                                                          FILED
                                                          MAY 29 2013
 1
                                                     SUSAN M SPRAUL, CLERK
                                                        U.S. BKCY. APP. PANEL
 2                                                      OF THE NINTH CIRCUIT
                    UNITED STATES BANKRUPTCY APPELLATE PANEL
 3
                              OF THE NINTH CIRCUIT
 4
 5   In re:                         )     BAP No.    AZ-12-1320-MkDJu
                                    )
 6   PETER F. BRONSON AND SHERRI L. )     Bk. No.    08-00777
     BRONSON,                       )
 7                                  )
                    Debtors.        )
 8   _______________________________)
                                    )
 9   PETER F. BRONSON; SHERRI L.    )
     BRONSON,                       )
10                                  )
                    Appellants,     )
11                                  )
     v.                             )     MEMORANDUM*
12                                  )
     THOMAS M. THOMPSON,            )
13                                  )
                    Appellee.       )
14   _______________________________)
15                      Submitted Without Oral Argument
                                on May 16, 2013
16
                              Filed – May 29, 2013
17
               Appeal from the United States Bankruptcy Court
18                       for the District of Arizona
19     Honorable George B. Nielsen, Jr., Bankruptcy Judge, Presiding
20
     Appearances:     Appellants Peter Bronson and Sherri Bronson on
21                    brief pro se; Jimmie D. Smith on brief for
                      appellee Thomas M. Thompson.
22
23
     Before:   MARKELL, DUNN and JURY, Bankruptcy Judges.
24
25
26        *
           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.
28   See 9th Cir. BAP Rule 8013-1.
 1                              INTRODUCTION
 2        Peter and Sherri Bronson (“Bronsons”) appeal from an order
 3   granting the motion of Thomas Thompson (“TMT”) to convert the
 4   Bronsons’ bankruptcy case from chapter 111 to chapter 7.        The
 5   Bronsons also appeal from an order denying their motion to
 6   reconsider the conversion order.       We AFFIRM both orders.
 7                                  FACTS
 8        Notwithstanding the contentious nature of the litigation
 9   between the parties, most of the facts relevant to this appeal
10   are undisputed.
11   A.   Purchase of Office Building and Default on Financing
12        In 2001, the Bronsons and their business partner Carl
13   Mickler purchased from TMT and his parents a 39,000 square foot
14   commercial building in Miami, Arizona (“Office Building”) for
15   $170,000.2   The purchasers paid $25,000 at the time of the sale
16   and executed a promissory note (“Note”) for the remainder of the
17   purchase price.   The Note was secured by a deed of trust and
18   assignment of rents (“Deed of Trust”).3
19        The Note provided for monthly payments of $1,272.00, with a
20
          1
           Unless specified otherwise, all chapter and section
21
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
22   all “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, Rules 1001-9037. All “Civil Rule” references are to
23   the Federal Rules of Civil Procedure.
24        2
           The Bronsons later acquired from Mickler his 50% interest
     in the Office Building.
25
          3
26         The Note and Deed of Trust also named TMT’s parents as
     parties to the transaction; however, their involvement is not
27   relevant to our analysis and disposition of this appeal. For
     ease of reference, we refer herein to both TMT alone and TMT
28   along with his parents as TMT.

                                        2
 1   balloon payment for the remaining balance due in September 2007.
 2   When the Bronsons defaulted on the balloon payment, TMT commenced
 3   nonjudicial foreclosure proceedings.    In furtherance thereof, TMT
 4   recorded in October 2007 a notice of trustee’s sale, which
 5   provided for an auction sale to be held on January 29, 2008.
 6   B.      Bankruptcy Filings, Relief from Stay and Foreclosure
 7           On January 28, 2008, the day before the scheduled trustee’s
 8   sale, the Bronsons filed their chapter 11 bankruptcy petition.
 9   As a result of the automatic stay, the trustee’s sale could not
10   be held as scheduled.    Before he could proceed with the trustee’s
11   sale, TMT had to obtain relief from the automatic stay not only
12   in the Bronsons’ bankruptcy case but also in the bankruptcy case
13   of the Bronsons’ business associate Mark Taylor, who claimed to
14   hold a junior security interest against the Office Building.    TMT
15   obtained relief from stay in the Bronsons’ bankruptcy case as of
16   November 19, 2008 and in Taylor’s bankruptcy case as of June 30,
17   2009.    The trustee’s sale was held on July 13, 2009, at which TMT
18   was the successful bidder based on a credit bid of $200,000.    A
19   trustee’s deed was recorded on July 17, 2009.
20   C.      Nondisclosure Lawsuit and Allowance of Judgment Claim
21           Even though the Bronsons had lost title to the property by
22   way of the foreclosure, this did not end the litigation between
23   the parties.    In 2007, the Bronsons had commenced a lawsuit
24   against TMT in the Gila County Superior Court (Case No. 2007-
25   0264), alleging among other things breach of contract,
26   nondisclosure, concealment and fraud (“Nondisclosure Lawsuit”).
27   The Bronsons claimed that TMT had wrongfully failed to disclose
28   asbestos contamination in the Office Building.

                                        3
 1        At the time of the trustee’s sale, the Nondisclosure Lawsuit
 2   was still pending.4   Ultimately, however, TMT prevailed in that
 3   action.   In June 2010, the Gila County Superior Court entered
 4   summary judgment in favor of TMT with respect to all of the
 5   Bronsons’ claims and awarded TMT his attorney’s fees and costs in
 6   that action in the amount of $26,426.00 (“Gila Judgment”).
 7        TMT filed a motion in the bankruptcy court seeking to have
 8   the Gila Judgment allowed as an administrative expense.   The
 9   Bronsons duly opposed that motion.    After a hearing on the
10   matter, the bankruptcy court declined to allow the Gila Judgment
11   as an administrative expense claim but instead entered an order
12   allowing it as a prepetition unsecured claim (“Gila Judgement
13   Claim Allowance”).    The Bronsons never appealed either the Gila
14   Judgment or the Gila Judgement Claim Allowance.
15   D.   Deficiency Lawsuit
16        Meanwhile, in October 2009, Thompson filed an adversary
17   complaint against the Bronsons asserting that he was entitled to
18   a deficiency judgment against them under A.R.S. § 33-814(A)
19   (“Deficiency Lawsuit”).5
20
21        4
           The Bronsons removed the Nondisclosure Lawsuit to the
22   bankruptcy court in September 2009, but the bankruptcy court
     entered an order in December 2009 remanding that matter to the
23   Gila County Superior Court.
          5
24         A.R.S. § 33-814(A) provides in relevant part:
25        [W]ithin ninety days after the date of sale of trust
26        property under a trust deed pursuant to § 33-807, an
          action may be maintained to recover a deficiency
27        judgment against any person directly, indirectly or
          contingently liable on the contract for which the trust
28                                                      (continued...)

