In re Ollis

• Decision Date: 13 March 2019
• Docket Number: C/A No. 18-04549-HB
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Parties: IN RE: James Edwin OLLIS, Debtor(s).

609 B.R. 459

IN RE: James Edwin OLLIS, Debtor(s).

C/A No. 18-04549-HB

United States Bankruptcy Court, D. South Carolina.

Signed March 13, 2019

Alecia Tate Compton, Alecia Compton Law Office, LLC, Greenwood, SC, for Debtor.

ORDER

Helen E. Burris, US Bankruptcy Judge THIS MATTER came before the Court for a hearing on March 1, 2019, to consider confirmation of Debtor James Edwin Ollis' Chapter 12 plan.¹ Several creditors objected to confirmation but reported to the Court that their objections were resolved.² Unresolved objections of creditors Rabo Agrifinance LLC,³ Tim Kalliainen,⁴ and Amber McCutcheon⁵ remain. Chapter 12 Trustee, J. Kershaw Spong, filed a Status Report⁶ and was present at the hearing. The Court heard testimony from Ollis, Clark Roach, and Dustin Dyal and received numerous exhibits. After careful consideration of the testimony, documents, arguments of the parties, and applicable law, the Court finds as follows.

FACTS

1. Ollis filed a petition for Chapter 12 relief on September 4, 2018. Spong was appointed Trustee and the employment of Alecia T. Compton as counsel for Ollis was approved by the Court.

2. Ollis is the sole member of J. Ollis Farms, LLC (the "LLC"). The LLC has not filed a petition for bankruptcy relief. Pre-petition farming operations included buying and raising cattle and fatting them to be sold as well as growing hay to feed the cattle.

3. Ollis' Amended Schedule A/B lists ownership interests in 10 parcels of real property, some of which the Trustee has sold or reported that he intends to sell.⁷ Ollis intends to retain ownership of two residences: one in Ware Shoals, South Carolina; and one in Simpsonville, South Carolina. Ollis lives, his family resides part time, and he operates his farm at the Ware Shoals property. Ollis' family resides at the Simpsonville property during the school year. Ollis testified that he maintains the Simpsonville home for his children to attend school within Greenville County.⁸

4. Ollis' Amended Schedule D lists secured debt in the total amount of $1,639,947.06 and Schedule E/F lists unsecured debts of only $258,204.00, for a total of $1,898,151.06. This total does not include amounts for numerous creditors because Ollis scheduled some debt amounts at $0.00.⁹ Creditor Anthony B. Thompson's debt is also not included in this sum because it is scheduled as an "unknown" amount. Objecting creditors McCutcheon and Kalliainen were not listed on Ollis' Schedules.

5. The claims bar date passed on November 13, 2018. The total of filed claims is $3,956,403.65 – far more than the scheduled amount.¹⁰ At the hearing, Ollis acknowledged he owes the debts asserted in these proofs of claim.

6. The total claims include a claim filed by Rabo in the amount of $1,606,622.61, evidenced by a note signed by Ollis individually and on behalf of the LLC, with a security agreement executed by Ollis and the LLC, listing collateral including, but not limited to, all accounts, inventory, equipment, farm products (including crops grown, growing or to be grown), and general intangibles. Ollis testified that the amount of this debt is correct.

7. McCutcheon and Kalliainen were not listed on Ollis' Schedules but filed claims. The claims attach checks written by claimants to "Jim Ollis Farms" and documents titled "Cattle Contract J. Ollis Farms LLC" signed by Ollis. McCutcheon filed a claim in the amount of $101,000.00, and Kalliainen filed three claims totaling $201,000.00. Documents indicate that the money was for an "investment" to purchase cattle and the cattle would be collateral for the funds. However, there were no cattle to serve as collateral for these creditors at the time Ollis filed for bankruptcy. Ollis admitted that he owed these debts and has not objected to these claims.

8. Court records indicate an adversary proceeding was filed by Anthony Thompson challenging the dischargeability of the debt owed to him pursuant to 11 U.S.C. § 523(a)(2). The complaint attached a copy of a promissory note executed in favor of Thompson by Ollis individually and on behalf of the LLC for a loan of $1,100,000.00.¹¹ At the confirmation hearing, Ollis admitted he owed this debt.

9. Court records also include an adversary proceeding filed by Pedro Arguedas pursuant to 11 U.S.C. § 523(a)(2). This complaint attached a copy of a contract with the LLC, which provided that $200,000.000 would be used to purchase cattle. Arguedas' complaint also attached a copy of a Letter of Agreement between him and the LLC for an "investment amount" of $200,000.00.¹² At the confirmation hearing, Ollis admitted he owed this debt.

