Kenneth W Worden and Patricia M Worden

So Ordered.

Signed this 11 day of July, 2023.

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GS, Ss United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF NEW YORK

In re:

KENNETH W. WORDEN and Chapter 12

PATRICIA M. WORDEN, Case No. 22-60094-6

Debtors.

APPEARANCES:

ORVILLE & McDONALD LAW, PC PETER ORVILLE, ESQ.

Attorney for Debtors

30 Riverside Drive

Binghamton, NY 13905

VLOCK & ASSOCIATES, PC STEPHEN VLOCK, ESQ.

Attorney for NG Solutions LLC

630 Third Avenue, 18" Floor

New York, NY 10017

Mark W. Swimelar EDWARD J. FINTEL, ESQ.

Chapter 13 Trustee

250 South Clinton St., Suite 203

Syracuse, NY 13202

Honorable Wendy A. Kinsella, Chief United States Bankruptcy Judge!

' This case was pending before Chief Bankruptcy Judge Diane Davis prior to her retirement on March 5, 2023, at

which time it was transferred to Hon. Wendy A. Kinsella. All observation and credibility assessments referenced

herein were provided by Chief Judge Davis. See In re EM Equip., LLC, 504 B.R. 8, 11 n.3 (Bankr. D. Conn. 2013).

MEMORANDUM-DECISION AND ORDER

INTRODUCTION AND PROCEDURAL BACKGROUND

Presently before the Court is Creditor NG Solutions LLC’s (“NG”) Motion to Dismiss Case

for Bad Faith Serial Filings under § 1208(c) (“Motion to Dismiss”), or in the alternative, Motion

for Relief from Stay pursuant to §§ 362(d)(1), (d)(2), and (d)(4) (“Motion for Alternative Relief”)

(ECF No. 10),2 and related Objection to Confirmation (“Objection to Confirmation”) (ECF No.

26) of Kenneth and Patricia Worden’s (“Debtors”) proposed chapter 12 Plan (the “Plan) (ECF No.

19).3 Pursuant to the Amended Scheduling Order (ECF No. 69), the Court conducted an

evidentiary hearing on December 7, 2022 (the “Hearing”) at which all of NG’s exhibits were

stipulated into evidence. Debtor Kenneth Worden, his brother Charles Worden, and their expert

witness, Gary Conklin testified on behalf of Debtors. NG presented its expert witness Bruce

Dehm. Mark W. Swimelar, Chapter 12 Trustee (the “Trustee”) appeared through his counsel,

Edward J. Fintel, Esq. At the close of testimony, Debtors and NG (the “Parties”) were afforded

an opportunity to submit post-hearing memoranda of law by January 6, 2023. (ECF Nos. 80 and

81). The matter was taken under advisement on that date.

As required by Federal Rule of Civil Procedure 52 (“FRCP”), made applicable to this

bankruptcy proceeding by Federal Rule of Bankruptcy Procedure 7052 (“FRBP”), the Court

renders the following findings of fact and conclusions of law. For the reasons detailed below, the

Court denies NG’s Motion to Dismiss and Motion for Alternative Relief and overrules its

2 Citations to docket entries within the current bankruptcy proceeding will be (ECF No. __); citations to docket entries

within Debtors’ previous bankruptcy cases will be (Bankr. [case number] at ECF No. __).

3 Debtors filed a First Amended Chapter 12 Plan dated October 28, 2022 (“Amended Plan”) (ECF No. 59) which is

the plan under consideration for confirmation herein. See Amended Scheduling Order (ECF. No. 69) (directing that

“the First Amended Plan (ECF No. 59) will incorporate the terms of the Parties’ agreed upon Joint Stipulation of Facts

and serve as the plan under consideration at the rescheduled Evidentiary Hearing [on December 7, 2022]”).

Objection to Confirmation. The Amended Plan as modified by the Parties’ Joint Stipulation of

Facts (the “Joint Stipulation”) (ECF No. 56) and on the record at the Hearing is hereby confirmed.

JURISDICTIONAL STATEMENT

The Court has jurisdiction over the Parties and subject matter of this core proceeding

pursuant to 28 U.S.C. §§ 157(a), (b)(1), (b)(2)(G) and (L), and 1334(b). Venue is proper in this

Court pursuant to 28 U.S.C. §§ 1408 and 1409.

FACTUAL BACKGROUND4

Debtors filed the present joint petition for chapter 12 relief on February 21, 2022 (the

“Petition”) (ECF No. 1), listing on Schedule A real properties known as 71, 111, 166, 170, and

310 Dutchtown Road, Town of Windsor, New York (collectively the “Property”). Between May

1998 and December 2007, Debtors executed several mortgages encumbering the Property in favor

of NBT Bank (“NBT”).5 On December 10, 2012, Debtors executed a promissory note with NBT

in the sum of $1,640,794.21 (“Note I”) and a second note in the sum of $874,674.14 (“Note II”).6

Thereafter, Debtors made monthly payments of $25,000 to NBT until August 2015, during which

time milk prices dropped and Debtors were forced to reduce their payments to $14,500.7

4 The facts are derived from the Joint Stipulation (ECF No. 56), the record of the Hearing, the Exhibits admitted into

evidence at the Hearing (see ECF No. 74), the documents filed in this case and Debtors’ previous bankruptcy cases

including Case No. 16-60022, Case No. 16-60905, and Case No. 16-61636 which this Court takes judicial notice of

pursuant to the Federal Rule of Evidence 201, and In re House, 2019 Bankr. LEXIS 156, at *2, n.1 (Bankr. S.D. Miss.

Jan. 18, 2019) (“A court may take judicial notice of related proceedings and records in cases before the same court”)

(citation omitted). Based on NG’s Motion for Alternative Relief and allegations of bad faith regarding Debtors’ serial

filings, the Court considers the facts of the prior cases and pleadings filed therein relevant to its findings.

5 NBT and Debtors entered into the following mortgages: (i) on May 1, 1998 a mortgage was executed in the amount

of $160,000.00 (“Mortgage I”) and was recorded on June 12, 1998; (ii) on June 3, 1998 a mortgage was executed in

the amount of $83,000 (“Mortgage II”) and was recorded on June 12, 1998; (iii) on November 20, 1998 a mortgage

was executed in the amount of $100,000 (“Mortgage III”) and was recorded on December 23, 1998; (iv) on May 26,

2005 a mortgage was executed in the amount of $750,000 (“Mortgage IV”) and was recorded on June 2, 2005; (v) on

November 1, 2002, a mortgage was executed in the amount of $200,000 (“Mortgage V”) and was recorded on

December 24, 2002; and (vi) on December 17, 2007 a mortgage was executed in the amount of $250,000 (“Mortgage

VI”) and was recorded on January 4, 2008 (collectively the “Mortgages”).

6 See Joint Stipulation, ¶¶ 7, 9, 11, 13, 15, 17.

7 See Debtors’ Affirmation in Opposition to Motion for Relief from Automatic Stay and Adequate Protection filed in

Debtors’ First Case. (Bankr. 16-60022 at ECF No. 18).

On January 7, 2016, Debtors filed a voluntary petition under chapter 12 of the Bankruptcy

Code with Case No. 16-60022 (“First Case”). Approximately 2½ months later, NBT and Debtors

agreed to an Interim Order for Debtors to pay NBT monthly adequate payments of $1,500.00

(“Interim Order”). Shortly thereafter, Mortgages I, II, III, IV, V and VI were transferred to NG

and assignments were recorded. Note I and Note II were simultaneously assigned and transferred

to NG by allonges. On May 5, 2016, NG was granted relief from the automatic stay based on a

default in the Interim Order. Four days later, the Court granted the Trustee’s motion to dismiss

the First Case due to Debtors’ failure to file and serve a notice of confirmation hearing.

On June 22, 2016, NG filed a summons and complaint against Debtors in the Supreme

Court of the State of New York, County of Broome (“State Court”), seeking a judgment against

Debtors in the amount of $1,496,187.92, and an Order of Seizure pursuant to New York Civil

Practice Law and Rule (“CPLR”) 7102. This action prompted Debtors to file their second chapter

12 petition, Case No. 16-60905 (“Second Case”). Approximately six months into the Second Case,

Debtors executed a Renewal and Modification Agreement in favor of NG (“Modification

Agreement”) whereby Debtors ratified and modified their obligations under the various Notes and

Mortgages and confirmed NG’s liens on the Property. Debtors acknowledged the principal,

interest and late fees were $1,249,510 on Note I and $1,527,718 on Note II. The Modification

Agreement required Debtors to execute a new mortgage in favor of NG on two Properties in the

amount of $200,000 (“Mortgage VII”) and required three separate monthly payments to NG.