                                       4
 1        Three principal issues arose in the Deficiency Lawsuit:
 2   (1) whether TMT actually incurred attorney’s fees in enforcing
 3   his rights under the Note and the Deed of Trust, (2) the
 4   reasonableness of any such fees, and (3) whether the amount of
 5   debt that the Bronsons owed TMT actually exceeded the fair market
 6   value of the Office Building at the time of the foreclosure sale.
 7   The Bronsons initially raised each of these issues in a Civil
 8   Rule 12(b)(6) motion to dismiss.       In ruling on that motion, the
 9   bankruptcy court held that TMT needed to amend his complaint to
10   allege the amount of fees actually incurred and to allege that
11   those fees were reasonable.   But the court otherwise denied the
12   Bronsons’ dismissal motion.
13        Over the next two years, the parties litigated over the two
14   fee-related issues (jointly, “Fee Issues”) but largely ignored
15   the third issue regarding the fair market value of the Office
16   Building (“FMV Issue”).   At the January 8, 2010 hearing on the
17   Bronsons’ dismissal motion, the Bronsons orally requested that
18   the court set a hearing to determine the FMV Issue.      The court,
19   however, indicated that TMT first should file his amended
20   complaint and that the Bronsons should answer that complaint.
21   The court further suggested that the Bronsons should bring up
22
23
          5
           (...continued)
24        deed was given as security . . . . In any such action
          against such a person, the deficiency judgment shall be
25        for an amount equal to the sum of the total amount owed
26        the beneficiary as of the date of the sale, as
          determined by the court less the fair market value of
27        the trust property on the date of the sale as
          determined by the court or the sale price at the
28        trustee's sale, whichever is higher.

                                        5
 1   their request for a hearing on the FMV Issue at the next status
 2   conference (scheduled for February 2010), but the Bronsons did
 3   not do so.   The litigation subsequently focused on the Fee Issues
 4   because TMT filed in May 2010 a summary judgment motion seeking
 5   partial summary adjudication of the Fee Issues.   As the Bronsons
 6   have admitted, TMT’s summary judgment motion did not address the
 7   FMV Issue at all.   The Bronsons filed a cross-motion for partial
 8   summary judgment in September 2010, but that motion like TMT’s
 9   motion only addressed the Fee Issues.
10        The court never explicitly stated that it was denying the
11   cross-motions for summary judgment, but it did orally rule at a
12   hearing held on September 30, 2010, that it needed an evidentiary
13   hearing on the Fee Issues.   At the same hearing, the court
14   indicated that it was aiming to cut off both discovery and
15   dispositive motions by no later than December 2010.
16        The court set trial on the Fee Issues for April 2011;
17   however, shortly before the scheduled trial date, the Bronsons’
18   attorney obtained permission to withdraw as counsel.6   As a
19
          6
20         According to the Bronsons’ former counsel, he felt
     compelled to withdraw because he felt that his life and his
21   girlfriend’s life were being threatened as a result of his
     litigation efforts against TMT. The Bronsons followed up with
22
     their own list of events and occurrences which they felt
23   demonstrated that TMT’s influence over others in the local area
     was causing them to experience hostility and unfair treatment
24   from, among others, the local state courts and the local police
     department. But the claims of misconduct and improper influence
25   are based largely on hearsay and conjecture. Even the Bronsons
26   admitted that it was not possible for them to directly tie TMT to
     the events and occurrences they were complaining about. More
27   importantly, the only relief the Bronsons sought in conjunction
     with the above-reference alleged events was for the bankruptcy
28                                                      (continued...)

                                      6
 1   result, TMT did not present his case in chief on the Fee Issues
 2   until May 24, 2011, and the Bronsons did not present their
 3   defense case on the Fee Issues until September 15, 2011.   After
 4   closing arguments by both sides and the filing of a closing
 5   statement (“Closing Statement”) by the Bronsons, the court on
 6   October 30, 2011 entered judgment in TMT’s favor on the Fee
 7   Issues and further purported to finally determine that TMT was
 8   entitled to a deficiency judgment in the amount of $18,574.
 9        The Bronsons filed a series of motions seeking relief from
10   the deficiency judgment.   These motions caused the bankruptcy
11   court to partially reconsider its October 30, 2011 judgment.
12   While the court upheld its ruling on the Fee Issues, the court
13   concluded that the parties had never litigated the FMV Issue.
14   Accordingly, the court vacated the portions of the October 30,
15   2011 judgment purporting to finally determine that TMT was
16   entitled to a deficiency judgment.7   The court set the FMV Issue
17   for trial in May 2012, but before that trial occurred, the court
18   vacated the trial date in light of the conversion of the case to
19   chapter 7, as discussed below.
20
21        6
           (...continued)
22   court: (1) to permit withdrawal of their counsel, (2) to grant a
     continuance of the pending litigation, and (3) to “order” an FBI
23   investigation. The court permitted the withdrawal and granted
     the continuance. And as for the FBI investigation, the
24   bankruptcy court later correctly pointed out that it had no
     authority to “order” the FBI to do anything. Oddly, the Bronsons
25   apparently never attempted to contact the FBI themselves.
26        7
           The Bronsons filed an appeal from the court’s partial
27   denial of their motions for relief from the deficiency judgment,
     but we dismissed that appeal as interlocutory by order entered
28   August 29, 2012 (BAP No. AZ-12-1058).

