In re Geijsel

• Decision Date: 24 August 2012
• Docket Number: Nos. 10–43979–11,10–43980–11.,s. 10–43979–11
• Citation: 480 B.R. 238
• Parties: In re Arjen Wilhelmus Petrus GEIJSEL and Kimberly Kay Geijsel, The Luckie Dutchman, LLC, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Texas

480 B.R. 238

In re Arjen Wilhelmus Petrus GEIJSEL and Kimberly Kay Geijsel, The Luckie Dutchman, LLC, Debtors.

Nos. 10–43979–11, 10–43980–11.

United States Bankruptcy Court,

N.D. Texas,

Fort Worth Division.

Aug. 24, 2012.

St. Clair Newbern, III, Law Offices of St. Clair Newbern III, P.C., Fort Worth, TX, for Debtors.

Elizabeth Ann Ziegler, U.S. Trustee Office, Dallas, TX, for U.S. Trustee.

J. Robert Forshey, Lynda L. Lankford, Forshey & Prostok, LLP, Fort Worth, TX, for Official Committee of Unsecured Creditors.

MEMORANDUM OPINION

DAVID R. JONES, Bankruptcy Judge.

Lone Star, FLCA and Lone Star, PCA are the sole remaining creditors objecting to the Second Amended Joint Plan of Reorganization (as modified), filed and submitted for confirmation by debtors Arjen Wilhelmus Petrus Geijsel and Kimberly Kay Geijsel and debtor The Luckie Dutchman, LLC. The Geijsels, individually and through their wholly owned limited liability company, The Luckie Dutchman, LLC, own and operate a dairy; they—the Geijsels and The Luckie Dutchman, LLC—filed separate petitions for relief under chapter 11 of the Bankruptcy Code (11 U.S.C.) on June 15, 2010. The two cases are jointly administered under Case No. 10–43979–rfn–11. For purposes of this Memorandum Opinion, Arjen and Kimberly Geijsel will be referred to as the “Geijsels,” and The Luckie Dutchman, LLC will be referred to as the “LLC.” The Geijsels and the LLC will collectively be referred to as “the Debtors.” Lone Star, FLCA will be referred to as “FLCA,” and Lone Star, PCA will be referred to as “PCA”; they will collectively be referred to as “Lone Star.” The Second Amended Joint Plan of Reorganization (as modified) will be referred to as the “Plan.” The Official Unsecured Creditors Committee, which supports the Plan, will be referred to as the “Committee.”

The Court considers whether to approve confirmation of the Debtors' Plan over Lone Star's objections. Resolution of the confirmation dispute effectively resolves other matters before the Court, specifically Lone Star's motion seeking relief from the automatic stay [Docket No. 183], Lone Star's motion to appoint a chapter 11 Trustee or, alternatively, to dismiss the cases [Docket No. 304], the Debtors' motion to determine the value of Lone Star's secured claims [Docket No. 433], and the Debtors' motion to designate Lone Star's votes [Docket No. 578].

The undersigned judge was appointed in April 2011 to hear Lone Star's then pending stay motion and motion to appoint a chapter 11 trustee or to dismiss, when the presiding judge, Judge Nelms, was out ill. These motions were tried over ten days, from April 25, 2011 to August 12, 2011. By August 12, 2011, the parties had completed their presentation of evidence. As the Debtors were then prepared to go forward with confirmation of their plan (as originally filed), and given that the major issue on the other pending motions concerned the Debtors' ability to propose a confirmable plan, the motions were suspended by the Court's order of August 19, 2011. The confirmation hearing then proceeded for eleven days, spanning approximately five months. The Plan, along with the other motions, was taken under advisement in early March, 2012.

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2). The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rules of Bankruptcy Procedure 7052 and 9014.

I. Facts

1. These bankruptcy cases arise from the failed financial relationship between the Geijsels and Lone Star. The Geijsels and the LLC filed their chapter 11 petitions after they unsuccessfully attempted to restructure their debts with Lone Star through Lone Star's in-house restructuring opportunity. Since the petition date, the Debtors have continued their dairy business as debtors in possession pursuant to §§ 1107 and 1108 of the Bankruptcy Code.