Although Debtors filed a plan, based on discussions among the Parties, they voluntarily

dismissed the Second Case on February 3, 2017, before confirmation. As part of an agreement

with NG, Debtors began making monthly payments of $3,000 per month, with an increase to

$4,000 per month for July and August 2017 (Bankr. 18-61636 at ECF No. 109). In February 2018,

NG paid Debtors’ delinquent real property taxes in the amount of $65,567.63. Approximately two

months later, the Parties entered an agreement for Debtors to sell 88.3 acres of their encumbered

Property to a third party at a price of $1,750 per acre, for a total sale price of $154,525 (“2018

Partial Property Sale”). Debtors sold the real property as agreed and remitted the net proceeds to

NG after the closing in August 2018.8 On September 6, 2018, NG filed another summons and

complaint in State Court, this time seeking a reduced judgment against Debtors in the amount of

$558,495.34 and an Order of Seizure pursuant to CPLR § 7102. (Joint Stipulation, ¶ 30).

On December 7, 2018, Debtors filed their third chapter 12 petition, Case No. 18-61636

(“Third Case”). Debtors proposed a chapter 12 plan, but the Court found it unfeasible and

confirmation was denied by Order dated February 6, 2020. (Bankr. 18-61636 at ECF No. 83).

The Court granted the Trustee a Conditional Order of Dismissal which provided Debtors an

opportunity to file and notice an amended chapter 12 plan. On March 13, 2020, NG filed a motion

seeking to have Debtors’ case dismissed pursuant to sections 1208(c)(1), (c)(5), and (c)(9), barring

Debtors from refiling for one year under sections 105(a) and 349(a) or, in the alternative, granting

NG in rem relief pursuant to section 362(d)(4). One month later, the Parties agreed that Debtors

would sell their cattle and equipment, from which NG received $25,918.22. (See Joint Stipulation,

¶ 36). By Order dated May 5, 2020, the Court denied NG’s motion; however, the Trustee’s Motion

to Dismiss was granted for failure to confirm a plan. (Bankr. Case No. 18-60636 at ECF Nos. 114

and 116).

The dismissal of the Third Case occurred during a global pandemic. From March 20, 2020,

to August 31, 2021, New York State laws and Executive Orders prohibited the filing of residential

8 The record does not reflect how much NG was paid under the Modification Agreement, or how long Debtors made

those monthly payments to NG between the dismissal of the Second Case on February 3, 2017, and the filing of

Debtors’ subsequent bankruptcy approximately eighteen months later.

mortgage foreclosure actions due to the financial crisis created by COVID-19. Upon the lifting of

the various moratoriums, NG filed a mortgage foreclosure action in State Court on October 7,

2021. Debtors filed a Hardship Declaration seeking a stay of that action through January 15, 2022.

NG challenged the asserted claim of hardship and moved for an order lifting the stay. The matter

was thereafter adjourned and on February 16, 2022, NG filed a motion to appoint a Referee to

compute the amount due under the Mortgages. Less than a week later, Debtors filed the instant,

fourth chapter 12 petition (“Fourth Case”) (ECF No. 1).

The schedules filed in this Fourth Case reflect that Debtors no longer own cattle or farm

equipment (ECF No. 1 and Joint Stipulation, ¶ 45). Instead, Debtors’ projected income is derived

from their modified farming operation.9 Debtors grow crops including corn, alfalfa, hay, and, in

some years, soybeans. Additionally, Debtors now board and raise beef cattle, and receive income

from Chobani whey distribution. Debtors also rent one of the Properties for $800 per month.

NG filed three proofs of claim in this case: Claim No. 2 is filed as a secured claim in the

amount of $1,398,825.95; Claim No. 3 is filed as a secured claim in the amount of $50,000.00 and

an unsecured claim in the amount of $587,681.58, for a total of $637,681.58; and Claim No. 4 is

filed as a secured claim in the amount of $101,174.05 and an unsecured claim in the amount of

$98,825.95, for a total of $200,000.00. These claims have been addressed in the Amended Plan

as revised by the Joint Stipulation, ¶ 2, wherein the Parties agreed to value the Property and NG’s

secured claim at $1,000,000 to be repaid with an interest rate of 8% (the “Stipulated Claim”), set

pursuant to Till v. SCS Credit Corp., 541 U.S. 465 (2004). At the Hearing, the Amended Plan was

orally modified to provide for an increase in plan payments to the Trustee of $8,621.00 for thirty-

six (36) months to pay the Stipulated Claim, administrative expenses and a small dividend to

9 Exhibit A attached to the Amended Plan (ECF No. 59-1) contains updated projected income and expenses supported

by Debtor’s testimony at the Hearing.

unsecured creditors, and for direct payments to continue to NG for months thirty-seven (37)

through forty-eight (48), at which time the balance on the NG debt would be paid in full through

a refinance.10

Notably, Debtors have paid the following school and county real property taxes: 2019 -

$28,758.81; 2020 - $25,474.12; and 2021 - $26,892.24. As of October 20, 2022, the combined

county and school taxes due on the Property totaled $38,278.91. (Joint Stipulation, ¶ 49). By

letter dated December 19, 2022, the Trustee confirmed that both he and NG supported Debtors’

decision to pay their tax arrears “in full, with a lump sum” “directly to the County of Broome.”

Accordingly, the Trustee withdrew his objection to confirmation. (ECF No. 79). With the

Trustee’s issues resolved, only the Parties’ competing positions are before the Court for

determination.

At the Hearing, the Court heard the following testimony, observing and assessing the

credibility of the four witnesses. Debtor Kenneth Worden (“Debtor”) testified Debtors made

monthly payments of $25,000.00 on NBT’s note for approximately ten years, for a total of

approximately $3,000,000. When dairy prices fell, coupled with costs associated with the floods

of 2006 and 2011, Debtors could no longer manage their monthly payments to NBT and filed the

First Case. During this time NBT sold the note to NG. Debtors dismissed the First Case because

NG had expressed a willingness to work with them. (Trial Tr. 17–20).11 NG commenced an action

seeking a judgment and order of seizure less than two months later and, in response, Debtors filed

the Second Case to “protect” themselves and to prevent NG from foreclosing on the farm. Debtors

believed the filing was their “only option.” (Trial Tr. 24-25). On January 26, 2017, the Parties

10 During the Hearing, Edward J. Fintel, counsel for the Trustee, advised the monthly payment needed to be $8,621

for the Amended Plan to be feasible. (Trial Tr. 121-122).

11 The Trial Transcript is filed at ECF No. 77-1 and will be referred to herein as “Trial Tr. [page number].”

entered into the Modification Agreement ratifying and amending payment terms on the Notes and

Mortgages. As a result, Debtors voluntarily dismissed their Second Case.

NG subsequently paid $65,567 in real property taxes. Debtors then sold 88.3 acres of real

property and remitted approximately $155,000 in proceeds from that sale to NG. After the closing

and receiving payment, NG “called the note” and commenced a collection action in State Court

approximately 30 days later. (Trial Tr. 30-32).

In response to that action, Debtors filed their Third Case, and noticed a plan for

confirmation. Debtors made payments of “roughly $5,800 a month, for six months, and then

catchup taxes that were due.” In April 2020, NG and Debtors agreed that the cattle and farm

equipment would be sold with all proceeds going to NG. In May 2020, the Third Case was

dismissed for failure to confirm a plan. (Trial Tr. 33-36).

Presently, Debtors are parties to an agreement with Wormont Dairy dated May 15, 2022,

under which Debtors raise and care for its cattle (“Cattle Contract”). Wormont Dairy is run by

Debtor’s brother, Charles Worden (“Charles”). Debtor testified the arrangement has “turned into

a good thing because beef prices are strong right now, so [Charles] is able to pull out beef cattle

on a monthly basis and sell them.” Debtors also grow crops consisting of “corn, hay, alfalfa and

in some years soybean,” part of which are used for feed with the excess sold. (Trial Tr. 42-43).

Debtors’ income and expenses as reflected on Exhibit A of the Amended Plan include

revenue from shell corn sales, high energy corn sileage, the Cattle Contract, Chobani whey

distribution, the house rental, the New York State tax refund, and Social Security income.12 Since

the filing, there have been two changes to Debtors’ cash flow as reflected therein. The first is a

price and head increase under the Cattle Contract pursuant to the amendment. The original

12 Patricia Worden’s part-time employment income is listed as zero in the Amended Schedule A attached to the

Amended Plan.

agreement provided for “200+ head of cattle at $1.50 per head per day.” (NG Ex. C). At trial,

Debtor testified they were boarding about 265 head and that the brothers had agreed to raise the

daily rate per head from $1.50 to $1.65. In addition, the length of the Cattle Contract was extended

out until the NG note was paid. (Trial Tr. 49-54). Due to the increase in the number of cattle,

Debtor testified the income and expenses numbers “might shift somewhat” since Debtors were

feeding more cattle. Shell corn sales may decrease and be put into storage for the cattle; however,

the amount of sileage sold would increase. (Trial Tr. 58-60). The second change relates to Patricia

Worden leaving her part-time job to work on the farm with Debtor and the corresponding loss of

her wages. (Trial Tr. 44-48).

