William M. Barger v. Hayes County Co-op

CourtUnited States Bankruptcy Appellate Panel for the Eighth Circuit
DecidedApril 3, 1998
Docket97-6073
StatusPublished

This text of William M. Barger v. Hayes County Co-op (William M. Barger v. Hayes County Co-op) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
William M. Barger v. Hayes County Co-op, (bap8 1998).

Opinion

United States Bankruptcy Appellate Panel FOR THE EIGHTH CIRCUIT

No. 97-6073 NE

In re: * * William M. Barger and Randee L. Barger * * Debtors. * * William M. Barger and Randee L. Barger * Appeal from the United States * Bankruptcy Court for the Appellants * District of Nebraska * v. * * Hayes County Non-Stock Co-op, * * Appellee. *

Submitted: February 12, 1998 Filed: April 3, 1998

Before WILLIAM A. HILL, SCHERMER and SCOTT, Bankruptcy Judges

SCHERMER, Bankruptcy Judge:

William and Randee Barger, Chapter 12 Debtors, filed a Motion to Alter or Amend Judgment, seeking reconsideration of the bankruptcy court’s1 order denying confirmation of Debtors’

1 The Honorable Timothy J. Mahoney, Chief Judge, United States Bankruptcy Court for the District of Nebraska. First Amended Chapter 12 Plan. The bankruptcy court denied Debtors’ Motion

2 to Alter or Amend. Debtors then filed a Motion to Vacate the order denying their Motion to Alter or Amend. From the bankruptcy court’s denial of the Motion to Vacate, Debtors filed this appeal. On appeal, Debtors seek review of not only the order denying Debtors’ Motion to Vacate, but also the substance underlying the order denying confirmation of their Chapter 12 plan.

Because we hold that Debtors’ Motion to Vacate did not toll the time for appeal of the underlying order denying confirmation, the only issue on appeal is whether the bankruptcy court abused its discretion in denying Debtors’ Motion to Alter and Debtors’ Motion to Vacate. With respect to the trial court’s denial of both of these motions, we hold that the trial court did not abuse its discretion. Thus, we affirm the decisions of the bankruptcy court.

I. FACTUAL AND PROCEDURAL HISTORY

Debtors operate a farm in Hitchcock County, Nebraska and sought relief under Chapter 12 of Title 11 of the United States Bankruptcy Code on October 23, 1995. Debtors became indebted to the appellee, Hayes County Non-Stock Co-op (“the Co-op”) on an open account for services performed or farm related goods sold prior to the filing. To secure these obligations, Debtors granted the Co-op a security interest in certain farm products and crops, including specifically the Debtors’ 1994 corn and pinto bean crop grown on property in Hitchcock County.

Over the next two years, Debtors filed four Chapter 12 plans in which they treated the Co-op as holding either an unsecured or minimally secured claim. In each instance, the Co-op filed objections to the modified and amended plans, disputing treatment of the Co-op’s claim on the basis that Debtors allegedly sold their 1994 corn and pinto bean crop out-

3 of-state, without recognizing the Co-op’s security interest in the crop proceeds.

4 On March 17, 1997, Debtors filed their fourth reorganization plan, denominated as the Debtors’ First Amended Chapter 12 Reorganization Plan (the “Plan”).2\ The Co-op again objected to confirmation, asserting that the Debtors’ history in two prior reorganization cases,3 together with the Debtors’ alleged conversion of the proceeds of the Co-op’s 1994 crop, demonstrated that the Plan was neither feasible nor proposed in good faith. On April 16, 1997, the court held a hearing on confirmation of the Plan and took the matter under advisement. On June 5, 1997, the court entered an order (dated June 4, 1997) denying confirmation. It is from denial of confirmation of this Plan and from denial of subsequent motions to reconsider this order that Debtors appeal.

In its order of June 4, 1997, the court found that Mr. Barger converted the Co-op’s collateral and that the Plan treatment afforded the Co-op’s claim was not made in good faith. The Plan proposed to treat the Co-op’s claim as follows: first, Debtors proposed to set off any balance found due the Co-op against any judgment Debtors obtained against the Co-op in an adversary proceeding which Debtors filed seeking

2 The sequence and descriptions of reorganization plans is somewhat confusing. Debtors’ first plan, in this case, was filed on November 8, 1995 and denominated Debtors’ Reorganization Plan. Debtors amended this plan by their First Modification to Chapter 12 Reorganization Plan on March 15, 1996, and by a Second Modification to Chapter 12 Reorganization Plan on August 15, 1996. On March 17, 1997, Debtors filed their fourth plan, which is the one at issue in the motions on appeal. That plan was denominated the First Amended Chapter 12 Reorganization Plan. 3 These Debtors are not strangers to Judge Mahoney nor the bankruptcy court in Nebraska. Debtors have been under the protections of Title 11 almost continuously since May, 1986 when they filed their first reorganization under Chapter 11. After a finding in April 1990, that their Chapter 11 plan was not feasible, the court dismissed the Chapter 11 case. One month later, Debtors filed a Chapter 12 petition. Five years after operating under the protections of Chapter 12, and after incurring post-petition deficits, the Debtors moved for dismissal of their Chapter 12 case. One month after that dismissal, Debtors filed this Chapter 12 petition.

5 damages for negligent application of herbicide. If, after set off, the Co-op’s claim exceeded $5,000.00, Debtors proposed to satisfy the Co-op’s claim by paying $5,000.00 with 8.25% interest, payable in three equal monthly installments. If the claim proved to be less than $5,000.00, Debtors proposed to pay the full amount of the claim with interest over such time period. The court found this

6 treatment lacked good faith because, as the court explained in its June 4, 1997, order, “[r]ather than attempting to make amends [for conversion of collateral], [the Debtors] now propose to pay at most a mere 1/7th of the claim of this once fully secured creditor, and . . . only if [the Debtors] are not entirely successful in [their] lawsuit against the Co-op.” In addition, based upon the Debtors’ projected cash flow, the court found that if the Debtors were ultimately unsuccessful in their lawsuit against the Co-op and had to classify and pay the Co-op’s claim as if it were fully secured, the Plan’s feasibility would be in question.

Debtors’ First Motion to Reconsider - Motion to Alter or Amend Judgment

On June 12, 1997, and within ten days of the June 4, 1997, order denying confirmation, Debtors filed a Motion to Alter or Amend Judgment (“Motion to Alter”) to obtain reconsideration of the order denying confirmation. As the basis for reconsideration, Debtors brought to the court’s attention the fact that between the confirmation hearing and the confirmation order, the court disallowed the Co-op’s claim in its entirety. Thus, Debtors argued that the Co-op had no claim which could provide grounds for objection to confirmation. As further grounds for reconsideration, (although inconsistent with the position that the Co-op did not have a valid claim against the estate), the Debtors asserted that the Co-op held a “last lien position on the 1994 corn and beans” and that the Plan’s proposal to pay the Co-op $5,000.00 was more than the creditor would have received outside of bankruptcy or as an unsecured creditor. Thus, Debtors asserted the Plan was proposed in good faith.

In an order dated July 1, 1997, the Court denied Debtors’ Motion to Alter. In that July 1, 1997, order, the court

7 rejected Debtors’ assertion that the court erred in considering the Co-op’s claim at confirmation, remarking that the court tried the secured status of the Co-op’s claim at the confirmation hearing, and at no time during trial, did the Debtors make known to the court that they had objected to the claim nor that the court had previously

8 entered an order sustaining an objection to the Co-op’s claim for failure of the Co-op to respond.4

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