United States District Court, D. Idaho
In re JOSEPH LLOYD SOELBERG, HEATHER MICHELLE SOELBERG, Debtors.
KATHLEEN A. McCALLISTER, ANNETTE DAVIDSON, Appellees. JOSEPH LLOYD SOELBERG, HEATHER MICHELLE SOELBERG, Appellants, Bk. No. 15-01355-TLM
MEMORANDUM DECISION AND ORDER
J. Lodge United States District Judge
before the Court in the above-entitled matter is an appeal of
Bankruptcy Judge Terry L. Myers' decision granting the
Motions to convert the case to a Chapter 7 bankruptcy
proceeding. The parties have filed their responsive briefing
and the matter is now ripe. The facts and legal arguments are
adequately presented in the briefs and record and, therefore,
in the interest of avoiding further delay, and because the
court conclusively finds that the decisional process would
not be significantly aided by oral argument, this matter
shall be decided on the record before this Court without oral
AND PROCEDURAL BACKGROUND
October 15, 2015 Debtors Joseph Lloyd Soelberg and Heather
Michelle Soelberg, husband and wife, filed a joint petition
under Chapter 13 of the Bankruptcy Code. The Trustee,
Kathleen McCallister, and creditor Annette Davidson filed
Motions to Convert the case to a Chapter 7 proceeding. The
Bankruptcy Court held a hearing and, on July 5, 2016,
Bankruptcy Judge Myers issued an oral ruling granting the
Motions to Convert and ordered the bankruptcy case to proceed
under Chapter 7. (Dkt. 9-3.) Debtors filed an appeal of that
decision which is now before this Court. The facts underlying
the bankruptcy proceeding are as follows.
Soelberg and Ms. Davidson were divorced in March of 2007.
Under their Judgment and Decree of Divorce, which
incorporated all but one paragraph of their Mediated
Parenting Agreement and Property Settlement Agreement, Mr.
Soelberg agreed to pay $2, 200 per month to Ms. Davidson in
spousal support for a period of ten years plus child support
payments. Mr. Soelberg made spousal support payments from
April 2007 to approximately November 2010. Mr. Soelberg
stated he stopped making the spousal support payments because
Ms. Davidson had remarried.
Davidson pursued payment of the lapsed obligations first by
emailing Mr. Soelberg and then retaining counsel. In February
of 2011, Ms. Davidson obtained a state court Judgment against
Mr. Soelberg for $28, 100 which was upheld on appeal. See
Davidson v. Soelberg, 296 P.3d 433 (Idaho App. 2013).
Ms. Davidson pursued collection of the unpaid spousal support
obligations from Mr. Soelberg through various retained
attorneys, including Eric Clark who undertook more aggressive
collection activities against Mr. Soelberg in 2015. Mr. Clark
served Mr. Soelberg with post-judgment interrogatories and
request for production which Mr. Soelberg answered on January
30, 2015. Mr. Clark also sought garnishment of amounts owed
to Mr. Soelberg from Data One, LLC, a company owned by Mr.
February 2015, Ms. Davidson filed a second lawsuit against
Mr. Soelberg to recover the all of unpaid spousal support
obligation. The Idaho state court granted summary judgment in
favor of Ms. Davidson on July 15, 2015. Mr. Soelberg was
served with a second set of interrogatories which he answered
on September 16, 2015. Also in September of 2015, Ms.
Davidson filed a complaint in Valley County, Idaho to set
aside a homestead exemption claimed by the Soelbergs as to a
cabin located in Cascade, Idaho. On September 30, 2015, the
Sheriff issued a Notice of Attachment and Levy against Mr.
Soelberg's interest in Data One, LLC. On October 15,
2015, one day before the Sheriff's sale, the Soelbergs
filed their Chapter 13 Bankruptcy petition.
this time, late 2014 up to the filing of the bankruptcy
petition, the Soelbergs engaged in various transactions
involving: a cabin located in Cascade, Idaho; a residence in
Star, Idaho; a Trust; a boat; various automobiles; and salary
payments, loans, and other transactions involving Data One,
LLC. These transactions and dealings are the basis for much
of the Bankruptcy Court's decision on the Motions to
federal District Court has jurisdiction to entertain an
appeal from the Bankruptcy Court under 28 U.S.C. §
158(a), which provides: “The district courts of the
United States shall have jurisdiction to hear appeals...from
final judgments, orders, and decrees[ ] of bankruptcy
judges[.]” On appeal, the Bankruptcy Court's
conclusions of law are reviewed de novo and the
factual findings for clear error. In re Greene, 583
F.3d 614, 618 (9th Cir. 2009) (citation omitted); see
also Fed. R. Bankr. P. 8013 (“Findings 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.”).
as here, the Bankruptcy Court's decision is in regard to
a motion for conversion of a case, that decision is reviewed
for abuse of discretion. See In re Levesque, 473
B.R. 331, 335 (B.A.P. 9th Cir. 2012) (citations omitted). A
Bankruptcy Court's decision that is made within its
discretion under the Bankruptcy Code will not be set aside
unless there is plain error or abuse of discretion. See
In re Rosson, 545 F.3d 764 (9th Cir. 2008) (explaining
that a bankruptcy court's decision to deny debtor's
request for dismissal of his Chapter 13 case and to convert
the case from Chapter 13 to Chapter 7 was reviewed for an
abuse of discretion); In Re Sherman, 491 F.3d 948,
969 (9th Cir. 2007) (“[W]e review a bankruptcy
court's decision to grant or deny a motion to dismiss for
misconduct that constitutes ‘cause' for abuse of
discretion.”). A two-part test applies to determine
whether the bankruptcy court abused its discretion.
Levesque, 473 B.R. at 335 (citation omitted). First,
the court must “determine de novo whether the
[bankruptcy] court identified the correct legal rule to apply
to the relief requested.” Id. Second, the
court examines the Bankruptcy Court's factual findings
for clear error. Id. The Bankruptcy Court's
factual findings are affirmed unless those findings are
“(1) ‘illogical, ' (2) ‘implausible,
' or (3) without ‘support in inferences that may be
drawn from the facts in the record.'” Id.
De Novo Review of the ...