Debtor testified their expenses were estimated “as high as we figured it could possibly be,”

noting that the $3,000 per month cost associated with the Wormont Dairy Equipment Rental

Agreement (the “Equipment Agreement”) (NG’s Ex. D) is deducted from the monthly income

received for raising cattle each month. The personal household expenses include “food,

housekeeping, childcare, laundry, personal care, the dental, everything.” Debtors also have

custody and care for their 11-year-old granddaughter. (Trial Tr. 61-66).

Charles testified that he has grown crops and raised cattle all his life, and that he has been

the sole owner of his farm since 1978. In 2017, Charles had a barn fire and lost his milking parlor,

his offices and everything at the dairy, and was “forced to move the cattle off the farm.” (Trial Tr.

86). Prior to that incident, Charles had started to use sexed semen to breed feeder steers, which

“really changed the dynamics” of the farming operation due to the increased demand for beef after

a lot of calves were lost in “the storms in the Dakotas.” (Trial Tr. 88-89). Due to the fire, he did

not have the space to house the cattle, and he and Debtor began discussing a joint operation. The

agreement for 200-plus head at $1.50 a pound, which dollar amount was “pretty standard,” is

“driven off of what it costs to feed one and a little bit for overhead.” (Trial Tr. 89). Debtor does

not own any equipment, and the cost under the Equipment Agreement with Debtor “is built into

the fee.” (Trial Tr. 93). While both the Cattle Contract and Equipment Agreement are still in

place, the Worden brothers recently agreed to increase the fee per head and the number of cattle

raised. Debtor feeds the cattle the same diet young animals are fed, which is “much different than

most” other farmers do, and it has “worked really well for us.” (Trial Tr. 94-96). As a result,

Charles is “getting a very high price for the cattle” because the unique diets are low-cost and result

in a good profit margin. With the solid profit margins, Charles is comfortable with the feeding

and care of the cattle so the number raised by Debtors has increased to 265 and may be further

increased over time. (Trial Tr. 95-96).

Debtors’ expert witness, Gary Conklin, is semi-retired and has worked as a part-time

consultant for the Chapter 12 Trustee since 1996. Mr. Conklin visited Debtors’ farm and wrote

the Field Report in this case. (NG Ex. J). Mr. Conklin acknowledged the two changes to income

and expenses supporting the Amended Plan, namely the new Cattle Contract terms with Wormont

Dairy and the lack of income from Patricia Worden, but that based on “actual numbers,” the

Amended Plan was “reasonable.” (Trial Tr. 102-104). Since Debtor and Charles have been in the

cattle business all their lives, in his opinion “if there’s anybody that can project what a dairy or

beef herd is going to produce, it’s probably these guys.” (Trial Tr. 103). Further, if Debtors

establish a “positive track record” of “making monthly payments on a timely basis” this will

“enhance the[ir] possibility of getting refinanced.” (Trial Tr. 103).

NG’s expert, Bruce Dehm (“Mr. Dehm”) is an agricultural economist who operates the

consulting business “Dehm Associates,” serving mostly dairy farms. He has worked with

hundreds of farms since 1991. (Trial Tr. 106-108). He indicated he reviewed NG’s exhibits, and

prepared NG’s Exhibit O in advance of his testimony, which summarized his analysis of Debtors’

income and expenses for the 11 months ending in November 2022. This review resulted in a

negative cash flow of $51,954. (Trial Tr. 112-118). After recomputing the Amended Plan figures

as discussed at the Hearing with an increase to 265 cattle at $1.65 per head per day, the removal

of Ms. Worden’s outside income, and an increase in the Amended Plan payments to $8,621 per

month, Mr. Dehm calculated there would still be an annual negative cash flow of $2,845. (Trial

Tr. 162-164; 167-168).13 He further testified based on his experience “if you’re adding cattle,

there’s going to be more expense” and expected increases in variable costs such as utilities, repairs

and fuel. (Trial Tr. 165-166).

ARGUMENTS14

In its Motion to Dismiss, NG argues this case should be dismissed for “cause” based on

Debtors’ bad faith serial filings. Asserting that Debtors have no desire or ability to formulate or

confirm a viable plan as demonstrated by the dismissal of the previous bankruptcy cases, NG

alleges Debtors have not filed their chapter 12 cases in good faith, have exhibited a lack of effort

in reorganizing, and that the factors in set forth in the Second Circuit’s chapter 11 decision C-TC

9th Ave. P’ship v. Norton Co. (In re C-TC 9th Ave. P’ship), 113 F.3d 1304 (2d Cir. 1997) support

its section 1208 motion. If the case is not dismissed, NG requests this Court grant relief from the

automatic stay for cause under section 362(d)(4) for bad faith serial filings with in rem relief for

13 Debtors’ counsel filed the October Monthly Operating Report and November Monthly Operating Report the day

before the Hearing. The Court does not condone the “trial by ambush” approach but allowed Debtor’s testimony

regarding the November financial results. Although unable to independently verify their accuracy, Mr. Dehm was

able to competently testify regarding the figures contained therein.

14 NG attempts to reargue its position in its Post-Trial Memorandum of Law that the testimony of fact witnesses

Kenneth Worden and Charles Worden should be precluded at trial. Prior to the Hearing, the Court addressed that issue

in a detailed Oral Ruling pursuant to Second Circuit case law and FRCP 16 and 37, made applicable to this bankruptcy

proceeding by FRBP 7016 and 7037. In analyzing the factors articulated in Patterson v. Balsamico, 440 F.3d 104

(2d. Cir. 2006), the Court determined they weighed in Debtors’ favor, and against NG, which decision was So Ordered

on November 21, 2022. Thus, the testimony will be considered. (See Amended Scheduling Order at ECF No. 69).

two years from the dismissal date, or in the alternative, grant NG relief from the automatic stay

pursuant to sections 362(d)(1) and (d)(2) and Local Bankruptcy Rule 4001-1.

Debtors counter that the arguments in NG’s Motion to Dismiss and Motion for Alternative

Relief mirror those made in the Third Case, which were previously rejected by the Court. (Bankr.

Case 18-61636 at ECF No. 114). Debtors contend NG continues to paint an incomplete picture of

the Parties’ relationship since NG purchased the loans from NBT in 2016, excluding facts and

misinforming the Court of the Parties’ history. Debtors aver that the dismissal of Debtors’ First

and Second Cases were at the behest of NG so that the Parties could work out their issues. This

arrangement included liquidating Debtors’ dairy herd to raise beef cattle, as well as making good

faith payments to NG by selling off their best tillable land and remitting all proceeds from the sale

to NG. Debtors therefore ask this Court to find that the Fourth Case was filed in good faith and

deny NG’s Motion to Dismiss and Motion for Alternative Relief in their entirety.

NG’s Objection to Confirmation focuses on Debtors’ lack of supporting documentation

which prevents this Court from assessing whether they will be able to make all payments under

the Amended Plan as required by section 1225(a)(6). NG asserts Debtors’ only documents concern

the cattle boarding and the equipment rental, which are suspect since the agreements are between

Debtor and his brother. Debtor’s newly created income from amendments to the Cattle Contract

were conveniently created to support the Amended Plan while Debtors’ past filings, performance

and historical operating reports demonstrate it is not feasible. Further, NG claims that although

certain line items provide for income from “Shell Corn Sales” and “Chobani Whey Distribution,”

no documentation to support receipt of revenue from those aspects of their farming operation was

provided. Thus, NG asserts Debtors have failed to carry their burden and the Court should deny

confirmation.

In turn, Debtors contend that the Projected Income and Expenses attached to the Amended

Plan demonstrate their ability to fund the Amended Plan as modified on the record at the Hearing.

Since Kenneth Worden’s detailed testimony of income and expenses was not controverted by NG

during cross-examination or through NG’s examination of its expert witness, Debtors submit they

have shown feasibility and the Amended Plan should therefore be confirmed.

DISCUSSION

The Court will first address NG’s argument for dismissal for bad faith under section

1208(c) and requests for relief from the automatic stay pursuant to sections 362(d)(1), (2), and (4).

Finally, the Court will discuss the Objection to Confirmation, and assess the feasibility of Debtors’

Amended Plan.

A. Section 1208(c) Dismissal for Cause: Bad Faith

In its Motion to Dismiss, NG claims that Debtors’ case should be dismissed with prejudice

pursuant to 11 U.S.C. § 1208(c) due to Debtors’ bad faith filing of the Petition. Section 1208(c)

provides that “[o]n request of a party in interest, and after notice and a hearing, the court may

dismiss a case under this chapter for cause…” and provides a nonexclusive list of ten grounds on

which a court may find cause. 11 U.S.C. § 1208(c); see Snider v. Rogers (In re Rogers), Case No.

