In re Robertson, Bankruptcy No. 2-87-04506.
| Decision Date | 04 March 1988 |
| Docket Number | Bankruptcy No. 2-87-04506. |
| Citation | 84 BR 109 |
| Parties | In re Farren L. (Lee) ROBERTSON dba High Grade Timber Co., Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Frank M. Pees, Worthington, Ohio, trustee.
Mitchel D. Cohen, Columbus, Ohio, for debtor.
Joseph C. Winner, Columbus, Ohio, for John Deere Co.
This matter is before the Court on the objection of John Deere Company ("John Deere") to the confirmation of the debtor's Chapter 13 plan. A hearing on this objection was held January 21, 1988, following which the Court took this matter under advisement.
The Court has jurisdiction in this matter pursuant to 28 U.S.C. § 1334(b) and the General Order of Reference entered in this District. This is a core proceeding arising under 28 U.S.C. § 157(b)(2)(L).
The debtor filed his Chapter 13 petition on October 28, 1987 as Farren L. (Lee) Robertson, doing business as High Grade Timber Company ("High Grade"). High Grade is a partnership, and the debtor is one of its partners. The debtor included in his Chapter 13 statement an obligation to John Deere in the approximate amount of $159,613.00. That obligation is secured by various logging equipment purchased by the debtor in September, 1986 and used by him in the partnership. He indicated, at the time of filing, that he had one unsecured debt of $2,500.00 arising from a student loan. On January 15, 1988, the debtor amended his schedules to list a $100,000.00 debt, that the debtor considers a contingent debt of the partnership.
The debtor's Chapter 13 statement indicates that his gross income for the last calendar year was $66,000.00. His statement also indicates that in December of 1986, he donated $33,333.00 to a church organization known as Zoe Ministries ("Zoe"). The debtor's uncle, Don Dillon, and Mr. Dillon's wife, are the principals of Zoe. Mr. Dillon is also a partner in High Grade.
A short time prior to filing this Chapter 13 petition, the debtor entered into an agreement, whereby the debtor agreed to allow High Grade to use his logging equipment in exchange for High Grade paying the debtor $1,550.00 per week. Under the agreement, High Grade was to be responsible for costs related to insurance, repairs, maintenance, diesel, oil and gas, operators, taxes, and transportation. The debtor's plan proposes to pay the trustee $5,000.00 per month for a period of 45 months. This plan is based on a total debt of $169,114.00. That amount includes the secured debt to John Deere of $159,613.00, a priority claim of $7,000.00 for state and federal taxes, and an unsecured student loan of $2,500.00. The debtor contends that the other unsecured debt of $100,000.00 is to be paid by the partnership. All creditors are to be paid in full under the proposed plan.
John Deere objects to the debtor's plan for a number of reasons. First, John Deere contends that the debtor does not qualify as a debtor under 11 U.S.C. § 109. Under this section of the Code, John Deere contends that the debtor is not able to show that his income is sufficiently stable and regular, that debtor's plan, as filed, is actually a disguised filing for the partnership, and that the debtor's unsecured debts exceed the statutory limit. John Deere objects also on the grounds that under Chapter 13 of Title 11, the plan is not proposed in good faith, is not feasible, and proposes to pay creditors over a period exceeding 36 months in contravention of 11 U.S.C. § 1322(c).
The debtor's partner, Mr. Dillon, testified that in 1986, High Grade suffered a loss in the approximate amount of $308,000 due to the spoilation of timber and inattentiveness to the business resulting from a family tragedy. He further testified that, despite this loss, the prospects for success of High Grade are good in light of a recent contract to lumber a large tract of timber. He testified that the proceeds from this and other logging operations would be sufficient to make the payments required under the agreement for use of the debtor's equipment which payments would then be used to fund the Chapter 13 plan.
The phrase "regular income" under 11 U.S.C. § 109(e) is to be interpreted liberally so as to include sources of income other than just wages. In re Campbell, 38 B.R. 193 (Bankr.E.D.N.Y.1984); In re Wilhelm, 6 B.R. 905 (Bankr.E.D.N.Y.1980). In the case of In re Tucker, 34 B.R. 257, 262 (Bankr.W.D.Okla.1983), the Court added that:
Our determination of what constitutes "regular income" is not limited to the date of filing the petition, but may be viewed prospectively. In re Troyer, 24 B.R. 727 (Bankr.N.D.Ohio 1982). Thus, our concern becomes not one of simply fluctuations of income, but whether there will be any reliable income to fund the plan.
