In re Miller
MEMORANDUM ON DEBTOR’S MOTION TO CONVERT TO CHAPTER 11
This contested matter is before the court on the Motion to Convert Case From a Case Under Chapter 7 to a Case Under Chapter 11 (Motion to Convert) filed by the Debtor on April 5, 2013. On April 10, 2013, Tennessee State Bank filed the Objection by Tennessee State Bank to Motion to Convert Case From a Case Under Chapter 7 to a Case Under Chapter 11 (Objection), arguing that the Debtor did
The trial on the Motion to Convert was held on July 1, 2013. The record before the court consists of the Stipulations filed by the parties on June 25, 2013, forty-nine exhibits introduced into evidence, and the testimony of four witnesses, Ann Mostol-ler, Chapter 7 Trustee, Shelly Spurgeon, Senior Vice President of Special Assets for Tennessee State Bank, Harold Ellison, and the Debtor.
I
On September 28, 2012, Tennessee State Bank commenced this bankruptcy ease against the Debtor through the filing of an Involuntary Petition under Chapter 7 of the Bankruptcy Code. On that same date, Tennessee State Bank also filed an Involuntary Petition commencing, under Chapter 7, Case No. 12-33943 against Karen L. Miller, the Debtor’s wife. Both Involuntary Petitions were later joined by the Housholder Family Trust and Charles A. and Melanie McGinnis. Tennessee State Bank is a creditor of the Debtor by virtue of thirteen Notes from Gerald Miller secured by real property located in Sevier County, Tennessee, owned by the Debtor, individually, or jointly with his wife, Karen L. Miller (collectively, the Millers).
On October 5, 2012, the Debtor filed a Voluntary Petition under Chapter 11 in the Middle District of Florida commencing bankruptcy Case No. 12-06567-JAF. Coll. Trial Ex. 32. Thereafter, on October 19, 2012, he filed an Answer to the Involuntary Petition which was amended on October 24, 2012, to include a List of Creditors reflecting seventeen creditors as well as an Amended Exhibit A to his Amended Answer adding Sevier County Bank and Tennessee State Bank as creditors. Coll. Trial Ex. 29. Finally, on December 7, 2012, the Debtor filed an Amended List of Creditors reflecting twenty-five creditors. Trial Ex. 31.
On November 9, 2012, the Debtor filed a Motion for Summary Judgment seeking a determination that Tennessee State Bank was not a qualified petitioning creditor to which Tennessee State Bank filed its Reply to the Motion for Summary Judgment on November 29, 2012. Following an Order entered on December 7, 2012, denying summary judgment with respect to the
At the time the Involuntary Petitions were filed against them, the Debtor, who is a licensed real estate broker, and Karen L. Miller owned 100% of the stock in Cove Mountain Realty, Inc., an entity which lists real estate for sale, manages a cabin rental program, and operates a campground in Sevier County, Tennessee. Pursuant to a Lease Agreement between the Millers and Katherine Housholder, Marceil H. Peery, and James A. Housholder that had been assigned to Tennessee State Bank for collateral purposes, counsel for Tennessee State Bank sent a letter to Cove Mountain Resorts on July 14, 2012, requesting that all future payments for rents from Cloud 9, a cabin property owned by the Millers, be made directly to Tennessee State Bank. TRIAL Ex. 21; Trial Ex. 24. In order to protect its collateral, Tennessee State Bank has made all lease payments under the Lease Agreement since the Millers stopped making payments in June 2011. See Trial Ex. 22. Additionally, the base property taxes owing to Sevier County, Tennessee, on the real properties securing Tennessee State Bank’s Notes, not including interest or penalties, are $56,187.00. See Trial Ex. 37.
On February 19, 2013, the court held a trial on the Involuntary Petition filed against Karen L. Miller and, on March 14, 2013, entered an Order for Relief in Case No. 12-33943, which was subsequently converted to Chapter 11, without objection, on March 28, 2013. The Debtor filed his Motion to Convert on April 5, 2013, and Tennessee State Bank filed its Objection to Motion to Convert on April 10, 2013.
