In re Gene Dunavant and Son Dairy, 1-86-0056
| Decision Date | 07 April 1987 |
| Docket Number | No. 1-86-0056,Bankruptcy No. 182-03781.,1-86-0056 |
| Citation | 75 BR 328 |
| Parties | In re GENE DUNAVANT AND SON DAIRY, Debtor. FEDERAL LAND BANK OF LOUISVILLE, v. GENE DUNAVANT AND SON DAIRY and Simmental Breeding Corporation. |
| Court | U.S. District Court — Middle District of Tennessee |
E. Franklin Childress, Asst. U.S. Atty., Edwin M. Walker, Nashville, Tenn., for appellant.
Stephen Miller, G. Rhea Bucy, Nashville, Tenn., for appellee.
This matter is before this Court on appeal of an order entered May 16, 1986, by the Honorable George C. Paine, II, United States Bankruptcy Judge, in a case commenced under Chapter 11 of Title 11, United States Code, by Gene Dunavant and Son Dairy, a partnership (sometimes referred to as the "debtor"). The order appealed from confirmed the debtor's Chapter 11 plan, as modified by a post-confirmation modification filed pursuant to 11 U.S.C. § 1127(b). The Federal Land Bank of Louisville ("Land Bank"), a secured creditor of the debtor, filed a notice of appeal with respect to the order. For reasons more particularly set forth below, the order of the Bankruptcy Judge will be affirmed and Land Bank's appeal dismissed.
The standard of review on this appeal is governed by Rule 8013, Rules of Bankruptcy Procedure, which provides in part as follows: "Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of witnesses."
On November 17, 1982 (the "Petition Date"), Gene Dunavant and Son Dairy, a general partnership composed of Gardner Eugene Dunavant and his son, Dennis Dunavant, filed a voluntary petition for relief under Chapter 11 of Title 11, United States Code, with the United States Bankruptcy Court for the Middle District of Tennessee. On the Petition Date the partnership operated a dairy farm in Giles County, Tennessee. Thereafter, the debtor was automatically continued in possession of its properties and continued the operation of its business during Chapter 11 as debtor-in-possession. See, 11 U.S.C. §§ 1107, 1108.
At the Petition Date the debtor's principal assets consisted of approximately 676 acres of improved real property situated in Giles County, dairy cattle, machinery and equipment, and crops and feed. The debtor's principal creditors included Land Bank, which was owed approximately $550,000.00, secured by deeds of trust on the real property junior only to a deed of trust securing a purchase-money note with a balance of approximately $72,500.00, in favor of Fain Ingram. Farmers Home Administration ("FmHA") was owed approximately $650,000.00, evidenced by four different notes secured variously by junior liens on the real property and first-lien security interests in the cattle, certain machinery and equipment and crops and feed. The debtor owed approximately $150,000.00, to four other entities whose claims were secured by machinery and equipment. Unsecured trade debt totalled approximately $200,000.00. See, generally, Record, Item 4.
By agreed order entered November 14, 1983, upon the consent of the debtor, Land Bank and FmHA, the debtor was authorized and directed to make monthly payments of $6000 to Land Bank as adequate protection of its liens on land. Record, Item 1. This order, among other things, acknowledged that the Land Bank loan bore interest at a variable rate, but recited that the monthly payments of $6000 had been computed using a rate of twelve per cent (12%) per annum, simple interest. That order also provided in part as follows:
6. This order is intended to be an interim order governing certain aspects of this proceeding and accordingly does not estop any party hereto with respect to the question of treatment of a particular claim under a plan of reorganization. * * *
Record, Item 1. Later an agreed order was entered (October 23, 1984), relative to curing defaults in the debtor's performance under the order of November 14, 1983. Record, Item 2.
On October 25, 1984, the debtor filed a proposed Chapter 11 plan and a disclosure statement to accompany same. The plan and disclosure statement were amended under date of November 21, 1984. Record, Items 3, 4. By order entered December 5, 1984, the disclosure statement as amended was approved and a confirmation hearing was set for December 18, 1984. Record, Item 6.
