                                                         FILED
                                                          MAY 28 2015
 1                        NOT FOR PUBLICATION         SUSAN M. SPRAUL, CLERK
                                                        U.S. BKCY. APP. PANEL
                                                        OF THE NINTH CIRCUIT
 2
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                             ) BAP No. EC-14-1390-PaJuKu
                                        )
 6   BRIAN COLIN WARREN and             ) Bankr. No. 08-31697
     PATRICIA WARREN,                   )
 7                                      )
                    Debtors.            )
 8   ___________________________________)
                                        )
 9   BRIAN COLIN WARREN;                )
     PATRICIA WARREN,                   )
10                                      )
                    Appllants,          )
11                                      )
     v.                                 ) M E M O R A N D U M1
12                                      )
     JIM YOUNG; CAROL YOUNG,            )
13                                      )
                    Appellees.          )
14   ___________________________________)
15                   Argued and Submitted on May 14, 2015
                           at Sacramento, California
16
                             Filed - May 28, 2015
17
               Appeal from the United States Bankruptcy Court
18                 for the Eastern District of California
19        Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding
20
     Appearances:    William Steven Shumway of Law Office of W. Steven
21                   Shumway, argued for appellants Brian and Patricia
                     Warren; Walter R. Dahl of Dahl Law, argued for
22                   appellees Jim and Carol Young.
23
     Before: PAPPAS, JURY, and KURTZ, Bankruptcy Judges.
24
25
26
          1
             This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may have
     (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
28   Cir. BAP Rule 8024-1.

                                      -1-
 1        Chapter 112 debtors Brian and Patricia Warren (“Debtors”)
 2   appeal the order of the bankruptcy court dismissing their
 3   bankruptcy case pursuant to § 1112(b).    We AFFIRM.
 4                                I.   FACTS
 5        On August 21, 2008, Debtors filed a chapter 11 petition.    In
 6   their schedule D, Debtors listed appellees Jim and Carol Young
 7   (the “Youngs”) as creditors holding a fully secured claim in the
 8   amount of $40,000.   Debtors did not indicate what collateral
 9   secured the Youngs’ claim.
10        On October 8, 2008, Debtors filed an amended schedule D that
11   listed the Youngs’ claim in the same amount, but Debtors now
12   indicated that the claim was unsecured.    Debtors also stated in
13   the amended schedule that the Youngs’ claim was secured by a
14   “third deed of trust” on seventy-one acres of “raw land” in
15   Auburn, California (the “Real Property”).    Neither the original
16   nor amended schedule D Debtors filed listed the claim as
17   contingent, unliquidated, or disputed.
18        On August 20, 2009, Debtors filed their proposed disclosure
19   statement.   In it, Debtors explained that they were sole
20   proprietors who intended to develop the Real Property, but due to
21   the downturn of the real estate market, as well as cost overruns
22   and delays, the development failed.     In addition, as is relevant
23   in this appeal, Debtors’ disclosure statement indicated that, in
24   their proposed chapter 11 plan (the “Plan”), the Youngs and other
25   creditors claiming a secured interest in the Real Property would
26
27        2
             Unless otherwise indicated, all chapter, section and rule
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28   to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

