Candie J. Nelson

OCR transcription for search; preserved printed pages are authoritative

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AUTH

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Cae ee eLaRk FILE

U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

NOT FOR PUBLICATION AUG 08 20

HAROLD S. MARENUS
U.S. BKCY. APP. P.
OF THE NINTH CIR

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

MICHAEL H. MEYER, Chapter 13
Trustee,

Appellee.

In re: ) BAP No. NC-07-1093-KSP
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CANDIE JILL NELSON, ) Bk. No. 05-10660
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Debtor. )
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CANDIE JILL NELSON, )
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Appellant, )
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Vv. } MEMORANDUM
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)

Argued and Submitted on July 27, 2007

for the Northern District of California

Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding

kK

Before: KLEIN, SMITH and PERRIS,” Bankruptcy Judges.

‘This disposition is not appropriate for publication.
Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.

See 9th Cir. BAP Rule 8013-1.

“Hon. Elizabeth L. Perris, Chief Bankruptcy Judge for the
District of Oregon, sitting by designation.

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eese 05-10660 Doc#80 Filed: 08/15/07 Entered: 08/17/07 11:19:52 Page 1 of
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This appeal is from a dismissal of a chapter 13 case

following a remand in a prior appeal. Nelson v. Meyer, 343 B.R.

671 (9th Cir. BAP 2006) (Nelson I). We previously reversed and
remanded for procedural reasons based on the two-step requirement
of 11 U.S.C. § 1307(c) to determine “cause” and then weigh the
alternatives of conversion or dismissal based on the “best
interests of creditors and the estate.”

On remand, the court again declined to confirm the plan and
because it determined that the debtor was not eligible for relief
in chapter 13 because her debts exceeded the eligibility
requirements of 11 U.S.C. § 109(e) and because her chapter 13
plan was not proposed in good faith. The denial of confirmation
was not timely appealed. The subsequent order dismissing the
case is now before us.

We now agree with the bankruptcy court that there was
§ 1307(c) “cause” and dismissal of the case was in the best

interests of creditors and the estate. We AFFIRM.

FACTS

Appellant, Candie J. Nelson, filed the pro se chapter 13
case in which this appeal arises on March 29, 2005, after having
been involved in five prior bankruptcy cases.

She was a chapter 13 debtor from December 30, 1999, until
voluntarily dismissing that case on September 24, 2001.

In October 2002, she became the debtor in two chapter 7
cases, one involuntary and one voluntary. We affirmed the order
for relief in the involuntary case. BAP No. NC-03-1170-PMaMc

(Feb. 9, 2004). The ultimate outcome was a settlement in which

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$60,000 was recovered from the debtor’s mother under avoiding
powers and the debtor waived discharge pursuant to 11 U.S.C.
§ 727(a) (10).

The debtor’s company, Viva Mexico, LLC, was the debtor ina
no-asset chapter 7 case that was filed and closed: during the
pendency of her consolidated individual chapter 7 cases.

In the present chapter 13 case, the debtor initially

scheduled unsecured claims of $324,382.00. Her chapter 13 plan

-proposed to pay the trustee $50.00 per month for 36 months based

on monthly income of $1,208.00 and expenses of $1,158..00 as
reflected in Schedules I and J.

The chapter 13 trustee, appellee Michael Meyer, objected to
plan confirmation based on ineligibility and lack of good faith.
The ineligibility argument was that the schedules listed more
than the statutory limit of $307,675.00 in unsecured nonpriority

debt and did not include undischarged debts from her prior

chapter 7 cases. The good faith argument was that $50.00 per

month for 36 months was too little in light of the prior waiver
of chapter 7 discharge.

At the confirmation hearing, the court denied confirmation
without reaching the eligibility question. In addition, without
affording an opportunity to modify the plan after denying
confirmation, the court ruled that the case would be dismissed.
On appeal, the debtor complained that she was prepared to modify
the plan but had no chance to do so.

We reversed and remanded the dismissal order because the
court did not comply with the two-step requirement of 11 U.S.C.

§ 1307(c) to determine “cause” and then weigh the alternatives of

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conversion or dismissal based on the “best interests of creditors
and the estate,” and also because the court did not allow the
debtor at least one opportunity to revise the rejected plan as
required by § 1307(c) (5). Nelson IT, 343 B.R. at 678.

On remand, the debtor re-submitted her originally filed plan
with the court without change. The court held a confirmation
hearing on July 17, 2006. At the conclusion of the hearing, the
court took the matter under submission.

On July 26, 2006, the court entered its “Memorandum on Plan
Confirmation.” The court determined that the debtor’s debts
exceeded the limit for chapter 13 eligibility as set forth in
§ 109(e), and further determined that the debtor proposed her
plan in bad faith. Based on those findings, the court denied
confirmation of the debtor’s plan and indicated that it was
necessary to bring the multiple bankruptcy filings to an end.

