Costley v. Herr

Filing 13

MEMORANDUM OPINION. Signed by Judge Lydia Kay Griggsby on 3/14/2024. (mu1s, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

NATHANIEL MAURICE COSTLEY,
Appellant,
v.
REBECCA A. HERR,
Appellee.

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Civil Action No. 22-cv-3265-LKG
Dated: March 14, 2024

MEMORANDUM OPINION
I.

INTRODUCTION
In this bankruptcy appeal, Appellant pro se, Nathaniel Maurice Costley, appeals the

United States Bankruptcy Court for the District of Maryland’s (“Bankruptcy Court”) order
denying confirmation of his Chapter 13 Plan, without granting him leave to further amend the
plan, pursuant to 28 U.S.C. § 158(a) and Rule 8002 of the Federal Rules of Bankruptcy
Procedure. ECF No. 11 at 5. Appellee, Rebecca A. Herr, in her capacity as the Chapter 13
Trustee, requests that the Court affirm the Bankruptcy Court’s order, because the Bankruptcy
Court correctly determined that Appellant’s Plan was not feasible. ECF No. 12 at 9. No hearing
is necessary to resolve this appeal. See L.R. 105.6 (D. Md. 2021). For the reasons that follow,
the Court AFFIRMS the Bankruptcy Court’s order.
II.

FACTUAL AND PROCEDURAL BACKGROUND 1
A. Factual Background
In this bankruptcy appeal, Appellant pro se, Nathaniel Maurice Costley, appeals the

Bankruptcy Court’s order denying confirmation of his amended Chapter 13 Plan (the “Amended
Plan”), without granting him leave to further amend. ECF No. 11 at 10. Appellant also appears
to challenge the Bankruptcy Court’s decisions to allow a witness to testify, and to admit certain
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The facts recited in this memorandum opinion are taken from the record before the Bankruptcy Court in
this matter.

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evidence, during an evidentiary hearing held in this matter on August 12, 2022. Id. at 11-15; 1825. As relief, Appellant requests, among other things, that the Court reverse the Bankruptcy
Court’s December 6, 2022, Order. Id. at 25-26.
Appellant’s Chapter 13 Bankruptcy
As background, on March 10, 2022, Appellant filed a voluntary Chapter 13 petition with
the Bankruptcy Court. See generally, Bk. Dkt. ECF No. 1. Appellant’s Chapter 13 statement of
monthly income and calculation of commitment period (Official Form 122C-1), which was filed
in the Bankruptcy Court on March 11, 2022, shows that Appellant is below median income and
has a current monthly income of $600.00 per month. Bk. Dkt. ECF No. 6.
Appellant’s Schedule I Form (Official Form 106I), which was filed in the Bankruptcy
Court on March 24, 2022, also shows that Appellant is unemployed and receiving family support
payments in the amount of $600.00 per month. Bk. Dkt. ECF No. 17 at 32-33. In addition,
Appellant’s Schedule J Form (Official Form 106J), which was filed in the Bankruptcy Court on
March 24, 2022, shows that Appellant has $233.00 in monthly expenses, resulting in a monthly
net income of $367.00. Bk. Dkt. ECF No. 17 at 39.
Appellant’s Initial Plan And SPS’s Motion For Relief
On April 22, 2022, Appellant filed a Chapter 13 Plan (the “Plan”) with the Bankruptcy
Court. Bk. Dkt. ECF No. 24. On April 29, 2022, creditor Select Portfolio Services (“SPS”) filed
an objection to confirmation of the Plan. Bk. Dkt. ECF No. 25.
On June 1, 2022, SPS filed a motion for relief from the automatic stay, seeking to
proceed with a foreclosure sale of the Appellant’s property. Bk. Dkt. ECF No. 28. The meeting
of creditors took place on August 4, 2022. Bk. Dkt. ECF No. 45.
On August 12, 2022, the Bankruptcy Court held an evidentiary hearing on SPS’s motion
for relief from stay, and the Bankruptcy Court, subsequently, denied the motion. Bk. Dkt. ECF
No. 46. On September 27, 2022, the Bankruptcy Court issued an order denying confirmation of
Appellant’s Plan, with leave to amend the Plan. Bk. Dkt. ECF No. 47.
Appellant’s Amended Plan And The Bankruptcy Court’s Order
On October 6, 2022, Appellant filed an amended Chapter 13 Plan (the “Amended Plan”).
Bk. Dkt. ECF No. 49. Appellant’s Amended Plan provides as follows:
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a. total payment in the amount of $4,241.92 on the State of Maryland’s
priority domestic support claim;
b. total payment in the amount of $125,696.69 on the secured claim from
Select Portfolio Services for pre-petition mortgage arrears;
c. payments in the amounts of $200.00 per month for 12 months; payments in the
amount of $300.00 per month for 12 months; and payments in the amount of
$350.00 for 12 months, for a total term of 36 months, for a total amount of
$10,200.00 in funding.
Bk. Dkt. at ECF No. 49 at 2-4. And so, the Bankruptcy Court held a confirmation hearing on
Appellant’s Amended Plan on November 15, 2022. Bk. Dkt. ECF No. 51.
On December 6, 2022, the Bankruptcy Court issued an order denying confirmation of
the Amended Plan without leave to amend (the “December 6, 2022, Order”). Bk. Dkt. ECF
No. 52. In the December 6, 2022, Order, the Bankruptcy Court held that the proposed Plan
“does not fulfill the requirements for confirmation set out in 11 U.S.C. § 1325.” Id. The
Bankruptcy Court also determined that Appellant was “unable to file a Plan that is susceptible
to confirmation.” Id. And so, the Court denied the Amended Plan without leave to amend.
Appellant, alleging error, filed this appeal of the Bankruptcy Court’s December 6, 2022,
Order on December 16, 2022. ECF No. 1.
B. Procedural Background
On December 16, 2022, Appellant filed a notice of appeal of the Bankruptcy Court’s
December 6, 2022, Order denying confirmation of his Amended Plan without leave to amend.
ECF No. 1. On January 4, 2023, the record on appeal was transmitted to this Court, without
Appellant’s designation of record on appeal. ECF No. 3.
On May 8, 2023, Appellant filed the designation of record on appeal. ECF No. 6. On
August 18, 2023, Appellant filed his brief. ECF No. 11. On September 15, 2023, Appellee filed
her brief. ECF No. 12.
III.

