You don your robe and take the bench for the chapter 11 confirmation hearing in the consolidated cases of debtors John Paul Smith, and his wholly-owned companies Gurganus Milling (grain storage), JPS Holdings (real estate), and JPS Farms (seed store). You already denied confirmation once, because in between balloting and confirmation, the debtor proposed changing the distribu-tion to a class of farmers, from full payment on favorable terms down to 50% pay-ment. Upon re-balloting, the farmers are apparently on board with this reduced treatment, but the bank is not happy. Below is what you heard from Mr. Oliver, counsel for the debtors, and Mr. Pryor, counsel for the undersecured bank, BB&T. How would you rule? Be prepared to rule from the bench (in class) and give a few sentences, including some authority, to justify your ruling.

Mr. Oliver: We have come before you several times with confirmation and this ought to be the last, telling Mr. Pryor, just before we came up, to wait to continue it, but I think that's alright. Last time what we did, we amended the plan in each of these four cases; we propose to pay farmer class differently from the general unse-cured creditor class and at the prior confirmation hearing, we proposed to pay the unsecured class in full which is different from how they'd been proposed.

Judge: As I recall, what you had agreed to do was to pay the unsecured class in full, and then you created the farmer class, but you are only going to pay them half, and that's where I said: "You can't do that, you can't send somebody a ballot saying we are going to pay you in full, vote, and then come to the confirmation hearing and say oh, by the way we are only going to pay you half." So I made you re-ballot and that's where we are.

Mr. Oliver: That's right. And we have proposed modified treatments for the farmer classes and got the ballots on those creditors and have those here today. We have acceptances from all creditors in all four cases with the exception ofMid State Mills in the Gurganus Mills case, your honor. But everybody else in all the other cases all say yes, the ones that have voted are all saying yes, and so if I could just again for recap purposes tell you what the differences are in the farmer classes ver-sus the general unsecured classes.

General unsecured classes were proposed to be paid in full, with 4% interest, and those we paid from the cash flow of various debtors and we included a kind of chart in the amended treatments in the unsecured class that says which debtors are responsible for each of the unsecured creditors. We are going to pay in semi-annual installments over a period of 25 years at 4% interest, and just continue to give you an idea these payments would be. The payments for JPS Farms, which is the grain elevator debtor, would be $46,743 every six months, starting the year after the effective date. The pay-ments for general unsecured creditors of JPS Holdings will be much smaller, $207.30 every six months. Gurganus Milling payments will be $59,470 every six months. Now let me describe to you what the farmers class would get. We do propose to pay half of [the farmer class] claims without interest, over a 10-year period in semi-annual payments, every six months. And listed in the amended treatment for these farmers' plans for each of the four debtors we list the similar chart which says which debtors are responsible for these debts. Because some of them had claims only against one debtor, sometimes had claims against all four debtors, so it is a similar payment structure. JPS Farms will make payments every six months to this class of $10,148 dollars. JPS Holdings will make payments every six months of $937.50, Gurganus Mills will make payments every six months of $15,211 and John Paul Smith will make payments every six months of about $6,800. That will pay 50% of the total of farmer claims in these classes and all of the farmers who voted for the payments had they have been treated in the unsecured class they would have been paid 100% with interest over a longer period of time. Mr. Smith will give testimony about the reason for having the separate class; it is because the farmers recognize the benefit for operations to stay in business. These farmers are owed money because they sold grain to Mr. Smith and his entities and were not paid. Arguably they each have a dischargeability action and have not brought them. They want him to stay in business, they want to be paid half of their money, but they also want to continue to sell grain through his operation.

Judge: Mr. Pryor, I would be glad if you make an opening statement; it does seem to have devolved into a dispute between BB&T and the debtors.

Mr. Pryor: It has, and I think the initial thing that probably we'll address is whether there is an accepting class, Your Honor, because of the gerrymandering issue. The treatment of the farmer claims in the prior plan and the treatment of the farmer claims as amended here are identical.

