In re Rape

• Decision Date: 29 August 1989
• Docket Number: No. C-C-89-0196-P,Bankruptcy No. 88-00960-MRW-12.,C-C-89-0196-P
• Citation: 104 BR 741
• Court: U.S. District Court — Western District of North Carolina
• Parties: In re A. Milton RAPE and Bonnie W. Rape, d/b/a Mil-Bon Farms, Debtors. FARMERS HOME ADMINISTRATION and Farm Credit Bank of Columbia, Appellants, v. A. Milton RAPE and Bonnie W. Rape, d/b/a Mil-Bon Farms, Appellees.

104 B.R. 741 (1989)

In re A. Milton RAPE and Bonnie W. Rape, d/b/a Mil-Bon Farms, Debtors.

FARMERS HOME ADMINISTRATION and Farm Credit Bank of Columbia, Appellants, v. A. Milton RAPE and Bonnie W. Rape, d/b/a Mil-Bon Farms, Appellees.

No. C-C-89-0196-P, Bankruptcy No. 88-00960-MRW-12.

United States District Court, W.D. North Carolina, Charlotte Division.

August 29, 1989.

Charles E. Lyons, Asst. U.S. Atty., Charlotte, N.C.

Thomas W. Waldrep, Jr., Womble Carlyle Sandridge & Rice, Winston-Salem, N.C., for appellants.

Robert L. Lindsey, Jr., Lindsey and Schrimsher, P.A., Charlotte, N.C., for appellees.

Wayne Sigmon, Gastonia, N.C., Trustee.

ORDER

ROBERT D. POTTER, Chief Judge.

I. PRELIMINARY STATEMENT

THIS MATTER is before the Court on an appeal from the bankruptcy court by the Farmers Home Administration ("FmHA")¹ and the Farm Credit Bank of Columbia ("FCB"), formerly the Farm Land Bank of Columbia.²

On September 22, 1988, A. Milton Rape and Bonnie W. Rape, doing business as Mil-Bon Farms, (the "Rapes") filed for protection under Chapter 12 of the Bankruptcy Code, 11 U.S.C.A. §§ 1201-1231 (West Supp.1989) (the "Family Farmer Bankruptcy Act of 1986" or the "Act").³ On December 20, 1988, the Rapes filed a Chapter 12 plan of reorganization, which was followed by an amended Chapter 12 plan. On January 30, 1989, the Honorable Marvin R. Wooten, Chief United States Bankruptcy Judge for the Western District of North Carolina, conducted a hearing to determine whether the Rapes' amended Chapter 12 plan should be confirmed; the feasibility of the amended Chapter 12 plan was the only contested issue. The following witnesses testified at the hearing: (1) P. Wayne Sigmon, Esq. ("Sigmon"), the Chapter 12 trustee; (2) Bonnie Rape; (3) Milton Rape; (4) Thomas Morgan ("Morgan"), the County Executive Director for the United States Department of Agriculture, Agricultural Stabilization Conservation Service; (5) Max Matthews ("Matthews"), Vice-President of Piedmont Farm Credit, acting as agent for FCB; and (6) Michael Huskey ("Huskey"), Farm Program Specialist for FmHA. After receiving all of the evidence and entertaining the arguments of counsel, for the Rapes and for FmHA and FCB, Judge Wooten indicated that the Rapes' amended Chapter 12 plan would be confirmed. On February 17, 1989, Judge Wooten entered a written order confirming the Rapes' amended Chapter 12 plan. On March 2, FmHA filed its Notice of Appeal, and on March 3, 1989, FCB filed its Notice of Appeal. On April 5, 1989, Judge Wooten entered an amended order — containing findings of fact and conclusions of law, pursuant to Rule 52(a) of the Federal Rules of Civil Procedure — confirming the Rapes' amended Chapter 12 plan. FmHA and FCB are appealing from the bankruptcy court's April 5th amended order.

On April 17, 1989, FmHA and FCB filed their respective designations of the record on appeal and statements of issues. On April 18, 1989, the Rapes filed their designations of the record on appeal and statement of issues. On May 1, 1989, the appeal was docketed in this Court, pursuant to Bankruptcy Rule 8007.

FmHA and FCB claim on appeal that:

(1) the bankruptcy court\'s findings of material fact in support of its amended order confirming the Rapes\' amended Chapter 12 plan are clearly erroneous;

(2) the bankruptcy court failed to make findings of material fact that are supported by the record; and

(3) the bankruptcy court erroneously concluded that the Rapes will be able to comply with the requirement of Section 1225(a)(6) of Title 11, United States Code — the feasibility test.

This Court has jurisdiction over the present action pursuant to Section 158(a) of Title 28, United States Code.