17-21187, 2018 Bankr. LEXIS 187, at *8-9 (Bankr. W.D.N.Y. Jan. 25, 2018); In re Hyman, 82

B.R. 23, 24 (Bankr. D.S.C. 1987); In re Galloway Farms, Inc., 82 B.R. 486, 489 (Bankr. S.D. Iowa

1987). Although not specifically listed in the statute, “[e]vidence of a bad faith filing constitutes

cause for dismissal pursuant to § 1208(c).” In re Burger, 254 B.R. 692, 696 (Bankr. S.D. Ohio

2000). “Bankruptcy courts…routinely treat dismissal for prepetition bad faith conduct as

implicitly authorized by the words ‘for cause’.” Marrama v. Citizens Bank, 549 U.S. 365, 373

(2007).

NG contends the bad faith analysis in the Second Circuit’s chapter 11 decision C-TC 9th

Ave. P’ship v. Norton Co. (In re C-TC 9th Ave. P’ship), 113 F.3d 1304 (2d Cir. 1997) is dispositive

in this Chapter 12 case. NG argues that courts in this Circuit have applied the C-TC factors to

allegations of bad faith in Chapter 13 cases and, because of the similarity between chapter 13 and

chapter 12, those factors should be applied here. NG cites several cases in which the C-TC

elements were used in the Chapter 13 context by the bankruptcy court, which decisions were

subsequently affirmed by the district court. See Newton v. BNH Five Pack LLC (In re Newton),

17CV6379, 2020 U.S. Dist. LEXIS 91448, at 23 (S.D.N.Y. 2020) (affirming Bankruptcy Court’s

grant of nunc pro tunc relief from the automatic stay in debtor’s third chapter 13 case for bad faith

filing); In re Jean-Francois, 516 B.R. 699 (E.D.N.Y. 2014) (affirming Bankruptcy Court’s grant

annulling stay for bad faith filing using C-TC factors but without citing to the case); Koutsagelos

v. PII SAM, LLC, 12CV1703, 2013 U.S. Dist. LEXIS 83418, at 12 (E.D.N.Y. 2013) (affirming

Bankruptcy Court’s grant of nunc pro tunc relief from the stay for bad faith filing under section

1325(a)(3)); Plagakis v. Gelberg (In re Plagakis), 03CV0728, 2004 Dist. LEXIS 2458, at *16

(E.D.N.Y. 2004) (affirming Bankruptcy Court’s dismissal of chapter 13 case nunc pro tunc to

filing date). While Plagakis is the only case to address a section 1307(c) motion to dismiss, these

decisions demonstrate that courts in this Circuit find the C-TC bad faith factors applicable to

chapter 13 cases.

In its post-trial submission, NG relies on the C-TC factors in the chapter 12 context citing

the Virginia case of In re Massie, 231 B.R. 249 (Bankr. E.D. Va. 1999). The Massie court

reviewed the C-TC elements and concluded that case should be dismissed. This outcome however,

was based upon vastly different circumstances than exist here. The Massie debtor was being

evicted through a state court unlawful detainer action after her mother had already lost ownership

of the farm property at issue. She had no income and virtually no other creditors, and the court

concluded “[o]bjectively, reorganization would be futile as she had nothing to reorganize.” Id. at

253. Moreover, the Massie debtor acknowledged on several occasions that she knew she did not

qualify as a chapter 12 debtor. Id. As a result, the court concluded she filed her petition in bad

faith. Id. at 254.

The only case in the Second Circuit that tangentially involved chapter 12 was not directly

on point, as the C-TC factors were discussed in a subsequently filed chapter 11 case. In re Ridge

View Farm, LLC, Case No. 12-31700, 2012 Bankr. LEXIS 5716 (Bankr. N.D.N.Y. Dec. 10, 2012).

There, the debtor had filed two chapter 12 cases that were dismissed and then filed a chapter 11

case. One creditor brought a motion to dismiss the chapter 11 proceeding for lack of good faith,

while another creditor moved to reopen one of the previously dismissed chapter 12 cases to modify

an order terminating the stay to include in rem relief. In analyzing the debtor’s filing of the pending

chapter 11 matter, the court considered the debtor’s actions in the previous two chapter 12 cases,

found seven (7) of the eight (8) C-TC bad faith factors present, and dismissed the case. Id. at *22-

24.

Although the Ridge View court considered the prior Chapter 12 filings as part of its C-TC

bad faith analysis, this Court is unaware of any decisions in this Circuit that directly applied the

C-TC factors to a chapter 12 proceeding. Accordingly, this case is a matter of first impression.

Mindful of the fact that chapter 12 debtors have always been afforded special consideration by

Congress, the involuntary nature of section 1208(c) relief being requested by NG is more fully

appreciated against the history behind chapter 12. Accordingly, the Court’s analysis begins with

a brief overview of its background.

“Farmers have long enjoyed favored status in America's bankruptcy laws.” Katherine M.

Porter, Phantom Farmers: Chapter 12 of the Bankruptcy Code, 79 AM. BANKR. L.J. 729, 730

(2005) (discussing the history of chapter 12 and advocating for the development of broadly

applicable economic initiatives to assist rural families). Specialized bankruptcy relief for family

farmers has existed for two decades. Chapter 12 was first enacted on a temporary basis as part of

the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, and

a series of extensions followed to keep chapter 12 alive. Id. at 731-32, nn.14 & 15. Chapter 12 is

rehabilitative in nature and was initially designed as a more workable vehicle to overcome

perceived problems with farmers’ potential reorganization under either chapter 11 or chapter 13.

Id. at 732 n.19 (citation omitted); see also Ralph A. Peeples, Staying In: Chapter 11, Close

Corporations and the Absolute Priority Rule, 63 AM. BANKR. L.J. 65, 103 (1989) (noting “[t]he

sparse legislative history indicates that chapter 12 was intended to make bankruptcy a more

workable alternative for family farmers.”). The aim of Congress was to give family farmers a

“fighting chance” to keep their land and to return to full-time farming after reorganizing. Porter,

79 AM. BANKR. L.J. at 734; Harmon v. United States ex rel. FMHA, 101 F.3d 574, 584 (8th Cir.

1996) (quoting H.R. Conf. Rep. No. 99-958, at 48 (1986), reprinted in 1986 U.S.C.C.A.N. at 5251-

52). With the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

(“BAPCPA”), which became effective on October 17, 2005, chapter 12 became a permanent part

of the Code. Through BAPCPA, Congress changed chapter 12 to again improve the ability of

family farmers to successfully reorganize. Porter, 79 AM. BANKR. L.J. at 733. In the spirit of

assisting rural families, which is the ultimate and singular goal of chapter 12, Congress gave

creditors far less control in a Chapter 12 case than they would have in a chapter 11 case. Id. at

732. “Compared to Chapter 11, a creditor in a Chapter 12 case has relatively few tools at its

disposal to derail a debtor's efforts to reorganize.” Id. at 743. Although Congress sought to ease

the burdens of family farmers who found bankruptcy to be their only option, it “also intended to

prevent abuse of the bankruptcy system and to ensure farm creditors [would] receive fair debt

repayment treatment.” In re Pianowski, 92 B.R. 225, 232 (Bankr. W.D. Mich. 1988) (quoting

H.R. Conf. Rep. No. 99-958, 99th Cong., 2d Sess. 48 (1986)). “Once triggered, Code § 1208

ensures that a Chapter 12 debtor’s conduct in connection with his or her case at all times comports

with the universally applied threshold requirement that he or she deal honestly and openly with

the Court and all creditors.” In re Nichols, 447 B.R. 97, 107-08 (Bankr. N.D.N.Y. 2010).

Against this backdrop the Court turns to C-TC and the Second Circuit’s factors used to

determine bad faith in the filing of a petition. To establish bad faith, the movant must satisfy a

two-pronged test by a preponderance of the evidence. First, the movant must demonstrate the

objective futility of the reorganization process such that at the time of filing there was “no

reasonable probability that [the debtor] would eventually emerge from bankruptcy proceedings.”

In re Cohoes Indus. Terminal, Inc., 931 F.2d 222, 227 (2d Cir. 1991) (citation omitted). Second,

in demonstrating subjective bad faith, the movant must show that there “was no reasonable

likelihood that the debtor intended to reorganize.” Id. The Second Circuit noted that “a

determination of bad faith requires a full examination of all the circumstances of the case; it is a

highly factual determination but also one that may sweep broadly.” C-TC, 113 F.3d at 1312; see

Squires Motel, LLC v. Gance, 426 B.R. 29, 34-36 (Bankr. N.D.N.Y. 2010). In making this

assessment, the Court considered whether: (1) the debtor has only one asset; (2) the debtor has few

unsecured creditors whose claims are small compared to those of secured creditors; (3) the debtor’s

one asset is the subject of a foreclosure action as a result of arrearages or default on the debt; (4)

the debtor’s financial condition is, in essence, a two-party dispute between the debtor and secured

creditors which can be resolved in the pending state foreclosure action; (5) the timing of the

debtor’s filing evidences an intent to delay or frustrate the legitimate efforts of the debtor’s secured

creditors to enforce their rights; (6) the debtor has little or no cash flow; (7) the debtor can’t meet

current expenses including the payment of personal and real estate taxes; and (8) the debtor has no

employees. C-TC, 113 F.3d at 1311 (citing Pleasant Pointe Apartments, Ltd. v. Kentucky Hous.

