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04/07/95 JOHNNY L. KILGO v. NANCY F. MCCLELLAN

April 7, 1995

JOHNNY L. KILGO
v.
NANCY F. MCCLELLAN



Appeal from Cullman Circuit Court. (CV-94-002). H. Frank Brunner, TRIAL JUDGE.

As Corrected April 28, 1995. Released for Publication August 21, 1995.

Houston, Hornsby, C. J., and Almon, Ingram, and Butts, JJ., concur.

The opinion of the court was delivered by: Houston

HOUSTON, JUSTICE.

The plaintiff, Johnny L. Kilgo, appeals from a summary judgment for the defendant, Nancy F. McClellan, a practicing attorney in Cullman County, in this action seeking damages under the Alabama Legal Services Liability Act, Ala. Code 1975, § 6-5-570 et seq. We reverse and remand.

Kilgo, a farmer, retained McClellan in the fall of 1989 to file a petition on his behalf under Chapter 12 of the Bankruptcy Code (Bankruptcy Reform Act of 1978, Title 11, United States Code). Chapter 12 provides a procedure for the adjustment of debts of a family farmer with regular income. McClellan failed to prepare and submit to the bankruptcy court a plan for restructuring Kilgo's debts, and she eventually advised Kilgo to dismiss his bankruptcy petition. Kilgo lost his farm through foreclosure in the spring of 1990. Sometime in June 1993, Kilgo read an article in Progressive Farmer magazine entitled "New Life for Chapter 12?" That article, in pertinent part, stated:

"Chapter 12 of the U.S. Bankruptcy Code was enacted by Congress in 1986 to assist financially troubled farmers. It allows farmers to reduce the amount of their secured debt to the present value of the collateral while continuing to control their farms.

"....

"Chapter 12 was created in response to the large number of farmers unable to repay their debts because of poor yields and low prices in the early to mid-1980's. The value of their loan collateral, particularly land, had taken a nosedive -- in some cases, by 50% or more.

"....

"Under Chapter 12, debtors are allowed to write down secured debt to its present fair market value, which, in most cases, is much less than its original loan value. In return, the farmer agrees to a repayment plan for the remaining debt.

"....

"The debate continues as to how effective Chapter 12 has been in achieving its objectives. Farmers who have used Chapter 12 generally feel it has helped them survive.

"Stanley and Delma Dunegan had their backs against the wall early in 1987. They had just come through six consecutive years of weather-related disasters. Farmland values had declined by 50%. Cattle prices were at a 10-year low. And their county FmHA supervisor was unwilling to cut them ...


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