Haffey v. Crocker

Case Type:
Case Status:
15-8018/8027 (6th Circuit, Nov 28,2017) Published
The Sixth Circuit BAP held the notice provided by the Bankruptcy Court's order of May 29, 2015 was not reasonably calculated to give the Debtor notice of what issues would be considered at June 2, 2015 hearing, or to provide him with an opportunity to be heard, and that the Debtor's due process rights were violated. The BAP proceeded to adopt a "harmless error" standard for the due process denial, asking if a substantially different result would have occurred if due process were given. Finding none of the three grounds relied upon were contested by the Debtor, the BAP affirmed the dismissal.
Procedural context:
The Bankruptcy Court dismissed a chapter 12 case at a hearing held on four days notice. Debtor appealed the order of dismissal.
Heather McKeever and Shane Haffey owned and operated Sandlin Farms in Lexington, Kentucky. Ms. McKeever is an attorney and they have been fighting with Deutsche Bank for many years in various venues about the validity of its mortgage. This episode played out in the Bankruptcy Court for the Eastern District of Kentucky, where Mr. Haffey filed a Chapter 12 (initially in the name of Sandlin Farms) on April 2, 2014. The Debtor filed a plan which did not propose paying the mortgage on the farm, or the mortgage on a separate property in South Carolina. Lenders objected and the Debtor obtained a continuance of the confirmation hearing to prosecute adversary actions against the lenders. The adversary actions were filed in October, 2014, but were both dismissed by March 30, 2015. In the interim, the U.S. Trustee moved to dismiss for inaccurate monthly reports and the inability to generate income to fund a plan. Debtor obtained a continuance of the hearing on the motion to dismiss and stymied the U.S. Trustee's efforts to depose the Debtor and Ms. McKeever prior to a discovery deadline of June 11, 2015. Those efforts included the withdrawal of Debtor's counsel and Debtor's motion to amend the order permitting withdrawal to cancel the June 25, 2015 hearing on the motion to dismiss. When the Debtor did not appear for a deposition on May 28th as previously agreed, the U.S. Trustee filed a motion to dismiss as a sanction, and to shorten time for hearing of the motion so it would be heard on June 2nd. On May 29, 2015 the court entered an order setting a hearing on June 2nd on the Debtor's motion to amend the withdrawal order and the U.S. Trustee's objection to that motion. The order also struck the June 25th hearing but did not indicate that the motion to dismiss or the motion for sanctions would be considered at the hearing. Three days later, on June 5, 2015, the court issued an opinion and order dismissing the case for an inability to present a timely confirmable plan; unreasonable and prejudicial delay; and continuing loss to the estate without a reasonable likelihood of rehabilitation under Section 1208(c). The Debtor timely appealed.
Humphrey, Opperman and Preston. Opinion by Preston

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