UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
FRANKFORT DIVISION
IN RE:
MALCOLM G. FITZGERALD CASE NO. 86-00009
ANNA BEA FITZGERALD
DANNY DALE FITZGERALD CASE NO. 86-00010
SHIRLEY ANN FITZGERALD
TIMOTHY REED FITZGERALD CASE NO. 86-00008
VICKIE LYNN FITZGERALD
DEBTORS CHAPTER 11
MEMORANDUM OPINION
This matter is before the Court for a determination of the entitlement of creditor Farm Credit Services of America, A.C.A. ("FCS") to its pro rata share of payments to unsecured creditors, as called for in the debtors' Plan. FCS and the debtors have submitted memoranda in support of their respective positions.
The specific question in issue herein is whether the Plan calls for payments of $3000.00 per year, or $9000.00 per year ($3000.00 per couple per year), to unsecureds. FCS contends that the Plan calls a total payment of $9000.00 per year, and that therefore the debtors owe FCS $24,480.00. This amount represents FCS's 68% pro rata share of the $36,000.00 it contends is due from January 1989 to January 1992.
The debtors in the above-referenced cases are operating under Second Amended Disclosure Statements and Chapter 11 Plans which are exactly the same in each case. Each Plan contains a section on Treatment of Classes which includes the following:
Class 6: Unsecured creditors, including unsecured portions of secured creditors' claims, will receive, pro rata, a percentage of their proven and allowed claims over a period of seven years, with annual payments commencing January 31, 1989. Debtors submit all their disposable income to unsecured creditors, with said annual payments to unsecureds to be not less than $3000.00.
Each Plan defines the term "debtors" as the couple who are the debtors in each case. Malcolm G. Fitzgerald and Anna Bea Fitzgerald are "the debtors" in Case No. 86-00009, and so on.
This language suggests support for FCS's reasoning that each couple was obligated to pay at least $3000.00 per year to unsecured creditors. However, consideration of other Plan provisions raises doubt as to such an interpretation. The Treatment of Classes section in each Plan further provides in part as follows:
Class 4: Production Credit Association ("PCA") currently has a secured claim in the amount of $113,000.00 and an unsecured claim of approximately $152,000.00. PCA's debt is secured by a second mortgage on the Debtors' 96-acre farm and a first mortgage on Debtors' dairy cattle and equipment. Debtors propose paying interest at PCA's prevailing loan rate. Payments to PCA are currently being made in the amount of $2000.00 per month by means of a dairy assignment. Additionally, PCA shall receive annual principal reduction payments of $6000.00 on or before January 31 of each year.
PCA is the predecessor of FCS. Applying FCS's reasoning to this provision would require a $2000.00 per month dairy assignment and a $6000.00 annual principal reduction payment to be made by each debtor couple. Taking that reasoning a step further would make each debtor couple responsible for a $113,000.00 secured debt and a $152,000.00 unsecured debt.
FCS does not maintain that it is owed a $6000.00 per month dairy assignment or an $18,000.00 annual principal reduction payment. The terms of the Plan do not suggest that such is the case. Further, there is nothing in the Plan that suggests that
the provisions for Class 6 should be applied any differently than the provisions for Class 4. It is therefore the opinion of this Court that the total owed to FCS on its unsecured debt pursuant to the provisions of the Plan is $3000.00 per year for all the debtors herein, or $12,000.00 for January 1989 through January 1992.
An order in conformity with this opinion will be entered separately.
BY THE COURT
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BANKRUPTCY JUDGE
COPIES TO:
Debtors
Lisa Koch Bryant, Esq.
John Ryan, Esq.
mfitzger.opi