BOGGS, Circuit Judge.
Three unsecured creditors of a debtor in bankruptcy under Chapter 7 of the bankruptcy code obtained a judgment from the bankruptcy court that their debt was non-dischargeable under 11 U.S.C. § 523(a)(6).
The bankruptcy court allowed the conversion. In considering whether to approve the debtor's plan to repay the unsecured creditors (the only creditors affected by the plan), the bankruptcy court extensively analyzed whether the plan met the requirements for confirmation listed in 11 U.S.C. § 1325. Among the requirements particularly discussed were the debtor's good faith in proposing the plan (1325(a)(3)), whether the unsecured creditors would receive an amount under the plan which is not less than the amount they would receive under a Chapter 7 liquidation (1325(a)(4)), and whether all of the debtor's "projected disposable income" would be used to make payments under the plan (1325(b)(1)(B)).
The creditors appealed to the district court. The district court did not conclude that any of the bankruptcy court's findings of fact were clearly erroneous or that any of the bankruptcy court's conclusions of law were incorrect. However, the district court expressed its doubt concerning, inter alia, the debtor's motivation in seeking bankruptcy, the debtor's good faith in proposing the plan and the propriety of approving a plan which "did not provide for eventual payment of the entire judgment and interest to the date of the chapter 7 filing." Thus, because of the district court's "impression that the confirmed plan may constitute an abuse of the provisions and purposes of chapter 13," it vacated the bankruptcy court's confirmation of the plan and ordered that the case be remanded to the bankruptcy court for reconsideration.
The debtor then appealed the district court's decision to this court and the creditors cross-appealed in order to preserve their objections to the plan. We conclude that the district court's decision in its present form is unreviewable. Accordingly, we vacate the decision of the district
We summarize briefly the facts attendant to this bankruptcy which most likely prompted the district court's "impression." James E. Hardin, James C. Hardin and Ralph Majors (respectively, father, son, and son-in-law, and collectively referred to as "the judgment creditors") obtained a state court judgment against Albert Caldwell, the debtor, for false arrest, false imprisonment and malicious prosecution. The total amount of the judgment, after the Tennessee Court of Appeals modified the judgment due to Caldwell's financial condition, is $40,000.
The judgment is the result of what became known in Knoxville, Tennessee, as the "Santa Claus Caper." During the 1978 Christmas holidays, Ralph Majors observed a man running away with a plastic Santa Claus which had been on the front porch of the Hardin home. The man later was identified as Larry Caldwell, Albert Caldwell's son.
The judgment creditors chased Larry Caldwell and his accomplice, Robert Campbell. When they caught up with the thieves, an altercation ensued involving a sawed-off shotgun taken from Campbell's automobile and a pistol taken from Larry Caldwell's coat pocket. Although the shotgun went off, no one was injured. After the police arrived at the scene, they found another loaded gun in Larry Caldwell's possession, a spring-loaded switchblade knife on Campbell, and a second shotgun in Campbell's automobile.
Albert Caldwell, Assistant Chief of Police for Knoxville, Tennessee, who arrived on the scene after the struggle, spoke with Majors that night. Caldwell told Majors that he would take care of his son. Four days later, Caldwell had his son, Campbell and another individual, Mark Swaggerty, swear out complaints against the judgment creditors for assault and battery.
Caldwell then personally supervised the arrests of the judgment creditors. However, after a hearing in state court, all charges against the judgment creditors were dropped. (Campbell and Larry Caldwell eventually were indicted by a grand jury, and, after approximately three years of proceedings, entered into a plea agreement with the local district attorney.)
As a result of these events, the judgment creditors sued Caldwell for false arrest, false imprisonment and malicious prosecution. They obtained a judgment in their favor. As already noted, the judgment was modified but substantively affirmed by the Tennessee Court of Appeals. Caldwell applied for permission to appeal to the Tennessee Supreme Court but on August 12, 1985, permission was denied.
Less than two months later, Caldwell filed for bankruptcy under Chapter 7. The only unsecured creditors listed in his debt schedules were the three judgment creditors.
The judgment creditors had their debt deemed nondischargeable under the bankruptcy code. Thus, although Caldwell obtained a discharge under Chapter 7, he still was indebted to the judgment creditors for the full amount of their claim.