LEGAL STANDARDS
A.

Pro se Litigants

Appellant is proceeding in this bankruptcy matter without the assistance of counsel. And
so, the Court must construe his filings liberally. See Hughes v. Rowe, 449 U.S. 5, 9-10 (1980).
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B.

Bankruptcy Court Appeals

Pursuant to 28 U.S.C. § 158(a), district courts have jurisdiction over appeals from
bankruptcy courts with respect to final judgments, orders, and decrees. 28 U.S.C. § 158(a). “On
appeal from the United States Bankruptcy Court, this Court acts as an appellate court and
reviews the Bankruptcy Court’s findings of fact for clear error and conclusions of law de novo.”
R&J Contractor Servs., LLC v. Vancamp, 652 B.R. 237, 241 (D. Md. 2023) (citing In re MerryGo-Round Enters., Inc., 400 F.3d 219, 224 (4th Cir. 2005); In re Kielisch, 258 F.3d 315, 319 (4th
Cir. 2001)).
C.

Section 1325

Chapter 13 of the United States Bankruptcy Code allows debtors with regular income to
repay or discharge certain debts after making payments to creditors for a specified commitment
period. See 11 U.S.C. §§ 1301-30. To obtain such relief, a debtor must propose a debt
adjustment plan that meets all the requirements for confirmation, as set forth in the Bankruptcy
Code. See §§ 1322, 1325.
In this regard, 11 U.S.C. § 1325(a)(6) provides that “the court shall confirm a plan if . . .
the debtor will be able to make all payments under the plan and to comply with the plan.” 11
U.S.C. § 1325(a)(6); see also Ekweani v. Thomas, 574 B.R. 561, 569 (D. Md. 2017) (citing Mort
Ranta v. Gorman, 721 F.3d 241, 253 (4th Cir. 2013)) (holding that appellant’s proposed plan was
not feasible pursuant to 11 U.S.C. § 1325(a)(6) where the plan hinged on the dissolution or
significant reduction of appellant’s mortgage debt). And so, the debtor, as plan proponent, bears
the burden of proving that a proposed plan meets the requirements set forth in 11 U.S.C. § 1325.
See Asfar v. Grigsby, No. 16-2552, 2017 WL 1063226, at *2 (D. Md. Mar. 20, 2017) (citing In
re Lewis, 170 B.R. 861, 865 (Bankr. D. Md. 1994)).
IV.

