                                           Filed:    December 4, 1997


                    UNITED STATES COURT OF APPEALS

                        FOR THE FOURTH CIRCUIT



                           No. 96-1357
                (CA-95-154-B, BK-88-952-7-HPB-11)



Raymond L. Jackson,

                                             Plaintiff - Appellant,

           versus

United States of America, etc.,

                                                 Defendant - Appellee.




                              O R D E R


           The Court amends its opinion filed August 15, 1997, as

follows:
           On page 9, first paragraph, line 4 -- the phrase "within

90 days of remand" is corrected to read "within 90 days after final
disposition of the IRS claim litigation scheduled for trial on

January 15, 1998."

                                       For the Court - By Direction



                                          /s/ Patricia S. Connor

                                                      Clerk
UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: RAYMOND L. JACKSON,
Debtor.

RAYMOND L. JACKSON,
Plaintiff-Appellant,
                                                           No. 96-1357
v.

UNITED STATES OF AMERICA, on
behalf of the Internal Revenue
Service,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Big Stone Gap.
James C. Turk, District Judge.
(CA-95-154-B, BK-88-952-7-HPB-11)

Argued: October 31, 1996

Decided: August 15, 1997

Before RUSSELL, ERVIN, and WILKINS, Circuit Judges.

_________________________________________________________________

Reversed and remanded by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Robert Tayloe Copeland, COPELAND, MOLINARY &
BIEGER, Abingdon, Virginia, for Appellant. Laurie Allyn Snyder,
Tax Division, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellee. ON BRIEF: Loretta C. Argrett,
Assistant Attorney General, Gary R. Allen, Gary D. Gray, Tax Divi-
sion, W. Clarkson McDow, Jr., United States Trustee, Martha L.
Davis, Executive Office for the United States Trustee, Robert P.
Crouch, Jr., United States Attorney, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

In June 1988, Raymond Jackson petitioned the United States Bank-
ruptcy Court for the Western District of Virginia for relief under
Chapter 11 of the United States Bankruptcy Code. On July 3, 1995,
the Internal Revenue Service (IRS), one of Jackson's creditors, filed
a motion pursuant to 11 U.S.C. § 1112(b) either to convert the case
to a Chapter 7 case or to dismiss it.

The bankruptcy court denied the IRS' motion, and the government
appealed this decision to the United States District Court for the
Western District of Virginia. The district court granted the govern-
ment leave to appeal from the interlocutory order of the bankruptcy
court and reversed, ordering that the case be dismissed. Jackson
appeals from the district court order. We reverse and remand with
instructions.

I.

Prior to petitioning for relief under Chapter 11 of the Bankruptcy
Code, Jackson was the chief executive officer of RBJ Coal Company
(RBJ) and a director or officer of Kennedy Coal Company (KC). In
August 1986, a grand jury indicted Jackson, along with Emory Cox,

                    2
also a director or officer in RBJ and KC, and the accountant for the
companies, for conspiring to defraud the government of the income
and social security taxes for which the two men were responsible for
withholding from the wages of the employees of RBJ and KC, and for
filing false or fraudulent quarterly employment tax returns on behalf
of RBJ and KC for those taxes. These allegations involved the tax
years of 1980-1982. Jackson, Cox, and the accountant were convicted
by a jury on all counts. We upheld those convictions in United States
v. Cox, 856 F.2d 187 (4th Cir. 1988). Before he was indicted, Jackson
allegedly transferred all of his assets to his wife; Jackson, however,
contests this point.

In June 1988, Jackson filed a petition seeking relief under Chapter
11 of the Bankruptcy Code. Since that filing, the United States
Trustee and the IRS have collectively filed six separate motions to
convert the case to Chapter 7 or to dismiss it. These motions were
filed on August 23, 1988, March 22, 1989, December 19, 1990,
November 19, 1993, July 3, 1995, and September 8, 1995. Five of
these motions were denied by the bankruptcy court and one remains
pending due to the interlocutory appeal which gave rise to this case.
In the July 3, 1995 motion, the IRS asked the bankruptcy court for
dismissal or conversion due to Jackson's inability to effectuate a reor-
ganization plan, unreasonable delay, and failure to comply with that
court's order to make monthly payments to the IRS. The denial of that
motion resulted in this appeal.

Jackson proposed a plan and disclosure statement in July, 1989.
The United States Trustee and two creditors objected to the proposed
plan on grounds that the disclosure statement was insufficient and that
the plan failed to provide adequate terms for payment of creditors'
claims. The plan was never confirmed by the bankruptcy court. By
March 31, 1992, however, Jackson had resolved and paid the claims
of all his creditors except the IRS.

On November 14, 1990, Jackson initiated an adversary proceeding
contesting the claims of the IRS. In his complaint, Jackson disavowed
liability for the claim of the IRS for income taxes on the grounds that
he had committed no fraud and therefore the assessment of such taxes
was time-barred pursuant to 26 U.S.C. § 6501. He challenged the
IRS' employment tax claims on the ground that he was not liable for

                    3
payment of the taxes as a responsible officer within the coal company
pursuant to 26 U.S.C. § 6672(a) and, alternatively, on the ground that
the amount of the claim was overstated.