10. Testimony also indicated a number of debts owed either by Ollis and/or the LLC that were loans for the purchase of cattle, but were not listed on his bankruptcy Schedules and for which no claim was filed, as follows: Chapman in the amount of $100,000.00; Lee Thompson in the amount of $270,000.00; and Jeff in the amount of $100,000.00.

11. A consent order between Rabo and Ollis entered on December 14, 2018, required Ollis to turn over to Rabo all cattle owned by Ollis or the LLC within 14 days from entry of the order and any proceeds from any cattle Ollis may have sold between the original hearing date and the date of entry of the order. Ollis and/or the LLC no longer own the cattle, but no proceeds have been paid to Rabo.

12. Rabo also claims a security interest in hay on the farm and seeks relief from the automatic stay as to this interest, which Ollis contests.¹³ Ollis sold and/or removed from the farm some of the hay while Rabo's Motion for Relief from Stay was pending. Rabo also claims a security interest in any of Ollis and/or the LLC's unencumbered equipment.¹⁴ Ollis listed the value of these items at $25,575.00 in the liquidation analysis filed in support of his plan, but disputes they secure Rabo's claim.¹⁵

13. Ollis' plan proposes monthly payments of $11,886.00 for 50 months beginning January 25, 2019, and $11,330.00 for 10 months beginning March 25, 2023, as well as quarterly payments of $1,765.00 beginning March 25, 2019.

14. Under the plan, Ollis seeks to value Rabo's secured claim at $11,099.37, and the remaining $1,595,523.24 is to be treated as unsecured. The secured claim represents only the value of the cattle Ollis sold post-petition without Rabo's consent. Rabo would receive a monthly distribution of $214.58 for 60 months, which includes 6% interest, until its valued secured claim is paid in full.

15. The plan proposes a 1% distribution to allowed general unsecured claims. The liquidation analysis filed in support of the plan indicates unsecured creditors would receive a distribution of 1.26% in Chapter 7. Ollis' liquidation analysis lists the amount of his unsecured debts in the plan as $2,520,012.30. It is unclear how this figure was derived but appears to be based on the unsecured portion of the claims valued in the plan and other general unsecured claims filed.

16. Ollis' monthly reports through January 2019 do not indicate sufficient historical income to fund anticipated expenses plus payments due to the Chapter 12 Trustee. Further, from his testimony it appears that Ollis has not properly and accurately completed all reports.

17. Ollis provided tax returns for 2016 and 2017 but was unable to testify regarding any details for his income for 2018.

18. Ollis presented a lease agreement with Kenneth Satterfield for consigning cattle, which he testified should produce income to fund a portion of his plan going forward. The agreement was executed in favor of the LLC, not Ollis.

19. Ollis proposes that he will fund the plan from a combination of his wife's income as a pharmacist and from farming operations that differ from those performed pre-petition. Because Ollis no longer owns any cattle, he seeks to consign cattle that he will feed and keep on his property, raise and sell quail to be used for hunting purposes, and bale and sell hay. Ollis will combine land and equipment owned by him, the LLC, and his mother to do so. He anticipates that March 2019 will be the first month he will be fully operating.

20. The evidence did not support a finding that Ollis will have sufficient income to fund the plan.

21. Prior to the confirmation hearing, the Chapter 12 Trustee assisted with the sale of several properties. The Court approved the sale of: 130 acres of Ollis' real property for $360,000.00, of which $1,000.00 was carved out of the proceeds for distribution to unsecured creditors and the remainder paid to satisfy liens; and 2133 Mt. Bethel Road for $42,500.00, which will cover the Trustee's commission and expenses and the balance will be paid to the secured creditor. An additional request to sell 50.7 acres located on Ranch Road for $71,000.00 or more is pending. The proceeds from this sale will pay the Trustee's commission and expenses, be applied toward the balance of one secured creditor's claim, and $3,500.00 will be carved out to be paid toward Ollis' bankruptcy attorney's fees. A judgment lien attached to the property would not be paid. The Trustee has also recovered a $5,000.00 preference payment to be disbursed to unsecured creditors.

22. The plan includes the following provision: "In the event of default by the Debtor in making the payments required by the Plan, the Chapter 12 Trustee may, in his discretion, and after further notice and approval by the court, sell real property and farm equipment under § 1206 in order to pay the claims of this estate in full."

DISCUSSION AND CONCLUSIONS OF LAW

This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (L) and this Court may enter a final order. Rabo objects to confirmation of the plan on grounds that the plan was not proposed in good faith as required by § 1225(a)(3), does not meet the Chapter 7 liquidation test under § 1225(a)(4), violates § 1225(a)(5)(B) because treatment of Rabo's secured claim does not account for all of the...