                                       -2-
 1   be deemed to be unsecured creditors and would be paid along with
 2   the other general unsecured creditors.       The disclosure statement
 3   explained that plan payments to unsecured creditors would begin
 4   “one month after [the Plan] is confirmed and will end when the
 5   creditor has received 9.0% of its allowed claim.”       A copy of the
 6   Plan was attached to the disclosure statement.       It provided that
 7   Debtors “will make a $1,000 payment per month to [unsecured]
 8   creditors . . . until the creditor has received 9% of its allowed
 9   claim.       Debtor[s] will distribute pro-rata payments to these
10   creditors from [their] operations on a monthly basis beginning one
11   month after the [P]lan is confirmed.”
12        The bankruptcy court approved Debtors’ disclosure statement
13   on December 5, 2009, and it confirmed the Plan on February 6,
14   2010.       The bankruptcy court closed the bankruptcy case on
15   October 5, 2012.
16        On May 23, 2014, the bankruptcy court granted a motion by
17   Highland Crofters, LLC, another creditor of Debtors, to reopen the
18   bankruptcy case.3      Then, on June 10, 2014, the Youngs filed a
19   motion to convert Debtors’ case to chapter 7.       To support the
20   motion, the Youngs’ declaration represented that they had received
21   no payments from Debtors after confirmation even though the Plan
22
             3
             The parties did not provide the Panel with a copy of the
23   motion to reopen the bankruptcy case. We have reviewed it in the
     bankruptcy court’s docket, and it explains that Highland Crofters,
24   LLC, is the “current holder of the promissory note, previously
     held by Samuel R. Spencer, secured by a first deed of trust on
25   [the Real Property.]” Bankr. Dkt. No. 386. The creditor asked
     the bankruptcy court to reopen the bankruptcy case for a
26   “clarification of [the] terms of [the] order confirming the plan.”
     Id. We exercise our discretion to consider pleadings appearing on
27   the docket in the underlying bankruptcy case. Fed. R. Evid. 201;
     O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d
28   955, 957-58 (9th Cir. 1989).

                                         -3-
 1   provided that monthly payments would be made to them beginning in
 2   March 2010.   Other declarations accompanying the motion, authored
 3   by creditors Marilyn Peters of Peter’s Drilling, Paul Ferreira of
 4   Don Robinson Sand and Gravel, and Howard Anderson of Anderson
 5   Sierra Pipe Company; each averred that the creditors held allowed
 6   general unsecured claims under the Plan, but had received no
 7   payments after confirmation of the Plan.
 8        On June 17, 2014, Debtors filed an objection to the Youngs’
 9   proof of claim.   Debtors asked the bankruptcy court to disallow
10   Youngs’ claim because the proof of claim was filed one day after
11   the claims bar date.   On July 8, 2014, Debtors filed an amended
12   schedule F that now listed the Youngs’ claim, as well as the
13   claims of every other creditor on the amended schedule (except for
14   Jack and Laura Warren), as unsecured, nonpriority claims that
15   Debtors disputed.
16        On July 8, 2014, Debtors filed an opposition to the Youngs’
17   motion to convert.   In the opposition, Debtors now conceded that,
18   even though the Youngs’ proof of claim had been filed after the
19   deadline, the claim was “deemed filed” under § 1111(a)4 because
20   they had listed it in their original and amended schedules and had
21   not alleged the claim was disputed, contingent, or unliquidated.
22   Because of this, Debtors offered to pay the Youngs the full amount
23   they were owed under the Plan provided the bankruptcy court denied
24   the Youngs’ motion to convert.   Debtors further argued that they
25
26        4
             Section 1111(a) provides: “A proof of claim or interest is
     deemed filed under section 501 of this title for any claim or
27   interest that appears in the schedules filed under section
     521(a)(1) or 1106(a)(2) of this title, except a claim or interest
28   that is scheduled as disputed, contingent, or unliquidated.”