Mr. Oliver: No, no, no. Now we're paying them it over a shorter period of time. Before, I think it was 15 maybe 20 years, now it's 10.

Mr. Pryor: Where we got to when we were here before is that Mr. Oliver said BB&T was supposed to be getting nothing on the unsecured claim. And Mr. Oliver came in and orally modified the plan so that BB&T would be paid in full over 25 years deferring out a year at 4% interest.

Judge: Right.

Mr. Pryor: They re-balloted everybody and the question was whether there should be separate classifications for farmer claims which are just unsecured creditors ver-sus other unsecured creditors.

Mr. Pryor: Their [original] justification at that point for having a separate classifi-cation for the farmer claims [that treated them more favorably under the first ballot was] we've got to treat them better than the other unsecured creditors because we've got to continue to do business with them. Now I did the math in the response [to the reduced treatment]. For example, if you take a fictitious farmer with a $100,000 claim, he would get 20 semi-annual installments of $2,500 each. Whereas if that farmer was treated with all the other unsecured creditors similarly situated, they would get 50 semi-annual payments in excess of $3,200 each; so not only are the farmers getting many fewer payments, they are also getting lower amounts of these payments. So the justification for having a separate class simply falls back on, we wanted to find some friendly folks who would vote in favor of our plan.

Judge: Well, which is precisely why I required to be re-balloted since it was unfav-orable, I thought. I understand your point, Mr. Pryor, but I do think this is not an easy issue. I do think it is factually intensive and I hear your argument, but I want to hear the evidence before we get to the legal argument. Let's go ahead, Mr. Oliver.

Mr. Oliver: Thank you, your Honor. I call Mr. John Paul Smith to the stand.

Court clerk: Mr. Smith, please come forward. Place your left hand on the Bible, raise your right. Do you solemnly swear that the testimony which you are about to offer will be the truth, the whole truth and nothing but the truth, so help you God?

Mr. Smith: Yes, Ma'am.

Mr. Oliver: Good morning, Mr. Smith, how are you, Sir?

Mr. Smith: Good morning. Chair don't move back, do it?

Mr. Oliver: I'm afraid not. Mr. Smith, I think you were last in that chair when we had the first hearing in this case back in July of last year. Is that right?

Mr. Oliver: I talked about how these farmers were owed money prior to filing and I said they might be subject to dischargeability actions. Do you know what I mean by that? Mr. Smith: Not really.

Mr. Oliver: You remember you had a 2004 exam with Mr. Bingham when you came to my office and were asked a bunch of questions?

Mr. Smith: Yeah.

Mr. Oliver: And he was inferring that maybe you did something wrong by not pay-ing the debts back as opposed to just not paying the debts. Remember that?

Mr. Smith: Yeah, I sure do.

Mr. Oliver: Do you know whether, those farmers, have any of them have pursued that and tried to say that you can't discharge their debts?

Mr. Smith: No.

Mr. Oliver: Are they all pretty satisfied about what you are doing here to pay them back?

Mr. Smith: Yeah, they want me to stay in business and keep on buying grains so we to try to get as much as we can with the market. The market is up $0.50 one day and down another day $0.40, it's hard to predict the market and we do something different than our competitors and if a farmer is gonna need more $4 grains, then we will put in for another $4 truck.

Mr. Oliver: How important is it to your business that these farmers do business with you?

Mr. Smith: It's very important to keep the farmers, the farmers is the backbone, they bring the grains, that's where the money's coming in.

Mr. Oliver: If these farmers, that you owed money to, they did not do businesses with JPS Farmers going forward, are there enough other farmers out there to even make your minimum that you owe the grain dealer?

Mr. Smith: Yeah, oh yeah.

Mr. Oliver: If you didn't have the farmers that you owed money to, would you be able to make the financial predictions that you made in the plan.

Mr. Smith: Yes.