Paul Hansmeier v. Daniel McDermott
15-6035
| 8th Cir. | Sep 29, 2016Background
- Debtor Paul Hansmeier filed Chapter 13; the U.S. Trustee moved under 11 U.S.C. § 1307(c) to convert the case to Chapter 7. The Trustee’s motion was verified.
- Hansmeier filed an unverified objection without affidavit or identification of witnesses as required by local rules.
- At the hearing no additional evidence was offered; the bankruptcy court ruled from the bench and converted the case to Chapter 7. Hansmeier appealed.
- On the record, the bankruptcy court relied on verified assertions by the U.S. Trustee showing numerous nondisclosures, inconsistent testimony, undisclosed transfers over $500,000, and prior judicial findings of dishonesty and possible bar discipline.
- Hansmeier argued the court erred by not holding an evidentiary hearing and that his proposed 100% plan showed good faith; the bankruptcy and appellate courts rejected both arguments.
Issues
| Issue | Hansmeier's Argument | U.S. Trustee's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court abused its discretion in converting the Chapter 13 case to Chapter 7 for cause under § 1307(c) | Conversion was improper because Hansmeier acted in good faith and had a proposed 100% confirmable plan | Verified facts showed bad faith, nondisclosures, misrepresentations, and inability to confirm a plan — these constitute cause | No abuse of discretion; conversion affirmed |
| Whether the bankruptcy court erred by refusing to hold an evidentiary hearing under Fed. R. Bankr. P. 9014(d) | Court should have taken live testimony because factual disputes existed | Hansmeier never supported his objections with affidavit, identified witnesses, or requested testimony; no disputed material facts in the record | No error: Rule 9014(d) requires an evidentiary hearing only if disputed material facts exist and are supported; none were shown |
| Whether counsel argument that a 100% plan demonstrates good faith prevents conversion | A confirmable 100% plan proves good faith and precludes conversion | Argument alone is not evidence; no admissible proof plan was confirmable and other evidence showed bad faith | Argument is insufficient; without evidentiary support plan does not preclude conversion |
| Whether appellate review should consider new arguments raised for the first time on appeal | Hansmeier urged Rule 9014(d) and other errors on appeal | Issues were not raised below; appellate courts ordinarily do not consider new arguments absent exceptional circumstances | Appellate court refused to consider belated arguments; not an exceptional case |
Key Cases Cited
- Paulson v. Wein (In re Paulson), 477 B.R. 740 (B.A.P. 8th Cir.) (abuse-of-discretion standard for § 1307(c) actions)
- City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 702 F.3d 1147 (8th Cir. 2013) (definition of abuse of discretion)
- In re Hervey, 252 B.R. 763 (B.A.P. 8th Cir. 2000) (issues raised first on appeal ordinarily not reviewed)
- In re Molitor, 76 F.3d 218 (8th Cir. 1996) (bad faith as cause to dismiss or convert under § 1307(c))
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment principles: nonmoving party must present admissible evidence)
- Residential Funding Co. v. Terrace Mortg. Co., 725 F.3d 910 (8th Cir.) (opposing party must show genuine factual issue with admissible evidence)