                                      -4-
 1   had paid a total of $52,000 to various other unsecured creditors
 2   under the Plan and, therefore, they had substantially complied
 3   with the payment terms of the Plan.   Debtors did not dispute that
 4   they had not paid the Youngs, Don Robinson Sand and Gravel, and
 5   several other general unsecured creditors as required by the Plan.
 6        Before the July 23, 2014 hearing on the Youngs’ motion to
 7   convert, the bankruptcy court issued a tentative decision.   In it,
 8   the bankruptcy court found that the Youngs had shown cause existed
 9   under § 1112(b)(1) to dismiss or convert Debtors’ case because
10   Debtors were “in material default of the terms of the confirmed
11   plan” with respect to their obligation to pay unsecured creditors.
12   Specifically, the bankruptcy court found and concluded:
13             [Debtors] have failed to make any payments to
               the Youngs or Don Robinson Sand & Gravel, a
14             fact the Youngs have demonstrated by way of
               admissible evidence and which [Debtors] do not
15             dispute. Further, [Debtors] do not dispute
               that they have made no payments on any claims
16             of creditors who did not file timely proofs of
               claim . . . . The fact that [Debtors] have
17             opposed [the Youngs’ motion] without proposing
               to pay any of the 15 creditors who did not
18             file claims or who filed late claims except
               the Youngs, despite [Debtors’] asserted
19             newfound awareness of § 1111(a), leads the
               court to conclude that [Debtors] do not intend
20             to comply with the terms of the [P]lan.
21   (emphasis in original) (footnote omitted).
22        In the tentative decision, the bankruptcy court next
23   addressed whether conversion or dismissal was in the best interest
24   of creditors and the estate under § 1112(b)(1).   The court noted
25   that the Youngs’ motion had requested conversion of the case to
26   chapter 7, rather than dismissal, because Debtors’ interest in the
27   Real Property should be revested in the bankruptcy estate and
28   administered for the benefit of Debtors’ creditors.   Concerning

                                    -5-
 1   this argument, the court observed that it “ha[d] no evidence of
 2   the current value of the [Real Property] or the amount of the
 3   senior lien against it, or of other assets that might be available
 4   to provide [a] distribution to creditors.”   The court further
 5   stated that, assuming the case was converted, it was “not
 6   convinced the language of the [P]lan and disclosure statement was
 7   sufficient to allow the [Real Property] to be revested in the
 8   estate under applicable law.   See Pioneer Liquidating Corp. v.
 9   United States Trustee (In re Consolidated Pioneer Mortgage
10   Entities), 264 F.3d 803, 807-08 (9th Cir. 2001).”    The court
11   advised the parties that it would consider whether conversion or
12   dismissal would be in the best interest of creditors and the
13   estate at the hearing.
14        Finally, the bankruptcy court stated it intended to strike,
15   as being filed in bad faith, Debtors’ amended schedule F wherein
16   Debtors claimed, more than six years after their case was filed
17   and four years after the Plan was confirmed, that most of their
18   general unsecured creditors’ claims were disputed.
19        At the hearing, after argument by the parties, the bankruptcy
20   court announced it would adopt its tentative decision that
21   adequate cause existed to dismiss or convert Debtors’ case under
22   § 1112(b)(1).   The court then addressed whether the case should be
23   converted or dismissed.   Despite the relief sought in their
24   motion, the Youngs now requested dismissal as opposed to
25   conversion of the case to chapter 7.   Debtors also requested that
26   the case be dismissed.    The bankruptcy court concluded it would
27   dismiss the case for the reasons stated in its tentative
28

                                      -6-
 1   decision.5
 2        An order dismissing the chapter 11 case was entered on
 3   July 25, 2014.   Debtors filed a timely appeal on August 6, 2014.
 4                               II.    JURISDICTION
 5        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
 6   and 157(b)(2)(A).   We have jurisdiction under 28 U.S.C. § 158.
 7                                     III.    ISSUE
 8        Whether the bankruptcy court erred in dismissing the
 9   bankruptcy case.
10                         IV.    STANDARD OF REVIEW
11        “We review de novo whether the cause for dismissal of a
12   Chapter 11 case under [] § 1112(b) is within the contemplation of
13   that section of the Code.”        Marsch v. Marsch (In re Marsch),
14   36 F.3d 825, 828 (9th Cir. 1994).
15        Upon a finding of “cause” under § 1112(b)(1), “[w]e review
16   the bankruptcy court’s decision to dismiss a case under an abuse
17   of discretion standard.”     Sullivan v. Harnisch (In re Sullivan),
18   522 B.R. 604, 611 (9th Cir. BAP 2014) (citing Leavitt v. Soto
19   (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999)).       A two-step
20   analysis is used to determine whether the bankruptcy court abused
21   its discretion: (1) we review de novo whether the bankruptcy court
22   applied the correct legal standard to the relief requested; and
23   (2) we review the bankruptcy court’s findings of fact for clear
24   error.   In re Sullivan, 522 B.R. at 611-12 (citing United States
25   v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc)).
26   “We must affirm the bankruptcy court’s fact findings unless we
27
          5
             The bankruptcy court also dismissed, as moot, Debtors’
28   objection to the Youngs’ proof of claim.

