- Case Type:
- Case Status:
- Reversed and Remanded
- 21-6001 (8th Circuit, Jul 15,2021) Published
- Remanding to the Bankruptcy Court for District of Minnesota (BC), the Bankruptcy Appellate Panel for the Eighth Circuit (BAP) first vacate the BC's ruling denying a creditor's objection to the motion of a debtor (DR) to confirm their second amended plan (Plan). As the BAP concluded, no bankruptcy court may make a finding regarding a disputed fact without holding an evidentiary hearing. As such, when BC had rejected valuation evidence from the creditor but accepted the DR's due to their "minor" discrepancy, it had erred, for the creditor was entitled, by law, to a hearing.
- Procedural context:
- On April 24, 2020, the DR here--Adam R. Schiller--had filed a petition for relief (Petition). The DR listed Citizens State Bank Norwood Young America (Bank, CSBNYA, or CR) as a secured creditor on his schedules. At some point after the U.S. Trustee had appointed a trustee, the BC granted the motion to obtain credit, to which the Bank objected, that the DR had tendered along with the Petition itself. The deadline for filing proofs of claim was thereafter set -- and later passed, without the Bank ever doing such humdrum thing.
On December 31, 2020, after a period of months during which the DR unsuccessfully struggled to win confirmation of two earlier iterations, the DR submitted the Plan. As it had done so before, the Bank objected to this third effort too, making three arguments: the Plan (1) failed to provide distributions on account of its secured claim of $3,431.31; (2) had not been filed in good faith by virtue of its disallowance of the Bank's unsecured claim, its failure to file a proof as to that claim characterized as irrelevant; and (3) did not contribute all of the DR's disposable income.
On January 26, 2021, during a telephonic hearing, the BC overruled the Bank's objection and granted the DR's motion to confirm the Plan. In so doing, the BC accepted DR's valuation of Bank's collateral and thus the amount of Bank's secured claim as set forth in the Plan, all without receiving any kind of evidence. As it reasoned, the difference between Bank's valuation and DR's valuation was too "minor" to warrant an evidentiary hearing.
- Prepetition, the Debtor and the Bank had been parties to a number of agreements (collectively, Loan Documents). Five were dated February 20, 2017: (1) one promissory note in the original principal amount of $80,000; (2) an agricultural security agreement; (3) assignment of life insurance policy as collateral; (4) a second promissory note in the original principal amount of $180,000; and (5) an agricultural security agreement. More followed: (6) a third promissory note in the original principal amount of $48,000, dated June 21, 2017; (7) a fourth promissory note in the original principal amount of $60,000, (8) an agricultural security agreement, and (9) fifth promissory note in the original principal amount of $377,000, all three of which were dated December 21, 2017; (10) a sixth promissory note in the original principal amount of $45,000, dated October 1, 2018; (11) a seventh promissory note in the principal amount of $33,664, dated December 26, 2018; and (12) a forbearance agreement, dated April 1, 2020. As of the Petition Date, the DR had defaulted under one or more of these twelve Loan Documents, all cross-collateralized and secured by "all [of the DR's] farm products," a 1972 Chevrolet pickup, a 1984 freightliner, 2005 John Deere Combine, and 2004 John Deere Flexhead. In his schedules, the DR listed the total debt owed under the Loan Documents as $869,798.01, $566,552.00 of which was secured by the collateral and $303,246.01 which was not .
- Charles L. Nail, Jr.; Barry S. Schermer; and Thomas L. Saladino
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