638 B.R. 137
9th Cir. BAP2022Background
- Debtor Orange County Bail Bonds, Inc. is a small bail-bond company; creditor Global Fugitive Recovery obtained a state-court judgment against Debtor for fugitive-recovery fees and sought collection.
- Debtor held a deed of trust on the Saddozai property as security; state-court proceedings and appeals, plus a chapter 13 filing by the property owner, complicated foreclosure and recovery.
- Debtor filed chapter 11 in June 2019 and later elected to proceed under subchapter V; Global moved to dismiss or convert the case, asserting bad faith, a two‑party dispute, missed subchapter V deadlines, and lack of feasibility (exacerbated by California bail-reform SB10).
- After California voters repealed SB10, Debtor foreclosed and sold the Saddozai property, generating $432,972.95 for the estate; Debtor proposed a plan paying an effective‑date distribution from those proceeds and future payments of actual disposable income (with discharge conditioned on at least $181,000 of such payments).
- Bankruptcy court confirmed the plan and denied Global’s dismissal motion; Global appealed both rulings. The BAP affirmed both orders.
Issues
| Issue | Plaintiff's Argument (Global) | Defendant's Argument (Debtor) | Held |
|---|---|---|---|
| Whether plan is "fair and equitable" under §1191(c)(2) | Plan fails §1191(c)(2)(A) and (B); no committed disposable income or present-value pledge | Effective‑date payment plus contingent payments satisfy §1191(c)(2) | Affirmed: effective‑date payment alone exceeded three‑year projected disposable income, satisfying §1191(c)(2)(B) |
| Whether plan was proposed in good faith (§1129(a)(3)) | Petition and prosecution were bad‑faith litigation tactics to stall collections | Plan advances legitimate reorganization objectives and preserves estate value | Affirmed: plan proposal consistent with Code objectives; no clear error |
| Whether plan is feasible (§1129(a)(11)) | Debtor operated at losses; projections speculative, so plan unlikely to succeed | Repeal of SB10 and sale proceeds support reasonable probability of success; failure to hit projections merely affects discharge, not confirmation | Affirmed: bankruptcy court reasonably found a "reasonable probability" of success and plan conservatively protects creditors |
| Whether court erred in denying motion to dismiss/convert (§1112(b)) | Cause existed due to bad faith filing, missed subchapter V deadlines, and continuing losses | Court properly extended deadlines, allowed time for referendum and property recovery, and found no bad faith or lack of rehabilitation | Affirmed: court did not abuse discretion in denying dismissal/convert |
Key Cases Cited
- Marshall v. Marshall, 721 F.3d 1032 (9th Cir. 2013) (review standards for confirmation and dismissal motions)
- TrafficSchool.com v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011) (abuse of discretion defined; appellate review standards)
- First S. Nat’l Bank v. Sunnyslope Hous. Ltd. P’ship, 859 F.3d 637 (9th Cir. 2017) (en banc) (fair and equitable determination review)
- Acequia, Inc. v. Clinton, 787 F.2d 1352 (9th Cir. 1986) (feasibility and "reasonable probability" standard)
- Platinum Cap., Inc. v. Sylmar Plaza L.P., 314 F.3d 1070 (9th Cir. 2002) (good‑faith plan proposal standard)
- Pizza of Hawaii, Inc. v. Shakey’s, Inc., 761 F.2d 1374 (9th Cir. 1985) (courts should reject visionary schemes lacking realistic feasibility)
- Motor Vehicle Cas. Co. v. Thorpe Insulation Co., 677 F.3d 869 (9th Cir. 2012) (equitable mootness doctrine)