardcastles”) appeal the orders of the 3 bankruptcy court denying confirmation of their chapter 133 plan 4 (Appeal No. EC-13-1249) and dismissing the bankruptcy case 5 (Appeal No. EC-13-1072). We AFFIRM both orders. 6 FACTS 7 The Hardcastles filed a bankruptcy petition under chapter 13 8 on August 1, 2012. At the time, there were two mortgages on 9 their residence. Their Schedule D listed a debt they owed to 10 Bank of America for a loan secured by the second mortgage with a 11 balance of $85,741.00 (the “Second Mortgage”). Their original 12 chapter 13 plan submitted with their petition proposed that they 13 pay the chapter 13 trustee $1,540 per month for sixty months, 14 which would result in a dividend to unsecured creditors of 50.25 15 percent. That dividend was calculated including the full amount 16 due on the Second Mortgage as an unsecured claim. 17 On August 8, 2012, the Hardcastles filed a motion asking the 18 bankruptcy court to value the Second Mortgage at “$0.0", arguing 19 that, based on the value of their Residence, and the amounts owed 20 on the first mortgage, the Second Mortgage was fully unsecured. 21 On September 21, 2012, chapter 13 trustee Russell D. Greer 22 (“Trustee”) objected to confirmation of the Hardcastles’ plan 23 because it did not propose that they pay all of their disposable 24 25 3 Unless otherwise indicated, all chapter and section 26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and 27 "Rule" references are to the Federal Rules of Bankruptcy Procedure. The Federal Rules of Civil Procedure are referred to 28 as “Civil Rules.”
-2- 1 income into the plan. 2 At some point after filing the petition and original plan, 3 the Hardcastles entered into a modification agreement with the 4 holder of the first mortgage, reducing the amount of that 5 mortgage payment by $652.78 per month. As a consequence, the 6 Hardcastles filed an amended plan (the “First Amended Plan”) 7 providing for payment of $2,192.00 per month for sixty months, 8 with a corresponding increase in the dividend to unsecured 9 creditors to 71 percent. The First Amended Plan dividend also 10 assumed that the full balance due on the Second Mortgage would be 11 unsecured in calculating the expected dividend to unsecured 12 creditors. 13 On September 24, 2012, a hearing was held on the 14 Hardcastles’ motion to value the Second Mortgage. The bankruptcy 15 court granted the motion and entered an order on October 1, 2012 16 (the “Valuation Order”). The Valuation Order provided that, 17 This motion is granted as provided in this order. The secured claim of Bank of America, whose claim is 18 secured by a junior deed of trust on debtors’ residence, is set at $0.00. The claim shall be treated 19 as an unsecured claim in any Chapter 13 plan. No further relief will be afforded. 20 21 (Emphasis added.) 22 On November 16, 2012, Bank of America filed a secured proof 23 of claim in the bankruptcy case in the amount of $88,970.00 for 24 the Second Mortgage debt. 25 The bankruptcy court denied confirmation of the First 26 Amended Plan on November 27, 2012, because creditors had not 27 received proper notice. The Hardcastles filed a Second Amended 28 Plan the same day. The Second Amended Plan provided for payments
-3- 1 of $1,540.00 per month for sixty months and projected a 100 2 percent dividend to unsecured creditors. For the first time, the 3 calculation of that dividend did not include any amounts owed on 4 the Second Mortgage. Trustee objected to confirmation of the 5 Second Amended Plan because, among other reasons, it did not 6 provide for payment of the now-unsecured claim arising from the 7 Second Mortgage. 