Filing 5

MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 2/10/14. (SAC )

FILED
2014 Feb-10 PM 01:46
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
JUSTIN DAVIS,
Appellant,
v.
LINDA GORE,
Trustee.

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) CASE NO. 1:12-CV-2013-WMA
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MEMORANDUM OPINION

Debtor-appellant, Justin Davis (“Davis” or “debtor”), appeals
an order of the Bankruptcy Court for the Northern District of
Alabama in In re Justin Davis, Case No. 11-43159-JJR13.

In its

order of April 17, 2012, the bankruptcy court sua sponte dismissed
Davis’s Chapter 13 bankruptcy case based upon its finding that
Davis failed to show cause for proposing a 60-month plan, rather
than a 36-month plan, and on its finding that Davis did not propose
his plan in good faith. BK Doc. 42, Doc. 3 (“Stay Opinion”) at 5-6.
This court has jurisdiction pursuant to 28 U.S.C. § 158.

For the

reasons detailed below, the court will affirm the order of the
bankruptcy court.
PROCEEDINGS BELOW
Davis filed his Chapter 13 case on December 20, 2011. BK Doc.
1.

His proposed plans and the related confirmation hearings have

particular significance because the bankruptcy court dismissed the
case for failure to satisfy plan confirmation requirements.

Davis filed his original Chapter 13 plan with his petition on
December 20, 2011, and filed two amended plans in response to the
Chapter 13 trustee’s objections. BK Docs. 11, 26, 38. The original
plan proposed a 60-month term, no payments to unsecured creditors,
and 5% interest for Santander’s claim secured by a lien on Davis’s
car. BK Docs. 1, 11.

In response, the trustee filed an objection

and motion to dismiss asserting that Davis did not propose the plan
in good faith; that cause must be shown for a term beyond 36
months; that the plan did not account for all disposable income;
and

that

the

interest

increased. BK Doc. 23.

rate

on

Santander’s

claim

should

be

Davis’s first amended plan kept the plan

term at 60 months and increased the interest rate on Santander’s
claim to 5.25%. BK Doc. 26.

The trustee amended her objection and

motion to dismiss to state that Davis did not propose the plan in
good faith; that the plan must have a 36-month term; and that the
plan must pay 100% to unsecured creditors. BK Doc. 34.

Davis’s

second amended plan kept the 60-month term but provided for 100%
payment

to

unsecured

creditors.

BK

Doc.

38.

The

trustee

subsequently withdrew her objection to confirmation and her motion
to dismiss. BK Doc. 39.
Four confirmation hearings were held to consider the trustee’s
objections and motions to dismiss.
hearings. Stay Op. 2-6, Doc. 4 at 3.

Davis did not attend these
At the final confirmation

hearing, Davis’s attorney indicated to the bankruptcy court that

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Davis wanted to go forward with the proposed plan and that the plan
could not be shortened “due to budget constraints.” Id.

The

bankruptcy court sua sponte dismissed Davis’s case in an order that
provides:

“For the reasons stated on the record, this case is sua

sponte DISMISSED.” BK Doc. 42.

Davis appeals this order.

The

trustee does not contest Davis’s appeal and has filed no brief in
opposition to the appeal, but that does not relieve this court from
the obligation to review the order appealed for the errors alleged.
DISCUSSION
This

court

sits

as

an

appellate

court

when

reviewing

bankruptcy courts’ “final decisions,” including dismissal orders.
See 28 U.S.C. § 158.

It reviews those decisions under a clearly

erroneous standard for findings of fact and under a de novo
standard for conclusions of law. Equitable Life Assurance Soc. v.
Sublett (In re Sublett), 895 F.2d 1381, 1383-84 (11th Cir. 1990).
In the present case, Davis disputes the dismissal order as contrary
to the Bankruptcy Code and as contrary to the facts. Doc. 1,
Statement of Issues on Appeal (“Statement of Issues”).
Before reaching the substantive issues on appeal, the court
first must consider whether Davis’s failure to designate and
provide transcripts of the confirmation hearings prevents review of
the dismissal order.
A below.