Two months after the judgment creditors' debt had been deemed nondischargeable, Caldwell sought to reopen the bankruptcy and to convert the case to Chapter 13. Although the judgment creditors opposed the motion, the bankruptcy court granted it. Caldwell then filed an updated schedule of his income and expenses and a proposed Chapter 13 plan to pay the judgment creditors. The plan proposed that Caldwell would pay to the trustee Caldwell's "projected disposable income" of $400 a month out of his wages for 36 months. Caldwell subsequently modified the plan, proposing that the monthly payment to the trustee be increased to $550 and that any tax refunds he might receive which were attributable to his earnings after conversion of the case to Chapter 13
The judgment creditors objected to the plan. A confirmation hearing was held on September 11, 1986. Caldwell testified at the hearing that he is 54 years old, in good health, married and has three grown children. His wife is not employed outside the home. He has been employed with the Knoxville Police Department since 1960. His gross monthly salary is $2,889.47 and his take-home pay is $2,177.92 per month. He stated that he does not intend to retire in the near future. He holds a current real estate license.
The bankruptcy court confirmed the modified plan, finding that it met the requirements for confirmation listed in 11 U.S.C. § 1325, including the requirement of section 1325(a)(3) that "the plan has been proposed in good faith and not by any means forbidden by law." Although the bankruptcy court determined that the plan would pay the judgment creditors only about $20,000, approximately half of what they were due, the bankruptcy court calculated that the maximum amount available to the creditors if the estate were liquidated under Chapter 7 would be less than that, and, therefore, 11 U.S.C. § 1325(a)(4) was satisfied.
The judgment creditors appealed to the district court. The district court agreed with the bankruptcy court that Caldwell had the right to have the Chapter 7 discharge revoked and his bankruptcy converted to proceedings under Chapter 13. As already noted, however, the district court stated:
In a bankruptcy proceeding, the bankruptcy court is the finder of fact. Although bankruptcy rule 8013 provides that "[o]n an appeal the district court or the bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings," the rule also mandates that "[f]indings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." The advisory committee's note to rule 8013 states that the rule "conforms the appellate review standard to Rule 52 F.R.Civ.P....." Advisory Committee note to 1987 amendment of B.R. 8013. Moreover,
In re: Edward M. Johnson and Associates, Inc., 845 F.2d 1395, 1401 (6th Cir.1988).
Thus an appellate court reviews a bankruptcy court's decision to determine whether its factual findings are clearly erroneous and its legal conclusions, which are subject to de novo review on appeal, are correct. Education Assistance Corp. v. Zellner, 827 F.2d 1222, 1224 (8th Cir.1987). It is important to bear in mind that when a district court acts as an appellate court, as it does when it reviews a bankruptcy proceeding, the district court is subject to the same limitations which are imposed upon any appellate tribunal. This means that the district court
Edward M. Johnson and Associates, 845 F.2d at 1401 (quoting Wegner v. Grunewaldt, 821 F.2d 1317, 1320 (8th Cir.1987)).
The district court in this case did not exceed its authority by making improper factual findings. Rather, the district court failed to exercise its authority to review the bankruptcy court's decision in an appropriate manner. The district court's decision does not contain any determination that the bankruptcy court's findings of fact are erroneous, or that the bankruptcy court reached incorrect conclusions of law. The district court's "impression" that something may be wrong with the bankruptcy court's confirmation of the plan conveys to us no concrete ruling. We are certain it would not provide the bankruptcy court with any enlightenment as to how it may or may not have erred.
When a fact-finder determines that a ball is red, an appellate tribunal reviewing that decision has various options. If the appellate court determines that the lower court's factual determination of the color of the ball is correct, the appellate court may affirm that the ball is red. If the reviewing court concludes that the record does not support the conclusion that the ball is red, the appellate court may inform the fact-finder that the finding is clearly erroneous, thus reversing the lower court.
The appellate court also could conclude that the lower court committed no factual error, but that legal error is present. Thus, the reviewing court could inform the fact-finder that the color of the ball is irrelevant and remand for a determination of whether the ball is, say, a tennis ball or a baseball, because the relevant disputed
Finally, the appellate court could conclude that the fact-finder committed neither factual nor legal error, or, if legal error is present, that the right result was reached regardless.
What the appellate tribunal may not do is merely tell the fact-finder to "take another look because the ball may or may not be red and what kind of ball it is may or may not be relevant." The fact-finder already has examined the ball closely and has reached a decision. It is then the appellate tribunal's duty to do the same.
