In re Perkins

581 B.R. 822

IN RE: Tony Dian PERKINS, Debtor.

Nos. 17–8001/8008

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Argued: November 14, 2017

Decided and Filed: March 13, 2018

ARGUED: Brian R. Pollock, STITES & HARBISON PLLC, Louisville, Kentucky, for Appellant. Sandra D. Freeburger, DEITZ, SHIELDS & FREEBURGER, LLP, Henderson, Kentucky, for Appellee. ON BRIEF: Brian R. Pollock, STITES & HARBISON PLLC, Louisville, Kentucky, for Appellant. Sandra D. Freeburger, DEITZ, SHIELDS & FREEBURGER, LLP, Henderson, Kentucky, for Appellee.

Before: DELK, HARRISON, and HUMPHREY, Bankruptcy Appellate Panel Judges.

GUY R. HUMPHREY, Bankruptcy Appellate Panel Judge.

In these consolidated appeals, SummitBridge National Investments V LLC ("SummitBridge") appeals the Bankruptcy Court for the Western District of Kentucky's Memorandum–Opinion overruling Branch Banking & Trust Co.'s ("BB & T")¹ objection to the confirmation of Tony Dian Perkins' ("Perkins") Chapter 12 plan, and the subsequent order confirming that plan.

Chapter 12 relief is only available to family farmers or family fisherman. 11 U.S.C. § 109(f). A family farmer is an "individual ... engaged in a farming operation whose aggregate debts do not exceed $4,153,150,"² and who receives more than half of her gross income from "such farming operation." 11 U.S.C. § 101(18)(A). SummitBridge contends that the bankruptcy court improperly found Perkins to be a family farmer, arguing that Perkins both exceeded the "aggregate debt" limit and did not receive more than half of her income from her farming operation. In the alternative, SummitBridge argues that even if Perkins qualified for Chapter 12 relief, Perkins' plan should not have been confirmed because it was not feasible, provided improper treatment to BB & T's secured claim, and failed to meet the best interests of creditors test. We reject SummitBridge's arguments and affirm the bankruptcy court.

ISSUES ON APPEAL

1. How is "aggregate debt" calculated in determining a farmer's eligibility for Chapter 12 relief?

2. In determining a farmer's eligibility for Chapter 12 relief, can partnership income received by the individual debtor from the liquidation of separate farming partnerships and from an S corporation constitute income from "such farming operation" when the partnerships and S corporation are not being reorganized in the Chapter 12 case?

3. Did the bankruptcy court err by confirming the Chapter 12 plan in finding the plan was feasible, met the best interest of creditors test, and provided appropriate treatment to the BB & T secured claim?

JURISDICTION

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Western District of Kentucky has authorized appeals to the Panel, and neither party has timely elected to have this appeal heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, a final order "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Midland Asphalt Corp. v. United States , 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citations omitted). An order confirming a plan is a final order. Bullard v. Blue Hills Bank , ––– U.S. ––––, 135 S.Ct. 1686, 1692, 191 L.Ed.2d 621 (2015) (citing 11 U.S.C. § 1327(a) ; United Student Aid Funds, Inc. v. Espinosa , 559 U.S. 260, 275, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) ); Burden v. Seafort (In re Seafort ), 437 B.R. 204, 206 (6th Cir. BAP 2010) (citing Gen. Elec. Credit Equities, Inc. v. Brice Rd. Devs., LLC (In re Brice Rd. Devs., LLC ), 392 B.R. 274, 278 (6th Cir. BAP 2008) ).

STANDARD OF REVIEW

Conclusions of law are reviewed de novo. Mediofactoring v. McDermott (In re Connolly N. Am., LLC ), 802 F.3d 810, 814 (6th Cir. 2015) (citations omitted); Isaacs v. DBI–ASG Coinvester Fund III, LLC (In re Isaacs ), 569 B.R. 135, 139 (6th Cir. BAP 2017) (citation omitted). "Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination." Matteson v. Bank of Am., N.A. (In re Matteson ), 535 B.R. 156, 159 (6th Cir. BAP 2015) (citation omitted).

On the other hand, "[f]indings of fact ... must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court's opportunity to judge the witnesses' credibility." Fed. R. Civ. P. 52(a)(6) ; see Sutter v. U.S. Nat'l Bank (In re Sutter ), 665 F.3d 722, 728 (6th Cir. 2012) ; In re Aubiel , 534 B.R. 300, 302 (6th Cir. BAP 2015) (quoting Lester v. Storey (In re Lester ), 141 B.R. 157, 160 (S.D. Ohio 1991) ).