8 The bankruptcy court denied confirmation of the Second 9 Amended Plan on January 22, 2013. The bankruptcy court expressed 10 concern about whether the Hardcastles had submitted the Second 11 Amended Plan in good faith. The court noted that, in connection 12 with proposing that plan, they had increased the reported income 13 of Mrs. Hardcastle by $646.00. They then increased their 14 proposed expenses for food, clothing, laundry, dry cleaning, 15 medical and dental, recreation, auto repairs and maintenance, and 16 added new categories of expenses for savings and a college fund. 17 Indeed, as the court observed, the net increase in expenses over 18 the original and First Amended Plan was $1,298 per month. 19 But of greatest concern to the bankruptcy court was the 20 Second Amended Plan’s elimination of any payments on the Second 21 Mortgage debt, which in turn allowed them to effectively 22 “increase” the dividend to other unsecured creditors to 100 23 percent. The court denied confirmation of the Second Amended 24 Plan, citing a lack of good faith, on January 22, 2013. 25 The Hardcastles immediately filed a motion for 26 reconsideration concerning the bankruptcy court’s denial of 27 confirmation. They argued that they were not obligated to 28 include the Second Mortgage unsecured debt in their Second
-4- 1 Amended Plan because Bank of America had failed to timely file a 2 claim for the unsecured debt. Trustee objected to 3 reconsideration, reminding that the court’s order valuing the 4 Second Mortgage stated, “the claim shall be treated as an 5 unsecured claim in any Chapter 13 plan.” The bankruptcy court 6 denied reconsideration on February 12, 2013, making two points: 7 First, the court’s order granting the debtors’ motion to value Bank of America’s collateral provides: “The 8 secured claim of Bank of America, whose claim is secured by a junior deed of trust on the debtors’ 9 residence is set at $0.00. The claim shall be treated as an unsecured claim in any Chapter 13 plan.” Second, 10 the court’s standard form plan, and thus the debtors’ proposed [Second Amended Plan] at para. 2.15 provides 11 that Class 7 general unsecured claims include the under-collateralized portion of secured claims not 12 entitled to priority. 13 The Hardcastles filed a timely appeal of the order denying 14 confirmation on February 14, 2013. 15 When no further amended plan was filed by the Hardcastles, 16 on March 7, 2013, Trustee filed a motion to dismiss their 17 chapter 13 case for “unreasonable delay by the debtor(s) that is 18 prejudicial to creditors.” The Hardcastles responded to the 19 dismissal motion order on March 11, 2013, again asserting that 20 Bank of America, the formerly secured creditor, must file an 21 unsecured claim in order to be paid under the chapter 13 plan. 22 The bankruptcy court conducted a hearing on Trustee’s motion 23 on April 23, 2013. The bankruptcy court granted the motion, it’s 24 dismissal order, entered on April 25, 2013, reciting that 25 “findings of fact and conclusions of law having been stated 26 orally on the record and good cause appearing, IT IS ORDERED that 27 the motion is granted and the case is dismissed.” The excerpts 28 do not include a transcript of that hearing in the record, nor
-5- 1 does it appear in the docket of the bankruptcy case. 2 The Hardcastles filed a timely appeal of the dismissal order 3 on April 27, 2013. 4 JURISDICTION 5 The bankruptcy court had jurisdiction under 28 U.S.C. 6 §§ 1334 and 157(b)(2)(A) and (L). We have jurisdiction under 7 28 U.S.C. § 158. 8 ISSUES 9 Whether the bankruptcy court erred in denying confirmation 10 of Hardcastles’ Second Amended chapter 13 plan. 11 Whether the bankruptcy court abused its discretion in 12 dismissing the Hardcastles’ chapter 13 case. 13 STANDARDS OF REVIEW 14 Whether a chapter 13 plan should be confirmed involves mixed 15 questions of fact and law, where factual determinations are 16 reviewed under the clearly erroneous standard, and determinations 17 of law are reviewed de novo. Meyer v. Lepe (In re Lepe), 18 470 B.R. 851, 855 (9th Cir. BAP 2012). Whether a chapter 13 plan 19 has been filed in good faith or lack of good faith is a question 20 of fact reviewed for clear error. Id. 21 We review the bankruptcy court’s dismissal of a chapter 13 22 case for abuse of discretion. Ellsworth v. Lifescape Med. 23 Assocs. (In re Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 2011). 24 A bankruptcy court abuses its discretion if it applies an 25 incorrect legal standard or misapplies the correct legal 26 standard, or its factual findings are illogical, implausible or 27 without support from evidence in the record. TrafficSchool.com 28 v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing United
