Keith's Tree Farms v. Grayson National Bank
2015 U.S. Dist. LEXIS 101468
W.D. Va.2015Background
- Keith’s Tree Farms (a family general partnership) filed Chapter 12 on Aug. 14, 2013, listing secured debt of about $1.67M (GNB and FCB major creditors).
- The Farm proposed multiple plans; the bankruptcy court denied confirmation of its first plan and later considered the Farm’s third amended plan after lengthy hearings and testimony by Mr. and Mrs. Keith and a bank witness.
- Secured creditors objected to the third amended plan on feasibility, good-faith, present-value/interest rate, amortization period, and unfair discrimination grounds; FCB moved to dismiss for delay and lack of a confirmable plan.
- The bankruptcy court found the third amended plan not feasible (material errors and omissions in cash projections, unreliable valuations), refused further leave to amend as futile, and granted FCB’s motion to dismiss without prejudice for cause (unreasonable delay/prejudice to creditors and absence of reasonable likelihood of rehabilitation).
- The Farm challenged the timeliness of FCB’s motion and asserted due process defects; the bankruptcy court provided post-hearing briefing time, and the district court found the Farm had adequate notice and opportunity to be heard.
- The district court reviewed factual findings for clear error and discretionary rulings for abuse of discretion, and affirmed the bankruptcy court in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether third amended plan should be confirmed (feasibility) | Farm: projections and pre-confirmation payments show plan is feasible | Creditors: projections flawed, valuations unreliable, plan not probable to succeed | Denied — plan not feasible due to material projection errors and optimistic valuations |
| Whether court abused discretion by denying leave to further amend plan | Farm: should be allowed additional opportunity to propose confirmable plan | Creditors: Farm already filed multiple unsuccessful plans; further amendment would be futile and delay creditors | Denied — bankruptcy court did not abuse discretion in refusing leave to amend |
| Whether dismissal of petition (FCB motion) was improper for untimely notice | Farm: FCB filed motion <21 days before hearing, so dismissal violated Rule 2002(a)(4) and due process | Creditors: motion justified by Farm’s late filings and prior motions; court gave additional briefing time and adequate notice | Affirmed — court reasonably excused shortened notice under Rule 9006 and provided adequate opportunity to be heard |
| Whether bankruptcy court erred in rejecting plan treatment of secured creditors (rate/amortization) | Farm: proposed interest rate and amortization satisfied §1225(a)(5)(B) | Creditors: terms not commercially reasonable and fail to provide present value | Not reached on merits — affirmed on feasibility grounds (alternative grounds unnecessary to decide) |
Key Cases Cited
- Anderson v. Bessemer City, 470 U.S. 564 (U.S. 1985) (clearly erroneous standard for factual findings)
- Farouki v. Emirates Bank Int’l Ltd., 14 F.3d 244 (4th Cir. 1994) (deference to trial court credibility findings)
- In re Merry-Go-Round Enterprises, 180 F.3d 149 (4th Cir. 1999) (appellate review of bankruptcy court factual findings)
- Gilbane Bldg. Co. v. Federal Reserve Bank, 80 F.3d 895 (4th Cir. 1996) (mixed questions: apply clear-error to facts and de novo to legal conclusions)
- In re Harford Sands, Inc., 372 F.3d 637 (4th Cir. 2004) (de novo review of bankruptcy court legal conclusions)