II
The Debtor seeks to convert his case to Chapter 11 under the authority of § 706, which allows a debtor to convert from Chapter 7 to another chapter if the case has not previously been converted and the debtor is eligible to be a debtor under the chapter to which it is to be converted. See 11 U.S.C. § 706(a), (d) (2006). The right to convert, however, is not absolute where cause may exist to
Marrama misrepresented the value of his Maine property and that he had not transferred it during the preceding year. Respondent DeGiacomo, the trustee of Marrama’s estate, stated his intention to recover the Maine property as an estate asset. Thereafter, Marrama sought to convert the proceeding to Chapter 13, but the trustee and respondent bank, Marrama’s principal creditor, objected, contending that the request to convert was made in bad faith and would constitute an abuse of the bankruptcy process.
Marrama,
Nothing in the text of ... § 706 ... (or the legislative history ... ) limits the authority of the court to take appropriate action in response to fraudulent conduct by the atypical litigant who has demonstrated that he is not entitled to the relief available to the typical debtor. On the contrary, the broad authority granted to bankruptcy judges to take any action that is necessary or appropriate “to prevent an abuse of process” described in § 105(a) of the Code, is surely adequate to authorize an immediate denial of a motion to convert filed under § 706 in lieu of a сonversion order that merely postpones the allowance of equivalent relief and may provide a debtor with an opportunity to take action prejudicial to creditors.
Marrama,
The Debtor must meet the threshold requirements of § 706 that he has not previously converted his case and is eligible to be a Chapter 11 debtor after which Tennessee State Bank, as the objecting party, bears the burden of proving by a preponderance of the evidence why the Debtor should not be permitted to convert
The burden of proof on the motion to convert is on the debtor. The debtor must first make a prima facie case for conversion (showing there has been no prior conversion in the case, that the debtor is eligible for relief under § 109, and that conversion is to achieve a purpose permitted under the proposed Chapter). The burden of coming forward with evidence then shifts to the objecting parties to show that the debtor is not eligible for relief under Marrama.
In re Broad Creek Edgewater, LP,
When making a determination with respect to conversion from Chapter 7 to Chapter 11, courts generally consider the “for cause” factors set forth in 11 U.S.C. § 1112(b) (2006) “or if the debtor has engaged in ‘bad faith’ conduct,” In re Basil St. Partners, LLC,
(i) whether the debtor is seeking to convert to chapter [11] in good faith (including a review of facts such as the timing of the motion to convert; the debtor’s motive in filing the motion; and whether the debtor has been forthcoming with the bankruptcy court and creditors);
(ii) whether the debtor can propose a confirmable ... plan;
(iii) the impact on the debtor of denying conversion weighed against the prejudice to creditors caused by allowing conversion;
(iv) the effect of conversion on the efficient administration of the bankruptcy estate; and
(v) whether conversion would further an abuse of the bankruptcy process.
In re Yarborough,
A
The initial burden of proof under § 1112(b) lies with the moving party to establish “cause” by a preponderance of the evidence, after which the burden shifts to the debtor to prove either the existence of “unusual circumstances” or that therе is a reasonable likelihood a plan will be confirmed and that any deficiencies in the case are reasonably justified and will be cured within a reasonable period of time. In re Miell,
Tennessee State Bank first argues that cause exists to deny conversion under § 1112(b) for “substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation.” 11 U.S.C. § 1112(b)(4)(A). In support, Tennessee State Bank argues that the Debtor has not made any payments on the thirteen Notes, which continue to accrue interest and the collateral continues to incur taxes, since August 2011. Additionally, Tennessee State Bank questions why rents and income from camper storage and cabin rentals are being retained by Cove Mountain rather than being paid into the Millers’ respective bankruptcy estates and why the Debtor’s estate is not receiving any payments from Movieland Games, which is also operated by the Millers. It also questions why the Debtor allows residential real property located in Edwardsville, Illinois (Illinois Residence), for which the Millers recently paid property taxes of approximately $8,000.00 to avoid a tax sale, to be occupied by his former wife, his daughter, and his grandson without any payments or consideration back to the Millers. Finally, with respect to the rehabilitation prong, Tennessee State Bank argues that the Debtor plans to liquidate, which would be better served in Chapter 7 and that the Debtor’s income since 2010 has, reportedly, been $10,500.00 from employment and $20,000.00 from Social Security, so he cannot fund a plan of reorganization.