Corp. 139 B.R. 828 (W.D. Ky. 1992)).

Several of the C-TC factors support NG’s assertion of bad faith in this case. Debtors’ only

asset is the Property15 and there are no unsecured claims. The Property was subject to a foreclosure

action as a result of arrearages and the dispute with NG could be resolved in the pending State

Court action. The timing of the filings clearly delayed NG’s enforcement efforts.

But those facts do not tell the whole story. Debtors have multiple sources of revenue

derived from raising cattle, producing crops, distributing whey, and rental income. They have

business agreements with Wormont Dairy and Chobani. Debtors have met their ongoing expenses,

making large payments on real estate taxes that are current. While Debtors technically do not have

employees, both of them work full time on the farm. Those factors weigh heavily against a finding

of bad faith.

In a traditional Chapter 12 analysis, courts consider other relevant facts and agree that no

one factor should be viewed as a dispositive indication of a debtor’s good faith. In re Pertuset,

No. 12-8014, 2012 Bankr. LEXIS 5792, at *41 (B.A.P. 6th Cir. Dec. 18, 2012); In re Ryder Farms,

Case No. 02-3201, 2002 Bankr. LEXIS 2034, at *22 (Bankr. S.D. Iowa 2002); In re Girdaukas,

92 B.R. 373, 377 (Bankr. E.D. Wis. 1998). These factors include: (1) the likelihood that much of

the debt may be nondischargeable in Chapter 7; (2) the adverse impact on creditors of the debtor’s

15 Notably, Debtors owned other assets such as cattle and equipment until they were sold with the proceeds paid to

NG.

actions in dissipating substantially all assets in the weeks leading up to filing; (3) the debtor’s

refusal to be forthcoming with the Court, the Trustee, and creditors concerning assets, liabilities,

and prospects for reorganization; (4) the debtor’s apparent lack of sincerity in seeking bankruptcy

relief; and (5) the immovable impediment to ever confirming a plan created by the debtor’s

invocation of the Fifth Amendment privilege. Snider v. Rogers (In re Rogers), No. 17-21187,

2018 Bankr. LEXIS 187, at *10 (Bankr. W.D.N.Y. 2018) (citing Pertuset, 2012 Bankr. LEXIS

5792, at *43). “Courts should also consider whether the debtor concealed assets, has been evasive

toward the court and creditors, violated the Bankruptcy Code, or violated court orders. Evasion

includes the failure to provide honest and complete information concerning financial affairs. . . .”

Ryder Farms, 2002 Bankr. LEXIS 2034, at *22-23.

The timing and number of serial filings are an important element of any bad faith

assessment. There is no per se rule against successive filings and a bona fide change in

circumstances may justify a debtor’s multiple filings. In re Metz, 820 F.2d 1495, 1498 (9th Cir.

1987); Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir. 1983); In

re Dupuy, 308 B.R. 843, 850 (Bankr. E.D. Tenn. 2004). In addition, bad faith is not necessarily

construed simply because a debtor files for bankruptcy on the eve of foreclosure; such conduct

may be “probative” of bad faith when it has happened repeatedly with the same creditor. In re

Glenn, 288 B.R. 518, 520 (Bankr. E.D. Tenn. 2002).

The Court's inquiry into the propriety of Debtors’ successive filings for purposes of

dismissal for “cause” necessarily involves the question of bad faith since it examines whether there

was a pattern or strategy behind those filings to frustrate statutory requirements and abuse the

bankruptcy process. In re McDermott, 78 B.R. 646, 651 (Bankr. N.D.N.Y. 1985). Here, the Court

observed the demeanor and candor of Debtor at the Hearing and is satisfied that Debtors intended

to reorganize and had a reasonable probability they would emerge from the bankruptcy proceeding

in each of the prior cases. See In re Sletteland, 260 B.R. 657, 662 (Bankr. S.D.N.Y. 2001). The

Court believes Debtors did not invoke bankruptcy protections for an illegitimate purpose and have

currently proposed the Amended Plan in good faith, without improper intent. Debtor answered all

questions at the Hearing straightforwardly and honestly. There are no allegations that Debtors

have concealed assets or been evasive toward the Court, the Trustee, or NG, or that they dissipated

assets shortly before filing. Debtors have been forthcoming with information and cooperated in

the administration of the case by attending the 341 meeting of creditors, filing monthly operating

reports and providing documents, and have not violated court orders. See Rogers, 2018 Bankr.

LEXIS 187, at *4-5 (finding debtor’s refusal to testify at the meeting of creditors as to matters

directly relating to the bankruptcy filing, and refusal to provide documents relating to the business

support for dismissal). Considering all the circumstances, Debtors possess a proper business

purpose for filing this case. The Court finds the following considerations pertinent to its

conclusions.

Since 2016, Debtors have demonstrated their good faith effort to pay down their secured

debt. When NBT sold the debt to NG, Debtors believed that it was necessary to voluntarily dismiss

the First Case to be able to work with NG. While such belief was mistaken, it was

understandable.16 Approximately 1½ months later, NG commenced a State Court collection action

seeking a judgment of $1,496,187 and an order of seizure, prompting Debtors to file their Second

Case on June 25, 2016. During the Second Case, Debtors executed the Modification Agreement

in favor of NG. (NG’s Ex. I, Motion for Alternative Relief).17 When that proceeding was

16 NG did not have a representative testify at the Hearing as to any of the allegations in the Motion to Dismiss, Motion

for Alternative Relief or the Objection to Confirmation.

17 The docket in the Second Case does not reflect the Court approved the Modification Agreement.

voluntarily dismissed, NG paid $65,567.63 of real property taxes on behalf of Debtors (Joint

Stipulation, ¶ 27) and the Parties agreed Debtors would sell approximately 90 acres of real

property, from which NG received $154,525 in proceeds. According to Kenneth Worden, “the

check went to them and first thing that it covered was reimburse them for the taxes that they’d

paid.” (Trial Tr. 27-28; Joint Stipulation, ¶¶ 28 and 29).

After the dismissal of the Second Case, Debtors commenced making monthly payments to

NG of between $3,000 to $4,000 per month. While unclear how much Debtors paid NG during

the intervening eighteen (18) month period, when NG commenced another State Court action on

September 6, 2018, it sought a significantly reduced judgment in the amount of $558,495.34.

Debtors’ payments and corresponding reduction in debt do not escape the Court as relevant to the

bad faith analysis here.

Three months after the State Court action was filed, Debtors filed their Third Case and a

proposed chapter 12 plan. NG sought relief from the automatic stay under sections 362(d)(1),

(d)(2), and (d)(4). Debtors responded by asserting that the motion misrepresented or misconstrued

Debtors’ commercial relationship with NG. NG then filed an objection to Debtors’ proposed plan.

Meanwhile, NG received adequate protection payments, and took an order on its original motion

for relief from stay. Subsequently, and after obtaining stay relief, NG filed a motion for in rem

relief, which sought, inter alia, to bar Debtors from refiling for one year and/or asking that the

section 362(a) stay would not apply if Debtors filed any subsequent bankruptcy case for a period

of one year. (Bankr. 18-61636 at ECF No. 102). After conducting a hearing, the Court denied

NG’s requests for in rem relief and dismissal with prejudice, (Bankr. 18-61636 at ECF No. 114)

and granted the Trustee’s motion to dismiss. (Bankr. 18-61636 at ECF No. 116). As a result of

the COVID-19 pandemic, all was quiet until Debtors filed this Fourth Case.

Debtor credibly testified that based on communications with NG, it was Debtors’

understanding that there would be a systematic sale of farm property, minus a carve out for them

to continue running a small farming operation. Debtors sold collateral and real property and

remitted all proceeds to NG.18 While NG asserts Debtors failed to obtain its written approval

pursuant to the Modification Agreement, NG accepted the proceeds and, in this Court’s view,

tacitly agreed to the arrangement per the Parties’ discussions. Unlike the debtor in Snider who

dissipated substantially all assets just before filing, Debtors sold their assets with NG’s imprimatur.

Additionally, Debtors have fully cooperated in the administration of their case and demonstrated

a sincere desire to reorganize. Considering these factors and taking into account the change in

Debtors’ circumstances since their Third Case, Debtors appear to be gaining traction towards

rehabilitation and thus should be afforded their “fighting chance.” Based on the above, NG has

not demonstrated objective futility in the reorganization process such that on the Petition date

“there was no reasonable probability that [the debtor] would eventually emerge from bankruptcy

proceedings” as required in this Circuit. In re Cohoes Indus. Terminal, Inc., 931 F.2d 222, 227

(2d Cir. 1991) (citation omitted); In re Anderson, 631 B.R. 417, 423 (Bankr. S.D. Ohio 2021)

(sufficient explanation for progression of successive cases avoided conclusion of bad faith).

