In re Townsend, Bankruptcy No. 88-718-BKC-3P2.
| Decision Date | 11 August 1988 |
| Docket Number | Bankruptcy No. 88-718-BKC-3P2. |
| Parties | In re George Phillip TOWNSEND, Jr. a/k/a Phil Townsend, Jr.; and Margaret Townsend, Debtors. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Lansing J. Roy, Keystone Heights, Fla., for debtors.
Earl M. Barker, Jacksonville, Fla., for South Atlantic.
Jerry Funk, Trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case is before the Court upon confirmation of debtors' Chapter 12 Plan and upon Motion to Dismiss filed by South Atlantic Production Credit Association ("South Atlantic"). Upon evidence presented at the hearings held April 19, 1988, and June 16, 1988, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. This Chapter 12 case was filed on March 1, 1988, in the United States Bankruptcy Court for the Northern District of Florida. By order entered April 1, 1988, dealing with venue, the case was transferred to the Middle District of Florida, Jacksonville Division. 84 B.R. 764.
2. The debtors in this case are George Phillip Townsend, Jr., and Margaret Townsend. Mr. Townsend was formerly a debtor in a Chapter 11 case filed in the Northern District of Florida on December 13, 1985. That case was dismissed on February 11, 1988, after the debtor announced that he was unable to propose a plan which could be confirmed under Chapter 11.
3. On February 23, 1988, George Phillip Townsend, Jr., and George Phillip Townsend, III, his son, entered into a Cash Farm Lease agreement (South Atlantic's Exhibit 10) in which this debtor leased 227 acres of land and 80,000 pounds of tobacco allotment to his son for a fixed annual rental payment of $23,405.00.
4. Approximately one week later, on March 1, 1988, the debtors filed a petition for relief under Chapter 12.
5. The Chapter 12 Plan filed May 4, 1988, contemplates annual payments to the Trustee in the amount of $83,701.00 for three years, with certain payments to secured creditors to continue following the conclusion of the Plan.
6. Under the section entitled "Miscellaneous Provisions of the Plan," the debtors have agreed to pay George P. Townsend, III, an amount equal to the rent provided in the Cash Farm Lease of February 23, 1988. The Plan incorporates the agreement between the father and states that it is also a "shares agreement providing that the parties share both the proceeds of the crops and expenses for producing the crops equally."
7. The primary creditor objecting to confirmation is South Atlantic Production Credit Association owed a total of $906,522.02 as of June 16, 1988. With respect to this creditor, the Plan proposes to divide the real property of the debtors into five parcels designated as follows:
Designation Acreage Location
Parcel A 315 Suwannee County
Parcel B 287 Suwannee County
Parcel C 120 Suwannee County
Parcel D 80 Madison County
Parcel E 72 Suwannee County
8. In Class 5, the debtors state that they will "abandon" Parcels B and C to South Atlantic pursuant to 11 U.S.C. § 1225(a)(5)(C). The debtors will retain parcels A, D and E and propose payment to South Atlantic in the amount of $326,441.95 amortized over twenty-five years with ten percent interest. This would result in annual payments of $35,963.48.
9. The Plan also provides that the debtors will abandon to South Atlantic 1982 Chevrolet Pick-up Truck, 1976 Killibrew Trailer, 1974 Mack Truck, 1977 Ford Spreader Truck, and stock in South Atlantic Production Credit Association. The debtors will retain the remainder of the equipment subject to South Atlantic's lien and will pay $35,100.00 or "whatever value is eventually assessed by the Court over a five year period at ten percent interest." Assuming the $35,100.00 figure is used, the resulting annual payments would be $9,259.29.
10. The Court received testimony as to the value of the real property from appraisers Andrew V. Santangini, Jr., and Darrel W. Hunt. Mr. Santangini is a member of the American Institute of Real Estate Appraisers and has been engaged in the business of appraising real property for a period in excess of nineteen years. The Court received into evidence (South Atlantic's Exhibit 17) an extensive report analyzing, comparing, and reconciling various comparable sales upon which he relied in formulating his value opinion.