On August 23, 2006, the trustee filed a motion to dismiss
the debtor's case pursuant to § 1307 due to debtor ineligibility
and denial of confirmation of her plan. At a hearing held on
September 18, 2006, the court granted the trustee’s motion.
However, based on the debtor’s statement that she planned to
appeal the order denying confirmation of her plan, the court
stayed its dismissal order until an appeal from the order denying
confirmation became final. If the debtor’s appeal was
unsuccessful, ‘the court would enter its order dismissing the

case.?

iThe debtor filed a notice of appeal on September 27, 2006.
The appeal was dismissed as untimely.

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We dismissed the debtor’s appeal of the order denying
confirmation of her plan on January 19, 2007, for lack of
jurisdiction because there was not a timely appeal. Nelson v.
Meyer, BAP No. NC-06-1342 (1/19/07). The debtor did not appeal
our order.

In the meanwhile, notwithstanding the findings of bad faith
and ineligibility, on October 19, 2006, the debtor filed an
amended chapter 13 plan, upon which the court declined to act,
which is implicit in its subsequent entry of the previously
announced dismissal order.’

The bankruptcy court entered its order dismissing the
debtor’s case on February 28, 2007.

This appeal ensued.

JURISDICTION
The bankruptcy court had jurisdiction via 28 U.S.C. § 1334.

We have jurisdiction under 28 U.S.C. § 158(a) (1).

ISSUE

Whether the bankruptcy court abused its discretion when it

dismissed the debtor’s chapter 13 case.

STANDARD OF REVIEW
Orders of dismissal are reviewed for an abuse of discretion.

Guastella v. Hampton (In re Guastella), 341 B.R. 908, 915 (9th

*The debtor’s amended plan extended plan payments from 36
months to 60 months, and provided for reporting of any change in
the debtor’s financial status and amendment to payments if a
change were to occur.

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Cir. BAP 2006). An abuse of discretion may be based on an
incorrect legal standard, or a clearly erroneous view of the
facts, or a ruling that leaves the reviewing court with a
definite and firm conviction that there has been a clear error of

judgment. SEC v. Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001);

Ho v. Dowell (In re Ho), 274 B.R. 867, 871 (9th Cir. BAP 2002).

DISCUSSION

In Nelson I, we reversed and remanded the bankruptcy court’s
order dismissing the debtor’s case pursuant to § 1307(c) (5)
because the court did not comply with the statute’s two-step
requirement to determine “cause” and then weigh the alternatives
of conversion or dismissal based on the “best interests of
creditors and the estate,” and also because the court did not
allow the debtor an opportunity to revise the rejected plan.
Nelson I, 343 B.R. at 677-78.

On remand, the debtor resubmitted her originally filed plan
without any changes. At the confirmation hearing, the bankruptcy
court examined whether the debtor proposed her resubmitted plan
in good faith under the totality of the circumstances.

Looking at the totality of the circumstances, the court
determined that the debtor filed her case “in a cynical attempt
to manipulate the Bankruptcy Code.” The court further found

that:

[t]here is no doubt in the court’s mind that when [the
debtor] stipulated to denial of her discharge in the
Chapter 7 case[,] she had already formed the intent to
buy her discharge back on the cheap in a Chapter 13.
[The debtor’s] intentions are to obtain a discharge
without ever having to answer for her unlawful conduct.
The legal effect of confirmation would be to discharge,

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with no justice or compensation to her creditors, a

debtor who a few months prior to filing was denied a

discharge. This is not the spirit of Chapter 13.
Memorandum on Plan Confirmation, 4:9 - 4:14, 7/26/06 (footnote
omitted) .

The court concluded that the debtor proposed her plan in bad
faith and further was not eligible for chapter 13 relief. Based
on these findings, the court denied confirmation of the debtor’s
resubmitted plan. That denial of confirmation was not timely
appealed.

The court subsequently dismissed the debtor’s case pursuant
to § 1307(c) (5) based on the denial of confirmation of her plan
and for “cause”. The present appeal is from that dismissal.

A court must examine the totality of the circumstances in
determining whether a chapter 13 petition has been filed in bad
faith. Ho, 274 B.R. at 876. When making a bad faith
determination, the bankruptcy court should consider:

(1) Whether the debtor misrepresented facts in his or

her petition or plan, unfairly manipulated the

Bankruptcy Code or otherwise filed the Chapter 13

petition or plan in an inequitable manner;

(2) the debtor’s history of filings and dismissals;

(3) whether the debtor’s only purpose in filing for

chapter 13 protection is to defeat state court

litigation; and

(4) whether egregious behavior is present.

Id., citing Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224

(9th Cir. 1999).