The § 1112(b)(4)(A) analysis contemplates a “two-fold” inquiry into whether the estate has decreased in value and if there is a reasonably likelihood of rehabilitation^] In re v. Cos.,
Tennessee State Bank first argues that there is a continuing loss based upon the rising expenses and costs associated with the Notes, and in response, the Debt- or argues that loss of assets or value to the estate was not documented or proved by Tennessee State Bank and that the estate is not any less valuable than it was when the Order for Relief was entered. As of September 28, 2012, the aggregate balance owed Tennessee State Bank on the thirteen Notes was $7,389,348.53, of which $5,614,315.04 is principal. TRIAL ex. 14. The Debtor has not made payments on any of the Notes since August 2011, and interest continues to accrue at $3,691.61 per diem, which translates to approximately $110,748.30 monthly. TRIAL Ex. 15. Additionally, taxes owed to Sevier County on Tennessee State Bank’s collateral, dating back to 2009, continue to accrue and are currently $56,187.00,
Furthermore, Tennessee State Bank has not satisfied the second prong of the analysis and proved that the Debtor cannot effectuate a successful reorganization. At trial, the Debtor testified that if the case is converted to Chapter 11, he intends to propose a plan that incorporates both liquidation of property and the continuation of his businesses to pay his debts. At trial, the Debtor testified that he hopes to
In order to support its contention that the Debtor cannot successfully reorganize, Tennessee State Bank showed, through his testimony, that the Debtor has allowed Mrs. Miller to be fully responsible for all accounting and monetary aspects of his personal and business finances. As established at trial, the Debtor unquestionably relies on his wife to maintain the Millers’ personal and business finances. He testified that he has been married to Mrs. Miller for many years and has relied on her to maintain their finances the entire time. Throughout his testimony, any time he was asked financially related questions, the Debtor stated that he relied on Mrs. Miller, that she had told him how much money each business made or was expected to bring in, or that he was unsure about an answer because his wife did all the bookkeeping and he did not personally know. Additionally, when questioned about the income derived from the shopping center, the campground lots, and cabin, the Debtor testified that he understood that all of that income was going into Mrs. Miller’s debtor-in-possession account but that he had never questioned why. In essence, the Debtor testified that he does not perform any of the bookkeeping or
While the court agrees that perhaps the Debtor should monitor his finances more closely and rely less on Mrs. Miller to the extent that he was unable to answer several questions at triаl concerning his basic financial information, the fact that the Debtor allows his wife to manage all financial aspects of their closely-held businesses while he attends to the daily operations does not constitute mismanagement or bad faith and does not weigh against his ability to successfully reorganize. In fact, because Karen Miller is likewise in a Chapter 11 case and their properties and estates are so closely related and intertwined, the Debtor’s contention that the Millers’ joint creditors would be better served if both were in Chapter 11 reorganization cases wherein their joint interests could be serviced without the intervention of a Chapter 7 trustee carries merit.
For the foregoing reasons, the court finds that neither prong of § 1112(b)(4)(A) has been satisfied, and cause does not exist under that subsection to deny the Debtor’s Motion to Convert.
B
Tennessee State Bank also argues that the Motion to Convert should be denied because the Debtor has not filed his tax returns, which is denoted as “cause” for failing “timely to pay taxes owed after the date of the order for relief or to file tax returns due after the date of the order for reliefi,]” 11 U.S.C. § 1112(b)(4)(I), because “[t]he timely payment of post-petition taxes is crucial[.]” In re Tri-Chek Seeds, Inc.,
The language of the statute expressly addresses payment of taxes and the filing of returns after entry of an order for relief. In this case, the Order for Relief was entered on January 9, 2013. Accordingly, cause under § 1112(b)(4)(I) would exist with respect to any post-petition taxes and/or returns due after that date. Because his 2011 and 2012 tax returns reflect tax liabilities incurred prior to January 9, 2013, his failure to have timely filed those returns — while relevant — is not determinative.
C
Finally, Tennessee State Bank argues that the Debtor’s conduct evidences bad faith, thus also justifying denial of his Motion to Convert. Stating that “[t]he principal purpose of the Bankruptcy Code is to grant a fresh start to the honest but unfortunate debtor[,]” the Supreme Court held that bad faith may be cause to deny conversion. Marrama,
“Bad faith is a term of art. Its inquiry can be objective rather than subjective. Thus, a court may find that a debtor is attempting to convert a case in bad faith based on the totality of circumstances without specifically finding that the debtor’s motivation is evil.” George Love Farming, LC,
(1) the debtor has one asset;
(2) the pre-petition conduct of the debt- or has been improper;
(3) there are only a few unsecured creditors;
(4) the debtor’s property has been posted for foreclosure, and the debtor has been unsuccessful in defending against the foreclosure in state court;
(5) the debtor and one creditor have proceeded to a standstill in state court litigation, and the debtor has lost or has been required to post a bond which it cannot afford;
(6) the filing of the petition effectively allows the debtor to evade court orders;
(7) the debtor has no ongoing business or employees; and
(8) the lack of possibility of reorganization.
