570 B.R. 500
Bankr. M.D.N.C.2017Background
- Debtor Carol Fisher Carter and husband own ~390 acres encumbered by foreclosures from Uwharrie and Carolina Farm Credit (CFC); Ryan Mining holds subordinate liens and alleges a joint-venture (Barringer) producing aggregate/gravel.
- Multiple prior bankruptcy filings: Mr. Carter (dismissed 2015) and Debtor’s Chapter 13 (dismissed July 2016 for bad faith, payment defaults, and unauthorized gravel sales); this Chapter 12 petition was filed March 10, 2017 on the last day to upset bids in foreclosure sales.
- Debtor claimed Chapter 12 eligibility as a family farmer, listing significant assets and income that included large gravel-sale receipts; schedules, tax returns, and testimony contained material inconsistencies.
- Movants (CFC, Uwharrie, Ryan Mining) moved to dismiss for lack of Chapter 12 eligibility and bad faith; Chapter 12 Trustee and Bankruptcy Administrator supported dismissal.
- Court concluded gravel/aggregate production and sale is not a ‘‘farming operation’’ for §101(18), Debtor failed the 50%‑of‑debts and 50%‑of‑income farm‑tests, and Debtor filed in bad faith to delay foreclosures; case dismissed and Debtor barred from refiling for one year.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Chapter 12 eligibility — "family farmer" under §109(f)/§101(18) | Debtor: she and husband engage in farming (leasing crops, timber, poultry), and aggregate/gravel sales are part of an irrigation/farming operation | Movants: gravel sales are mining/commercial, not farming; Debtor’s debts and income include substantial nonfarm items so she fails statutory tests | Held: Debtor is an individual and engages in some farming (leases, timber, poultry hopes) but cannot count gravel sales as farming; fails the 50%‑of‑debts and 50%‑of‑income requirements → not eligible for Chapter 12 |
| Does sale/processing of gravel/aggregate qualify as a "farming operation"? | Debtor: expansive construction of "farming" and totality‑of‑circumstances support inclusion (irrigation lake expansion) | Movants: crushing and selling rock is mining/processing, not crop/livestock farming; risks and markets differ | Held: Gravel production/sale is not farming (distinguished from irrigation or crop production); gravel processing likened to nonfarming manufacturing/mining |
| Bad faith dismissal under §1208(c) | Debtor: no separate statutory good‑faith filing requirement; filed a $5,000 "good faith" payment and intends to propose a plan | Movants: filing was a dilatory tactic to thwart foreclosures; prior dismissals, misleading schedules, repeated self‑upset bidding, and prepetition conduct show bad faith | Held: Totality of circumstances shows bad faith (prepetition scheme to delay foreclosures, dishonest disclosures, repeat filings, no changed circumstances) → dismissal for cause |
| Request to bar refiling and sanctions | Movants: seek 3‑year bar and other sanctions for Debtor’s conduct | Debtor: not addressed substantively | Held: No authority provided for 3‑year bar; court imposed 1‑year bar on refiling (district practice) and denied additional unspecified sanctions for lack of basis/evidence |
Key Cases Cited
- Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir.) (recognizes good‑faith filing requirement and equitable cause analysis)
- Neufeld v. Freeman, 794 F.2d 149 (4th Cir.) (factors for evaluating good faith in bankruptcy filings)
- In re Page, 519 B.R. 908 (Bankr. M.D.N.C.) (applied factors for bad‑faith dismissal in Chapter 13/12 context)
- In re Miller, 122 B.R. 360 (Bankr. N.D. Iowa) (operation of sawmill and processing distinguished from farming activity)
- In re Dickenson, 517 B.R. 622 (Bankr. W.D. Va.) (dismissal where schedules and disclosures were consistently inaccurate and untrustworthy)