-6- 1 States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) 2 (en banc)). 3 DISCUSSION 4 I. The bankruptcy court did not err in denying confirmation 5 of the Hardcastles’ Second Amended Plan. 6 A. The Hardcastles’ Second Amended Plan was not submitted in good faith. 7 8 To be confirmed, a debtor must prove that its chapter 13 9 plan is proposed in good faith and not by any means forbidden by 10 law. § 1325(a)(3). The debtor, as the chapter 13 proponent, has 11 the burden of proof in establishing good faith (as well as all 12 other elements of plan confirmation in § 1325). In re Hill, 13 268 B.R. 548, 552 (9th Cir. BAP 2001). The Panel recently 14 examined application of the good faith standard in cases 15 involving denial of confirmation of chapter 13 plans: 16 One of the requirements for confirmation of a chapter 13 plan is that it be proposed in good faith. 17 § 1325(a)(3). "Good faith" is not defined in the Bankruptcy Code. The Ninth Circuit has held that "the 18 proper inquiry is whether the [debtors] acted equitably in proposing their Chapter 13 plan." Goeb v. Heid 19 (In re Goeb), 675 F.2d 1386, 1390 (9th Cir. 1982). In making that inquiry, the court applies a "totality of 20 the circumstances" test, taking into consideration (1) whether the debtor misrepresented facts, unfairly 21 manipulated the Bankruptcy Code or otherwise proposed the plan in an inequitable manner; (2) the history of 22 the debtor's filings and dismissals; (3) whether the debtor intended only to defeat state court litigation; 23 and (4) whether the debtor's behavior was egregious. Leavitt, 171 F.3d at 1224 (applying same factors for 24 good faith filing of chapter 13 petition). 25 Drummond v. Welsh (In re Welsh), 465 B.R. 841, 843 (9th Cir. BAP 26 2012), aff'd 713 F.3d 1120, 1129 (9th Cir. 2013). 27 Criteria two and three in Welsh do not appear to apply in 28 this case. Nor did the bankruptcy court characterize the
-7- 1 Hardcastles’ behavior as egregious. However, in denying 2 confirmation of the Second Amended Plan, the bankruptcy court 3 found that the Hardcastles had unfairly manipulated the 4 Bankruptcy Code and acted in an inequitable manner toward their 5 creditors. In its order, the bankruptcy court expressed concern 6 for the manipulative posture taken by the Hardcastles in 7 proposing the Second Amended Plan: 8 In the present case, it is clear the debtors made these dramatic increases to their living expenses, together 9 with reduction of their estimated total of unsecured claims [by ignoring the Second Mortgage unsecured 10 debt], for the sole purpose of retaining for themselves, at the expense of their creditors, all of 11 their previously-unreported income. In these circumstances, the court is unable to conclude that the 12 plan has been proposed in good faith. 13 As a result of the modification, the Hardcastles’ first 14 mortgage payment was significantly reduced. Rather than use the 15 additional monthly income to pay plan payments, they instead 16 increased their living expense budget items, indeed, creating two 17 new expenses. They presumably sought to justify this approach by 18 suggesting that their new plan would, despite their increase in 19 living costs, pay their unsecured creditors in full. However, to 20 do so, the Hardcastles’ plan sought to ignore their obligation on 21 the Second Mortgage debt, which the bankruptcy court had declared 22 to be unsecured. All things considered, we cannot conclude that 23 the bankruptcy court’s finding that the Hardcastles’ lacked good 24 faith in submitting the Second Amended Plan was clearly erroneous 25 based on this record. 26 The bankruptcy court was also concerned that, in proposing 27 the Second Amended Plan, the Hardcastles disregarded the 28 Valuation Order concerning treatment of the Second Mortgage