Trident Assocs. Ltd. P’ship,
Tennessee State Bank has raised a number of actions and specific conduct by the Debtor it contends evidences the Debtor’s bad faith. First, the Bank argues that the Debtor waited for nearly three months after the Order for Relief was entered to file his Motion to Convert, that he was not forthcoming in identifying creditors in his involuntary case, amending his list of creditors three times prior to the December 21, 2012 trial, and that the Debtor did not disclose a number of things in his statements and schedules including uncashed checks from cabin rentals and the Valley Mart Exxon rental, a transfer of real property for $50,000.00 in January 2012, the correct amount of his income, all accounts closed during the year preceding his bankruptcy, payments to Michael D. Tranum, and payments to the IRS in the two years before his bankruptcy that were, presumably, outside the ordinary course of business. Tennessee State Bank also argues that the Debtor did not turnover property to the Chapter 7 Trustee when she requested, necessitating the filing of a motion for turnover of assets, that the Debtor signed off on a Commercial Purchase and Sale Agreement for Valley Mart Exxon without the authority to do so, that the Debtor has listed 3174 Wears Valley Road, Sevierville, Tennessee (3174 Wears Valley Road Property) for sale during the course of the Chapter 7 case, and that the
As previously discussed, the fact that the Debtor has relied in the past — and testified that he will continue to rely in the future — on his wife, Karen Miller, to handle all aspects of their individual finances as well as the finances for their joint businesses is not unusual and does not give rise to any bad faith conduct by the Debt- or, even though his reliance to that great of an extent may be ill-advised and has hindered the Debtor’s knowledge of his own personal financial affairs. Nevertheless, it is not evidence of bad faith and does not support Tennessee State Bank’s objection to the Debtor’s Motion to Convert. The court likewise does not agree with Tennessee State Bank’s argument that the Motion to Convert should be denied because the Debtor did not file it for nearly three months following entry of the Order for Relief, finding that the Debtor has sufficiently explained his delay in filing the Motion to Convert. At trial, the Debt- or testified that he had intended to file a Chapter 11 case, which he subsequently did in the Middle District of Florida, but that Tennessee State Bank commenced the involuntary Chapter 7 case against him before he could get his Chapter 11 case filed.
The court also finds that the Debtor’s actions and explanations with respect to the turnover of property and information to the Chapter 7 Trustee as well as the execution of a post-petition contract for the sale of the Valley Mart Exxon and the post-petition listing of the 3174 Wears Valley Road Property cure any potential bad faith issues. The Order for Relief was entered on January 9, 2013, following a trial held on Decembеr 21, 2012, and Ms. Mostoller was appointed Chapter 7 Trustee. She testified that upon her designation as Trustee, she sent an email to Thomas Ray, the Debtor’s former counsel, to reschedule the creditors meeting and requested that all funds being held by the Debtor’s former attorney in Florida remain intact. Ms. Mostoller also testified that she had discussions with Mr. Ray prior to the meeting of creditors, that they agreed to have a meeting with the Debtor prior to the meeting of creditors, and at that time, Ms. Mostoller requested a limited number of records from the Debtor concerning his business entities, primarily, the Valley Mart Exxon and the shopping center, and she received the requested information about the Exxon station. Thereafter, at the initial meeting of creditors on March 8, 2013, Ms. Mostoller requested additional documents from the Debtor including one year of bank records for himself and his companies as well as
Ms. Mostoller testified thаt she filed the Motion for Turnover Order on. April 25, 2013, because, based on the statements and schedules and the questioning at the meeting of creditors, it was apparent that the Debtor had a substantial amount of cash in a joint account with Mrs. Miller. See trial ex. 42. Ms. Mostoller testified that once it was determined that Mrs. Miller was properly a Chapter 11 debtor, Ms. Mostoller asked Mr. Ray to turnover one-half of the funds to her but she did not receive them. Additionally, Ms. Mostoller had not received the titles to the Debtor’s vehicles listed in his statements and schedules, so she filed the motion for turnover in order to protect and receive possession of those assets. Two days later, the Debtor filed an objection to the turnover motion, but an Order Resolving Motion of Trustee for Turnover was entered on June 10, 2013, in which Ms. Mostoller agreed to withdraw the turnover motion and the Debtor agreed to turnover the titles to the requested vehicles to the Trustee and one-half of the cash in the Debtor and Mrs. Miller’s joint bank account to be held in his current counsel’s trust account. Trial Ex. 43; Trial Ex. 44.