The California Rural Assistance League (“CRAL”) filed a $1.3
million claim in the debtor’s chapter 7 case. The CRAL filed the

Claim on behalf of at least fifty former employees of Viva Mexico

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who allege that the debtor is personally liable to them for
unpaid wages in violation of California law. A state court
action has been pending against the debtor since 1999 - Aguilar,

et al _v. Nelson, SCV-222860. While we do not have the complaint

from that action, we are told in declarations that the action is
against the debtor personally for unfair business: practices under
California Business and Professions Code § 17203, for
intentionally maintaining two sets of employee time records (one
of which was fraudulent) in violation of California Labor Code

§§ 226 and 1174, and for systematically causing her LLC to
underpay employees.’

Multiple and successive bankruptcy filings by and against
the debtor have stayed progression of the state court case.

In the debtor’s chapter 13 case, filed in March 2005, she
only listed four former employees with wage claims on her
schedules. The four former employees are the four named
plaintiffs in the state court litigation. The debtor listed the
value of each of the four former employees’ claims at $1,000

each.

*Declaration of Robert Lotero, 7/17/06 at pg. 2 (exhibit R
to E.R.); Declaration of Kelly Lentz [entitled Declaration of
Robert Lotero], 7/17/06 at pg. 2 (exhibit T to E.R.) (“While
working as a ‘manager’ I was told by [the debtor] that she keeps
two separate records of employee time. She told me that she
keeps the accurate timesheets or timecards that show the real
hours worked by each worker. She further told me that she
fabricates a second time record for each worker and removes most
of the overtime worked. She told me that she does this to save
on money that she would otherwise have to pay workers. ... On
various occasions during my employment I observed [the debtor]
manipulating the time clocks in the restaurants. At various
times she told me and other ‘managers’ in my presence, that she
could control the time clocks to show less hours than the

employee actually worked.”)

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The bankruptcy court found, and there is evidence in the
record on appeal, that the debtor has refused to provide her
former employees with employment records and other pertinent
documents, thus making it nearly impossible for her former
employees to calculate the exact value of their wage claims.

The record amply supports the bankruptcy court’s finding
that the debtor filed her chapter 13 petition in bad faith. The
debtor is a serial bankruptcy filer and has been so since 1999
when several of her former employees commenced state court
litigation against her for violation of state labor laws.
Moreover, the debtor filed the present chapter 13 petition
shortly after stipulating to the denial of her discharge in her
previous chapter 7 case.

The bankruptcy court found that the debtor misrepresented
facts in her schedules and filed the present case to manipulate
the Bankruptcy Code. The court also commented on the debtor’s
egregious behavior by stating that “[a] bad faith finding is
necessary to finally resolve [the debtor’s] bankruptcy rights, .
especially for the fifty or so working people who were
intentionally robbed of their rightful income by [the debtor] .”

In light of the totality of the circumstances, the
bankruptcy court correctly dismissed the debtor’s case pursuant

to § 1307(c) as in the best interests of creditors and the

estate.?

“Because we are affirming the court’s order dismissing the
debtor’s case under § 1307(c), we need not address whether the
debtor is ineligible for chapter 13 relief under § 109(e).

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CONCLUSTON
The bankruptcy court did not abuse its discretion when it
dismissed the debtor’s chapter 13 case under § 1307(c)} (5).

AFFIRMED.

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U.S. Bankruptcy Appellate Panel
of the Ninth Circuit
125 South Grand Avenue, Pasadena, California 91105
Appeals from Central California (626) 229-7220
Appeals from all other Districts (626) 229-7225

NOTICE OF ENTRY OF JUDGMENT

BAP No. NC-07-1093-KSP

RE: CANDIE JILL NELSON

A separate Judgment was entered in this case on 8/8/07

BILL OF COSTS:

Bankruptcy Rule 8014 provides that costs on appeal shall be taxed by the
Clerk of the Bankruptcy Court. Cost bills should be filed with the Clerk
of the Bankruptcy Court from which the appeal was taken.

9th Cir. BAP Rule 8014-1

ISSUANCE OF THE MANDATE:

The mandate, a certified copy of the judgment sent to the Clerk of
the Bankruptcy Court from which the appeal was taken, will be issued
7 days after the expiration of the time for filing a petition for
rehearing unless such a petition is filed or the time is shortened or
enlarged by order. See Federal Rule of Appellate Procedure 41.

APPEAL TO COURT OF APPEALS:

An appeal to the Ninth Circuit Court of Appeals is initiated by
filing a notice of appeal with the Clerk of this Panel. The Notice
of Appeal should be accompanied by payment of the $455 filing fee

and a copy of the order or decision on appeal. Checks may be made
payable to the U.S. Court of Appeals for the Ninth Circuit. See
Federal Rules of Appellate Procedure 6 and the corresponding Rules of
the United States Court of Appeals for the Ninth Circuit for specific
time requirements.

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CERTIFICATE OF MAILING

The undersigned, deputy clerk of the U.S. Bankruptcy
Appellate Panel of the Ninth Circuit, hereby certifies that a copy
of the document on which this certificate appears was mailed this date
to all parties of record to this appeal.

By: Elaine Lewis

Deputy Clerk: August 8, 2007

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