This initial matter is discussed in section

The substantive issues are discussed in section B.

The

court finds that (A) it may review the dismissal order because no
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facts are at issue and the bankruptcy court’s reasoning can be
discerned from the record before this court; and (B) the bankruptcy
court did not err in its “for cause” legal standard and did not
clearly err in finding that Davis failed to show cause for a 60month plan, making it unnecessary for the court to reach the issue
of good faith.
A.

Propriety of Reviewing the Dismissal Order
As an initial matter, the court examines whether Davis’s

failure to provide transcripts of the confirmation hearings renders
this court unable to review the dismissal order.

The failure to

provide transcripts is problematic because the dismissal order
states that the bankruptcy court’s reasons for dismissal were
stated on the record.

Davis did not provide that record.

An

appellant’s failure to provide evidence relevant to the disputed
finding or conclusion typically requires the court to affirm the
order to avoid “speculat[ing] as to potential errors” without “the
relevant evidence in the record.” See Cody v. D.A.N. Joint Venture
III, L.P., 588 F.3d 1312, 1316 n.5 (11th Cir. 2009); Loren v.
Sasser, 309 F.3d 1296, 1304 (11th Cir. 2002).
to

this

rule

exist.

See

Forehand

v.

However, exceptions

Fla.

State

Chattahoochee, 89 F.3d 1562, 1571 (11th Cir. 1996).

Hosp.

at

One such

exception is an occasion where the reviewing court can discern the
basis for the bankruptcy court’s ruling from documents in the
record and no disputed facts are at issue. See In re Wilson, 402
4

B.R. 66, 70 (B.A.P. 1st Cir. 2009).

When this exception applies,

the court may rule on the merits of an appeal even without the
transcripts. Id.
This exception applies to the present appeal because the
record, although lacking the transcripts, includes the bankruptcy
court’s opinion and order denying Davis’s motion to continue
automatic stay pending appeal.

That opinion contains an extensive

discussion of the bankruptcy court’s reasons for dismissing Davis’s
case.

It

also

states

that

the

bankruptcy

court

relied

on

“information extracted solely from the Debtor’s proposed plan,
schedules and statement of financial affairs.” Stay Op. 1.

Given

that no disputed facts are at issue, and the bankruptcy court
explained its reasons for dismissing Davis’s case in the Stay
Opinion, the court will consider the merits of Davis’s appeal.
B.

Substantive Issues on Appeal
The bankruptcy court’s dismissal order was based on its

finding that Davis failed to show cause for a 60-month plan and
its finding that Davis did not propose the plan in good faith.
Davis’s Statement of Issues on Appeal indicates that he disputes
the legal conclusions and factual findings for both grounds for
dismissal.1

The court finds that the bankruptcy court did not err

1

As the bankruptcy court points out, one of the designated issues
“conflates and misstates several confirmation requirements.” Stay Op. 8. See
the bankruptcy court’s discussion for more detail. Id at 8-12. Also, the
issues listed in Davis’s Statement of the Issues on Appeal differ from those

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in its legal conclusion or clearly err in its factual finding that
the bankruptcy case should be dismissed for Davis’s failure to show
cause for a 60-month plan term.

Because the dismissal was proper

on that basis, the court need not reach the second basis for
dismissal, that Davis did not propose the plan in good faith.
Bankruptcy courts have an independent obligation to verify
that a debtor meets all confirmation requirements before confirming
the plan and allowing the case to proceed. United Student Aid
Funds, Inc. v. Espinosa, 559 U.S. 260, 277 n.14 (2010).

A Chapter

13 plan must meet the confirmation requirements in 11 U.S.C. §
1325(a).2

This section, in conjunction with § 1322(d)(2), imposes

a 36-month term limit for debtors classified as below median income
“unless

the

court,

for

cause,

approves

a

longer

period.”

