Virginia Lawyers Weekly VA Lawyers Weekly
A Roanoke U.S. District Court affirms a bankruptcy court’s denial of confirmation of debtor tree farm’s third amended plan and dismissal of its Chapter 12 bankruptcy petition.
Debtor Keith’s Tree Farms is a general partnership operating in Wythe and Carroll Counties in Virginia. It sells Christmas and live nursery trees and also provides trucking services, both for the hauling of its trees and for limestone producers and users. Curtis Keith and his two sons act as general partners of the Farm and Verna Keith, Mr. Keith’s wife, serves as its secretary and bookkeeper. In its Chapter 12 petition, filed Aug. 14, 2013, the Farm reported $1,674,148 in secured claims, including $1,383,962 owed to Grayson National Bank and $206,114 owed to First Community Bank.
In denying confirmation of the third amended plan, the bankruptcy court found that the plan failed both because it was not feasible and because it failed to provide the secured creditors with the full present value of their allowed claims. The bankruptcy court denied the Farm leave to further amend its plan after concluding that the Farm failed to show a reasonable likelihood of reorganization.
The bankruptcy court found the Farm’s projections, prepared by Mrs. Keith, contained several significant errors, rendering that data insufficient to permit the court to conclude that the financial projections are more likely true than not. For example, the bankruptcy court found that, although the Farm had projected a net cash balance of $39,240 for the year, it had inadvertently omitted $54,000 worth of salary payments from its projections. Moreover, the projections lacked continuity. Considering the discrepancies and omissions, the bankruptcy court concluded that even taking the Farm’s projections in the light most favorable to its position, the plan is not feasible. The bankruptcy court also considered Mr. Keith’s testimony that property owned by the Farm contained millions of dollars’ worth of trees unreliable in light of contradictory evidence. The court ultimately decided that the Farm had failed to meet its burden with respect to feasibility, given the material defects in the Farm’s income and expense predictions and Mr. Keith’s “unreasonably optimistic” testimony.
The bankruptcy court carefully considered the record and concluded it was unlikely that the Farm could carry out the requirements of its proposed plan. This decision was not clearly erroneous.
The court also finds no abuse of discretion in its decision to deny leave to amend the plan, as debtor already had filed four unsuccessful plans. Finally, the court concludes the Farm received ample notice and opportunity to be heard before the bankruptcy court granted the motion to dismiss.
Judgment affirmed.
Keith’s Tree Farms v. Grayson National Bank (Conrad) No. 7:15cv15, Aug. 4, 2015; USDC at Roanoke, Va. VLW 015-3-385, 12 pp.