In summary the plan, as amended, provided for a sale and transfer of substantially all the debtor's property — improved real property, cattle, crops and feed, and machinery and equipment — to Simmental Breeding Corporation ("SBC"), a corporation headquartered in Memphis, Tennessee, under the following terms and conditions:
(1) SBC would pay in cash $150,000.00 ($60,000.00 at closing, the balance in four equal quarterly installments due over the year following closing), which sum would be used to pay the administration expenses of the Chapter 11 case which were estimated to total approximately $150,000.00 (2) SBC would assume and agree to pay certain debts secured by machinery and equipment;
(3) SBC would take the real property subject to the liens of Ingram, Land Bank and FmHA, and subject to repayment terms specified in the plan;
(4) From the earnings of the dairy or otherwise, SBC would make the payments provided in the plan for general, unsecured creditors; and
(5) SBC would employ Eugene and Dennis Dunavant in the continued operation of the dairy for a term of years and at a guaranteed minimum compensation.
See, generally, Record, Items, 3, 4. The plan provided that it would become effective, ". . . the thirtieth (30th) day following the entry of the order confirming the Plan, provided that no appeal is pending. . . ." Record, Item 3, p. 2.
An important factor in the hoped-for success of the plan was SBC's ability to add milking cows to the debtor's herd thereby increasing revenues at marginal additional cost. Record, Item 4, p. 12.
On December 26, 1984, the Bankruptcy Judge entered an order confirming the debtor's plan. Record, Item 8.
On December 31, 1984, certain steps were taken towards consummation of the plan. In particular, deeds to the real property and bills of sale as to certain personal property were executed by the debtor in favor of SBC and delivered to Stephen M. Miller, Esq., counsel for the debtor-in-possession, as escrow agent. Transcript, pp. 40-42. SBC also delivered to Mr. Miller as escrow agent the sum of $60,000.00, being the cash payment due at closing from SBC. Ibid. Also, on December 31, 1984, FmHA filed a notice of appeal of the order of confirmation. Record, Item 9.
The FmHA appeal was dismissed by the District Court on March 28, 1985. Record, Item 10. But FmHA timely appealed the District Court's order to the Court of Appeals. This appeal was pending until July 3, 1985, at which time FmHA voluntarily dismissed its appeal. Transcript, p. 36.
Taking the position that the pendency of the FmHA appeal tolled the effective date of the plan, the parties did little towards consummation of the plan after December 31, 1984. The deeds and other instruments of transfer were never delivered out of escrow, and except for certain small payments to a few administration creditors, the $60,000.00 fund was not disbursed by the escrow agent. Transcript, pp. 40-42. SBC paid none of the balance of the $150,000.00 required under the plan, and did not place the additional milking cows into the herd as contemplated by the plan. Ibid.
For several months following dismissal of FmHA's appeal, the debtor and SBC took no steps to complete the closing of the sale of properties provided for in the plan or otherwise perform the plan. This apparently prompted FmHA to file a motion to dismiss the case. Record, Item 12. Thereafter, on February 19, 1986, SBC filed a motion seeking a determination of the allowed amount of FmHA's secured claim. Record, Item 18. On February 20, 1986, the debtor filed a post-confirmation modification of the plan pursuant to 11 U.S.C. § 1127(b). Record, Item 20a. On February 20, 1986, the debtor also filed a supplement to the previously-approved disclosure statement. Record, Item 20b.
After a hearing conducted March 4, 1986, upon notice to creditors and other parties in interest, by order entered March 21, 1986, the disclosure statement, as supplemented, and as amended and supplemented in open court at the hearing (hereinafter, the "Disclosure Statement"), was approved.1 Record, Item 23.
In accordance with the order of March 21, 1986, the debtor transmitted to creditors and other parties in interest copies of the Chapter 11 plan, as originally confirmed and as modified, the Disclosure Statement, a ballot conforming to Official Form No. 29, and a copy of said order. Within the time fixed by the order of March 21, 1986, Land Bank and FmHA, filed objections to confirmation of the plan as modified, and cast ballots against the plan. Record, Items 25, 26. All other classes of creditors accepted the plan by the requisite majorities. Transcript, pp. 7-9.
On April 25, 1986, the Bankruptcy Judge conducted a hearing on the debtor's request for confirmation of its Chapter 11 plan, as modified by the post-confirmation modification thereof filed February 20, 1986, and upon the objections of Land Bank and FmHA thereto. In open court at the hearing the debtor sought and obtained leave of court to amend the plan, as modified, as respects the treatment of the secured claims held by FmHA and the Land Bank. Transcript, pp. 4-6. Thereafter, the United States of America for FmHA moved in open court at the hearing for leave to withdraw its objection...
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