Webb, In re, 1130

• Decision Date: 07 May 1991
• Docket Number: D,No. 1130,1130
• Citation: 932 F.2d 155
• Court: U.S. Court of Appeals — Second Circuit
• Parties: Bankr. L. Rep. P 73,969 In re James WEBB and Elsie Webb, Debtors. John J. ABELE and Abbott & Cobb, Inc., Appellants, v. James WEBB, Elsie Webb, Robert E. Littlefield, Jr., Chapter 12 Trustee, and Key Bank, N.A., Appellees. ocket 90-5064.

Page 155

932 F.2d 155

Bankr. L. Rep. P 73,969

In re James WEBB and Elsie Webb, Debtors John J. ABELE and Abbott & Cobb, Inc., Appellants, v. James WEBB, Elsie Webb, Robert E. Littlefield, Jr., Chapter 12 Trustee, and Key Bank, N.A., Appellees.

No. 1130, Docket 90-5064.

United States Court of Appeals Second Circuit.

Argued Feb. 27, 1991.

Decided May 7, 1991.

Joseph P. Van De Loo, Albany, N.Y. (Bond, Schoeneck & King, of counsel), for appellants.

Michael Jude O'Connor, Troy, N.Y. (Lee & LeForestier, P.C., Troy, N.Y., Gaines Gwathmey III, Paul, Weiss, Rifkind, Wharton & Garrison, New York City, of counsel), for appellees Webb.

Robert E. Littlefield, Jr., Chapter 12 Trustee, pro se.

Cooper, Erving, Savage, Nolan & Heller, Albany, N.Y., for appellee Key Bank, N.A.

Before OAKES, Chief Judge, and CARDAMONE and MAHONEY, Circuit Judges.

PER CURIAM:

Abbott & Cobb, Inc. ("Abbott") and John Abele ("Abele"), two unsecured creditors, appeal an order of the United States District Court for the Northern District of New York, Howard G. Munson, Judge, affirming a bankruptcy court's decision to modify a confirmed reorganization plan. For the following reasons, we affirm.

BACKGROUND

On October 2, 1987, James and Elsie Webb, two farmers whose land along the Hudson River was encumbered by more than $600,000 in mortgages, filed a voluntary petition for reorganization under Chapter 12 of the Bankruptcy Code, see 11 U.S.C. Secs. 1201-1231, ¹ in the United States Bankruptcy Court for the Northern District of New York, Justin J. Mahoney, Judge. Under the proposed plan, the Webbs would remain as debtors-in-possession of their land, and would pay $245,000 over fifteen years to two secured creditors that held three mortgages on their property. All other debt, including a $350,000 mortgage held by the Farmers Home Administration, would be classified as unsecured, and paid according to a priority schedule. After hearing extensive testimony about the value of the Webbs' farm and homestead, the bankruptcy court concluded that the property was worth $298,708, and that, based on this appraisal, the plan was Shortly after the plan was confirmed, the Webbs began negotiating to sell a negative easement on a portion of their land to a conservation organization for $250,000, which would be used to discharge the secured debt on the property. The easement would prohibit all non-agrarian development on the land except for development on the Webbs' homestead and approximately 25 acres of farmland. As required by 11 U.S.C. Sec. 1229, the Webbs petitioned the bankruptcy court for an order modifying the original plan to permit sale of the easement. After three creditors objected to the modification, the bankruptcy court held a hearing on the matter, at which the creditors, including Abbott and Abele, argued that a new valuation of the property was necessary before permission to sell the easement could be granted. In the hearing, the court noted that a new valuation was not necessary, that the sale of the easement would not inhibit the effective operation of the original plan, and that the sale would, in fact, be in the interest of all creditors. As a result, it approved the modification by order on October 31, 1989.

                feasible, fair and equitable to all creditors. 2   As a result, the court confirmed the plan on March 16, 1989
                

Thereafter, Abbott and Abele appealed to the district court, which affirmed the bankruptcy court's decision to approve the modified plan. In two detailed decisions, the district court rejected a vast array of arguments levied against the modified plan, four of which are the bases for this appeal.

DISCUSSION

Appellants' chief claim is that the bankruptcy court failed to make an explicit finding that the confirmed plan would continue to be "feasible" after the sale of the easement, as required under 11 U.S.C. Sec. 1225(a). ³ As a result, appellants argue that we should vacate the decision to modify the original plan, and remand to the bankruptcy court for a determination whether the easement will adversely affect the Webbs' ability to make payments to their creditors. Because we believe that the bankruptcy court made an adequate feasibility finding, we decline this invitation.

In its order modifying the confirmed plan, the bankruptcy court stated:

payment [for the easement] is greater than or equivalent to the value of the land, less the homestead property, as fixed by this Court at Plan confirmation and the interest of all creditors, including the claims of unsecured creditors, would be better served by satisfaction of the claims of existing mortgage lienors.

Contrary to appellants' assertion, we find this language to be an explicit finding that the modified plan was feasible. First, the court found that the price to be paid for the easement was at least equivalent to the original value of the Webbs' property, less the homestead. In other words, it found that the sale of the easement would generate as much value as could be expected from liquidation. Second, the court found that the sale of the easement would satisfy the secured debt and thus place the unsecured creditors in a better position by increasing their position in the payment hierarchy. Taken together, these findings establish that, at a minimum, the creditors would not be in a worse position under the modified plan, and probably would be better served by the sale of the easement. Although not phrased in terms of feasibility, these conclusions constitute an explicit finding that, under the modified plan, the Webbs "will be able to make all payments ... and comply with the plan." 11 U.S.C. Sec. 1225(a)(6) (1988). ⁴

Appellants next argue that, even if the bankruptcy court's feasibility finding were sufficiently explicit, it was nonetheless clearly erroneous. See In re Rape, 104 B.R. at 748 (finding that a bankruptcy court's feasibility determination will not be set aside unless clearly erroneous). Based on our review of the record, we disagree. Initially, we note that appellants advance no reasons to suggest that the bankruptcy court's decision was in error, and thus obviously fail to meet their burden of proving that the court's feasibility finding was clearly erroneous. See In re Rape, 104 B.R. at 748. In addition, even upon a de novo review of the evidence, we agree with the bankruptcy court that the modified plan was feasible. As the court noted during the modification hearing, because the "heart" of the Webbs' farming operation is not...