2. The Geijsels have eight outstanding loans with Lone Star, described as follows:

+--------------------------------------------------+
                ¦   ¦Loan No.  ¦Date                ¦Loan Amount   ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦          ¦                    ¦              ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦858175    ¦March 17, 2006      ¦$ 350,000     ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦477730    ¦July 18, 2006       ¦$ 150,000     ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦259100277 ¦August 31, 2006     ¦$ 95,000      ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦259100383 ¦February 15, 2008   ¦$ 163,100     ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦876408    ¦February 15, 2008   ¦$2,838,000    ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦885689    ¦April 8, 2009       ¦$1,450,000    ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦259100177 ¦November 30, 2009   ¦$2,800,000    ¦
                +---+----------+--------------------+--------------¦
                ¦   ¦259100178 ¦November 30, 2009   ¦$2,237,000    ¦
                +--------------------------------------------------+
                

See Lone Star's Exhibits 1–10. The loans are each evidenced by a promissory note and secured by deeds of trust and security agreements, all now owned and held by Lone Star. See Lone Star's Exhibits 11–49, 111–115. The loans are secured by virtually all of the real and personal property owned by the Debtors. In particular, Lone Star's collateral includes all livestock, feed, milk, and accounts receivable, including periodic milk checks from the Debtors' sale of milk, and proceeds from the sale of cows and bulls. The real property (and improvements) that secures the loans are a 77–acre heifer ranch and the 626.7–acre dairy facility. The Geijsels hold title to the 77–acre heifer ranch; the LLC holds the title to the dairy facility. The liens and security interests securing the loans are, for purposes of confirmation, assumed to be properly perfected, first priority liens and security interests. One or more of the notes evidencing the loans was renewed or extended from time to time. All of the loans are cross-collateralized and contain cross-default provisions.

3. The Geijsels are liable on all eight notes and are owners of most of the collateral securing the loans. The LLC is liable on the note evidencing Loan No. 885689 in the amount of $1,450,000 and, as stated, holds title to the 626.7–acre dairy facility. At the time of their bankruptcy filing, the total indebtedness of the Geijsels to Lone Star, including Loan No. 885689, was approximately $9.8 million.

4. Prior to filing for bankruptcy protection, the Debtors defaulted on their loans with Lone Star. As of June 14, 2010, the day before the petition date, the loans were still in default, either under the terms of the loan documents pertaining to each specific loan or by virtue of the cross-default provisions in the loan documents.

A. The Plan

5. The Plan, as is relevant here, provides that allowed administrative claims ( see§ 503 of the Bankruptcy Code), designated as Class 1, are paid in full upon the later of the effective date of the Plan or entry of an order allowing the claim; provided, if an administrative claim was incurred in the ordinary course of business by the Debtors, the Debtors may pay such claim in the ordinary course going forward. In either event, the Plan provides that the Debtors may pay an administrative claim upon such other terms as the Debtors and the holder of the administrative claim may agree upon.

6. With respect to the Debtors' secured creditors, Classes 2–11, the Plan generally provides that each class will be paid in full, the Debtors submitting that, with respect to each class, the creditor is paid the present value of its secured claim in light of the term and interest rate provided and given the nature of the collateral held by each claimant. With the exception of Lone Star, whose claims are consolidated into two classes (Class 2 and Class 3), all other secured creditors have either affirmatively voted for and accepted the Plan or have not lodged an objection to the Plan.

7. The Plan specifies that priority creditors ( see§ 507 of the Bankruptcy Code), Class 12 and Class 13, are either paid in deferred cash payments with interest at 12%, or in cash upon the later of the effective date or entry of an order allowing the claim. The Court is not aware of actual claimants within these two classes, however.

8. The Plan has separated unsecured creditors into two classes, Class 14 and Class 15. Class 14 consists of unsecured creditors of $1,500 or less and states that they will be paid “prorata their allowed claim” upon sixty days from the effective date of the Plan or the allowance of the claim, whichever is later. The Court understands such treatment means the Debtors will pay such claims in full despite the language of the Plan stating they are paid pro rata. Unsecured claims in excess of $1,500, Class 15, shall bear interest at prime and are payable over sixty months in equal monthly installments. They are likewise to be paid in full.

9. Lone Star filed three proofs of claim: a claim by PCA in the Geijsels' case as a secured claim for approximately $5.317 million; a claim by FLCA in the Geijsels' case as a secured claim for approximately $4.571 million; a claim by FLCA in the LLC case as a secured claim in the approximate amount of $1.463 million. The Plan consolidates Lone Star's three claims into two claims, one for PCA and one for FLCA. In effect, FLCA's claim filed in the LLC case (Loan No. 885689 for $1,450,000) is included with FLCA's claim filed in the Geijsels' case. The LLC and the Geijsels are joint obligors on this debt; the dairy facility, which is owned by the LLC (and which was subject of a separate lawsuit),¹ serves as the primary collateral for this debt. FLCA is restricted to one recovery for this obligation.

10. PCA is designated as the Class 2 secured creditor,...