Here, the tribunal designated to review the bankruptcy court's decision in the first instance, see B.R. 8001(a), has not fulfilled its duty to make an explicit determination as to whether the bankruptcy court's confirmation of the Chapter 13 plan is free of legal and factual error. Thus, this tribunal, which provides a second and not primary level of appellate review in these bankruptcy proceedings, must now refrain from reviewing the decision of either the bankruptcy or the district court.
Accordingly, this case must be remanded to the district court for a determination of whether the bankruptcy court's confirmation of the plan is based on clearly erroneous findings of fact, erroneous conclusions of law, or is neither factually nor legally in error. However, before ordering this remand, we note that while we are constrained from reviewing the merits of this appeal, we can provide some guidance to the district court on the state of the law for use upon remand.
The judgment creditors have raised a number of specific objections to the bankruptcy court proceedings, including the decisions to reopen Caldwell's bankruptcy, to convert the bankruptcy to Chapter 13, and to confirm Caldwell's plan to pay the judgment creditors. We express no opinion concerning the merits of any of these objections at this time. However, our review of the proceedings has revealed that the issue most contested (and confused) by the parties, particularly in light of the circumstances which led to the judgment creditors' claim and to Caldwell's filing for bankruptcy, is whether the Chapter 13 plan has been proposed in good faith pursuant to 11 U.S.C. § 1325(a)(3). Consequently, we believe that it is appropriate to provide the district court with some instruction regarding the legal standards which govern the resolution of this particular issue.
"A bankruptcy judge's finding that a debtor's plan is proposed in good faith is a finding of fact reviewed under the clearly erroneous standard." Matter of Metz, 820 F.2d 1495, 1497 (9th Cir.1987) (collecting cases).
Recently, another panel of this court clarified the analysis required for a determination of a debtor's good faith under 11 U.S.C. § 1325(a)(3). In Re Okoreeh-Baah, 836 F.2d 1030 (6th Cir.1988), concluded that "a good faith determination under § 1325(a)(3) requires an inquiry into all the facts and circumstances of a debtor's proposed plan." Id. at 1033 (collecting cases). The panel in Okoreeh-Baah specifically rejected the contention that when a debtor's pre-plan conduct in incurring a specific debt has been "questionable," 100% repayment on that debt is required. Okoreeh-Baah, 836 F.2d at 1031-32. Instead, the panel wrote,
Okoreeh-Baah, 836 F.2d at 1033.
Although the panel in Okoreeh-Baah stated that it could not "promulgate any precise formulae or measurements to be deployed in a mechanical good faith equation," the court did cite two cases which list specific factors relevant to a good faith analysis, Matter of Kull, 12 B.R. 654 (S.D.Ga.1981), aff'd sub nom. In re Kitchens, 702 F.2d 885 (11th Cir.1983), and a case cited by the district court in its decision, In re Estus, 695 F.2d 311, 316-17 (8th Cir.1982). See Okoreeh-Baah, 836 F.2d at 1032-33. While a comparison of the two lists reveals that they basically are the same, we conclude that the list provided in In re Estus is a particularly succinct and clear statement of "some of the factors that a court may find meaningful in making its determination of good faith." Estus, 695 F.2d at 317. Accordingly, we quote with approval the Estus list:
Estus, 695 F.2d at 317.
We note that the Estus list can be supplemented with the following considerations:
Matter of Chaffin, 816 F.2d 1070, 1073 (5th Cir.1987);
Public Finance Corp. v. Freeman, 712 F.2d 219, 221 (5th Cir.1983) (citing In re Goeb, 675 F.2d 1386 (9th Cir.1982)); see
Education Assistance Corp., 827 F.2d at 1224; and
Chaffin, 816 F.2d at 1074.
We emphasize, however, that no list is exhaustive of all the conceivable factors which could be relevant when analyzing a particular debtor's good faith. It would be impossible to provide such a list and we have not attempted to do so. We also stress that no one factor should be viewed as being a dispositive indication of the debtor's good faith. We agree with the Fifth Circuit that "[t]he `totality of the circumstances' test means what it says: It exacts an examination of all the facts in order to determine the bona fides of the debtor." Chaffin, 816 F.2d at 1074.
Accordingly, upon remand the district court should examine the bankruptcy court's finding that the plan has been proposed in good faith in light of the discussion provided here. Should it be necessary to do so, the district court also should review and resolve the other objections raised by the judgment creditors.
For the foregoing reasons, the judgment of the district court is VACATED and the case is REMANDED to that court for further proceedings not inconsistent with this opinion.
Kull, 12 B.R. at 659.