Matter of Ladner, Bankruptcy No. 8408188SC.
| Decision Date | 10 May 1985 |
| Docket Number | Bankruptcy No. 8408188SC. |
| Citation | 50 BR 85 |
| Parties | In the Matter of Dickie Joe LADNER d/b/a Ladner Farms. |
| Court | U.S. Bankruptcy Court — Southern District of Mississippi |
COPYRIGHT MATERIAL OMITTED
Craig M. Geno, Jackson, Miss., for Ladner.
Dennis M. Ford, Jackson, Miss., Trustee.
Pat H. Scanlon, Jackson, Miss., for First Mississippi Nat. Bank.
Harold J. Barkley, Jr., Jackson, Miss., for Agrow Credit Corp.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
On April 16, 17 and 18, 1985, the Court heard the following issues and matters: I. Attorneys fees for Agrow Credit Corporation ("Agrow") and First Mississippi National Bank ("FMNB"); II. The enforceability of the dragnet clauses of FMNB; III. Confirmation of debtors, creditors and unsecured creditors committee plans of reorganizations; and IV. Debtor's motion for authority to sell property in both the Ladner Farms Chapter 11 proceeding and in the Robinwood Forest, Inc. Chapter 11 proceeding.
On October 5, 1984, Dickie Joe Ladner d/b/a Ladner Farms filed for relief under Chapter 11 of the U.S. Bankruptcy Code. The Debtor is a sizable farming operation of approximately 14,000 acres situated in Pearl River, Hancock, Harrison, Stone and Jefferson Davis Counties in southern Mississippi. The Debtor has 14 full-time employees, which fluctuates with the seasons, and a full-time staff veterinarian. He has a creative approach to farming as he tries to make his land productive the year round. He buys young light-weight cattle in the fall and winter grazes them on 6,000 acres of rye grass until spring when he sells the heavy cattle. He then plants a soybean crop which he harvests in the fall. Then he purchases new cattle, commencing the cycle again. Additionally, the Debtor raises winter wheat. Since the filing of the Debtor's petition he has been involved in extensive litigation—most of which was brought about by Agrow and FMNB, secured creditors.
Hearings commenced on October 19, 1984, on the Debtor's Application for the Use of Cash Collateral. The FMNB opposed the application and countered with a motion for relief from the automatic stay and "adequate protection". "Adequate protection" is a modern phrase peculiar to bankruptcy practice and is asserted when a secured creditor deems his collateral is insufficient security for the loan. The October 19 hearing was continued to December 5 and 7 of 1984 and finalized on January 11, 1985. Each hearing required rulings by the Court since the farming operation was ongoing with daily requirements and changing circumstances. There have been two appeals of the Court's interim rulings to the United States District Court.
In a response to several creditors' request for the appointment of a trustee, the Court on October 22, 1984, appointed Dennis M. Ford.
It is inherent that a reorganizing debtor will be faced with obstacles presented by the various creditors. However, this Debtor has been involved in extensive litigation in his effort to keep his farming operation alive.
During the first hearings before the Bankruptcy Court, the Debtor was faced with the claim by FMNB that they were undersecured. It is noted that throughout the case, Agrow was oversecured.
However, as the case advanced, First Mississippi National Bank confronted the Debtor with the proposition that they were oversecured and thus entitled to their attorney's fees pursuant to 11 U.S.C. § 506(b).
After a number of other hearings, the Bank has now presented another obstacle for the Debtor's reorganization. The Bank has requested that it be allowed to enforce its dragnet clauses and apply assets of Ladner Farms to debts incurred by other entities of the Debtor.
The deadline for filing proofs of claim was April 8, 1985. FMNB failed to file its claim. Under the authorities governing the filing of a proof of claim, the Court doubts that it needs to reach the "dragnet" issue but it shall be considered and resolved in the findings of fact and conclusions of law.
When the Debtor voluntarily filed his Chapter 11 petition he sought the relief assured by the Code, 11 U.S.C. § 301, which states in part:
"The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter."
To date, the only relief this Debtor has received is an ongoing battle in Court for survival.