                                      7
 1   E.      Plan Confirmation Proceedings
 2           During the course of the chapter 11 proceedings, the
 3   Bronsons proposed two plans.    The Bronsons’ first proposed plan
 4   was premised on the sale or refinancing of the Office Building.
 5   The Bronsons abandoned that plan shortly after TMT foreclosed on
 6   the Office Building.    The Bronsons thereafter proposed an amended
 7   plan.    The amended plan provided three sources of funding:
 8   (1) proceeds from litigation against TMT; (2) proceeds from
 9   litigation and judgments against others; and (3) sale of a parcel
10   of real property known as the “Railroad Property” or as the
11   “Commercial Land.”    TMT objected to the Bronsons’ amended plan.
12   TMT argued that the amended plan did not satisfy the best
13   interests of creditors test under § 1129(a)(7).    TMT further
14   argued that the proposed means of funding the amended plan would
15   be insufficient in light of the actual value of the Railroad
16   Property and the value of the Bronsons’ litigation and judgments
17   against others.    In addition, according to TMT, the amended plan
18   did not meet the requirements of § 1129(a)(15) (which requires
19   debtors under certain circumstances to commit their projected
20   disposable income to plan funding) and § 1129(a)(9) (which
21   generally requires debtors to pay allowed administrative claims
22   in full upon confirmation).    TMT also claimed that the plan was
23   not proposed in good faith, as required by § 1129(a)(3).
24           In response to TMT’s plan objections, the Bronsons contended
25   that, in light of TMT’s foreclosure on the Office Building, all
26   of TMT’s claims against the Bronsons had been satisfied, and so
27   TMT no longer held any allowable claim against the Bronsons’
28

                                        8
 1   bankruptcy estate.8   Therefore, the Bronsons reasoned, TMT had no
 2   standing to object to their amended plan.
 3         The bankruptcy court held multiple hearings on the Bronsons’
 4   amended plan and considered the issues referenced above as well
 5   as other issues.   Ultimately, the court sustained most of TMT’s
 6   objections to plan confirmation, as reflected in the court’s
 7   order entered on January 21, 2011.9   Even though the Bronsons’
 8   bankruptcy case remained in chapter 11 for another 14 months
 9   before the court converted the case to chapter 7, the Bronsons
10   never filed a new proposed plan attempting to cure the defects
11   the court had identified in their amended plan.
12   F.   TMT’s Motions to Convert
13         TMT filed his first motion to dismiss or convert (“First
14   Conversion/Dismissal Motion”) in February 2009.    The bankruptcy
15   court in effect let the First Conversion/Dismissal Motion trail
16   the confirmation proceedings.   When the Bronsons abandoned their
17   initial proposed plan in July 2009 (in light of the foreclosure
18   of the Office Building), the court set the First
19   Conversion/Dismissal Motion for hearing.    The Bronsons opposed
20   that motion, and on September 22, 2009, the bankruptcy court
21   orally ruled on that motion.    The court wanted to give the
22   Bronsons another opportunity to propose a confirmable plan, but
23   the court also acknowledged TMT’s complaints regarding the
24
           8
           Of course, this contention was the subject of the
25   Deficiency Litigation, which has not been fully resolved.
26         9
           While the voluminous record contains multiple transcripts,
27   neither party provided us with the transcript from the
     January 11, 2011 hearing on plan confirmation, held just before
28   the court entered its order sustaining TMT’s objections.

                                       9
 1   Bronsons’ delay in moving their chapter 11 case forward.         With
 2   these considerations in mind, the court orally ruled that the
 3   Bronsons would have until October 22, 2009, to file an amended
 4   plan and disclosure statement.       If the Bronsons did not timely do
 5   so, the court indicated it was prepared to convert the case.         If
 6   the Bronsons did timely file an amended plan and disclosure
 7   statement, the court indicated that this would “moot out” the
 8   First Conversion/Dismissal Motion.10
 9           Consistent with the bankruptcy court’s ruling, the Bronsons
10   filed their amended plan and disclosure statement on October 22,
11   2009.        As mentioned above, the Bronsons proposed to fund and
12   effectuate their amended plan through the proceeds from various
13   lawsuits and judgments and by selling the Railroad Property.         As
14   also mentioned above, TMT objected to the amended plan based in
15   part on the Bronsons’ alleged noncompliance with various portions
16   of § 1129(a) and in part on the allegedly minimal value of the
17   assets the Bronsons proposed to use for plan funding.
18           Roughly one year later, in October 2010, while the battle
19   over the amended plan was still ongoing, TMT filed a “Renewed
20   Motion to Convert Case to Chapter 7.”       (“Second Conversion/
21   Dismissal Motion”).       TMT’s grounds for conversion or dismissal
22   were similar to his objections to the amended plan.       More
23   specifically, TMT asserted:
24   •       The Bronsons’ chapter 11 case was two and one half years
25           old, and still they had not been able to confirm a plan.
26
             10
27         The bankruptcy docket indicates that the bankruptcy court
     never entered a written order memorializing its oral ruling on
28   the First Conversion/Dismissal Motion.

