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Booker v. Johns

United States District Court, W.D. Louisiana, Shreveport Division

April 17, 2018

WEBSTER BOOKER, ET AL.
v.
TODD S. JOHNS

          HORNSBY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          S. MAURICE HICKS, JR. CHIEF JUDGE

         Before the Court is an appeal by Appellants, Webster Booker and Lillie Booker (“the Bookers”) of the bankruptcy court's finding of the absence of good faith on the part of the Bookers in submitting their Chapter 13 plan. See Record Document 2-2 at 11; see Record Document 3 at 26. For the reasons contained in the instant Memorandum Ruling, the bankruptcy court's ruling is AFFIRMED.

         I. BACKGROUND

         The facts of this case are not in dispute. On June 2, 2016, Debtors, the Bookers, jointly filed for bankruptcy relief under Chapter 13 of the United States Bankruptcy Code. See Record Document 2-1 at 1-65 (Chapter 13 Voluntary Petition). At the time of filing, the Bookers earned a below median income. Further, at the time of filing the Bookers owned two vehicles, a 2012 Ford F-150 Truck and a 2014 Dodge Charger. See id. at 19. Both vehicle payments were in default and the Bookers were indebted on three other secured obligations. First Heritage Credit (“First Heritage”) was secured by a Yardman riding lawnmower, a 52" Zenith flat screen TV, a 36" Sharp flat screen TV, a 28" Sharp TV, a 1998 Procraft Boat (“the boat”), a 1998 Force 90 Motor, 1998 Motorguide Trolling motor and a trailer. See id. at 18. First Heritage filed a proof of claim as secured for $3, 100.00 with the remaining balance of $839.89 as unsecured. Ivan Smith Furniture was secured by living room furniture with a remaining balance of $2, 290.12 which was to be paid in full in the Chapter 13 plan. Preferred Credit Inc. was secured by a Kirby vacuum cleaner which debtors surrendered in the confirmed plan.

         The Bookers' initial Chapter 13 plan provided for 58 monthly plan payments of $1, 200.00 with a proposed $600.00, or 4%, distribution to unsecured creditors. See id. at 68-71 (Initial Chapter 13 Plan). This plan called for repayment of several secured claims. See id. at 69. The Bookers proposed to pay First Heritage for the boat, the TVs, and a firearm. See id. The plan also proposed to pay Ivan Smith Furniture for living room furniture. See id. at 70. The last secured claims listed in the plan were two debts with State Farm Bank that secured the vehicles. See id. Finally, the plan proposed to pay for attorney fees of $2, 800.00. See id. at 71.

         On June 22, 2016, First Heritage filed an objection to this proposed plan, which asserted it was owed $3, 939.89 and that the collateral securing the loan was worth more than the debt. See id. at 108 (Objection to Initial Confirmation Plan). In response to this objection, the Bookers filed an amended plan on August 12, 2016, which increased the term to 59 months and increased the value of the collateral of First Heritage as per an agreement to $3, 100.00. See id. at 119 (Amended Chapter 13 Plan). This sum was to be paid with interest through Trustee distributions. See id. This second plan continued to propose a dividend of $600.00 to the unsecured creditors but was also over-funded and as reflected by the plan Summary $1, 284.54 was available to pay unsecured creditors. See id. at 122. No objections were filed to this plan, and the Trustee submitted to the bankruptcy court an order of confirmation, to which no interested party filed an objection. On August 31, 2016, the bankruptcy court denied confirmation and set the matter for hearing on September 28, 2016 “regarding retention of the 1988 Procraft boat, in a 4% plan.” See id. at 130 (Order Denying Amended Plan); see Record Document 3 at 2 (Hearing Transcript).

         At the hearing on September 28, 2016, the bankruptcy court indicated that the retention of the boat in this case raised an issue of good faith. See Record Document 3 at 3. After the bankruptcy court's announcement, the Bookers testified. At the conclusion of the hearing, the representative for the Trustee, Daven Hill, advised the bankruptcy court that she did not oppose the confirmation of the plan and did not have an issue with good faith based upon the facts elicited through testimony, as well as the age and condition of the boat. See id. at 24. The bankruptcy court issued findings of fact and conclusions of law holding that the plan was not proposed in good faith and denied the confirmation of the Bookers' amended Chapter 13 plan. See id. at 25-27.

         On October 12, 2016, the Bookers filed another amended plan proposing to surrender all collateral to First Heritage, including the boat. See Record Document 2-2 at 35 (Second Amended Chapter 13 Plan). The Trustee objected to the plan on a ground unrelated to good faith. See id. at 58 (Objection to Second Amended Chapter 13 Plan). Following the Trustee's objection, on November 3, 2016, the Bookers proposed a third amended plan, which also proposed to surrender all collateral to First Heritage. See Id. at 59 (Third Amended Chapter 13 Plan). On November 10, 2016, the bankruptcy court entered an order confirming the Bookers' third amended Chapter 13 plan. See id. at 69 (Order Confirming Chapter 13 Plan). The Bookers then filed the instant appeal of the bankruptcy court's order denying confirmation of the first amended Chapter 13 Plan and the order confirming Chapter 13 Plan. See Record Document 2-2 at 11; see Record Document 2-2 at 69.

         II. LAW AND ANALYSIS

         A. Jurisdiction and Standard of Review.

         This Court has jurisdiction over the Bookers' appeal from the bankruptcy court's order pursuant to 28 U.S.C. § 158(a). In reviewing a decision of the bankruptcy court, this Court functions as an appellate court and applies the standards of review generally applied in a federal court of appeals. See Matter of Webb, 954 F.2d 1102, 1103-04 (5th Cir. 1992). Conclusions of law are reviewed de novo. See Matter of Herby's Foods, Inc., 2 F.3d 128, 131 (5th Cir. 1993). Findings of fact are not to be set aside unless clearly erroneous. See id. at 130-31. “A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with a firm and definite conviction that a mistake has been committed.” Matter of Missionary Baptist Foundation of America, 712 F.2d 206, 209 (5th Cir. 1983). Thus, appellate courts will sustain a bankruptcy court's factual findings “absent a firm and definite conviction that the bankruptcy court made a mistake.” In re Ragos, 700 F.3d 220, 222 (5th Cir. 2012) (citation omitted).

         As applied to the instant matter, “a factual finding that a [bankruptcy] petition was not filed [or a plan was not proposed] in good faith is subject to the clearly erroneous standard of review. If this finding is based on an incorrect statement of law, however, [the] review [is] de novo.” Matter of Elmwood Dev. Co. v. Gen. Elec. Pension Trust, 964 F.2d 508, 510 (5th Cir. 1992); see also In re Ragos, 700 F.3d at 222 (stating that “[a] bankruptcy court's determination that a debtor has [or has not] acted in bad faith is a finding of fact reviewed for clear error.”).

         The Bookers argue that the de novo standard of review applies because the bankruptcy court used an incorrect legal standard, did not correctly apply the totality of circumstances test enumerated by the Fifth Circuit, and used an incorrect per se approach to deny their plan. See Record Document 7 at 8 ...


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