In a response to a question by the Court on this subject the Debtor articulated his position probably better than anyone when he replied:
(Transcript of testimony of Dickie Joe Ladner, April 18, 1985).
The provisions under the Code are equally protective of the Debtor's creditors through the reorganization process. This protection extends to secured as well as to unsecured creditors, and the Court must balance each of the various interests before it.
At the onset of this proceeding, First Mississippi National Bank was owed approximately 1.3 million dollars. This debt has now been fully repaid. The debt to Agrow Credit Corporation has been completely retired. It should be noted that the largest secured creditor, Federal Land Bank, which is owed approximately six to seven million dollars, has continued to be in full support of the Debtor's plan. Moreover, the general creditors, through an active creditors' committee, have supported the debtor's plan throughout these proceedings.
1. Agrow and FMNB seek to recover attorneys fees and out-of-pocket expenses pursuant to 11 U.S.C. § 506(b) from the proceeds of the Ladner Farms cattle sales, which sales were in progress at the April 16-18 hearing and have been concluded since the hearing.
2. At all material times, Agrow and FMNB have been oversecured creditors in this Chapter 11 proceeding as contemplated pursuant to 11 U.S.C. § 506(b).
3. Agrow seeks, as reasonable attorneys fees and expenses, $90,000.00. FMNB seeks, as reasonable fees and expenses, $80,000.00.
4. In this Chapter 11 proceeding, there was never a real possibility that Agrow and FMNB would not be paid in full.
5. The services of the attorneys for Agrow and FMNB were not beneficial to the administration of the estate, or to the plan of reorganization submitted by Debtor which was confirmed by the Court in its bench ruling at the conclusion of the hearing.
6. The legal and factual issues in this case were not novel or difficult, in that all factual and legal issues were typical of Chapter 11 reorganization proceedings.
7. The only aspect of this case that was not typical of a Chapter 11 reorganization proceeding was the time and labor expended by Agrow and FMNB which in this Court's opinion was excessive. This Court will not attempt to determine the zeal with which attorneys represent their clients or follow their instructions. On the other hand, this Court must make its independent judgment on reasonableness of that time and effort.
8. This Court is charged with the responsibility to make an independent determination of the reasonable necessity of the services and the appropriate charges for those services as they apply to the specific matters before the Court. In Re Erewhon, Inc., 21 B.R. 79, 86 (Bkrtcy.D. Mass.1982).
9. This Court is further guided, with respect to the issue of attorneys fees, by the case of In the Matter of First Colonial Corp. of America, 544 F.2d 1291 (5th Cir. 1977), and the 12 factors for consideration of an attorneys fees enumerated therein.
10. The Court concludes and rules that there is no authority, under the Bankruptcy Code, for reimbursement of fees and expenses paid by FMNB to its appraisers.
11. The Court concludes and finds, being guided by the factual findings and the conclusions of law stated above, that a reasonable attorneys fee, and reasonable expenses, for the attorney for Agrow Credit Corporation is $30,000.00 attorney's fee and $2,000.00 expenses, and that a reasonable attorney's fee, and reasonable expenses, for the attorneys for FMNB is $26,500.00 attorney's fee and $1,000.00 expenses.
1. The Court must determine whether the "dragnet clause" of the deed of trust executed by Robinwood Forest, Inc. to FMNB, causes that deed of trust to stand as security for the debt of Coastal Plains, a partnership of which Debtor is a partner. Likewise, the Court must determine whether the dragnet clause of the security agreement executed by Debtor and the Trustee, stands good for the Coastal Plains debt, and whether the land deed of trust executed by Debtor and the Trustee operates to secure the Coastal Plains debt.
2. The Robinwood Forest deed of trust was executed November 23, 1984, after the petition in this case was filed. No new money was advanced by the Bank to Robinwood; this deed of trust was renewal of a prior deed of trust executed by Robinwood on July 18, 1984. Likewise, no money was actually loaned in July by the Bank to Robinwood. The deed of trust was simply collateral for a continuing guaranty of the Debtor's farm loan at FMNB.
3. In the November 23, 1984 "Robinwood" deed of trust, it is recited that the purpose of the instrument is "to secure the prompt payment at maturity of the said indebtedness of Dickie Joe Ladner, doing...
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