Likewise, NG failed to demonstrate subjective bad faith and show there “was no reasonable

likelihood that the debtor intended to reorganize.” Id.

A dismissal for bad faith under section 1208(c) seeks to prevent dishonest and ill-motivated

debtors from invoking the protections of bankruptcy altogether. Keeping in mind Congress’s

18 Debtor’s uncontroverted testimony indicates that they were willing to sell all farmland except for the tenant house

and 50 acres to be able to “run a few beef cattle.” (Trial Tr. 32). Since Debtors were amenable to selling the farmland

under section 363, a sale remains an option for Debtors. As one court acknowledged, “[t]he real test still remains the

presence of honest intention of Debtor and some real need and real ability to effectuate the aim of the reorganization,

even if this involves total liquidation of assets.” In re North Redington Beach, Assocs., Ltd., 91 B.R. 166, 169 (Bankr.

M.D. Fla. 1988).

intention to encourage the rehabilitation of family farmers and after fully examining all the

circumstances before it, this Court concludes Debtors are not the type Congress intended be

punished under that section. Accordingly, this Court finds Debtors’ Fourth Case was not filed in

bad faith and denies NG’s Motion to Dismiss.

B. Section 362(d): Relief from the Automatic Stay

Having determined this case was not filed in bad faith, the Court now turns its attention

to NG’s Motion for Alternative Relief and requests for stay relief for cause under sections

362(d)(1), (d)(2) and (d)(4). Section 362(d)(1) provides in relevant part:

On request of a party in interest and after notice and a hearing, the

court shall grant relief from the stay provided under subsection (a)

of this section, such as by terminating, annulling, modifying, or

conditioning such stay-

(1) for cause, including the lack of adequate protection of an interest

in property of such party in interest…

11 U.S.C. § 362(d)(1).

The creditor bears the initial burden of showing that it is entitled to relief for cause under

this subsection. “The statute does not define ‘cause,’ so courts must determine whether cause

exists based on the totality of the circumstances of each case.” In re Magnale, LLC, No. 17-61344,

2018 Bankr. LEXIS 4232, at *18 (Bankr. N.D.N.Y. Feb. 8, 2018) (citing United States v. Olayer

(In re Olayer), Case No. 17-23386-GL, 2017 Bankr. LEXIS 4045, at *9 n.58 (Bankr. W.D. Pa.

Nov. 22, 2017)). “Once the creditor does so, the burden shifts to the debtor to show that the

creditor's interest is adequately protected.” Magnale, 2018 Bankr. LEXIS 4232, at *18; 11 U.S.C.

§ 362(g).

NG asserts Debtors’ failure to make post-petition payments constitutes “cause” to modify

the automatic stay and is “one of the best examples of a lack of adequate protection” under section

362(d)(1), relying on In re Taylor, 151 B.R. 646, 648 (E.D.N.Y. 1993). This reliance is misplaced,

as that case involved a Chapter 13 debtor who failed to make post-confirmation payments.19 (See

ECF No. 10). Moreover, unlike Chapter 13 debtors’ statutory obligations under section 1326(a)

to commence making payments not later than 30 days after the date of the filing of the plan or the

order for relief, Chapter 12 debtors are not required to make any such payments under section

1226. “The language of section 1226(a), although not requiring pre-confirmation payments, does

not state that a bankruptcy court is powerless to order such payments… the bankruptcy court [has]

the power pursuant to 11 U.S.C. § 105(a), to order pre-confirmation plan payments.” Stahn v.

Haeckel, 920 F.2d 555, 557-58 (8th Cir. 1990).

In accordance with that authority, by Order entered May 4, 2023, this Court directed

Debtors to make monthly adequate protection payments to NG beginning on May 15, 2023. (ECF

No. 93). Given that mandate and the pending confirmation of an Amended Plan that will pay NG

its $1,000,000 Stipulated Claim with 8% interest, the Court finds cause does not exist to warrant

stay relief under section 362(d)(1).

NG also requests relief under section 362(d)(2) which authorizes relief with respect to a

stay of an act against property under subsection (a) of this section, if-

(A) the debtor does not have an equity in such property; and

(B) such property is not necessary to an effective reorganization…

11 U.S.C. § 362(d)(2) (emphasis added).

Once the debtor's lack of equity in the collateral has been demonstrated, the burden shifts

to the debtor to prove that the property is “necessary to an effective reorganization.” United Sav.

Ass’n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 375-76 (1988); In re MHS

19 NG also cites a chapter 7 case of In re Sterling, 2018 Bankr. LEXIS 18* (Bankr. S.D.N.Y. 2018), where no

reorganization was contemplated, and a liquidating debtor failed to make post-petition mortgage payments.

Mgmt. Grp., LLC, Case No. 08-63116, 2009 Bankr. LEXIS 3580, at *13 (Bankr. N.D.N.Y. Oct.

26, 2009) (citing In re 266 Washington Assocs., 147 B.R. 827, 829 (E.D.N.Y. 1992)); see In re

East/Alexander Holdings, LLC, Case No. 22-20151-PRW, 2022 Bankr. LEXIS 1367, at *6-7

(Bankr. W.D.N.Y. May 12, 2022); In re St Maarten, Case No. 18-41215, 2019 Bankr. LEXIS

4007, at *7 (Bankr. E.D.N.Y. May 24, 2019).

As movant, NG again bears the burden of establishing that Debtors lack equity in the

Property covered by its secured claim. See 11 U.S.C. § 362(g)(1). A debtor has no equity in its

property when the debts secured by liens on the property exceed the property's value.

East/Alexander Holdings, 2022 Bankr. LEXIS 1367, at *6-7 (citing In re Manning, 620 B.R. 199,

205 (Bankr. W.D.N.Y. 2020) (Warren, J.); In re Elmira Litho, Inc., 174 B.R. 892, 900-01 (Bankr.

S.D.N.Y. 1994)). The value of the property relevant to a court's consideration of whether to grant

stay relief is the property's value as of the date of the hearing on the motion for relief from stay.

Id. at *6-7 (citing In re Windham Mills Dev. Corp., Case No. 04-23619, 2008 Bankr. LEXIS 1126,

at *7 (Bankr. D. Conn. Apr. 8, 2008)). In this case, the Joint Stipulation acknowledged Debtors

have no equity in the Property at the time of commencement of this case and continuing through

October 2022, satisfying the first prong of section 362(d)(2). (See Joint Stipulation, ¶ 46).

Debtors must then demonstrate “that the collateral at issue is ‘necessary to an effective

reorganization.’” Timbers, 484 U.S. at 375. “Under § 362(d)(2)(B), the test of whether property

is ‘necessary to an effective reorganization,’ as articulated by Timbers, is a two-part test: (1)

whether the property is needed for the execution of the Debtors’ plan, and (2) whether the Debtors’

proposal amounts to a plan “that is in prospect.” In re Simpson, Case No. 17-10442, 2018 Bankr.

LEXIS 1211, at *25 (Bankr. D. Vt. 2018); see Versus Bank of Commerce v. Fox (In re Fox), Case

No. 12-32462, 2013 Bankr. LEXIS 653, at *9-10 (Bankr. D. Colo. 2013). “What an ‘effective

reorganization that is in prospect’ means is that ‘there must be a reasonable possibility of a

successful reorganization within a reasonable time.’” Id. (quoting Timbers, 484 U.S. at 375-76).

It is undisputed that Debtors’ farm operations are located on the Property where Debtors

raise beef cattle and grow crops. The testimony established Debtors’ primary sources of income

needed for plan execution are derived from that Property. Thus, the first part of the Timbers test

is easily satisfied.

The more difficult inquiry is whether Debtors’ Amended Plan is “in prospect.” NG argues

that there is no reasonable possibility of a successful reorganization within a reasonable time,

highlighting that Debtors had five years since the first Chapter 12 filing in 2016, their previous

proposals for a feasible plan failed, and “their financial situation has gotten significantly worse

over time.” (ECF No. 10). Debtors’ previous performance did not support the proposed

reorganization, and any alleged increases in income from the Cattle Contract amendment should

not be considered since it was never introduced or admitted into evidence. It was undisputed that

prior to the change in terms, Debtors were not boarding the maximum number of cattle and in

some months the figures indicate that the head of cattle went to a low of 97 head. (Trial Tr. 158).

According to NG, “Debtors provided no explanation for their sudden miraculous ability to increase

their cattle boarding ability by over 53% to 265 head[,]…[and that] Debtors could also claim they

increased the head of cattle, as well as the dollar amount per head, because the cattle raising

contract was between the Debtor and the Debtor’s brother.” (ECF No. 80, p. 23). Without

verification, there is “every incentive for the Debtor to conveniently ‘adjust’ the number of head

of cattle and the dollar amount per head to whatever figures would work to support their proposed

plan.” (ECF No. 80, p. 18).