                                              -7-
 1   conclude that they are illogical, implausible, or without support
 2   in the record.”   In re Sullivan, 522 B.R. at 612 (citing Hinkson,
 3   585 F.3d at 1262).
 4                               V.   DISCUSSION
 5        A.     Debtors’ arguments on appeal.
 6        Debtors argue that the bankruptcy court erred when it found
 7   that cause existed to dismiss their case under § 1112(b)(1).
 8   Debtors allege that they had made fifty-two, $1,000 monthly
 9   payments under the Plan, but paid only those creditors who had
10   filed “timely” proofs of claim.    Debtors assert that they intended
11   to pay the other creditors who were listed in their schedules who
12   had not filed a proof of claim, or had filed tardy claims, at some
13   later time, and would have done so had the bankruptcy court not
14   dismissed the bankruptcy case.    Because of this, Debtors argue
15   that they had substantially complied with the terms of the Plan,
16   and that dismissal of the case under these circumstances was
17   inappropriate.
18        In addition, Debtors argue that, as provided in § 1112(b)(2),
19   unusual circumstances existed allowing them to avoid dismissal of
20   their case, even if they were in default under the Plan.     Debtors
21   point out that they were making payments under the Plan to most
22   creditors, and that they could have cured any default in payments
23   to the other creditors.   Debtors insist that “[i]n liquidation, []
24   creditors would have received nothing.      The continuation of the
25   [P]lan was in the best interest of creditors.”     Appellants’ Op.
26   Br. at 7.
27
28

                                       -8-
 1          B.   The bankruptcy court did not err in finding cause to
                 dismiss Debtors’ case pursuant to § 1112(b)(1).
 2
 3          Section 1112(b)(1) provides:
 4               Except as provided in paragraph (2) and
                 subsection (c), on request of a party in
 5               interest, and after notice and a hearing, the
                 court shall convert a case under this chapter
 6               to a case under chapter 7 or dismiss a case
                 under this chapter, whichever is in the best
 7               interests of creditors and the estate, for
                 cause unless the court determines that the
 8               appointment under section 1104(a) of a trustee
                 or an examiner is in the best interests of
 9               creditors and the estate.
10          Section 1112(b)(4) sets forth a nonexhaustive list of what
11   constitutes “cause” to convert or dismiss a case under
12   § 1112(b)(1).    In re Consol. Pioneer Mortg. Entities, 248 B.R. at
13   375.    Included in the list of items constituting “cause” to
14   convert or dismiss is a “material default by the debtor with
15   respect to a confirmed plan.”    § 1112(b)(4)(N).   “The movant bears
16   the burden of establishing by preponderance of the evidence that
17   cause exists.”    In re Sullivan, 522 B.R. at 614 (citing StellarOne
18   Bank v. Lakewatch, LLC (In re Park), 436 B.R. 811, 815 (Bankr.
19   W.D. Va. 2010)).
20           If the bankruptcy court finds that cause exists to grant
21   relief under § 1112(b)(1), it must then: “(1) decide whether
22   dismissal, conversion, or the appointment of a trustee or examiner
23   is in the best interest of creditors and the estate; and
24   (2) identify whether there are unusual circumstances that
25   establish that dismissal or conversion is not in the best interest
26   of creditors and the estate.”    In re Sullivan, 522 B.R. at 612
27   (citing § 1112(b)(1), (b)(2), and Shulkin Hutton, Inc., P.S. v.
28   Treiger (In re Owens), 552 F.3d 958, 961 (9th Cir. 2009)).      In