-8- 1 claim. While the Hardcastles prefer to focus our analysis on 2 later events, a proper review of this issue begins with the 3 propriety of the Valuation Order itself. 4 The Valuation Order was entered on motion of the Hardcastles 5 and granted the precise relief they requested: that Bank of 6 America’s collateral be valued at zero, thereby rendering its 7 claim fully unsecured. After giving them that relief, in its 8 order granting the Hardcastles’ motion, the bankruptcy court 9 added that “[t]he claim shall be treated as an unsecured claim in 10 any Chapter 13 plan.” In this regard, we note the bankruptcy 11 court’s choice of words – “shall be treated”. The Hardcastles 12 were given no option by the bankruptcy but to thereafter treat 13 the Second Mortgage claim as an unsecured claim because it was 14 the lawful order of the court. Devers v. Bank of Sheridan 15 (In re Devers), 759 F.2d 751, 755 (9th Cir. 1985) (explaining 16 that, by seeking protection of the bankruptcy court, debtors 17 assume "a duty to participate in that proceeding by obeying the 18 court's lawful orders."). 19 The bankruptcy court’s order directing that the claim “shall 20 be treated” as an unsecured claim in subsequent chapter 13 plans 21 was grounded in the unambiguous language of § 506(a)(1): 22 An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that 23 is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such 24 creditor's interest in the estate's interest in such property, or to the extent of the amount subject to 25 setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor's 26 interest or the amount so subject to set off is less than the amount of such allowed claim. 27 28 (Emphasis added.) Interpreting § 506(a)(1), the Supreme Court
-9- 1 has ruled that, via this statute, a secured claim is bifurcated 2 into “secured and unsecured portions, with the secured portion 3 limited to the value of the collateral.” Assocs. Commer. Corp. 4 v. Rash, 520 U.S. 953, 961 (1997). See also Enewally v. Wash. 5 Mut. Bank (In re Enewally), 368 F.3d 1165, 1168-69 (9th Cir. 6 2004) (“Under the Bankruptcy Code, a secured loan may be 7 separated into two distinct claims: a secured claim for an 8 amount equal to the value of the security, and an unsecured claim 9 for the difference, if any, between the amount of the loan and 10 the value of the security.”). According to the statute and case 11 law, then, the bankruptcy court’s action in granting the 12 Hardcastles’ motion under § 506(a)(1) effectively rendered the 13 creditor’s claim formerly secured by the Second Mortgage an 14 unsecured claim. Consistent with the statute, the court directed 15 that the claim “shall be treated as an unsecured claim in any 16 Chapter 13 plan.” 17 The Hardcastles did not appeal the bankruptcy court’s 18 directive in the Valuation Order, and they do not challenge the 19 authority or legitimacy of the bankruptcy court’s Valuation Order 20 in this appeal. They are thus bound by the terms of that order 21 and were obliged to include the Second Mortgage as an unsecured 22 claim in their Second Amended plan. Instead, the Hardcastles 23 note that Bank of America filed a secured proof of claim on 24 November 26, 2012, about two months after the bankruptcy court 25 entered its Valuation Order deeming the creditor’s claim fully 26 unsecured. The Hardcastles insist that, in filing a secured 27 claim, the creditor elected to forego any unsecured claim in the 28 bankruptcy court.