                                          10
 1   •    During the pendency of the chapter 11 case, the Bronsons had
 2        accrued unpaid administrative expenses in excess of
 3        $100,000.
 4   •    The Bronsons had scheduled roughly $375,000 in general
 5        unsecured debts, none of which had been paid or otherwise
 6        resolved.
 7   •    The Bronsons had not managed to sell any of the real
 8        property assets they had proposed selling in either of their
 9        proposed plans.
10   •    The Bronsons had not been successful in most of their
11        litigation against others and had not collected from most of
12        those parties against whom they held judgments.11
13   •    The Bronsons’ chapter 11 operating reports showed little
14        cash on hand, even though the Bronsons had not made any
15        payments on account of either unsecured claims or
16        administrative claims during the course of their chapter 11
17        case.
18   •    The Bronsons had little regular income and had not shown any
19        willingness to contribute other nonexempt assets towards the
20        funding of their proposed amended plan.
21   •    The Bronsons’ creditors would be best served by the
22        liquidation of the Bronsons’ assets by a chapter 7 trustee.
23   Second Conversion/Dismissal Motion (Oct. 28, 2010) at pp. 1-3.
24
          11
           The Bronsons were successful in their litigation against
25   the Arizona Department of Environmental Quality (“ADEQ”). As a
26   result of a state appellate court judgment in their favor and a
     subsequent settlement, the Bronsons apparently obtained a
27   recovery of $33,000. But the record indicates that the amount
     recovered only served to defray a portion of the attorney fees
28   and costs the Bronsons incurred in that litigation.

                                    11
 1          The Bronsons opposed the Second Conversion/Dismissal Motion.
 2   The Bronsons argued that, but for TMT, their amended plan already
 3   would have been confirmed, as TMT was the only person who had
 4   objected to their amended plan.    The Bronsons further argued that
 5   TMT had no standing either to object to their plan or to seek
 6   conversion of their case.   According to the Bronsons, all of
 7   TMT’s claims had been satisfied by his foreclosure on the Office
 8   Building, and all of the claims TMT had asserted since that
 9   foreclosure were meritless.
10          Even though the bankruptcy court sustained most of TMT’s
11   objections to the Bronsons’ amended plan in January 2011, and
12   even though the Bronsons did not thereafter propose a new plan,
13   the bankruptcy court did not hold a hearing on the the Second
14   Conversion/Dismissal Motion until April 12, 2012.    A week before
15   the hearing on the Second Conversion/Dismissal Motion, the
16   Bronsons filed a motion to continue that hearing.    In support of
17   their motion to continue, the Bronsons argued that the court
18   should first resolve all of the disputes concerning TMT’s claims
19   and concerning the Deficiency Lawsuit.   According to the
20   Bronsons, once they had prevailed in those disputes, TMT would no
21   longer have any claims against the Bronsons, and hence TMT would
22   have no standing in the Bronsons’ bankruptcy case.   Therefore,
23   the Bronsons reasoned, they would be able to move forward with a
24   new plan and disclosure statement without any interference from
25   TMT.   The bankruptcy court denied the continuance motion without
26   ///
27   ///
28   ///

                                       12
 1   explaining its reasoning.12
 2           At the April 12, 2012 hearing, before permitting either side
 3   to argue, the bankruptcy court expressed its concerns regarding
 4   the viability of the Bronsons reorganizing under chapter 11.       It
 5   asked the Bronsons to address whether they had the financial
 6   resources to fund a chapter 11 plan.       In particular, the court
 7   asked the Bronsons to update the court on the prospective revenue
 8   sources the Bronsons relied upon in support of their amended
 9   plan.        More specifically, the court asked the Bronsons whether
10   any progress had been made to sell the Railroad Property.        The
11   court also noted that the Nondisclosure Lawsuit, another
12   prospective source of plan funding, had been decided against the
13   Bronsons.       In addition, the court asked the Bronsons for an
14   update regarding their efforts to collect on judgments they had
15   obtained against third parties.
16            The Bronsons did not address the court’s questions and
17   concerns.       Instead, they recapitulated the contentions they had
18   made in their written opposition to the Second
19   Conversion/Dismissal Motion, particularly the need to complete
20   their litigation with TMT.
21           The court was not persuaded by the Bronsons’ presentation.
22   After each side argued, the court orally announced its findings
23   and conclusions.       First, the court concluded that TMT had
24   standing.       Based on § 1109(b) and prior decisions of this Panel,
25
             12
26         Notwithstanding the absence of explicit reasoning for the
     denial of the continuance motion, the record indicates that the
27   bankruptcy court disagreed with the Bronsons’ belief that
     resolving their disputes with TMT was going to enable the
28   Bronsons to propose and effectuate a confirmable plan.

                                          13
 1   the bankruptcy court held that TMT was a party in interest
 2   entitled to oppose the Bronsons plan and to seek conversion even
 3   though the Bronsons disputed his claims.
 4        The court then went on to address the merits of the
 5   conversion motion.   According to the court, cause existed under
 6   § 1112(b) to dismiss or convert.     The court further noted that
 7   based on the particular circumstances of the Bronsons’ case,
 8   conversion was appropriate.   In so ruling, the court pointed to
 9   several circumstances, including but not limited to the
10   following: (1) the length of time the case had been pending
11   without a confirmed plan (over four years); (2) the various
12   defects evident in the last plan the Bronsons had proposed, which
13   the court had ruled upon in January 2011 (over 14 months prior);
14   and (3) the Bronsons’ inability to demonstrate any tangible
15   progress toward proposing and funding a new confirmable plan.
16        The following statement by the bankruptcy court is
17   representative of the court’s findings regarding the Bronsons’
18   failure to address the issues critical to proposing and
19   effectuating a confirmable plan:
20        It appears that there have been money judgments that
           . . . the State Court [has] entered against the
21        Debtors [in the Nondisclosure Lawsuit]. I have no
          report or no understanding on the [Railroad Property]
22        or any current marketing efforts.
23        It's -- I have no information on the collection of
          funds from the stock judgment. I have no indication
24        that they -- the prosecution of a collection action or
          a liability action against the law firm Tidmore Lerma.
25        There's no amended plan on file. There's no disclosure
          statement on file. Instead the clear preference is to
26        continue to litigate against Mr. Thompson on his
          bankruptcy claim and that seems to also require a need
27        to involve the FBI into this case. And I'm told that
          although the FBI has been talked about, apparently the
28        Bronsons have not talked to the FBI in connection with