With respect to the Valley Mart Exxon, a motion was filed in Karen Miller’s bankruptcy Case No. 12-33943 on April 26, 2013, and amended May 1, 2013, seeking approval of a Commercial Purchase and Sale Agreement (Sale Agreement) between the Millers and James, Gail, Brandon, and Amanda Headrick for the purchase of the Valley Mart Exxon for $465,000.00.
Per her testimony, Ms. Mostoller believes that she has now received all documents and information that has been requested from the Debtor that are available. Additionally, the court did not find, from her testimony, that Ms. Mos-toller believed that the Debtor had not been forthcoming with information and/or documentation or that she did not accept the explanation provided by the Millers concerning the Valley Mart Exxon Sale Agreement and/or the 3174 Wears Valley Road Property. In fact, she testified that Karen Miller had provided her with the initial documentation she requested in a very timely manner and that Mrs. Miller has been quite helpful in providing her with the requested documentation. Ms. Mostoller also testified that she has received sufficient explanations concerning documents that were requested but unavailable or lost and that she recalled having been advised about the execution of the Sale Agreement by Mrs. Miller’s attorney. The mere fact that the Chapter 7 Trustee filed a motion for turnover to protect assets that could have easily been used and/or sold doеs not rise to any level of bad faith, particularly considering the parties came to an agreement, the Trustee withdrew her motion, and the Debtor has done what he agreed to do and turned over the agreed upon assets. Furthermore, nothing within Ms. Mostoller’s testimony led the court to believe that she considered any of her dealings with the Debtor to be in any way indicative of bad faith.
When questioned about payment of the various taxes, the Debtor testified that he had not known that he was not supposed to pay the taxes he paid to Sevier County but that any payments made to Sevier County would have been made by Mrs. Miller towards back taxes owed on Cove Mountain Realty, Inc. properties and would have been paid from Cove Mountain Realty, Inc. funds. There was no evidence to the contrary. With respect to the Illinois Residence, the Debtor testified that his daughter, grandson, and former spouse have lived in the house for nine or ten years, and his daughter is supposed to pay the taxes, but not only did she not pay them in 2012, she did not advise the Debt- or that they were unpaid until the last minute, forcing him to pay them to avoid a tax sale. The Debtor acknowledged that he originally paid the taxes with estate funds but was advised by the attorney for the United States Trustee that he had to repay those funds, which he did the following day using his exempt social security monies. He also testified that his daughter has multiple sclerosis and his ex-wife has cancer, and although they earn money through dog grooming and medical record transcription, respectively, they have good days and bad days and their conditions make it difficult for either to be employed full-time. It is not indicative of bad faith that the Debtor wanted to protect the home in which members of his family reside and although he used estate funds without authorization, he reimbursed the full аmount immediately with his social security payments.