LEGAL ANALYSIS
Appellant appeals the Bankruptcy Court’s December 6, 2022, Order denying

confirmation of his Amended Plan without further leave to amend upon two primary grounds.
First, Appellant argues that the Bankruptcy Court erred by allowing a witness called by SPS to
testify, and admitting other evidence, during the August 12, 2022, evidentiary hearing on SPS’s
motion for relief from the automatic stay. ECF No. 11 at 11-15; 18-25. Second, Appellant
argues that the Bankruptcy Court erred in the December 6, 2022, Order by, among other things,
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not confirming his Amended Plan, or granting him leave to further amend the Amended Plan.
Id. at 15-17. And so, Appellant requests that the Court reverse the Bankruptcy Court’s
December 6, 2022, Order. ECF No. 11 at 26.
Appellee counters that the only issue in this appeal is whether the Bankruptcy Court
properly denied confirmation of Appellant’s Amended Plan without leave to amend, upon the
ground of unfeasibility. ECF No. 12 at 7-9. In this regard, Appellee argues that the Bankruptcy
Court properly denied confirmation, because Appellant did not meet his burden to show that his
Amended Plan was feasible. Id. at 9-10. And so, Appellee requests that the Court affirm the
Bankruptcy Court’s December 6, 2022, Order. Id. at 10.
For the reasons that follow, the evidentiary record shows that Appellant’s challenges to
the Bankruptcy Court’s evidentiary rulings during the August 12, 2022, evidentiary hearing are
not properly before this Court. The evidentiary record also makes clear that Appellant failed to
satisfy his burden to show that his Amended Plan was feasible, because he lacks sufficient
funds to fund the Amended Plan and the Amended Plan would not resolve his outstanding
debts. And so, the Court AFFIRMS the Bankruptcy Court’s, December 6, 2022, Order.
A. Appellant Improperly Challenges The Bankruptcy Court’s Evidentiary Rulings
As an initial matter, the Court agrees with Appellee that Appellant cannot challenge the
Bankruptcy Court’s evidentiary rulings during the August 12, 2022, hearing in this appeal. In his
brief, Appellant identifies the following five issues in this bankruptcy appeal: (1) “whether the
Bankruptcy Court erred in allowing the witness to testify on issues that he was coached and
could not provide documentation or evidence to support,” during the August 12, 2022,
evidentiary hearing; (2) “whether the Bankruptcy Court in not confirming Appellant’s Chapter
13 Plan or giving Appellant time to Amend Plan in accordance with the Bankruptcy Codes[;]”
[sic] (3) “whether the Bankruptcy Court erred in allowing Select Portfolio Services to enter
evidence for a debt that was not owed or assumed by Appellant,” during the August 12, 2022,
evidentiary hearing; (4) “whether the Bankruptcy Court erred in not allowing Appellant to
challenge or dispute the claim even though he filed a timely dispute of the claim and the debtor
failed to submit the necessary documents as required by law,” during the August 12, 2022,