                                     14
 1          this matter.
 2          I don't have a good answer to my question that we
            started this hearing with . . . . And that is, is
 3          there a viable Chapter 11 plan such to make it useful
            to continue this four year old litigation[?]
 4
 5   Hr’g Tr. (April 12, 2012) at 26:4-22.
 6   G.     The Bronsons’ Reconsideration Motion
 7          On April 17, 2012, the bankruptcy court entered its order
 8   converting the case, and on April 27, 2012, the Bronsons filed a
 9   motion for relief from that order under Civil Rule 60(b)
10   (“Reconsideration Motion”).   While most of the Bronsons’
11   arguments in the reconsideration motion reiterate their prior
12   arguments, the Bronsons sought for the first time to present to
13   the court an appraisal dated April 27, 2012, valuing the Office
14   Building as of the date of TMT’s foreclosure at $640,000 – far in
15   excess of the amount owed to TMT at the time of foreclosure.
16   Based on this new appraisal, the Bronsons made two new arguments:
17   (1) that they clearly had a meritorious defense that would cause
18   them to prevail in the Deficiency Lawsuit; and (2) that they now
19   had grounds to assert a cause of action against TMT for unjust
20   enrichment, because TMT otherwise would receive a windfall from
21   his purchase of the Office Building based on a $200,000 credit
22   bid.   In their reply in support of their Reconsideration Motion,
23   the Bronsons further requested that the court recuse itself based
24   on the Bronsons’ perception of bias.
25          The bankruptcy court held a hearing on the Reconsideration
26   Motion on June 1, 2012.   After finding no grounds to recuse
27   itself, the bankruptcy court denied the Reconsideration Motion,
28   in essence holding that the new information presented – the new

                                      15
 1   appraisal - would not have had any impact on the court’s
 2   § 1112(b) ruling.
 3        The bankruptcy court entered its order denying the
 4   Reconsideration Motion on June 5, 2012, and the Bronsons timely
 5   appealed on June 15, 2012.
 6                                JURISDICTION
 7        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
 8   §§ 1334 and 157(b)(2)(A).    We have jurisdiction under 28 U.S.C.
 9   § 158.
10                                   ISSUES
11   1.   Did the bankruptcy court err when it converted Bronsons’
12        chapter 11 bankruptcy case to chapter 7 pursuant to
13        § 1112(b)(1)?
14   2.   Did the bankruptcy court err in ruling on the Second
15        Conversion Motion without first resolving the Deficiency
16        Lawsuit?
17                           STANDARD OF REVIEW
18        Historically, we have reviewed a bankruptcy court’s decision
19   to convert a chapter 11 case to chapter 7 for abuse of
20   discretion.   See, e.g., Greenfield Drive Storage Park v. Cal.
21   Para–Professional Servs., Inc. (In re Greenfield Drive Storage
22   Park), 207 B.R. 913, 916 (9th Cir. BAP 1997); Johnston v. Jem
23   Dev. Co. (In re Johnston), 149 B.R. 158, 161 (9th Cir. BAP 1992).
24   While the 2005 amendments to the Bankruptcy Code in some respects
25   limited the bankruptcy court’s discretion in this context, see
26   In re Prods. Int'l Co., 395 B.R. 101, 108 (Bankr. D. Ariz. 2008),
27   it still is appropriate in this appeal to conduct the same type
28   of analysis we ordinarily utilize when reviewing the bankruptcy

                                       16
 1   court’s exercise of its discretion.     Under the abuse of
 2   discretion standard, we first determine de novo whether the court
 3   identified the correct legal rule to apply.     And if the court
 4   identified the correct legal rule, we then review the court’s
 5   findings of fact to determine whether those findings were
 6   “(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in
 7   inferences that may be drawn from the facts in the record.’”
 8   United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009)
 9   (en banc) (quoting Anderson v. City of Bessemer City, N.C.,
10   470 U.S. 564, 577 (1985)).
11        We also review for an abuse of discretion the bankruptcy
12   court’s decision not to continue the final hearing on the Second
13   Conversion Motion until after resolution of the Deficiency
14   Lawsuit.     See Orr v. Bank of Am., 285 F.3d 764, 783 (9th Cir.
15   2002); Khachikyan v. Hahn (In re Khachikyan), 335 B.R. 121, 125
16   (9th Cir. BAP 2005).
17                                  DISCUSSION
18        As amended by the Bankruptcy Abuse Prevention and Consumer
19   Protection Act of 2005 (“BACPA”)13 and the Bankruptcy Technical
20   Corrections Act of 2010 (“BTCA”),14 § 1112(b) generally requires
21   a bankruptcy court to dismiss, convert, or appoint a chapter 11
22   trustee or examiner if it finds “cause.”     See 11 U.S.C.
23   § 1112(b)(1);15 see also In re Prods. Int'l Co., 395 B.R. at
24
          13
25             Pub. L. 109-8, 119 Stat. 23 (Apr. 20, 2005).
          14
26             Pub. L. 111-327, 124 Stat 3557 (Dec. 22, 2010).
          15
27         Among other things, BTCA clarified that appointment of a
     trustee or an examiner was an additional alternative to
28                                                      (continued...)

                                        17
 1   107-08; 7 COLLIER   ON   BANKRUPTCY, ¶ 1112.04[7] (Alan N. Resnick &
 2   Henry J. Sommer, eds., 16th ed. 2013).16
 3
 4        15
           (...continued)
 5   conversion or dismissal. In this appeal, conversion is the only
     relevant alternative because the bankruptcy court found that
 6   conversion was in the best interests of creditors and because the
     Bronsons have not asserted on appeal that the bankruptcy court
 7
     instead should have selected one of the other two alternatives to
 8   conversion.
          16
 9         Upon finding cause, the court’s obligation to dismiss,
     convert or appoint a trustee or examiner is not absolute.
10   Section 1112(b) identifies certain exceptions to this general
     requirement. The main exception is set forth in § 1112(b)(2),
11
     which provides that the court “may not” convert or dismiss a
12   chapter 11 case notwithstanding the existence of cause if it
     “finds and specifically identifies unusual circumstances
13   establishing that converting or dismissing the case is not in the
     best interests of creditors and the estate,” and the following
14   additional circumstances are established:
15
          (A) there is a reasonable likelihood that a plan will
16        be confirmed within the timeframes established in
          Sections 1121(e) and 1129(e) of this title, or if such
17        sections do not apply, within a reasonable period of
          time; and
18
19        (B) the grounds for converting or dismissing the case
          include an act or omission of the debtor other than
20        under paragraph (4)(A)--

21        (i) for which there exists a reasonable justification
          for the act or omission; and
22
23        (ii) that will be cured within a reasonable period of
          time fixed by the court.
24
     At the hearing on the Second Conversion/Dismissal Motion, the
25   bankruptcy court in essence found that there was not a
26   “reasonable likelihood” of plan confirmation “within a reasonable
     period of time.” § 1112(b)(2)(A). We perceive no error in this
27   finding, nor have the Bronsons pointed us to any. Thus, the
     exception set forth in § 1112(b)(2) does not apply under the
28   facts of this case.