The court also does not believe that the Debtor intentionally left out any creditors or that the failure to initially list all creditors constitutes bad faith. With respect to the identification of creditors in association with the Involuntary Petition, there is no dispute that the Debtor filed his initial List of Creditors, listing seventeen creditors, as an attachment to the Debtor’s Amended Answer to Involuntary Petition Filed by Tennessee State Bank on October 24, 2012, which he then amended later that same date to include two additional creditors, or that he then filed an Amended List of Creditors, evidencing twenty-five creditors, on December 7, 2012. Coll. Trial Ex. 29; Trial Ex. 31. Likewise, there is no dispute that the Debtor included only eleven creditors in the Verification of Creditor Matrix filed with his Voluntary Petition in the Middle District of Florida on September 19, 2012. Coll. Trial Ex. 32. When questioned about these incon-sistences at trial, the Debtor testified that he did not review the Verification of Creditor Matrix filed in his Florida case before
As stated, there is no dispute that the Debtor filed an initial list of creditors with his amended answer on October 24, 2012, or that he amended the list of creditors on that same date to add Sevier County Bank and Tennessee State Bank. The Debtor’s list of creditors was then amended once more on December 7, 2012, to include six additional creditors, and it has not been amended again since that date. The Debt- or testified that he thought of the additional creditors when questioned during a deposition and steps were then taken to amend the list of creditors to include those previously omitted. It is significant that the Debtor was the party to identify the omitted creditors, that he quickly took steps to amend the list to add them, and that no other creditors have since been required to be added. It is also significant to note that the Debtor was represented by two different attorneys between the initial filing date and December 7, 2012, the date that the final amendment to the list of creditors was filed. Based upon the record as well as his testimony, the court does not find that the inconsistencies with respect to the lists of creditors evidences any bad faith by the Debtor to justify denying the Motion to Convert.
Similarly, the inconsistences raised by Tennessee State Bank with respect to the Debtor’s statements and schedules does not rise to the level of bad faith necessary to deny conversion under Mamma. At trial, the Debtor testified that he went over his statements and schedules with someone in Mr. Ray’s office before they were filed on January 23, 2013, and amended on March 20, 2013, and that he believes that the assets listed were those he owned as of September 28, 2012 and as of January 9, 2013. See Coll. Trial Ex. 16. He acknowledged that it appeared that his Schedule B appeared to reflect that the “ — ” in the “Husband, Wife, Joint, or Community” column was intended to be a continuation of jointly owned property, although making that presumption, the schedule incorrectly states that his clothing is jointly owned when Mrs. Miller clearly does not own it. Coll. TRIAL Ex. 16. Schedule B also refleсts that the Millers jointly owned Cove Mountain Realty, Inc. and Valley Mart Exxon but the values were listed as “unknown.” Coll. Trial Ex. 16. The Debtor also testified that he and Mrs. Miller both owned the Cloud 9 cabin, but he was unsure whether there were, as of September 28, 2012 or January 9, 2013, any uncashed checks from rents.
More specifically with respect to the Debtor’s income, Tennessee State Bank questioned the Debtor about the disposition of proceeds of approximately $314,000.00 from the sale of the Whetstone property, see Trial Ex. 55, and approximately $400,000.00 paid by the Weavers on a Purchase Money Note in connection with the sale, see Trial Ex. 27, to which he testified that the funds were used to pay off a tax lien to the Internal Revenue Service of between $100,000.00 and $200,000.00, to pay off the settlement of a lawsuit with Century 21 of roughly $190,000.00, and other business-related bills. He also testified that, to the best of his knowledge, Mrs. Miller did not receive any of the funds just for herself. With respect to the Millers’ 2009 and 2010 tax returns and the large disparity in income and wages reflected therein: total income of $213,437.00 in 2009 and -$54,970.00 and wages of $79,000.00 in 2009 and $8,000.00 in 2010, Coll. Trial Ex. 28, the Debtor
Under the Marrama standard, in order to find bad faith sufficient to deny conversion, the court must find that the Debtor’s conduct was intentional and egregious, such as transferring or concealing property without consideration with the intent to hinder creditors, fraud, or an abuse of the bankruptcy process. The court does not find such egregious behavior present in this case. Clearly, the Debtor’s statements and schedules contain omissions and inconsistencies; however, the court does not find any intent on behalf of the Debtor to file fraudulent or misleading statements. Furthermore, whilе it does not make them excusable, the fact that this was an involuntary case filed against the Debtor is relevant. The Debt- or prepared and filed the statements and schedules in January 2013, to reflect his information as it would have existed in September 2012, and, as previously discussed, the Debtor himself knew very little about his personal and business finances, having relied almost entirely upon Mrs. Miller or, in the case of the Millers’ taxes, his accountant, while he conducted operations of the businesses. Additionally, having had the opportunity to review these statements and schedules more closely in connection with this litigation, there is nothing to prevent the Debtor from amending these documents to better reflect the information that he has now testified to in addition to providing further disclosures in a plan of reorganization.
