In re Garako Farms, Inc.
| Citation | 98 BR 506 |
| Decision Date | 16 December 1988 |
| Docket Number | Bankruptcy No. 188-02768-AA-12. |
| Parties | In re GARAKO FARMS, INC., a California corporation, Debtor. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Eastern District of California |
Albert J. Berryman, Fresno, Cal., for objecting creditor.
Michael H. Meyer, Fresno, Cal., for debtor.
GARAKO FARMS, INC., the Debtor herein, filed this Chapter 12 Petition in the above-entitled Court on July 18, 1988. The Debtor filed a Plan on October 17, 1988, and the Confirmation hearing was set for November 30, 1988. On November 30, 1988, the Chapter 12 Trustee, M. Nelson Enmark appeared; Albert J. Berryman of the law firm of Lerrigo, Snyder, Nibler, Moss & Berryman, appeared as attorneys for San Jose Production Association and Michael H. Meyer, Jarrett & Meyer, appeared as attorney for the Debtor. Testimony was taken, documents were introduced and the matter as to whether or not the debtor's Chapter 12 Plan should be confirmed was taken under advisement subject to receipt of Mr. Meyer's response to objections of PCA to confirmation of the Chapter 12 plan and the further response by PCA in support of its Objections to Confirmation of the Chapter 12 Plan. Those documents have been received and reviewed, the written documentation introduced at the hearing has been reviewed and the testimony of Dr. Garabedian has also been reviewed.
The factual background of this case arose when in 1979 Michael Garabedian, Robert Garabedian, Michael Kowitz and Lynn Kowitz, as tenants in common, purchased ninety (90) acres of real property. In 1981, the same individuals purchased an adjoining parcel consisting of 40 (forty) acres. In 1983, Michael Garabedian died. In 1982, prior to Michael's death, the above four individuals formed a corporation and called it GARAKO FARMS, INC. All the individual co-owners of the property were shareholders in the corporation. After the death of Michael, Robert Garabedian inherited the interest of Michael Garabedian and purchased the interest of Helen Garabedian. The interest of Lynn Kowitz was transferred to Michael Kowitz.
On July 8, 1986, GARAKO FARMS, INC., made a crop loan application with PCA. The loan application was a renewal of prior loans with PCA, which loans began in 1983. The Debtors were unable to make all the payments to PCA and as a result the Debtor filed a petition pursuant to Chapter 12 to prevent the loss of the assets of the debtor corporation through foreclosure. In addition to the obligations owing to PCA there was an obligation on the ninety acres owing to Federal Land Bank and an obligation on the forty acres owing to Frank Finitz.
San Jose Production Credit Association filed Objections to the Confirmation to the Debtors' Chapter 12 Plan on the following grounds:
1. The court clerk in sending out notice of the hearing on confirmation in the above-entitled case did not follow precisely Bankruptcy Rule 9006 and Bankruptcy Rule 2002(b) and as a result there were only 21 days to file objections, rather than the 25 day period provided by Rule 2002(b).
2. The creditor, PCA, filed its objections within the appropriate time and attended the hearing wherein its objections were presented to the Court.
3. The Court made a finding at the time of the hearing that the shortened notice was moot and as a result the objection was overruled.
4. The Court finds from the testimony of Dr. Garabedian as follows:
The Court makes no further Findings of Fact as it is not necessary to support the decision in this case.
PCA asserts that the Debtor is not a "family farmer" as defined by 11 U.S.C. Section 101(17)(B). Eligibility is of course a necessary requirement to confirmation of a Chapter 12 plan under Section 1225(a)(1).
"Family farmer" is defined in 11 U.S.C. Section 101(17)(B) as follows:
"Corporation or partnership in which more than 50 per cent of the outstanding stock or equity is held by one family or by one family and the relatives of the members of such family; and such family or such relatives conduct the farming operation . . . "
The Chapter 12 Trustee investigated and it was testified to by Dr. Garabedian that the debtor corporation is owned more than fifty percent by Dr. Garabedian, that eighty percent of the value of its assets relate to a farming operation, its aggregate debts do not exceed $1,500,000 and not less than 80 percent of its aggregate noncontingent liquidated debts (excluding a debt for one dwelling which is owned by such corporation or partnership and which a shareholder or partner maintains as a principal residence, unless such debt arises out of a farming operation), on the date the case was filed.
The key words in this case are "and such family or such relatives conduct the farming operation."
On October 27, 1986, President Reagan signed into law the bill creating Chapter 12 for the "family farm" reorganizations. During this period of time and prior thereto there was a grave concern for "family farmers", particularly in the midwest states. In the case of In re Tim Wargo and Sons, Inc., 74 B.R. 469 (Bkrtcy.E.D. Ark.1987) the Court makes reference to statements made by Senator Charles Grassley before the final vote on the Chapter 12 bill. In part his statement was that:
"I measure the farm crisis in terms of human tragedy, the disruption of lives, the dispair of being a middleaged farmer suddenly told to find another livelihood to support a family", 132 Congressional Record, S. 15075.
The Court also quotes Representative Mike Synar who stated:
"Chapter 12 would give new hope to family farmers who are facing the brink of disaster where they would have to be thrown off their farms. 182...
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