                                           18
 1        Here, the bankruptcy court correctly identified the two-step
 2   test it needed to consider in applying § 1112(b).         As the court
 3   put it, it first had to determine if cause existed to act
 4   under § 1112(b); and second, if cause existed, it had to
 5   determine which remedy, conversion or dismissal, was in the best
 6   interest of creditors.   See Nelson v. Meyer (In re Nelson),
 7   343 B.R. 671, 675 (9th Cir. BAP 2006); see also In re Prods.
 8   Int’l Co., 395 B.R. at 108; 7 COLLIER   ON   BANKRUPTCY, supra, at
 9   ¶ 1112.04[7].
10        In finding “cause” sufficient to satisfy the first step of
11   the two-step test, the bankruptcy court first noted that the
12   types of cause enumerated in § 1112(b)(4) are not exhaustive,
13   citing St. Paul Self Storage Ltd. P'ship v. Port Authority
14   (In re St. Paul Self Storage Ltd. P'Ship), 185 B.R. 580, 582 (9th
15   Cir. BAP 1995).    Indeed, we have held that bankruptcy courts
16   enjoy wide latitude in determining whether the facts of a
17   particular case constitute cause for conversion or dismissal
18   under § 1112(b).   See Pioneer Liquidating Corp. v. U.S. Trustee
19   (In re Consol. Pioneer Mortg. Entities), 248 B.R. 368, 375 (9th
20   Cir. BAP 2000), aff’d, 264 F.3d 803 (9th Cir. 2001); see also
21   In re Greenfield Drive Storage Park, 207 B.R. at 916.         This wide
22   latitude is driven in part by common sense.        Having presided over
23   the often lengthy and complex reorganization proceedings, the
24   bankruptcy court has a familiarity with the parties and the
25   issues that puts it in the best position to make the “cause”
26   determination under § 1112(b).   In addition, the wide latitude
27   afforded to bankruptcy courts is consistent with the legislative
28   history accompanying § 1112(b): “‘the court will be able to

                                      19
 1   consider other factors as they arise, and to use its equitable
 2   powers to reach an appropriate result in individual cases.’”
 3   In re Consol. Pioneer Mortg. Entities, 248 B.R. at 375 (quoting
 4   H. Rept. No. 95–595, 95th Cong., 1st Sess. 405–06 (1977),
 5   reprinted in 1978 U.S.C.C.A.N. 6362).
 6          In determining whether cause exists under § 1112(b), the
 7   bankruptcy court must balance the debtor’s continuing desire to
 8   remain in chapter 11 against the prospects for a successful
 9   reorganization.     Even before all confirmation-related litigation
10   has played out, when it becomes apparent to the court that the
11   debtor will not be able to confirm and effectuate a plan within
12   the foreseeable future, the bankruptcy court should exercise its
13   discretion under § 1112(b) to dismiss or convert.       See 7 COLLIER
14   ON   BANKRUPTCY, supra, at ¶ 1112.04[5].
15          This is precisely how the bankruptcy court here assessed the
16   Bronsons’ reorganization prospects.        The bankruptcy court
17   essentially found that the Bronsons were fixated on the
18   Deficiency Lawsuit and had given no consideration to moving
19   forward with a new plan in the fourteen months since the court
20   had sustained TMT’s objections to their amended plan.       Moreover,
21   the court noted that, even if the Bronsons ultimately were to
22   prevail in the Deficiency Lawsuit, such success in and of itself
23   would not enable the Bronsons to confirm and effectuate a plan.
24   The Bronsons have not disputed that they had over $300,000 in
25   general unsecured debt and over $100,000 in administrative
26   expenses.     And yet, when the court asked the Bronsons to provide
27   information on the status and value of assets that potentially
28   could fund their plan, the Bronsons basically ignored the court’s

                                        20
 1   inquiry.
 2        In sum, after four years in chapter 11 and over 14 months
 3   since the Bronsons’ last attempt to confirm a plan, the Bronsons
 4   demonstrated an inability or unwillingness to move forward with
 5   the plan process without first resolving their disputes with TMT.
 6   The bankruptcy court’s conclusion that this constituted “cause”
 7   under § 1112(b) was not illogical, implausible or without support
 8   in the record.   See Hinkson, 585 F.3d at 1261-62.     Accordingly,
 9   the bankruptcy court did not err in finding cause to convert.
10        On appeal, the Bronsons insist that they ultimately would
11   have prevailed in the Deficiency Lawsuit, either by way of a
12   favorable ruling on the Fee Issues or a favorable ruling on the
13   FMV Issue, or both.   According to the Bronsons, once they
14   prevailed, both TMT’s objection to their amended plan and TMT’s
15   motion to convert no longer would have been an obstacle to their
16   reorganization efforts.
17        For purposes of this appeal, we are willing to assume
18   without actually deciding that the Bronsons would have prevailed
19   in the Deficiency Lawsuit.   But even if they would have prevailed
20   in that lawsuit, this would not establish that the chapter 11
21   issues – the plan defects and the Second Conversion/Dismissal
22   Motion – would have simply disappeared.   The Bronsons apparently
23   believed that their success in the Deficiency Lawsuit would have
24   established that TMT lacked standing.   We disagree.    Regardless
25   of the outcome of the Deficiency Lawsuit, TMT already had an
26   allowed claim for over $25,000 in the Bronsons’ bankruptcy case.
27   The Bronsons never appealed either the Gila Judgment or the Gila
28