In the instant case, the Court cannot conclude that the debtor does not have sufficiently stable and regular income to fund the Chapter 13 plan. His testimony, and the agreement for use of the equipment by High Grade, indicate that he is to receive $1,550.00 per week. Moreover, his testimony, as well as that of Mr. Dillon's, demonstrates that High Grade is an on-going business that has secured a potentially lucrative contract for the farming of timber. On the basis of this evidence, the Court finds that the debtor has sufficiently stable and regular income.
John Deere argues that the debtor's plan is actually filed as a plan for the partnership, and therefore the debtor is ineligible for relief. John Deere states that the debtor's plan is designed to procure the benefits of Chapter 13 for the partnership, as opposed to the debtor, in contravention of 11 U.S.C. § 109(e). In support of its argument, John Deere contends that the agreement between the debtor and High Grade, and the testimony of Mr. Dillon, demonstrate that the John Deere equipment is considered an asset of the partnership. Mr. Dillon testified that the equipment would become property of the partnership when the note was paid in full. The debtor testified that the equipment was not property of the partnership, but belonged to him. He also testified that the agreement for use of the equipment executed between himself and High Grade was made in contemplation of filing under Chapter 13, and was made so as to formalize the terms for High Grade's use of the equipment, which had been occurring for several months prior to the execution of the agreement.
The debtor further testified that if he wanted to, he could take his equipment and use it elsewhere and apart from the partnership. Yet, clearly, under the agreement with High Grade the debtor has parted with a degree of ownership in the equipment, and would be answerable to the partnership under that agreement if he unilaterally removed the equipment. The agreement and testimony demonstrate that High Grade has made payments to John Deere on the equipment, though channeled through the debtor, and that High Grade intends to continue making payments in this fashion until the note is paid in full. At that time, the equipment is to become property of High Grade. In the interim, the Court notes that the debtor, by contributing the equipment to the partnership, and the partnership by contributing to the costs of that equipment, could not unilaterally remove the equipment from the partnership without an accounting to it. In other words, the partnership presently has an equitable and financial interest in the equipment to the extent of its contribution to its costs, and by the fact that the debtor contributed that equipment to the partnership.
In the case of In re Fisk, 36 B.R. 924 (Bankr.W.D.Mich.1984), the Court observed that:
It is a fundamental principle of bankruptcy law that a partnership entity cannot file for relief under Chapter 13 which under 11 U.S.C. § 109(e) is limited to an individual with regular income. See In re Tegtmeyer, 31 B.R. 555, 8 C.B.C.2d 1372, 1376 (Bankr.S.D.Ohio 1983); In re Krokos, 12 B.R. 520 (Bankr.S.D.N.Y. 1981). As a corollary to this principle, partnership assets may not be administered in an individual partner\'s Chapter 13 case. Citations omitted; Emphasis added.
In the instant case, the Court finds that the equipment is an asset of the partnership. The evidence and testimony clearly indicate that the debtor's intent when he purchased the equipment was to use that equipment in the partnership. His intent, as well as the partnership's contribution to the costs of the equipment demonstrates that it is an asset of the partnership. Ohio Rev.Code § 1775.07(B). That asset cannot be administered through the debtor's individual Chapter 13 plan. 11 U.S.C. § 109(e); Fisk, supra; See also Matter of Monaco, 36 B.R. 882 (Bankr.M.D.Fla.1983). For this reason, confirmation of the debtor's plan must be denied.
On January 15, 1988, the debtor amended his debt schedules to include a debt of $100,000.00 to a Wallace Gallier. That amendment indicates that the basis for the debt is a loan from Gallier to the High Grade partnership, and which is to be paid by the partnership. The amendment classifies the debt as contingent. John Deere objects to confirmation on the basis that as the debtor's amended unsecured debt is $100,000.00, he does not qualify for relief under 11 U.S.C. § 109(e), which states:
(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, secured debts of less than $350,000, or an individual with regular income and such individual\'s spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $100,000 and noncontingent, liquidated, secured debts of less than $350,000 may be a debtor under chapter 13 of this title.
The concern of the Court is with the total amount of unsecured...
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