                                      -9-
 1   choosing between dismissal or conversion, a bankruptcy court must
 2   consider the interests of all creditors.   Id. (citing In re Owens,
 3   552 F.3d at 961).   “If cause is established, the decision whether
 4   to convert or dismiss the case falls within the sound discretion
 5   of the court.”   Id. (citing Mitan v. Duval (In re Mitan), 573 F.3d
 6   237, 247 (6th Cir. 2009) and Nelson v. Meyer (In re Nelson),
 7   343 B.R. 671, 675 (9th Cir. BAP 2006)).
 8        Even if cause exists, § 1112(b)(2) provides an exception to
 9   the requirement that a chapter 11 case be converted or dismissed.
10   For the exception to apply: (1) the debtor must prove and the
11   bankruptcy court must “find and specifically identify” that
12   “unusual circumstances” exist to show that conversion or dismissal
13   is not in the best interest of creditors and the estate; and (2)
14   the debtor must prove that the cause for conversion or dismissal
15   was reasonably justified, and that basis for dismissal or
16   conversion can be “cured” within a reasonable time.6   As noted,
17
          6
18            More precisely, § 1112(b)(2) provides:
19              The court may not convert a case under this
                chapter to a case under chapter 7 or dismiss a
20              case under this chapter if the court finds and
                specifically identifies unusual circumstances
21              establishing that converting or dismissing the
                case is not in the best interests of creditors
22              and the estate, and the debtor or any other
                party in interest establishes that —
23
                (A) there is a reasonable likelihood that a
24              plan will be confirmed within the time frames
                established in sections 1121(e) and 1129(e) of
25              this title, or if such sections do not apply,
                within a reasonable period of time; and
26
                (B) the grounds for converting or dismissing
27              the case include an act or omission of the
                debtor other than under paragraph (4)(A)—
28                                                         (continued...)

                                     -10-
 1   the debtor bears the burden of proving the unusual circumstances
 2   are present in the case that render dismissal or conversion not in
 3   the best interest of creditors or the estate.      Sanders v. United
 4   States Tr. (In re Sanders), No. CC-12-1398, 2013 WL 1490971, at *7
 5   (9th Cir. BAP Apr. 11, 2013) (citing In re Orbit Petroleum, Inc.,
 6   395 B.R. 145, 148 (Bankr. D.N.M 2008)); see also 7 COLLIER ON
 7   BANKRUPTCY ¶ 1112.05[2] (Alan N. Resnick & Henry J. Sommers eds.,
 8   16th ed.) (“Once the movant has established cause, the burden
 9   shifts to the respondent to demonstrate by evidence the unusual
10   circumstances that establish that dismissal or conversion is not
11   in the best interests of creditors and the estate.”).
12        In this case, we conclude that the bankruptcy court did not
13   err in finding “cause” under § 1112(b)(4)(N), nor did it abuse its
14   discretion in dismissing Debtors’ case.      First, the bankruptcy
15   court found that, as provided in § 1112(b)(4)(N), cause existed
16   because Debtors were in material default under the Plan.      Debtors
17   had failed to make the required payments to the Youngs and several
18   other unsecured creditors for over four years.      The Plan clearly
19   required that Debtors begin making payments to all of their
20   unsecured creditors in March 2010.       The Youngs offered undisputed
21   evidence to show that they, along with several other unsecured
22   creditors that held allowed unsecured claims, had received no
23   payments after confirmation of the Plan.      As the bankruptcy court
24
25
          6
              (...continued)
26                (i) for which there exists a reasonable
                  justification for the act or omission; and
27
                  (ii) that will be cured within a reasonable
28                period of time fixed by the court.