On March 14, 1994, Jackson filed a modified plan of reorganiza-
tion. By that time, the only remaining claims against his estate were
those of the IRS. In his modified plan, Jackson stated that he disputed
the allowability of the IRS' income tax claim on the grounds that the
assessment of those taxes was time barred. He also stated that his lia-
bility for employment taxes of RBJ should be credited for (1) pay-
ments to be made by another officer of RBJ, James Ratliff, who also
had been assessed as a responsible person of the corporation under 26
U.S.C. § 6672, and (2) the amounts that the employees of RBJ might
have paid, which he had yet to investigate and which the bankruptcy
court had not determined. Jackson also stated that the IRS owed him
an income tax refund resulting from his overpayments for later tax
years.

To effectuate this modified plan, Jackson proposed to pay the IRS
$500 per month until such time as he finished investigating, and the
bankruptcy court determined, the extent of his tax liability. At that
time, he proposed that he would satisfy the allowed claims of the IRS
for income taxes by allowing the IRS to offset them against the over-
payments he had made. He proposed to pay any remaining income tax
claim in cash at the time of confirmation. Finally, he proposed to sat-
isfy the allowed claim of the IRS for employment taxes by offset
(again) against anything that remained of overpayment.

On May 3, 1994, the IRS objected to confirmation of the modified
plan on feasibility grounds. The IRS explained that (1) Jackson and
his wife had overpaid a total of $26,705 (Jackson claims this overpay-
ment is approximately $70,000) in income taxes for years 1984, 1985,
1987 and 1989, which was insufficient to satisfy by offset the IRS'
claims in a bankruptcy proceeding; (2) the assessment of employment
taxes against Ratliff was for only $58,378, not $131,000, as Jackson
had represented, and Ratliff had paid only $15,588 in satisfaction of
the debt; and (3) the IRS had informed Jackson over two years before
of the procedure for claiming an abatement of his liability for any of
RBJ's employment taxes for any taxes that may have been paid by its

                    4
employees, yet Jackson failed to produce any evidence that any
employee of RBJ paid such taxes.

The amount of the IRS claim had remained in dispute after five
years of adversary litigation when the district court heard the interloc-
utory appeal that we now review. Today, the IRS remains unpaid.
Further, the bankruptcy court, upon a motion of the IRS, ordered
Jackson on June 13, 1994, to pay $500 per month to the IRS pending
resolution of the case. Jackson made payments for six months until
January 1995, when he violated the court order and ceased making
payments.

II.

On appeal of a bankruptcy matter from the district court, we evalu-
ate the bankruptcy court decision directly, without being bound by the
district court's determinations. See In re Charfoos, 979 F.2d 390 (6th
Cir. 1990); In re Weiss, 111 F.3d 1159 (4th Cir. 1997). The bank-
ruptcy court's findings of fact are reviewed for clear error, while
questions of law are reviewed de novo. See In re Varat Enters., Inc.,
81 F.3d 1310, 1314 (4th Cir. 1996). Specifically, we review a deci-
sion of the bankruptcy court dismissing a case pursuant to § 1112(b)
of the Bankruptcy Code for an abuse of discretion. In re Superior Sid-
ing & Window, Inc., 14 F.3d 240, 242 (4th Cir. 1994).

III.

A.

The district court concluded that Jackson's conduct constituted
"undue delay" pursuant to § 1112(b)(3) and therefore his case
required dismissal. Section 1112(b) provides:

        (b) Except as provided in subsection (c) of this section, on
        request of a party in interest or the United States trustee or
        bankruptcy administrator, and after notice and a hearing, the
        court may convert a case under this Chapter [11 U.S.C.
        §§ 1101 et seq.] to a case under chapter 7 of this title,
        whichever is in the best interest of creditors and the estate,
        for cause, including --

                    5
        (1) continuing loss to or diminution of the estate
        and absence of a reasonable likelihood of rehabili-
        tation;

        (2) inability to effectuate a plan;

        (3) unreasonable delay by the debtor that is prej-
        udicial to the creditors;

        (4) failure to propose a plan under section 1121
        of this title within any time fixed by the court;

        (5) denial of confirmation of every proposed
        plan and denial of a request made for additional
        time for filing another plan or a modification of a
        plan;

        (6) revocation of an order of confirmation under
        section 1144 of this title, and denial of confirma-
        tion of another plan or modified plan under section
        1129 of this title;

        (7) inability to effectuate substantial consumma-
        tion of a confirmed plan;

        (8) material default by the debtor with respect to
        a confirmed plan;

        (9) termination of a plan by reason of the occur-
        rence of a condition specified in the plan; or

        (10) nonpayment of any fees or charges required
        under chapter 123 of title 28 [28 U.S.C. § 1191 et
        seq.].