                                     21
 1   Judgment Claim Allowance, from which TMT’s allowed claim arose.17
 2        By virtue of the Gila Judgment Claim Allowance, TMT was the
 3   holder of an allowed unsecured claim with a concrete stake in the
 4   outcome of the Bronsons’ chapter 11 case and had standing to be
 5   heard on all aspects of the Bronsons’ chapter 11 case.   See
 6   § 1109(b).   As a matter of law, the outcome of the Deficiency
 7   Lawsuit would not have altered the Gila Judgment or the Gila
 8   Judgment Claim Allowance because those were final judgments or
 9   orders that the Bronsons never appealed.   See generally United
10   Student Aid Funds, Inc. v. Espinosa, 130 S.Ct. 1367, 1376, 1380
11   (2010) (holding that bankruptcy court’s final order was binding
12   and that appellant could not later collaterally attack that order
13   when the appellant had notice of the proceedings leading up to
14   the entry of the order but never appealed the order).    In short,
15
16
          17
           After the bankruptcy court granted the Gila Judgment Claim
17   Allowance, TMT filed a new proof of claim – Claim Number 20 –
     with a copy of the Gila Judgment Claim Allowance attached.
18   Presumably, TMT filed Claim Number 20 to ensure that its allowed
19   claim would appear on the claims register and be properly
     accounted for in the Bronsons’ bankruptcy case. Remember, the
20   Gila Judgment Claim Allowance arose not from a proof of claim but
     rather from TMT’s motion for allowance of an administrative
21   expense. The Bronsons duly opposed TMT administrative expense
     motion, but the bankruptcy court ultimately decided, after
22
     holding a hearing on the motion, to deny the claim as an
23   administrative expense but allow it as a general unsecured claim.
     Without TMT’s filing of Claim Number 20, TMT’s allowed unsecured
24   claim based on the Gila Judgment Claim Allowance would not have
     shown up on the claims register. We acknowledge that the
25   Bronsons have filed an objection to Claim Number 20 and that the
26   bankruptcy court has not yet disposed of this claim objection.
     Nonetheless, we know of no legal doctrine that would permit the
27   Bronsons to collaterally attack the Gila Judgment Claim
     Allowance, a final order that was not appealed, by filing an
28   objection to Claim Number 20.

                                     22
 1   TMT would not have lost his standing to be heard in the Bronsons’
 2   chapter 11 case even if the Bronsons had prevailed in the
 3   Deficiency Lawsuit.
 4        The Bronsons’ reliance on the Deficiency Lawsuit also is
 5   misplaced for a second, independent reason.   Prevailing in that
 6   lawsuit might have freed the Bronsons from some of TMT’s claims,
 7   but it would not have established their ability to fund or
 8   effectuate a confirmable chapter 11 plan.   Put another way, even
 9   if the Bronsons successfully rid themselves of TMT’s deficiency
10   claim, the bankruptcy court had an independent duty to deny plan
11   confirmation unless the plan requirements set forth in § 1129(a)
12   were satisfied.   Varela v. Dynamic Brokers, Inc. (In re Dynamic
13   Brokers, Inc.), 293 B.R. 489, 498–99 (9th Cir. BAP 2003) (stating
14   that bankruptcy courts have an independent duty to verify that
15   all confirmation requirements are satisfied, regardless of
16   whether a creditor objects).   But the Bronsons had no answer for
17   the bankruptcy court’s questions and concerns regarding how they
18   were going to propose and effectuate a confirmable plan of
19   reorganization satisfying all of § 1129(a)’s requirements.    At
20   the hearing on the Second Conversion/Dismissal Motion, the court
21   noted all of the defects that had prevented confirmation of the
22   Bronsons’ amended plan fourteen months prior, and the Bronsons
23   were unable to explain how those defects would be remedied.    All
24   they did was point to their expectation that they ultimately
25   would prevail in the Deficiency Lawsuit.    As indicated by our
26   discussion set forth above, the Bronsons’ response was wholly
27   inadequate to address the court’s questions and concerns.
28        In sum, the Bronsons’ expected outcome in the Deficiency

                                     23
 1   Lawsuit did not demonstrate that they were capable of confirming
 2   a viable plan in the foreseeable future or that conversion to
 3   chapter 7 was inappropriate.
 4        The Bronsons only explicitly make one other argument in
 5   their opening brief: that, if the bankruptcy court had honored
 6   their evidentiary hearing requests, they would have been able to
 7   demonstrate to the court that TMT and his counsel were guilty of
 8   misconduct and concealment.
 9        The Bronsons’ evidentiary hearing argument is difficult to
10   follow.   The court did hold evidentiary hearings in the
11   Deficiency Lawsuit.   As best we can tell from their appeal brief,
12   the Bronsons are upset because the bankruptcy court did not
13   convene separate hearings to address their allegations that TMT
14   and his counsel were guilty of misconduct and concealment.
15   Specifically, the Bronsons contend that TMT and his counsel
16   failed to make required disclosures under Civil Rule 26(a),
17   failed to respond to their informal discovery requests, and did
18   not have a legitimate factual basis for claiming that the FMV of
19   the Office Building was equal to or less than the amount of TMT’s
20   credit bid.
21        As a threshold matter, we note that the Bronsons have not
22   pointed us to, nor has our independent review of the record
23   revealed, that the Bronsons ever filed in the bankruptcy court a
24   discreet formal motion seeking sanctions under either Rule 9011
25   or under Rule 7037.   In addition, it does not appear that the
26   Bronsons ever complied with the procedural requirements of
27   Rule 9011(b)(2).
28        But even if the Bronsons had satisfied the relevant