The Court rejects NG’s arguments and finds the testimony of Debtor and his brother

Charles about the changes to the Cattle Contract to be credible.20 While a written copy of the

amendment was not submitted into evidence, the Court may determine that oral testimony alone

is sufficient. See Sanders v. Monsanto Co., 574 F.2d 198, 200 (5th Cir. 1978) (stating in dicta

“[h]istorical experience has taught us that testimonial evidence has the highest reliability because

the credibility of the witness can be evaluated, and the factual issues narrowed by cross-

examination”). Here, Debtor provided direct evidence of personal knowledge of the revised

contract terms so that no other evidence needs to be presented. Sylvester v. SOS Children’s Vills.

III., Inc., 453 F.3d 900, 903 (7th Cir. 2006) (“direct testimony by a witness about a matter within

his personal knowledge . . . does not require drawing an inference from the evidence . . . to the

proposition that it is offered to establish”).

The increases in income from the amended terms of the Cattle Contract are also reflected

in the November Monthly Operating Report, of which the Court took judicial notice. (Trial Tr.

56). After the Hearing, Debtors filed monthly operating reports for December 2022 to May 2023

which show that they will have sufficient net income to fund the Amended Plan.21 Debtor’s plan

payments of $8,621 per month as proposed at the Hearing therefore appear to be “in prospect.”

See Timbers, 484 U.S. at 376. As a result, the Court finds Debtors have demonstrated a reasonable

possibility of a successful reorganization within a reasonable time, satisfying their burden to show

the Property is necessary for reorganization and defeating NG’s request for stay relief under 11

U.S.C. § 362(d)(2)(B). See id.

20 In New York, a contract may be modified “by another agreement, by course of performance, or by conduct

amounting to a waiver or estoppel.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 783 (2d Cir. 2003)

(quoting CT Chems. (U.S.A.) Inc. v. Vinmar Impex, Inc., 81 N.Y.2d 174, 613 N.E.2d 159, 162, 597 N.Y.S.2d 284

(N.Y. 1993)).

21 The January Monthly Operating Report (ECF No. 86) showed negative cash flow as a result of payment of the real

estate taxes.

As a final request in the Motion for Alternative Relief, NG seeks stay relief under 11 U.S.C.

§ 364(d)(4) with in rem protections so that the stay will not be reimposed against the Property if

Debtors were to file a new bankruptcy case in the next two years. Section 362(d)(4), as enacted

by BAPCPA, Pub. L. No. 109-8, and amended by the Bankruptcy Technical Corrections Act of

2010, Pub. L. No. 111-327, provides in relevant part:

(d) On request of a party in interest and after notice and a hearing, the court shall

grant relief from the stay provided under subsection (a) of this section, such as by

terminating, annulling, modifying, or conditioning such stay –

* * *

(4) with respect to a stay of an act against real property under subsection (a), by a

creditor whose claim is secured by an interest in such real property, if the court

finds that the filing of the petition was part of a scheme to delay, hinder, or defraud

creditors that involved either -

(A) transfer of all or part ownership of, or other interest in, such real property

without the consent of the secured creditor or court approval; or

(B) multiple bankruptcy filings affecting such real property.

11 U.S.C. § 362(d)(4).

“This provision gives the Court authority to grant in rem relief from the stay as to Debtor’s

interest in the Property, such that any and all future filings by any person or entity with an interest

in the Property will not operate as an automatic stay for a period of two years after the date of the

entry of such order, provided that the order is recorded in compliance with applicable state laws

governing notices of interest and liens in real property.” Magnale, 2018 Bankr. LEXIS 4232 at

*21 (citing In re Montalvo, 416 B.R. 381, 386 (Bankr. E.D.N.Y. 2009)); 11 U.S.C. § 362(d)(4).

“Section 362(b)(20) creates a specific exception for the enforcement of a lien against or security

interest in real property following the entry of a § 362(d)(4) order in a prior bankruptcy case

prohibiting the application of the stay as to that property. 11 U.S.C. § 362(b)(20).” Id. “The

purpose of the two year bar under § 362(d)(4) is to prevent parties from filing another bankruptcy

case to reimpose the stay and frustrate secured creditor’s enforcement rights.” Id. (quoting In re

Wilson, 2017 Bankr. LEXIS 3781, at *4 (Bankr. W.D. Ky. Nov. 1, 2017) (citing 11 U.S.C. §

362(b)(20); In re Alakozai, 499 B.R. 698 (B.A.P. 9th Cir. 2013))). The creditor bears the burden

of proof to show that it is entitled to in rem relief under this provision. Magnale, 2018 Bankr.

LEXIS 4232, at *21-22. (citing United States v. Olayer (In re Olayer), 577 B.R. 464, 468 n.32

(Bankr. W.D. Pa. 2017)).

“In order to appropriately grant in rem relief, the record must clearly demonstrate an abuse

of the bankruptcy process through multiple filings with the sole purpose of frustrating the

legitimate efforts of creditors to recover their collateral.” In re Price, 304 B.R. 769, 773 (Bankr.

N.D. Ohio 2004). “Although courts may no longer place undue reliance on the fraud element

following the 2010 amendment, they will likely continue to require a substantial showing by the

moving party before granting in rem relief.” In re McKenzie, Case No. 19-10130, 2019 Bankr.

LEXIS 906, at *5-6 (Bankr. S.D.N.Y. Mar. 25, 2019) (quotation omitted). To obtain stay relief

under section 362(d)(4), the creditor must prove that (1) the Debtor engaged in a scheme, (2) the

object of the scheme is to delay, hinder or defraud the creditor, and (3) the scheme involved either

a transfer of property without Movant’s consent or court approval, or multiple filings affecting the

Premises. See 11 U.S.C. § 362(d)(4); McKenzie, 2019 Bankr. LEXIS 906, at *5 (quoting In re

Lee, 467 B.R. 906, 920 (B.A.P. 6th Cir. 2012)). Because the statute’s remedy is extreme, “[t]he

language [in § 364(d)(4)] was deliberately chosen by Congress to impose a substantial burden of

proof on secured creditors….” 3 Collier on Bankruptcy, ¶ 362.05[19][a].

To succeed on its request for stay and in rem relief under § 362(d)(4), NG must make a

prima facie showing that the instant case is part of a scheme to hinder, delay, or defraud it. This

Fourth Case, as with Debtors’ previous cases, was filed as a means of stopping NG’s foreclosure

and replevin actions. In certain circumstances, “[f]iling a bankruptcy petition as a means of

stopping a state foreclosure on real property qualifies as a plan to hinder or delay a creditor’s rights

to property.” In re Wilson, Case No. 17-10770, 2017 Bankr. LEXIS 3781, at *4 (Bankr. W.D. Ky.

Nov. 1, 2017) (citing In re McKanders, 42 B.R. 108, 109 (Bankr. N.D. Ga. July 17, 1984)). It is

well settled that the Court may “‘infer an intent to hinder, delay, or defraud creditors from the fact

of serial filings’ alone, without holding an evidentiary hearing.” In re Richmond, 513 B.R. 34, 38

(Bankr. E.D.N.Y. 2014) (quoting In re Procel, 467 B.R. 297, 308 (S.D.N.Y. 2012)). “The extent

of the efforts by a debtor to prosecute his bankruptcy case and ‘[t]he timing and sequencing of the

filings’ are important factors in determining whether a debtor has engaged in ‘a scheme to delay,

hinder, and defraud.’” Richmond, 513 B.R. at 38 (quoting In re Montalvo, 416 B.R. 381, 387

(Bankr. E.D.N.Y. 2009)). When “debtors have exhibited a lack of effort in their bankruptcy

proceedings and have instead engaged in serial filings to thwart the efforts of secured creditors

exercising their rights under state law, courts have found that these serial filings are evidence of

bad faith and abuse of the bankruptcy process.” McKenzie, 2019 Bankr. LEXIS 906, at *3

(citations omitted).

Notwithstanding the negative inference the Court may draw from Debtors’ serial filings,

the record does not clearly demonstrate they abused the bankruptcy process with the sole purpose

of frustrating NG’s legitimate efforts to recover its collateral. While any bankruptcy filing

inherently delays collection efforts of a secured creditor such as NG, improper intent has not been

shown. As noted above, the Court found Debtor’s testimony credible and concluded this case was

not filed in bad faith. Debtors have made significant efforts toward proposing a confirmable plan

by modifying their farming operations to increase cash flow to fund plan payments and have

presumably been making adequate protection payments. In the Court’s view, these actions, along

with the Modification Agreement, the paydown on the NG debt, the consensual sale of acreage,

cattle and equipment with payment to NG, and Debtors’ desire to work with NG outside of

bankruptcy demonstrate Debtors’ good-faith intention to pay NG on its claim – not a scheme to

hinder or defraud it. Accordingly, NG’s requests for stay and in rem relief under section 362(d)(4)

are denied.