On the other hand, Mr. Hunt has been a real estate broker for only four years and has only been an appraiser since 1986. The Court finds that he did not conduct as extensive an analysis of the debtors' property as Mr. Santangini and failed to include in his valuation several improvements on Parcel A which were included in Mr. Santangini's report.
11. The Court finds that the opinion of values of Mr. Santangini are more reliable than that of Mr. Hunt and his opinions are accepted by the Court as follows:
Parcel Amount
Parcel A $340,500.00
Parcel B $207,800.00
Parcel C $ 69,000.00
Parcel D $ 16,000.00
Parcel E $ 53,300.00
In summary, the Court finds the fair market value of the real property to be retained by the debtors is $409,800.00 and the value of the real property to be abandoned is $276,800.00.
12. The Court finds that the value of the tobacco allotment owned by the debtor, George P. Townsend, Jr., is $48,000.00 and that such value should be included in the valuation of the real property based upon the unrebutted testimony of Julius D. Davenport.
13. The Court also heard testimony from two appraisers with respect to the value of equipment which the debtors will retain under Class 6 of the Plan. Darrel W. Hunt, testifying for the debtors, opined that the property had a value of $35,100.00. Donnie Roberts, an expert called by South Atlantic, has many years of experience in appraising, buying and selling agricultural equipment and is currently employed by the auction company consulted by Mr. Hunt in reaching his conclusion. He testified that the value of the equipment was $65,600.00. The Court finds the testimony of Mr. Roberts to be very reliable. Accordingly, the Court finds the fair market value of the personal property to be retained under the Plan to be $65,600.00.
14. No testimony was offered at the confirmation hearing with respect to the value of three trucks and one trailer which the debtors will be abandoning to South Atlantic. Accordingly, the Court will not value such property.
15. The debtors will also be abandoning under the Plan their stock equity interest in South Atlantic. According to the evidence, that stock has a liquidation value of $72,650.00.
16. The allowed amount of South Atlantic's secured claim is $872,850.00 less the $54,738.05 senior secured claim of the United States Small Business Administration, leaving a balance due of $818,111.95.
17. The Plan proposes an interest rate for payment to South Atlantic of ten percent per annum. The Court received testimony from three witnesses with respect to interest rates. Dennis O'Steen, an officer of First Federal Savings Bank in Suwannee County, Florida, testified on behalf of the debtors and stated that a standard agricultural real estate loan interest rate calls for eleven percent interest per annum based upon good credit history and a satisfactory seventy percent ratio of loan to value. The interest rate for a loan similar to that proposed by the debtors, if it were available, would be twelve to thirteen percent per annum.
18. Robert J. Tanner, Chairman and Chief Executive Officer of Sun Bank of North Florida, N.A., testified on behalf of South Atlantic and offered his opinion that a fair market interest rate for the loan proposed by the debtors would be a floating rate at not less that prime plus three percent. In this case, that would be twelve percent as of the petition date. Mr. Tanner also stated that a twenty-five year real estate loan as proposed by the debtors is currently unavailable. Mr. Tanner testified that a fair market interest rate for an equipment loan such as that proposed under the plan would be between sixteen and seventeen percent.
19. Julius D. Davenport testified that South Atlantic would not make a loan secured by real estate for a term greater than ten years. He agreed that its sister institution, the Federal Land Bank of Columbia, would make such a loan to a credit worthy borrower with a seventy percent loan to value ratio at a interest rate of 13.35% per annum, provided the term of the loan did not exceed twenty years. Mr. Davenport further stated that South Atlantic would deem a fair structuring of the equipment loan to include thirteen percent interest payable over a three year period.
20. The Court reconciles this testimony and finds that a fair market interest rate for the real estate loan proposed for South Atlantic under Class 5 of the Plan is thirteen percent with a maximum term of twenty years. The Court finds that the fair market interest rate for the equipment loan proposed under Class 6 of the Plan is thirteen percent paid over a three year period. Therefore, the present value of the cash payments to be made to South Atlantic will be determined by using these figures.
21. The value, as of the effective date of the Plan, of the property to be...
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