"Factual findings are clearly erroneous only when the reviewing court ‘is left with the definite and firm conviction that a mistake has been committed.’ " United States v. Ray , 803 F.3d 244, 265 (6th Cir. 2015) (quoting United States v. Navarro–Camacho, 186 F.3d 701, 705 (6th Cir. 1999) ). A finding of fact "is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. U.S. Gypsum Co. , 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948) ). "Inconsistencies alone do not demonstrate clearly erroneous findings." Q.W. ex rel. M.W. v. Bd. of Educ. of Fayette County, Ky ., 630 Fed.Appx. 580, 583 (6th Cir. 2015). "Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (citations omitted). Findings of good faith and feasibility are factual determinations, which we review for clear error. See In re Gentry , 807 F.3d 1222, 1225 (10th Cir. 2015) ("Because a plan's feasibility is a question of fact, we review for clear error...."); Lexon Ins. Co. v. Naser , 781 F.3d 335, 342 (6th Cir. 2015).

For bankruptcy issues implicating both factual findings and legal holdings, reviewing courts "must break it down into its constituent parts and apply the appropriate standard of review for each part."

Bank of Montreal v. Official Comm. of Unsecured Creditors (In re Am. HomePatient, Inc .), 420 F.3d 559, 563 (6th Cir. 2005), reh'g. denied (citations and internal quotation marks omitted). "A mixed question asks whether ‘the historical facts ... satisfy the statutory standard, or to put it another way, whether the rule of law as applied to the established facts is or is not violated.’ " U.S. Bank Nat. Ass'n ex rel. CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC , No. 15-1509, ––– U.S. ––––, ––––, 138 S.Ct. 960, 200 L.Ed.2d 218, 2018 WL 1143822, at *5 (U.S. Mar. 5, 2018) (quoting Pullman–Standard v. Swint , 456 U.S. 273, 289, n.19, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982) ). "When an ‘issue falls somewhere between a pristine legal standard and a simple historical fact,’ the standard of review often reflects which ‘judicial actor is better positioned’ to make the decision." Id. (quoting Miller v. Fenton , 474 U.S. 104, 114, 106 S.Ct. 445, 88 L.Ed.2d 405 (1985) ). "[T]he standard of review for a mixed question all depends—on whether answering it entails primarily legal or factual work." Id.

FACTS

Perkins operates a farm on 200 acres of prime land in southern Kentucky first purchased by her grandparents in 1948. She has played an active role in farming this land since 1970, when she married and the couple began farming the land in partnership with her parents. In the intervening years, the farming operation expanded to cultivate approximately 9,500 acres in various partnerships with their son. Perkins' husband retired from farming operations after becoming seriously ill in 2008. Perkins and her husband lived on the farm until their home was destroyed by a tornado in 2013.

Perkins encountered financial trouble in 2014 when high input prices and low crop prices combined to force the partnerships to begin talks with BB & T concerning the downsizing of their operation. These circumstances eventually led to the partnerships' filing of Chapter 11 bankruptcy cases.³ In 2015, in the midst of this restructuring, Perkins retired from her job as a teacher to run the farm and care for her husband. The Chapter 11 bankruptcies were dismissed after liquidating substantially all of the partnerships' assets and making over four million dollars of payments to BB & T.⁴

On April 25, 2016 Perkins filed for Chapter 12 bankruptcy protection,⁵ listing a total of $3,513,803.72 of secured and unsecured debts in Schedule E/F.⁶ As of the date of the confirmation hearing, proofs of claim filed by creditors totaled $4,012,908.79 for debts owed on the petition date. In the preceding tax year, Perkins received $279,000 of gross income from her own farm, $764,472 from her farm partnerships with her son,⁷ $161,571 of capital gains from the sale of farm equipment, and $132,360 from wages, a pension, and social security.

Perkins filed her Chapter 12 plan, and BB & T objected to confirmation of the plan, as later amended. The bankruptcy court held the confirmation hearing on October 19, 2016, with BB & T being the only party contesting confirmation of the plan. Perkins' amended plan projected gross income of $784,137 from corn and a double crop of wheat and soy as well as rent from leasing land, a drying barn, and other outbuildings to her son's tobacco growing operation. Perkins' farm income is supplemented by $84,000 of retirement income. After deducting operating and living expenses, Perkins' budget would pay $184,000 on secured debts each year leaving $18,950 of disposable income to be paid to unsecured creditors each year over the plan's five-year life. The liquidation analysis...