-10- 1 Unlike the Hardcastles, we do not know, and decline to 2 speculate about, why Bank of America filed a secured proof of 3 claim even after entry of the Valuation Order.4 While the 4 Hardcastles argue to the contrary, we genuinely doubt this act 5 was the result of Bank of America’s knowing election to file a 6 fully secured proof of claim notwithstanding that its claim had 7 been deemed unsecured in the Valuation Order. 8 In addition, the Hardcastles have cited no authority to 9 support their argument that a creditor’s submission of a secured 10 proof of claim after the claim has been valued by the bankruptcy 11 court as fully unsecured disqualifies that creditor from 12 thereafter participating in any plan payments to unsecured 13 creditors. Instead, the Hardcastles rely upon cases in which 14 there had been no valuation of the creditor’s claim under 15 § 506(a). 16 The principal case is In re Harrison, 987 F.2d 677, 681 17 (10th Cir. 1993). In that case, a creditor had filed a secured 18 claim, which the debtor’s plan proposed to treat as being 19 satisfied in full by surrender of the collateral securing that 20 claim to the creditor. The creditor appealed the order of the 21 4 22 A “Request for Special Notice” was filed by Pite Duncan, LLP, as attorneys for Bank of America, as the 23 successor-in-interest to the creditor that made the loan to the Hardcastles secured by the first mortgage, on August 17, 2012. A 24 “Notice of Appearance” for Bank of America was filed by attorneys 25 Prober & Raphael on August 21, 2012. There is nothing in the record to show that either of these law firms were given notice 26 of the Hardcastles’ motion to value the creditor’s collateral. 27 Pite Duncan filed the proof of claim for the first mortgage. Claim No. 6. Prober & Raphael filed the secured proof of claim 28 for the Second Mortgage. Claim No. 7.
-11- 1 bankruptcy court approving the plan arguing that its claim was 2 partly unsecured as a result of the surrender. The Tenth Circuit 3 held that because the creditor had filed a proof of claim 4 asserting fully secured status, the claim was properly treated as 5 such in the plan. The court noted that, to the extent that the 6 creditor contended its claim was partly unsecured, it had a duty 7 to amend its proof of claim, or to file a motion to value the 8 claim under § 506(a) as partially unsecured. In short, the court 9 in In re Harrison required the secured creditor to file an 10 amended proof of claim when its claim was partially unsecured and 11 when there had been no valuation of the collateral under 12 § 506(a). 13 In In re Padgett, 119 B.R. 793, 794 (Bankr. D. Colo. 1990), 14 a creditor filed a proof of claim asserting secured status in a 15 chapter 7 case. After the court approved the trustee’s proposed 16 distributions to unsecured creditors, the erstwhile secured 17 creditor filed a reconsideration motion, contending his 18 collateral was worthless, and that his claim should be paid as an 19 unsecured claim. The creditor argued that, “pursuant to 20 11 U.S.C. § 506(a), its claim is, by operation of law, an 21 unsecured claim to the extent that it exceeds the value of the 22 collateral.” Id. at 794. The Padgett court, however, held: 23 A creditor with an undersecured or unsecured claim, or a creditor with a secured claim that devolves into an 24 undersecured or unsecured claim, must timely file an amended, or supplemental proof of claim or otherwise 25 provide legally sufficient notice of same to the trustee in order to be treated as an unsecured creditor 26 of the estate and receive a pro rata distribution of estate proceeds. 27 28 Id. at 795. Again, like In re Harrison, there was no court
-12- 1 ordered valuation of collateral under § 506(a). Put another way, 2 Padgett stands for the rule that a secured creditor must file an 3 unsecured claim in the absence of a § 506(a) valuation of its 4 claim by the bankruptcy court. 5 Finally, the Hardcastles cite this Panel’s unpublished 6 decision in Olympic Coast Inv., Inc. v. Crum (In re Wright), 7 2008 WL 8462954 (9th Cir. BAP Oct. 16, 2008). This was another 8 chapter 7 case in which a creditor filed a secured proof of claim 9 for $4,573,239; the trustee later filed a motion to abandon the 10 creditor’s collateral on the grounds that the debtor had 11 estimated its value at $50,000. The creditor objected to the 12 trustee’s proposed distribution to creditors on the grounds that 13 trustee had “admitted” that the collateral was only worth 14 $50,000, so it had an unsecured claim for $4,523,239. The Panel 15 dismissed the appeal as moot. However, it commented that, if it 16 were to reach the merits, it would agree with the Padgett and 17 Harrison courts that “any undersecured creditor should file a 18 claim for the unsecured portion of its claim (or a valuation 19 motion) in order to participate in any distribution to unsecured 20 creditors.” Id. at * 6. 21 In short, none of the authorities cited by the Hardcastles 22 stand for the proposition that a secured creditor must file a 23 proof of claim as an unsecured creditor where the bankruptcy 24 court has valued that claim as unsecured in an order entered 25 under § 506(a). We know of no case law that requires the filing 26 of an unsecured proof of claim after the court determines that 27 claim as unsecured and directs it to be treated as an unsecured 28 claim in any Chapter 13 plan.
