Michels v. Maynard Savings Bank (In Re Michels)

305 B.R. 868, 2004 Bankr. LEXIS 279, 2004 WL 503583
CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedMarch 16, 2004
Docket03-6076NI
StatusPublished
Cited by10 cases

This text of 305 B.R. 868 (Michels v. Maynard Savings Bank (In Re Michels)) 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
Michels v. Maynard Savings Bank (In Re Michels), 305 B.R. 868, 2004 Bankr. LEXIS 279, 2004 WL 503583 (bap8 2004).

Opinion

DREHER, Bankruptcy Judge.

This is an appeal from an order of the bankruptcy court 1 dated September 19, 2003, which denied confirmation of Appellant’s Chapter 12 plan and dismissed the case. For the reasons stated below, we affirm the decision of the bankruptcy court.

I. FACTS AND PROCEDURAL HISTORY

This is the tale of two bankruptcy cases: the first, a Chapter 13 case filed on April 23, 2001, and dismissed on January 9, 2003, and the second, a Chapter 12 case, filed on February 5, 2003, and dismissed on September 19, 2003, by the order subject to this appeal. In his Chapter 13 case, Appellant, Vincent Michels, (“Debtor”) filed his first Chapter 13 plan after obtaining an extension of time from the bankruptcy court to file a plan. Ap-pellee Maynard Savings Bank (“MSB”) filed an objection to confirmation of the plan. The Chapter 13 trustee (“trustee”) also filed an objection to the plan and sought dismissal of the case. The Internal Revenue Service joined the trustee’s objection and motion for dismissal. At the time of Debtor’s filing, MSB held a security interest in Debtor’s 200 acre farm, a business establishment called Shooky’s Bar, and a blanket first lien on all farm equipment, crops, crop proceeds, and miscellaneous vehicles which served as collateral for an obligation with an outstanding balance of $193,531.40.

In response to these objections, Debtor amended his plan on July 30, 2001, and a day later amended his schedules. The creditors and the trustee renewed their objections. Subsequently, the bankruptcy court denied confirmation of the plan, but allowed Debtor to further amend his plan. Debtor filed a second amended plan on September 17, 2001, to which the same creditors and the trustee objected. Debt- or then filed “technical amendments” to the second amended plan on October 31, 2001.

Debtor’s Chapter 13 plan provided, in part, that 1) if the bar was sold, MSB would be paid the first $100,000.00 of sales proceeds in return for the release of its mortgage and security interest in the contents of the bar and that monthly payments to MSB would then be reduced to reflect the payments; 2) Debtor would *870 keep his vehicles and farm equipment and, if they were sold, MSB would release its lien in return for payment to it of one-half of the net proceeds; 3) the other one-half of the proceeds from the sale of the vehicles and from equipment would be used to fund the plan; 4) MSB would terminate its lien on Debtor’s crops; and 5) Debtor would pay the remaining balance of MSB’s claim in a balloon payment at the end of the 48 month plan.

The bankruptcy court did not find that the above plan provision, standing alone, would prevent confirmation, but on other grounds found the plan not confirmable. During the confirmation hearing of the second amended plan as.further amended, however, a dispute arose concerning the timeliness of MSB’s claim. The bankruptcy court held that, if MSB’s claim were allowed, the second amended plan would not be feasible and the case would be dismissed. On the other hand, if an objection were filed to the late filed claim of MSB, the claim would be disallowed and the plan confirmed. Eventually, the bankruptcy court denied MSB’s motion to allow it an informal proof of claim, disallowed MSB’s claim and confirmed Debtor’s plan. MSB appealed and we reversed, holding that MSB’s claim was a timely filed informal proof of claim. Since the bankruptcy court already concluded, and the parties agreed, that Debtor’s plan could not be confirmed if the MSB claim was included, we also held that denial of confirmation of Debtor’s plan was appropriate. See Maynard Savings Bank v. Michels (In re Michels), 286 B.R. 684, 693 (8th Cir. BAP 2002). On January 9, 2003, the bankruptcy court dismissed Debtor’s Chapter 13 case.

Immediately on the heals of that dismissal, Debtor changed his tactics and on February 5, 2003, filed a case under Chapter 12 of the Bankruptcy Code. On April 7, 2004 he filed his Chapter 12 plan. Paragraph 3.04(g) of Debtor’s Chapter 12 plan provided that “[c]onfirmation of this Chapter 12 Plan will terminate [MSB’s] blanket lien on Chapter 12 Debtor Michels’ farm machinery, equipment, crops, livestock, contract rights, general intangibles, proceeds and all other farm related collateral.” Debtor’s plan also provided for a balloon payment, but in 10 years, not 48 months as provided in his Chapter 13 plan. As with the Chapter 13 plan, MSB, the Internal Revenue Service and the trustee, 2 along with the Iowa Department of Revenue, all filed objections to confirmation. MSB’s objection was essentially the same as it had been in the earlier Chapter 13 case: that the plan failed to provide for MSB retaining its lien, paid MSB an inadequate rate of interest, was not feasible and was not filed in good faith. The hearing on confirmation of the plan was originally scheduled for May 21, 2003, but was rescheduled to June 18, 2003.

On June 5, 2003, the bankruptcy court held a hearing on the use of cash collateral. It is apparent from the transcript of that hearing that the bankruptcy court’s patience with Debtor was wearing thin. At the hearing the bankruptcy court made patently clear that Debtor would not be allowed a series of amendments or modifications to the plan, but left open the possibility that Debtor would be granted the opportunity to file an amended plan if circumstances warranted.

On June 18, 2003, a confirmation hearing was held. At that hearing the bankruptcy court denied confirmation of Debtor’s plan, granted Debtor permission to file an amended Chapter 12 plan, but allowed him only 10 days to do so. On June 30, 2003, Debtor filed an amended plan, but he did *871 not change the language contained in paragraph 3.04(g). The bankruptcy court set August 26, 2003, for the “final” confirmation hearing. The trustee did not object to confirmation of the amended plan. But, both MSB and the Internal Revenue Service renewed their objections. MSB also asked the court to dismiss the case if confirmation was denied. On July 24, 2003, Debtor filed another amendment, characterized by Debtor as an amendment to correct a “scrivener error.”

A confirmation hearing was held on August 26, 2003, and on September 19, 2003, the bankruptcy court issued an order denying confirmation of Debtor’s plan because the plan proposed to avoid the liens held by MSB on Debtor’s farm machinery in violation of section 1225(a)(5)(B)(i) of the Bankruptcy Code, the plan failed to provide MSB with the present value of its secured claim as required by section 1225(a)(5)(B)(ii), and because the plan was not filed in good faith and was not feasible. See 11 U.S.C. §§ 1225(a)(3) and (6). The bankruptcy court also dismissed the case pursuant to section 1208(c) for a variety of reasons including the fact that it had denied confirmation of debtor’s plan and its view that failure to dismiss would invite “unreasonable delay” and “diminution of the estate” in the “absence of a reasonable likelihood of rehabilitation.” In re Michels, 301 B.R. 9, 18 (Bankr.N.D.Ia.2003); see 11 U.S.C. § 1208(c). Debtor filed a timely appeal.

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Cite This Page — Counsel Stack

Bluebook (online)
305 B.R. 868, 2004 Bankr. LEXIS 279, 2004 WL 503583, Counsel Stack Legal Research, https://law.counselstack.com/opinion/michels-v-maynard-savings-bank-in-re-michels-bap8-2004.