§

1322(d)(2)(emphasis added) (§ 1325(a)(1) requires the plan to
comply with other provisions of Chapter 13, including § 1322(d));
see In re Tennyson, 611 F.3d 873, 878 (11th Cir. 2010).

The

bankruptcy court did not err when it concluded sua sponte and as a
matter of law that a Chapter 13 below median income debtor must
affirmatively show cause before a 60-month plan can be confirmed.
What constitutes “cause” for extending the plan term and
whether a debtor has shown cause are questions of fact decided by

in the appellant’s brief, the latter being more specific and encompassed by
the former. Accordingly, the court uses the former list.
2

Further references to 11 U.S.C. § 101 et. seq. (the Bankruptcy Code)
will be by section number only.

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the bankruptcy court on a case by case basis. In re Witt, 199 B.R.
890, 892 (W.D. Va. 1996).

Courts may find cause when a debtor

cannot cure a default or pay priority claims during a shorter term.
Collier on Bankruptcy ¶ 1322.18 (16th ed.).

This bankruptcy court

has also found cause when a longer term would enable a debtor to
save his home or pay domestic support obligations, thereby keeping
him out of jail. Stay Op. 4, n.6.

Although a bankruptcy court

would not likely find cause when a debtor does not pay all
disposable income into the plan, finding cause requires a separate
inquiry and does not rest solely on disposable income. See In re
Cormier, 478 B.R. 88, 97-98 (Bankr. D. Mass. 2012) (citing In re
Rodger, 423 B.R. 591 (Bankr. D.N.H. 2010)).

Davis qualifies as a

below median income debtor and, therefore, must show cause to
extend a plan beyond 36 months under § 1322(d)(2). Stay Op. 2.
Davis devotes little space to the bankruptcy court’s finding
that he did not show cause for a 60-month plan under § 1322(d)(2).3
See Doc. 4.

Davis only argues that “[h]e is forced to extend the

term to sixty months in hopes of protecting his vehicle, based on
the budget numbers in his schedules.
income to offer.” Id. at 10.

He has no more disposable

Davis cites no authority to support

his contention that cause exists if a debtor needs a longer term to

3

Davis consistently frames the issue as whether “a Chapter 13 Debtor
may file a 60 month case absent bad faith if he commits all of his disposable
income.” Statement of Issues. However, “for cause” is the standard for
extending the plan term under § 1322(d), not “absent bad faith” or commitment
of all disposable income. Davis’s arguments on the latter are inapposite.

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keep his vehicle and he commits his entire disposable income to the
plan.4

As the bankruptcy court observed, if a debtor could show

cause “simply by showing that all disposable income was being
devoted to the plan,” § 1322(d)(2) “would be entirely superfluous.”
Stay Op. 11.

The bankruptcy court correctly looked beyond Davis’s

disposable income to determine if he had shown good cause.
The bankruptcy court did not commit clear error in its factual
finding that Davis failed to show cause to extend the plan term.
See In re Englander, 95 F.3d 1028, 1030 (11th Cir. 1996).
bankruptcy

court

held

a

total

of

four

hearings

confirmation of Davis’s plan and amended plans.

to

The

consider

Davis did not

attend any of the hearings and presented no evidence to show cause
why his plan should be extended.

Each of the hearings is addressed

below to demonstrate that Davis had ample warning of the bankruptcy
court’s concerns yet did not present any evidence to support his
final proposal.
At the first confirmation hearing, the bankruptcy court
expressed its concern to Davis’s attorney that “the Court could
find no ‘cause’ for allowing the term of the plan ... to extend

4

Davis’s argument here appears to be based on § 1325(b)(1), which
provides that if the Trustee or holder of an allowed unsecured claim objects
to the conformation of the plan, the court may not approve the plan unless one
of two alternative requirements are met. The second alternative requires the
debtor’s plan to provide all of his projected disposable income to make
payments to unsecured creditors. § 1325(b)(1)(B). However, nothing in §
1325(b)(1) requires the bankruptcy court to approve a debtor’s plan simply
because he devotes his entire disposable income to pay unsecured creditors,
much less to find that cause to extend the plan exists under § 1322(d)(2).