C. Section 1225(a)(6): Feasibility Objection to Confirmation

Chapter 12 was “designed to give family farmers facing bankruptcy a fighting chance to

reorganize their debts and keep their land.” H.R. Rep. No. 99-958, 99th Cong. 2d Sess. 48 (1986),

U.S.C.C.A.N. 1986, pp. 5227-5249. Modeled after Chapter 13, it was enacted “in response to the

agricultural debt crisis of the mid-1980s,” In re Mann Farms, Inc., 917 F.2d 1210, 1214 (9th Cir.

1990), and “was intended to enable family farmers to retain their farms while reorganizing their

financial affairs.” In re Hudson, Case No. 08-09480, 2011 Bankr. LEXIS 1010, at *9 (Bankr.

M.D. Tenn. March 15, 2011) (citing In re Lockard, 234 B.R. 484, 490 (Bankr. W.D. Mo. 1999)).

A chapter 12 debtor has the burden of proving that the proposed bankruptcy plan meets all

confirmation requirements. United States v. Krause (In re Krause), 261 B.R. 218, 222 (B.A.P. 8th

Cir. 2001). It must be established that “the debtor will be able to make all payments under the

plan and to comply with the plan.” 11 U.S.C. § 1225(a)(6). “Feasibility is fundamentally a factual

question since it necessarily depends upon a determination of the reasonable probability of

payment.” In re Howard, 212 B.R. 864, 878 (Bankr. E.D. Tenn. 1997) (citing In re Foertsch, 167

B.R. 555, 566 (Bankr. D.N.D. Feb. 3, 1994). The Court considers debtor’s projected income and

expenses in deciding whether the debtors are likely to be able to make all proposed plan payments.

In re Chickosky, 498 B.R. 4, 12 (Bankr. D. Conn. 2013) (citing In re Elk Creek Salers, Ltd., 286

B.R. 387, 396 (Bankr. W.D. Mo. 2002)). “The plan must also be realistic; the debtors must be

able to do what they are proposing.” In re Perkins, Case No. 13-31277, 2013 Bankr. LEXIS 4539,

at *33 (Bankr. E.D. Tenn., Oct. 30, 2013) (quoting Howard, 212 B.R. at 880).

In deciding whether chapter 12 debtors have met their burden, courts generally give them

“the benefit of the doubt on the issue of feasibility, provided a reasonable probability of success is

established.” Hudson, 2011 Bankr. LEXIS 1010, at *19 (quoting In re Lockard, 234 B.R. 484,

492 (Bankr. W.D. Mo. 1999)). While not required to guarantee the success of a plan, a debtor

nonetheless must “provide a reasonable assurance that the plan can be effectuated, and that

reasonable assurance must rise above ‘bare agronomic feasibility.’” In re Crowley, 85 B.R. 76, 79

(Bankr. W.D. Wis. 1988). The court must be able to review financial evidence presented by the

debtor to render a considered opinion as to whether he has established a reasonable probability of

the plan’s success. In re Ellis, 478 B.R. 132, 139 (Bankr. N.D.N.Y. 2012). This “necessarily

entails a determination of the comparative credibility of experts, as well as the credibility of the

debtor.” Id. (quotations omitted).

“Feasibility is never certain, particularly in farm situations. It is an element of confirmation

that is difficult to prove [and] equally difficult to decide.” In re Kloberdanz, 83 B.R. 767, 773

(Bankr. D. Colo. 1988). A debtor’s income and expense projections are considered in conjunction

with their actual past performance to determine feasibility. In re Euerle Farms, Inc., 861 F.2d

1089, 1090 (8th Cir. 1988). “Because past behavior and productivity are excellent indicators of

future production, courts have frequently rejected plans which are premised on highly optimistic

projections of increased production.” Crowley, 85 B.R. at 79. Courts generally give debtors every

reasonable benefit of the doubt in matters concerning plan feasibility in furtherance of the

rehabilitative policies underlying the Code but will not turn a blind eye and confirm a plan which

will not cash flow, and which is thus, unfeasible. In re Tofsrud, 230 B.R. 862, 872-73 (Bankr.

D.N.D. 1999).

The Court finds Debtors’ past record of running a large dairy operation with an ability to

make monthly secured payment obligations of $25,000 for “approximately ten years” indicative

of Debtors’ knowledge and commitment to farming. (Trial Tr. 17). While their business model

changed to raising beef cattle after they sold their dairy cattle and equipment in April 2020 and

remitted the proceeds to NG, Debtors’ extensive experience and recent monthly operating reports22

demonstrate an ability to feed, board and raise 250 (or more) beef cattle profitably. Debtor testified

the current income coming into the household and the farm, minus the expenses, left $8,621 per

month, which is the required Amended Plan payment. (Trial Tr. 53). With regard to the estimated

expenses, he further stated that “[w]e tried to estimate everything as high as we figured it could

possibly be, and I mean even with the inflation and everything that’s going on, I think we’re still

in the safety zone.” (Trial Tr. 63). Debtors’ expert Mr. Conklin testified he reviewed the Plan and

associated pro forma at the time it was filed, along with the changes to the Cattle Contract and

elimination of Patricia Worden’s income, and concluded the projections provided for income to

fund the plan.23 (Trial Tr. 102-103).

NG’s expert, Mr. Dehm, expressed his opposing views, highlighting deficiencies with the

projections and the Debtor’s financial information from January – November 2022 that

demonstrated Debtors are not able to make the Amended Plan payments. (Trial Tr. 113-118; Ex.

22 The October 2022 Monthly Operating Report (Debtors’ Exhibit B) and November 2022 Monthly Operating Report

(Debtors’ Exhibit A) were stipulated into evidence (Trial Tr. 56); the Court also takes judicial notice of the monthly

operating reports filed by Debtors for December 2022 and January through May 2023 (ECF Nos. 85, 86, 87, 88, 94

and 95 respectively).

23 “Q: And in your opinion, do you think it’s a feasible plan to- just to review, it’s a three-year plan with payments to

the secured creditor and then an extra year or (sic) payments directly to the creditor and then a lump sum to the creditor.

A: Well, the plan provides for income to do that, and I think the validity of the cash flow – look this is not these

fellows’ first rodeo.” (Trial Tr. 102-103).

E). Given the very recent changes to the Cattle Contract and Patricia Worden’s loss of

employment, he was required to recalculate several of the income figures on the witness stand.

After recomputing the revised figures as discussed at the Hearing with an increase to 265 cattle at

$1.65 per head per day, the removal of Mrs. Worden’s outside income, and increasing the

Amended Plan payments to $8,621 per month, Mr. Dehm concluded Debtors would still be

operating with an annual negative cash flow of $2,845. (Trial Tr. 162-164; 167). Thus, there

would be a shortfall of $237.08 per month, without addressing his expected increase in variable

costs associated with a larger cattle herd.

In spite of Mr. Dehm’s concerns, the Court finds Debtors have a reasonable probability of

successful reorganization. The Court credits Mr. Conklin’s testimony and Debtor’s confident

statements regarding their ability to make the required payments, and will give Debtors the benefit

of the doubt regarding what might reasonably be expected to occur in the next four years.24 In

light of their lifetime of farming experience and recently demonstrated feasibility from modified

farming operations, the Court considers Debtors’ projections as more than “wishful thinking,”

Howard, 212 B.R. at 880, and finds the Amended Plan to be feasible as required under section

1225(a)(6).25

24 While the Court found Mr. Dehm to be highly credible, his experience was primarily in dairy farming and not cattle

farming, the Debtors’ business. The Court is not inclined to deny confirmation based on Mr. Dehm’s revised shortfall

of around $237.04 per month, or less than 3% of the proposed Amended Plan payment.

25 It is also significant to the Court that when Debtors brought their real estate taxes current, the Trustee withdrew his

objection to confirmation (ECF No. 79) which was premised on feasibility concerns as well as the tax arrears. Clearly

the Trustee would have pursued that objection if he was not comfortable the feasibility requirements of section

1225(a)(6) have been satisfied.

CONCLUSION

Based on the foregoing, it is hereby

ORDERED, that NG’s Motion to Dismiss and Motion for Alternative Relief are denied;

and it is further

ORDERED, that NG’s Objection to Confirmation is overruled, and Debtors’ Amended

Plan is confirmed; and it is further

ORDERED, that Debtors’ counsel is directed to submit a proposed Order Confirming First

Amended Chapter 12 Plan containing all stipulations between the Parties and modifications put on

the record at the Hearing, after review and approval by counsel for NG and the Trustee, within 20

days from the date of this Order; or if consent to said Order cannot be obtained, Debtors’ counsel

shall file a letter on the docket requesting a section 105(a) conference to address same; and it is

further

ORDERED, that Debtors are directed to make their first monthly plan payment to the

Trustee on August 15, 2023, and their obligation to make adequate protection payments to NG

after the July 15, 2023, payment pursuant to the Order Directing Adequate Protection Payments

(ECF No. 93) is hereby terminated.

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