                                       -11-
 1   observed:
 2               [Debtors] do not dispute that they have made
                 no payments on any claims of creditors who did
 3               not file timely proofs of claim . . . . The
                 fact that [Debtors] have opposed [the Youngs’
 4               motion] without proposing to pay any of the
                 15 creditors who did not file claims or who
 5               filed late claims except the Youngs, despite
                 [Debtors’] asserted newfound awareness of
 6               § 1111(a), leads the court to conclude that
                 [Debtors] do not intend to comply with the
 7               terms of the [P]lan.
 8        The bankruptcy court’s factual findings are clearly supported
 9   by the record.   And it correctly concluded that Debtors’ failure
10   to make any payments to several unsecured creditors for more than
11   four years in contravention of the Plan amounted to a material
12   default and constituted cause to convert or dismiss the bankruptcy
13   case under § 1112(b)(1) and (b)(4)(N).    See Kenny G. Enters., LLC
14   v. Casy (In re Kenny G. Enters.), No. BAP CC-13-1527, 2014 WL
15   4100429, at *14 (9th BAP Cir. Aug. 20, 2014) (noting that failure
16   to pay creditors as required by a confirmed plan is a material
17   default and cause for conversion or dismissal of a debtor’s case)
18   (citing AMC Mortg. Co. v. Tenn. Dep't of Revenue (In re AMC Mortg.
19   Co.), 213 F.3d 917, 921 (6th Cir.2000)); see also State of Ohio,
20   Dept. of Taxation v. H.R.P. Auto Center, Inc (In re H.R.P. Auto
21   Center, Inc.), 130 B.R. 247, 256 (Bankr. N.D. Ohio 1991) (holding
22   three missed payments to a single creditor over the course of a
23   year was a material default of a confirmed chapter 11 plan);
24   7 COLLIER ON BANKRUPTCY ¶ 1112.04[6][n] (“Although the Code does not
25   define the term material, certainly the failure to make payments
26   when due under the plan would constitute a material default.”).
27        In arguing that cause did not exist to convert or dismiss
28   their case, Debtors remind us that they paid fifty-two $1,000

                                      -12-
 1   payments to “other” unsecured creditors under the Plan, and thus
 2   they had “substantially complied” with the terms of the Plan.
 3   While there is no evidence in the record to show that Debtors
 4   actually made these payments, even if they did, Debtors were not
 5   absolved from the material default they committed under the terms
 6   of the Plan obligating them to pay all allowed unsecured claims,
 7   including those that the bankruptcy court determined had not been
 8   paid since March 2010.   In this context, whether Debtors had
 9   “substantially complied” in paying other creditors under the Plan
10   is of no moment because that is not the applicable standard under
11   § 1112(b)(1).   Cf. Greenfield Drive Storage Park v. Cal.
12   Para-Prof’l Servs., Inc. (In re Greenfield Drive Storage Park),
13   207 B.R. 913, 917 (9th Cir. BAP 1997) (“Whether the plan has been
14   ‘substantially consummated’ is not determinative as to whether
15   there has been a material default in the performance of the
16   plan.”).   Simply put, the bankruptcy court did not err in finding
17   that adequate cause existed under § 1112(b)(4)(N) to require
18   either conversion or dismissal of Debtors’ case.
19        Next, the bankruptcy court did not abuse its discretion when
20   it decided to dismiss Debtors’ case, as opposed to converting the
21   case to chapter 7, after considering which option was in the best
22   interest of creditors and the estate.   The court addressed this
23   issue in its tentative decision and expressed doubt, based upon
24   the language of the Plan, and other reasons,7 whether under these
25
          7
26           The bankruptcy court stated it was “not convinced the
     language of the [P]lan and disclosure statement was sufficient to
27   allow the [Real Property] to be revested in the estate under
     applicable law. See Pioneer Liquidating Corp. v. United States
28                                                        (continued...)