                                     24
 1   procedural requirements for relief under either Rule 7037 or
 2   9011, they still have not explained how they thereby could have
 3   overcome the fact that their amended plan did not satisfy the
 4   requirements set forth in § 1129(a), or the fact that they did
 5   not appeal and could not collaterally attack the Gila Judgment
 6   Claim Allowance, which conclusively established TMT’s standing as
 7   a creditor in the Bronsons’ chapter 11 case.
 8        Furthermore, most of the Bronsons’ concealment/misconduct
 9   allegations do not withstand scrutiny.   For instance, the
10   Bronsons complain most about the alleged failure of TMT and his
11   counsel to disclose facts concerning TMT’s foreclosure and
12   subsequent resale of a parcel of commercial real property located
13   on Broad Street in Globe, Arizona (“Broad Property”).   According
14   to the Bronsons, TMT purchased the Broad Property in June 2008 at
15   a foreclosure sale for a credit bid of $384,000 and resold the
16   Broad Property to a third party in 2009 for $420,000 (“Broad
17   Sale”).    The Bronsons contend that the the Broad Sale established
18   the value of the Broad Property, which in turn established the
19   value of the Office Building, by “extrapolation.”   Therefore, the
20   Bronsons conclude, TMT and his counsel should have disclosed the
21   Broad Property and its sale in the Deficiency Lawsuit and in
22   various relief from stay proceedings preceding the Deficiency
23   Lawsuit.
24        We disagree with the Bronsons’ analysis and conclusion for
25   at least three reasons.   First, just because the Bronsons
26   believed that the Broad Property was comparable to the Office
27   Building does not necessarily make it so for valuation and
28   disclosure purposes.   Second, relief from stay proceedings are

                                      25
 1   contested matters, and there is no Civil Rule 26(a) duty to
 2   disclose in contested matters.   See Rule 9014(c).   And third, to
 3   the extent TMT and his counsel generally had a duty to disclose
 4   in the Deficiency Lawsuit under Civil Rule 26(a), the Bronsons
 5   already were aware of the key facts regarding the Broad Property
 6   and the Broad Sale by the time they filed their Civil
 7   Rule 12(b)(6) motion to dismiss, as they recited those facts in
 8   their dismissal motion.   Consequently, that the bankruptcy court
 9   did not enforce this supposed disclosure duty in the Deficiency
10   Lawsuit was at worst harmless error, when the Bronsons obviously
11   already knew the key facts regarding the Broad Property and the
12   Broad Sale by the time they filed their dismissal motion.   As an
13   appellate court, we must ignore harmless error.   See Litton Loan
14   Serv'g, LP v. Garvida (In re Garvida), 347 B.R. 697, 704 (9th
15   Cir. BAP 2006).
16        The Bronsons also suggest in their appeal brief that the
17   bankruptcy court “rushed to convert” their chapter 11 bankruptcy
18   case to chapter 7 while at the same time depriving them of an
19   evidentiary hearing on the FMV Issue in the Deficiency Lawsuit.
20   As we explained above, however, no aspect of the Deficiency
21   Lawsuit was going to resolve in the Bronsons’ favor the defects
22   in their amended plan or the apparent cause for conversion under
23   § 1112(b).
24        Moreover, the bankruptcy court record tells a much different
25   story regarding why the Second Conversion/Dismissal Motion was
26   heard before the FMV Issue.   The Bronsons brought two motions in
27   the Deficiency Lawsuit that explicitly sought relief based on the
28   FMV Issue.   The first was their Civil Rule 12(b)(6) motion filed

                                      26
 1   in November 2009.    The court denied this dismissal motion, and
 2   the Bronsons have not argued on appeal that the bankruptcy court
 3   erred by denying their dismissal motion.   Nor do we independently
 4   perceive any error in this ruling.    The Bronsons did not again
 5   bring a motion focusing on the FMV Issue until March 2012, when
 6   they filed a motion for a judgment on the pleadings.   In the
 7   interim between these two filings the litigants hotly contested
 8   the Fee Issues and largely ignored the FMV Issue.   Significantly,
 9   in September 2010, when they were still represented by counsel,
10   the Bronsons filed their own summary judgment motion focusing on
11   the Fee Issues.   If they were anxious to refocus attention on the
12   FMV Issue, we do not understand why they did not address the FMV
13   Issue in that motion.   At a minimum, this would have forced TMT
14   to come forward and provide some evidentiary support for his
15   lower valuation of the Office Building.
16        Meanwhile, the Second Conversion/Dismissal Motion was filed
17   in October 2010, but the bankruptcy court did not hear it until
18   April 2012, roughly 18 months later.   We cannot fathom how the
19   Bronsons can characterize this as a “rush to judgment” on the
20   motion to convert.   In any event, the record reflects that the
21   setting of hearings on the FMV Issue and on the Second
22   Conversion/Dismissal Motion was not a unilateral decision of the
23   court governed by whim, but rather was a function of the parties’
24   conduct and how they chose to litigate their disputes.
25        The Bronsons devote none of their appellate brief to arguing
26   that the bankruptcy court erred in denying their Reconsideration
27   Motion or erred in denying the recusal request they made in their
28   reply in support of their Reconsideration Motion.   We decline to

                                      27
 1   address these issues because the Bronsons chose not to argue them
 2   on appeal.18   See Brownfield v. City of Yakima, 612 F.3d 1140,
 3   1149 n.4 (9th Cir. 2010) (citing Greenwood v. F.A.A., 28 F.3d
 4   971, 977 (9th Cir. 1994)); Van Zandt v. Mbunda (In re Mbunda),
 5   484 B.R. 344, 350 n.4 (9th Cir. BAP 2012).
 6                                 CONCLUSION
 7        For the reasons set forth above, we AFFIRM the bankruptcy
 8   court’s conversion order and the bankruptcy court’s order denying
 9   the Reconsideration Motion.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
          18
26         Nonetheless, we note that the bankruptcy court carefully
     considered whether recusal was appropriate during the June 1,
27   2012 hearing on the Reconsideration Motion. Suffice it to say we
     perceive no error in this recusal analysis or in the court’s
28   decision against recusal.

                                       28