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evidentiary hearing; and (5) “whether the Bankruptcy Court erred in ruling Appellant had
income as required by the Chapter 13 Bankruptcy Code.” ECF No. 11 at 10-11.
Appellant’s challenges to the evidentiary rulings of the Bankruptcy Court during the
August 12, 2022, evidentiary hearing are not properly raised in this appeal, because Appellant
was the prevailing party with regards to SPS’s motion for relief from the automatic stay. As the
Fourth Circuit has recognized, generally, “a prevailing party cannot appeal from a district court
judgment in its favor.” Chesapeake B & M, Inc. v. Harford Cnty., Md., 58 F.3d 1005 (4th Cir.
1995). In this case, the evidentiary record makes clear that Appellant was the prevailing party
with regards to SPS’s motion for relief from the automatic stay, because the Bankruptcy Court
denied that motion after conducting the August 12, 2022, evidentiary hearing. See Bk. Dkt. ECF
No. 46 (denying SPS’s motion for relief from automatic stay). Given this, Appellant’s arguments
that the Bankruptcy Court erred by: (1) allowing a witness called by SPS to testify; (2) allowing
SPS to “enter evidence for a debt that was not owed or assumed by Appellant;” and (3) not
allowing him to challenge or dispute SPS’s claim, during the August 12, 2022, hearing, are not
properly raised in this appeal. Chesapeake B & M, Inc., 58 F.3d 1005; see also ECF No. 12 at 79. And so, the sole issue before the Court is whether the Bankruptcy Court erred by denying
confirmation of Appellant’s Amended Plan without leave to amend.
B. The Bankruptcy Court Appropriately Declined to Confirm Appellant’s
Amended Plan
Turning to the merits of Appellant’s challenge of the Bankruptcy Court’s order denying
confirmation of his Amended Plan without leave to amend, the evidentiary record before the
Court also shows that the Bankruptcy Court properly denied confirmation of the Amended Plan
as unfeasible.
Title 11, United States Code, Section 1325(a)(6) provides that “the court shall confirm a
plan if . . . the debtor will be able to make all payments under the plan and to comply with the
plan.” 11 U.S.C. § 1325(a)(6); see also Ekweani v. Thomas, 574 B.R. 561, 569 (D. Md. 2017)
(citing Mort Ranta v. Gorman, 721 F.3d 241, 253 (4th Cir. 2013) (holding that appellant’s
proposed plan was not feasible pursuant to 11 U.S.C. § 1325(a)(6) where the plan hinged on the
dissolution or significant reduction of appellant’s mortgage debt). And so, Appellant bears the
burden in this case of proving that his proposed plan meets the requirements set forth in Section
1325. See Asfar v. Grigsby, No. 16-2552, 2017 WL 1063226, at *2 (D. Md. Mar. 20, 2017)
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(citing In re Lewis, 170 B.R. 861, 865 (Bankr. D. Md. 1994)). Appellant has not met this burden
here.
In this case, the evidentiary record shows that the Bankruptcy Court correctly determined
that Appellant would not be able to make all payments under the Amended Plan, or comply with
that plan, as required by Section 1325(a)(6). In the Amended Plan, Appellant proposes the
following monthly payments to resolve his debts:
[P]ayments in the amounts of $200.00 per month for 12
months; payments in the amount of $300.00 per month for
12 months; and payments in the amount of $350.00 for 12
months, for a total term of 36 months.
Bk. Dkt. at ECF No. 49 at 2. But Appellant’s submissions to the Bankruptcy Court show that
Appellant is unemployed and that he receives family support payments in the amount of $600.00
per month. Bk. Dkt. ECF No. 17 at 32-33.
Appellant’s submissions also show that he has a monthly net income of $367.00, after
incurring $233.00 in monthly expenses. Bk. Dkt. ECF No. 17 at 32-33; 39. Given this,
Appellant’s proposed payment amounts of $200.00-$350.00 per month, over 36 months, would
essentially exhaust his net monthly income. See Bk. Dkt. ECF Nos. 49 at 2; 17 at 32-33; 39.
And so, the Amended Plan would not allow Appellant to “make all payments under and comply
with the plan.” See 11. U.S.C. S 1325(a)(6).
The Bankruptcy Court also appropriately declined to confirm Appellant’s Amended Plan,
because the proposal fails to resolve all of Appellant’s outstanding debts. The evidentiary record
shows that Appellant’s Amended Plan proposes: (1) a total payment in the amount of $4,241.92
on the State of Maryland’s priority domestic support claim and (2) a total payment in the amount
of $125,696.69 on the secured claim from SPS for pre-petition mortgage arrears. Bk. Dkt. at
ECF No. 49 at 3, 4.
To resolve these debts, the Amended Plan proposes payments over 36 months, which
would total $10,200.00. Bk. Dkt. ECF 49 at 2. Appellant’s outstanding debt far exceeds this
payment amount. Id. at 3, 4 (showing a proposed payment of $125,696.69 on the mortgage
arrears and a proposed payment of $4,241.92 in payment on the priority domestic support claim).
Given this, the Court agrees with the Bankruptcy Court’s determination that Appellant’s
Amended Plan is simply not feasible.
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The Court is also satisfied as a final matter that the Bankruptcy Court appropriately
declined to grant Appellant leave to further amend his Amended Plan. The evidentiary record
makes clear that, after denying confirmation of Appellant’s initial Plan on September 27, 2022,
the Bankruptcy Court afforded Appellant the opportunity to amend his Plan. Bk. Dkt. ECF No.
47. Appellant did so, and he submitted the Amended Plan on October 6, 2022.
Given this, the record before the Court shows that Appellant has been afforded ample
opportunity to propose a Chapter 13 Plan that would meet the requirements of Section
1325(a)(6). Asfar, 2017 WL 1063226, at *2. Nonetheless, Appellant has twice failed to do so.
And so, the Bankruptcy Court appropriately denied confirmation of Appellant’s Amended Plan
without leave to further amend the proposal.
For these reasons, the Court AFFIRMS the Bankruptcy Court’s December 6, 2022,
Order.
V.

CONCLUSION
In sum, the evidentiary record before the Court demonstrates that Appellant failed to

satisfy his burden to show that his Amended Plan was feasible, because he lacks sufficient
income to fund the Amended Plan and the Amended Plan would not resolve his outstanding
debts. Appellant’s remaining challenges in this matter relate to the Bankruptcy Court’s
evidentiary rulings during the August 12, 2022, evidentiary hearing and these matters are not
properly before this Court. And so, the Court AFFIRMS the Bankruptcy Court’s December 6,
2022, Order.
A separate Order shall issue.

s/Lydia Kay Griggsby
LYDIA KAY GRIGGSBY
United States District Judge

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