The parties have adequately presented in their briefs the relevant facts and legal arguments, and, therefore, this Court will dispense with oral argument because a decision can be made on the basis of the record and because oral argument would not significantly aid the decisional process. Bankr.Rule 8012; Grundy Nat. Bank v. Shortt, 80 B.R. 802, 803 (W.D.Va.1987).

For the reasons that follow, this Court will adopt the bankruptcy court's findings of fact and will affirm the bankruptcy court's amended order, which confirmed the Rapes' amended Chapter 12 plan.

II. RELEVANT FACTS⁴

The Rapes are farmers; they grow soybeans, corn, and wheat in Union and Anson Counties, both of which are located in North Carolina. The Rapes receive their income primarily from selling their soybeans, corn, and wheat, but they have in the past also received income from the rental of their hog finishing house and from federal farm subsidiary programs.

Table One is a summary — generated from the Rapes' tax returns — indicating the general past profitability of the Rapes' farming operation:

                                               Table 1
                                                                            Net Income
                             Farm          Farm            Farm             Available to
                Year         Revenue       Expenses        Loss/Profit      Pay Creditors
                1981         -             -               ($227,431)       -
                1982         -             -                -               -
                1983         -             -               ($ 51,071)       -
                1984         -             -               ($153,091)       -
                1985         $163,955      $261,656        ($ 97,701)       ($ 36,326)
                1986         $ 94,448      $135,048        ($ 33,900)       ($ 34,184)
                1987         $143,303      $135,366         $  7,935         $ 17,432
                19885   $209,587      $177,696         $ 31,891         $ 31,891
                

As the above figures show, 1988 was the Rapes' best year, thus far. It is undisputed that they generated more revenue in 1988 than in any year since the 1970's. In 1987 and 1988, the Rapes' farming operation generated positive cash flow in part because they did not make any payments to FCB and FmHA, the two lenders holding approximately eighty-five percent (85%) of the Rapes' secured indebtedness.

Table Two is an item-by-item breakdown of the Rapes' 1988 income and expenses — expressed in both the cash basis method of accounting and in the accrual basis method of accounting.

                                                      Table 2
                                                                                    1988       1988
                                                                                    CASH      ACCRUAL
                                                                                    BASIS      BASIS
                --------------------------------------------------------------------------------------
                INCOME Source
                       Wheat                                                       $ 25,407   $ 25,407
                       Corn                                                               0   $ 29,250
                       Soybeans                                                    $  1,328   $ 62,000
                       Government Payments                                         $ 41,190   $ 13,209
                       1988 CCC Loan                                               $ 47,631   -
                       1987 Crops                                                  $ 83,421   -
                       Transfer from Savings                                       $  2,000   $  2,000
                       Insurance Proceeds                                          $  2,900   $  2,900
                       Interest Income                                             $    142   $    142
                       Rental Income                                               $  5,406   $  5,406
                       Insurance Dividend                                          $    162   $    162
                                                                                   ________   ________
                       TOTAL CASH AVAILABLE                                        $209,587   $140,476
                EXPENSES
                Operating Expenses (325 double crop acres,6 400 single crop acres)
                          Seed, Fert. & Chems.                                     $ 35,724   $ 35,724
                          Electricity                                              $  1,014   $  1,014
                          Building Insurance                                       $    831   $    831
                          Land Rental                                              $ 14,075   $ 17,275
                          Fuel                                                     $  5,758   $  5,758
                          Equipment Repair                                         $ 13,776   $ 13,776
                          Labor                                                    $  8,540   $  8,540
                          Miscellaneous                                            $    948   $  2,748
                          Taxes/Soc. Security                                      $  8,527   $  8,527
                                                                                   ________   ________
                          TOTAL OPERATING EXPENSES                                 $ 89,193   $ 94,193
                Debt Payments
                          1987 CCC Loan                                            $ 52,586   -
                          NCNB                                                     $  1,210   $  1,210
                          New Holland                                              $  3,690   $  3,690
                                                                                   ________   ________
                          TOTAL DEBT PAYMENTS                                      $ 57,486   $  4,900
                Miscellaneous Expenses
                          Family Living                                            $ 25,517   $ 25,517
                          Attorney's Fees                                          $  5,500   $  5,500
                                                                                   ________   ________
                          TOTAL MISCELLANEOUS EXPENSES                             $ 31,017   $ 31,017
                Total Cash Outlays
                          Total Operating Expenses                                 $ 89,193   $ 94,193
                          Total Debt Payments                                      $ 57,486   $  4,900
                          Total Miscellaneous Expenses                             $ 31,017   $ 31,017
                                                                                   ________   ________
                          TOTAL EXPENSES/PAYMENTS                                  $177,696   $130,110
                          Income

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