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beyond the 36-month limit anticipated by Code § 1322(d) for most
below-median debtors.” Stay Op. 2.
At the second confirmation hearing, the bankruptcy court again
noted that cause had not been established. Stay Op. 3.

The

bankruptcy court “reiterated its concerns that the Debtor had
purchased a car he simply could not afford when he bought it, and
having

made

an

unwise

financial

decision

now

wanted

to

use

bankruptcy to impose a 5-year refinancing on the secured creditor.”
Id.

The bankruptcy court told Davis’s attorney to provide an

explanation of what happened between Davis’s purchase of the car
and his filing bankruptcy.

The court “made it clear that the

Debtor’s testimony was needed and urged that the Debtor come to
court at the next setting.” Id. at 4.
At the third confirmation hearing, Davis’s attorney offered a
purported explanation of what had changed since Davis purchased the
car.

“Counsel stated that the Debtor had been taking his car

payments to the dealership, and instead of sending those payments
to Santander, a salesman had been pocketing the money.

Counsel

offered nothing by way of evidence to support this assertion.” Stay
Op. 5.

The bankruptcy court continued the hearing “to give the

Debtor yet another opportunity to establish ‘cause’ for a 60-month
plan, to show good faith, and examine the merits of [his] alleged
claim against the car dealership.” Id. at 5-6.

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At the fourth and final confirmation hearing, Davis again did
not appear and Davis’s attorney informed the bankruptcy court “that
the Debtor was determined to keep the [car], and that that was all
counsel could do.” Id. at 6.

Because the plan still proposed a 60-

month term, the bankruptcy court dismissed the case sua sponte. Id.
The four confirmation hearings did not result in any evidence,
much less live testimony from Davis, to support Davis’s contention
that retaining his car was an absolute necessity, or to support his
assertion that the car dealer had retained payments intended for
Santander.

The bankruptcy court considered this lack of evidence

or explanation in finding that Davis failed to show cause to extend
the plan term:
[T]he Court could not find that the Debtor’s buying a car
he could not afford when purchased was sufficient “cause”
under the standard of Code § 1322(d). If other “cause”
existed, it could not be discerned despite the Court’s
repeated attempts to assimilate the totality of the
Debtor’s schedules and statements filed in the case and
despite the repeated opportunities for the Debtor to
explain to the Court what the Court might be missing——
opportunities that were repeatedly ignored. With no help
from the Debtor whatsoever in terms of an explanation
under oath——not even an affidavit——the Court simply could
not fabricate “cause” out of the patchwork of schedules,
statements, and speculation on the record before it. In
addition, Counsel never, during any of the four hearings,
offered any explanation as to why the Debtor had failed
to appear.
Id. at 6-7. Based on the confirmation hearings and the record, the
bankruptcy court’s finding that Davis failed to show cause to
extend the plan term under § 1322(d)(2) is not clearly erroneous.

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Because Davis’s plan did not comply with § 1322(d)(2), and
therefore did not meet the confirmation requirements of § 1325(a),
the bankruptcy court did not err in dismissing Davis’s case.

The

dismissal order being warranted on this ground, the court need not
consider the second ground for dismissal relating to whether Davis
proposed the plan in good faith.
CONCLUSION
For the above reasons, the court concludes that the bankruptcy
court’s did not err in its legal conclusions regarding cause under
§ 1322(d)(2) and did not clearly err in its finding of fact that
Davis failed to show cause to extend his plan term.

Accordingly,

the court hereby AFFIRMS the decision of the bankruptcy court.

A

separate final order will be entered.

DONE this 10th day of February, 2014.

_____________________________
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE

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