                                     -13-
 1   facts the Real Property, Debtors’ primary asset, would “revest” in
 2   the bankruptcy estate if the court converted the case to
 3   chapter 7.    After hearing from Debtors and the Youngs, who each
 4   requested dismissal rather than conversion,8 and neither of whom
 5   disputed the court’s concern about the status of Real Property
 6   upon conversion, the court determined the interests of the
 7   creditors were best served by dismissal.     We find no abuse of
 8   discretion in this determination.
 9        C.      Debtors’ alternative argument under § 1112(b)(2) fails.
10        Debtors note that they had paid their unsecured creditors
11   $52,000, and that they would cure the balance owed to the other,
12   unpaid creditors, if given an opportunity.     They assert that these
13   facts should allow them to avoid the harsh consequence of
14   dismissal of their chapter 11 case.      However, Debtors never argued
15
16
          7
           (...continued)
17   Trustee (In re Consolidated Pioneer Mortgage Entities), 264 F.3d
     803, 807-08 (9th Cir. 2001).” In re Consol. Pioneer Mortg.
18   Entities notes that based upon § 1141(b) property of the estate
     vests in the debtor upon plan confirmation unless the plan
19   provides otherwise. Id.
20        8
             The Youngs, who had previously requested conversion of
     Debtors’ case in their motion, were clearly persuaded by the
21   bankruptcy court’s concerns regarding the status of the Real
     Property in the event of a conversion. At the hearing, counsel
22   for the Youngs stated:
23                Your Honor, first, I would like to thank the
                  court for its lengthy tentative ruling. We
24                would not oppose dismissal at this time, aside
                  from conversion. I know, in our moving
25                papers, we ask for conversion, but with the
                  court’s concern and notation in its tentative
26                ruling about the real property not revesting
                  in the Chapter 7 bankruptcy estate, we would
27                not oppose dismissal of the case.
28   Hr’g Tr. at 4:23-5:4, July 23, 2014.

                                       -14-
 1   in the bankruptcy court that these facts constituted the sort of
 2   “unusual circumstances” that justify application of the exception
 3   to dismissal codified in § 1112(b)(2).   We do not consider
 4   arguments of this type made for the first time on appeal.     See
 5   Mano-Y&M, Ltd. v. Field (In re Mortg. Store, Inc.), 773 F.3d 990,
 6   998-99 (9th Cir. 2014) (stating issues not raised in the
 7   bankruptcy court are waived); Barnes v. Belice (In re Belice),
 8   461 B.R. 564, 569 n.4 (9th Cir. BAP 2011) (stating the BAP did not
 9   need to decide arguments not raised in the bankruptcy court).
10        Even if Debtors had timely raised their argument, and even
11   were the bankruptcy court inclined to agree that unusual
12   circumstances were present, to satisfy § 1112(b)(2), Debtors would
13   have also had to show that there was a “reasonable justification”
14   for their failure to pay the Youngs and other unsecured creditors
15   for over four years, and that their failure to do so would be
16   cured within a reasonable amount of time fixed by the court.     YBA
17   Nineteen, LLC v. IndyMac Venture, LLC (In re YBA Nineteen, LLC),
18   505 B.R. 289, 303 (S.D. Cal. 2014).   The bankruptcy court found no
19   reasonable justification existed for their failure to make the
20   required Plan payments, however, and, in fact, stated Debtors’
21   conduct “leads the court to conclude that [Debtors] do not intend
22   to comply with the terms of the [P]lan.”    Given these findings,
23   all adequately supported by the record, Debtors can not rely upon
24   § 1112(b)(2).
25                            VI.   CONCLUSION
26        The bankruptcy court did not err when it concluded that
27   Debtors’ failure to pay several creditors for four years amounted
28   to a material default under the confirmed plan, and that cause

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 1   existed under § 1112(b)(1) to grant Youngs’ motion.   It also did
 2   not abuse its discretion when it ordered that Debtors’ case be
 3   dismissed as opposed to converted.    We AFFIRM the order of the
 4   bankruptcy court.
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