Farmer’s petition dismissed after multiple unsuccessful plans

Where a farmer’s four reorganization plans included unreliable and inaccurate projections will not have an opportunity to submit a fifth plan.

Background

Dale W. Akers’ filed a voluntary petition under Chapter 12 on May 3, 2017. His  farming operations include a produce farm and a general partnership through which he and his son Ryan Akers buy and sell cattle. Akers has partly financed his farming operations through loans from the Farm Service Agency, Skyline National Bank and Farm Credit of the Virginias A.C.A.

On Aug. 14, 2018, Akers filed a fourth amended plan of reorganization. During the hearing on that plan, it became apparent that Akers’ operating report for August 2018 contained erroneous calculations. During the same hearing, confusion arose regarding the claims of Farm Credit.

The bankruptcy court ultimately took confirmation under advisement, directed Farm Credit to file amended claims reflecting the remaining deficiency and permitted the parties to file briefs in support of their respective positions on the debtor’s fourth amended plan. Akers then filed a fifth amended plan without being granted leave to do so. The bankruptcy court construed the filing as a request for leave to amend.

On Jan. 3, 2019, the bankruptcy court issued an opinion and order denying confirmation of the fourth amended plan. The bankruptcy court also denied Akers’ request for leave to file a fifth amended plan and dismissed the case. Akers timely appealed the bankruptcy court’s decision.

Denial of plan confirmation

Akers argues that, in denying confirmation of the fourth amended plan, the bankruptcy court failed to give him the benefit of the doubt and did not properly credit the fact that he made all of the required Chapter 12 payments or that two hurricanes affected his crop production. The court is unpersuaded.

The fact that Akers complied with the bankruptcy court’s order of payments did not automatically warrant confirmation of the fourth amended plan. After considering the totality of the evidence, including the debtor’s history of providing unreliable and inaccurate projections, the bankruptcy court found that the evidence of prior payments was simply insufficient to prove that the fourth amended plan was feasible.

Akers also argues that the bankruptcy court erred by failing to give him the benefit of the doubt, particularly in light of the fact that weather negatively impacted his profits in 2018. The bankruptcy court reviewed the debtor’s 2017 operating reports and noted that his 2018 revenue did not fall far below the prior year’s earnings, thus indicating that the original 2018 projections were overly optimistic. The court is convinced that this decision was not clearly erroneous.

Denial of leave to amend

Akers also challenges the bankruptcy court’s decision to deny him leave to further amend his plan. Akers argues that he was entitled to file a new plan as a matter of right. The court is unpersuaded.

The Bankruptcy Code allows a debtor to modify a plan “at any time before confirmation.” However, if confirmation is denied, a debtor must obtain leave to file a new or modified plan outside the 90-day period set forth in the statute. This conclusion is supported by § 1208(c)(5) of the Bankruptcy Code and by decisions from other circuits.

In arguing that he had an absolute right to file a fifth amended plan, Akers relies on 11 U.S.C. § 1223, which allows a debtor to modify a plan before confirmation. The court agrees with the trustee that this provision does not give a debtor an absolute and unlimited right to amend a Chapter 12 plan after confirmation is denied. However, even if the text of § 1223, when read in isolation, could be construed to support Akers’ position, the context and history of Chapter 12 further buttress the conclusion that leave to amend was required under the circumstances presented in this case.

Dismissal of the petition

Because Akers received “multiple opportunities to present a confirmable plan and [was] unable to do so,” the bankruptcy court dismissed the case. Upon review of the record, the court finds no abuse of discretion.

Affirmed.

Akers v. Micale, Case No. 19-cv-00037, Sept. 13, 2019. WDVA at Roanoke (Conrad). VLW 019-3-443. 14 pp.