-13- 1 In summary, the Hardcastles manipulated the bankruptcy 2 system when, in proposing the Second Amended Plan, they 3 dramatically increased their living expenses, while at the same 4 time inappropriately reducing payments to unsecured creditors. 5 In doing so, they ignored a lawful order of the bankruptcy court 6 directing that they treat Bank of America’s claim as an unsecured 7 claim in the plan. The bankruptcy court did not clearly err in 8 its factual determination that the Hardcastles had not proposed 9 the Second Amended Plan in good faith, nor in its decision to 10 deny confirmation of the plan. 11 B. The Second Amended Plan required that the Second Mortgage be treated as an unsecured claim. 12 13 In its order denying reconsideration of the order denying 14 plan confirmation, the bankruptcy court cited an alternative 15 reason to deny confirmation: that the Hardcastles’ proposed 16 Second Amended Plan, paragraph 2.[1]5, provides that the class of 17 general unsecured creditors includes “the under-collateralized 18 portion of secured claims not entitled to priority.” 19 Paragraph 2.15 is derived from the district’s standard form 20 chapter 13 plan, EDC-Form 3-080. The text of paragraph 2.15 of 21 the Second Amended Plan reads as follows, with the Hardcastles’ 22 addition to the form underlined: 23 Class 7 [unsecured claims] consists of all other unsecured claims not listed as class 5 or 6 claims. 24 These claims will receive no less than a 100.0 % dividend. These claims, including the 25 undercollateralized portion of secured claims not entitled to priority, total approximately $71,438.00. 26 27 The Eastern District of California has by local rule adopted 28 a “mandatory” form chapter 13 plan, Form EDC 3-080, which is to
-14- 1 be used by all chapter 13 debtors. Bankr. E.D. Cal. Local 2 R. 3015-1(a). The practice of prescribing form plans for use in 3 a district is widespread. Indeed, over 70 percent of the 4 bankruptcy courts in the United States have adopted mandatory 5 chapter 13 plans for use in their districts. In re Visintainer, 6 435 B.R. 727, 729-30 (Bankr. M.D. Fla. 2010). The provision of 7 the Hardcastles’ Second Amended Plan is based on the district’s 8 form. To the extent that the bankruptcy court in this case 9 interpreted this provision to mean that the class of unsecured 10 claims “includes the under-collateralized portion of secured 11 claims not entitled to priority,” and that the Hardcastles’ 12 failure to include the Second Mortgage debt as an unsecured claim 13 in their Second Amended Plan would violate the intent of the 14 local rule and form, we defer to the court’s interpretation of 15 its local form. Moncur v. Agricredit Acceptance Co. 16 (In re Moncur), 328 B.R. 183, 191 (9th Cir. BAP 2005). 17 Moreover, we note that the Second Amended Plan also provides 18 at paragraph 2.04 that, 19 [A] proof of claim, not this plan or the schedules, shall determine the amount and classification of a 20 claim unless the court’s disposition of a claim objection, valuation motion, or lien avoidance motion 21 affects the amount or classification of the claim. 22 (Emphasis added.) In other words, as we read it, the 23 Hardcastles’ own Second Amended Plan effectively provides that 24 the Valuation Order, and not Bank of America’s proof of claim, 25 would control the classification of the creditor’s claim. 26 II. The bankruptcy court did not abuse its discretion 27 in dismissing the Hardcastles’ chapter 13 case. 28 The Hardcastles’ brief in the appeal from the dismissal of