11 U.S.C. 1112(b).

The presence of any one of these statutory factors, or other factors
deemed important by the bankruptcy court, is sufficient to warrant

                     6
dismissal or conversion. See In re Gucci, 174 B.R. 401 (Bankr.
S.D.N.Y. 1994); In re Maricamp Square Ass'n., Ltd., 139 B.R. 554
(Bankr. M.D. Fla. 1992); In re Route 202 Corp., 37 B.R. 367 (Bankr.
E.D. Pa. 1984). However, the district court, upon dismissing Jack-
son's case, specifically concluded that the bankruptcy court abused its
discretion by not finding that subsection (3) applied: unreasonable
delay by the debtor that is prejudicial to creditors.

We have established a two-part test by which § 1112(b) is to be
applied. In re Superior Siding & Window, Inc., 14 F.3d 240 (4th Cir.
1994). First, the court must "determine whether `cause' exists either
to dismiss or to convert the Chapter 11 proceeding to a Chapter 7 pro-
ceeding[;] and second[,] . . . [the court must] determine which option
is in the `best interest of the creditors and the estate.' Once `cause'
is established, a court is required to consider this second question of
whether to dismiss or convert." Id. at 242 (internal citations omitted).
Thus, the "cause" determination is a threshold finding; if we deter-
mine that the bankruptcy court did not err when it declined to find
"cause" for dismissal, our discussion must end there and the district
court must be reversed.

B.

When determining whether cause exists to warrant a dismissal or
conversion, a bankruptcy court retains "broad discretion." In re Wood-
brook Assoc., 19 F.3d 312, 316 (7th Cir. 1994). However, the district
court cites several cases in which unreasonable delay and other causes
justify dismissal where periods of delay were of less than the seven
years which has passed in the instant case. See In re Kerr, 908 F.2d
400, 404 (8th Cir. 1990) (where three years without confirmation of
plan, dismissing for "bad faith"); In re Cohen, 173 B.R. 950 (Bankr.
S.D.Fla. 1994) (where debtor had enjoyed protection of Chapter 11
for 11 months and IRS was prejudiced because it was prevented from
pursuing collection against debtor, the record supported dismissal for
unreasonable delay); In re William Steiner, Inc., 139 B.R. 356 (Bankr.
D. Md. 1992) (where two years without filing a plan, dismissing for
"bad faith"); In re Jones, 115 B.R. 351, 352 (Bankr. N.D. Fla. 1990)
(where six years without confirmation of plan, dismissing for inability
to effectuate a plan of reorganization); In re Sundale Assocs., 48 B.R.
288 (S.D. Fla. 1984) (where three years without a confirmation plan,

                    7
dismissing for inability to effectuate a plan of reorganization, unrea-
sonable delay, and denial of confirmation of every proposed plan).

Even in the face of the authority cited by the district court, we
adhere to the strict standard of review which prevents us from deter-
mining "how [we] . . . would have ruled if[we] had been considering
the case in the first place . . . ." Washington v. Sherwin Real Estate,
Inc., 694 F.2d 1081, 1087 (7th Cir. 1982). We will correct the bank-
ruptcy court only where "1) the decision was based on an erroneous
conclusion of law, 2) the record contains no evidence on which the
bankruptcy court could have based its decision, or 3) the factual find-
ings are clearly erroneous." Stavriotis, 977 F.2d at 1204 (citation
omitted). Further, we have held that "a reviewing court may deter-
mine that the Bankruptcy Court abused its discretion only when there
is a definite and firm conviction that the court below committed a
clear error of judgment . . . ." In re Posner, 700 F.2d 1243, 1246 (4th
Cir. 1983).

On this interlocutory appeal we do not have before us a full expla-
nation of the bankruptcy court's reasons for allowing this case to con-
tinue and we regret that it has not yet been resolved. We note that
were we reviewing a bankruptcy court's dismissal of a case, we
would expect a more thorough explanation of that court's reasons for
such action. We are, however, less likely to second-guess a bank-
ruptcy court where it has simply retained jurisdiction and a district
court has granted leave to appeal from an interlocutory order. The
bankruptcy court is familiar with every aspect of this case. There is
no rule that the age of a case alone requires its dismissal, and we con-
clude that the court has neither misapplied the law nor made errone-
ous findings of fact.

IV.

Upon review of the record, it appears that this case has languished
in the bankruptcy courts for too many years and that much of this
delay is attributable to Jackson's failure to propose a realistic plan of
reorganization. Jackson has also failed to comply with interim pay-
ment schedules ordered by the bankruptcy court. The Bankruptcy
Code was not intended to be used as a mechanism to "buy time" by
those with no realistic chance of reorganization, and we fear the law

                     8
has been so used in this instance. For the reasons heretofore stated,
however, we decline to second-guess the bankruptcy court on this
issue. Accordingly, we reverse the district court and instruct the bank-
ruptcy court to dispose of this case within 90 days after final
disposition of the IRS claim litigation scheduled for trial on
January 15, 1998.


REVERSED AND REMANDED

                    9