The Debtor testified that he intends to reorganize under Chapter 11 through the liquidation of certain properties and the retention of lucrative businesses and properties, many of which are jointly owned with Mrs. Miller. He also testified that he and Mrs. Miller intend to work together in their respective Chapter 11 cases to pay off their joint liabilities. At trial, the Debtor testified that his estate is not currently receiving any of the income recеived from operation of their jointly held properties and/or businesses, that other than the Subway monies, which are deposited into a Valley Mart Exxon account, all income received from the shopping center has been paid into Mrs. Miller’s debtor-in-possession account, and none of the income from the campground has been paid into the Debtor’s estate, although he is unsure whether Mrs. Miller has deposited those funds into her debtor-in-possession ac
An Order consistent with this Memorandum will be entered.
Notes
. Mrs. Miller is also a co-obligor on four of the Notes.
. The parties’ Stipulations erroneously state that the trial was conducted on December 22, 2012.
. This Order also granted the Motion of Tennessee State Bank to Determine Venue fоr the Administration of the Debtor's Estate and directed that the Debtor’s bankruptcy case would proceed before this court rather than in the Middle District of Florida where the Debtor filed his Voluntary Petition under Chapter 11.
. The taxes owed to Sevier County are $56,187.00 after the Millers’ unauthorized post-petition payments of $15,167.12. See Section III.C., infra.
. At trial, the Debtor testified that his wife, Karen Miller, controls the money and was told in January and February 2013, to put all income received from Cove Mountain Realty into her debtor-in-possession account.
. The Debtor’s intention with respect to these properties is also reflected in his Chapter 7 Individual Debtor's Statement of Intention, although in that document, he also states an intent to surrender 3202 Wears Valley Road, Sevierville, Tennessee, 3958 Wears Valley Road, Sevierville, Tennessee, and 3141 Happy Hollow Road, Sevierville, Tennessee, which he specifically identified through his trial testimony as properties he hoped to retain. Trial Ex. 52.
. The Debtor also acknowledged that the Internal Revenue Service had filed a tax lien against the Millers which they had satisfied prior to the commencement of the Involuntary Petition against him.
. In support of this contention, the Debtor also testified that, prior to the filing of the Involuntary Pеtition, he had taken his consumer credit counseling briefing as required for individual debtors. See 11 U.S.C. § 109(h)(1) (2006).
. The motion was subsequently withdrawn on May 14, 2013, and'another option to sell the Valley Mart Exxon leasehold free and clear of liens was filed in Ms. Miller’s case on May 30, 2013. After notice and hearing, an Order was entered on June 17, 2013, granting the motion with the proceeds to be paid to Tennessee State Bank on its mortgage obligation and any net proceeds to be held by Ms. Mostoller pending determination of ownership and distribution.
. Tennessee State Bank also included within its Statement of Cause Factors and Bad Faith Acts the fact that the Millers have allowed Cove Mountain Realty, Inc. and Movieland Games to occupy properties in which the Millers hold a joint ownership interest without receiving any value or rental income from either company. At trial, the Debtor testified that he would move his office at Cove Mountain Realty, Inc. in the event a paying tenant sought to rent the space. He also acknowledged that while Cove Mountain Realty, Inc. does not currently pay rent, in the event the case is converted, if the property is not rented or sold, he intends to collect rent from Cove Mountain Realty, Inc. With respect to Movie-land Games, thе Debtor testified that the business is failing and it needs to be closed. He further stated that he will seek a paying tenant for that property as well. Although the
. The Debtor did clarify that after the Order for Relief was entered against Mrs. Miller, she had one or two checks from their businesses in her possession and was instructed by the United States Trustee’s office to deposit those funds into her debtor-in-possession account.
. In response to question ten "Other transfers,” a transfer to James Headrick in 2011 for "Real Estate — Hickory Hollow” is listed, Trial Ex. 17; however, the General Warranty Deed from the Millers transfers the property to James Headrick and his wife, Glenda Gail Headrick. Trial Ex. 33. The Debtor testified that he does not recall any other transfers of real property to Mr. Headrick and the one listed in his Statement of Financial Affairs would be the same transfer reflected in Trial Exhibit 33.
. Schedule I also reflects monthly income for Mrs. Miller in the amount of $8,937.02, consisting of $6,500.00 in wages, less $2,035.58 in taxes, plus $4,472.60 for income from real property, resulting in the Millers reflecting a combined average monthly income of $14,984.62. Coll Trial Ex 16.