-15- 1 their case is substantially the same as their brief concerning 2 denial of confirmation. They argue that the bankruptcy court 3 erred in denying the confirmation of their Second Amended Plan, 4 and it was therefore a corresponding error for the bankruptcy 5 court to dismiss the case. 6 The hearing on Trustee’s dismissal motion occurred after two 7 continuances. The only document relevant to this event appearing 8 in the appellate record, or in the bankruptcy court’s docket of 9 the case, is the order which recites that the bankruptcy case was 10 dismissed because the Hardcastles had engaged in unreasonable 11 delay that was prejudicial to creditors. Such is one of the 12 causes set forth in the Code which may justify dismissal. See 13 § 1307(c)(1) (providing that a bankruptcy court may dismiss a 14 chapter 13 case “for cause, including – (1) unreasonable delay by 15 the debtor that is prejudicial to creditors . . . .”); Nelson v. 16 Meyer (In re Nelson), 343 B.R. 671, 676 (9th Cir. BAP 2006) (“A 17 debtor who declines to revise a plan after denial of confirmation 18 becomes vulnerable to § 1307(c)(1) ‘cause’ for unreasonable delay 19 by the debtor that is prejudicial to creditors.”). 20 The dismissal order states that "findings of fact and 21 conclusions of law having been stated orally on the record and 22 good cause appearing, IT IS ORDERED that the motion is granted 23 and the case is dismissed." We have been provided with no 24 transcript of that hearing to detail those findings and 25 conclusions. In addition, the Hardcastles’ brief offers no 26 insight beyond the order as to the bankruptcy court’s findings, 27 conclusions or reasoning in support of its decision, simply 28 arguing that the bankruptcy court was wrong to have denied
-16- 1 confirmation and thus was wrong to dismiss the case. 2 This approach on appeal is regrettable; we simply have no 3 way to review the bankruptcy court’s decision nor to examine the 4 court’s reasoning. The Ninth Circuit has instructed that, where 5 a transcript of the hearing at which the bankruptcy court made 6 findings and conclusions is unavailable, we should employ our 7 best efforts to determine the court’s reasons from all sources. 8 Ehrenberg v. Cal. State Fullerton (In re Beachport Enters., 9 Inc.), 396 F.3d 1083, 1086-88 (9th Cir 2005). Where we cannot 10 determine the bankruptcy court’s reasoning from all available 11 sources, we may summarily affirm the bankruptcy court. Id. The 12 Hardcastles, as appellants, bear the burden of providing an 13 adequate record to evaluate their arguments and must equally bear 14 the consequences of failing to provide that record. Cashco Fin. 15 Sec. Servs., Inc. v. McGee (In re McGee), 359 B.R. 764, 765 (9th 16 Cir. BAP 2006). 17 We know that the bankruptcy court denied confirmation of the 18 Hardcastles’ Second Amended Plan. We are unaware of whether the 19 Hardcastles filed a further plan to conform to the bankruptcy 20 court’s ruling. And, above, we cite the case law holding that, 21 if they did not file such a plan, it may constitute unreasonable 22 delay justifying dismissal. At bottom, the Hardcastles have not 23 provided an adequate record to allow us to review the bankruptcy 24 court’s dismissal order. We therefore decline to disturb that 25 order and summarily affirm it. Where there is a clearly 26 inadequate record on appeal, we have “little choice” but to 27 affirm. Morrissey v. Stuteville (In re Morrissey), 349 F.3d 28 1187, 1191 (9th Cir. 2003); In re Friedman, 126 B.R. 63, 68 (9th
-17- 1 Cir. BAP. 1991). 2 CONCLUSION 3 The orders of the bankruptcy court are AFFIRMED. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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