O & S Trucking, Inc. v. Mercedes Benz Fin. Servs. USA (In re O & S Trucking, Inc.), BAP No. 14–6036.

• Decision Date: 07 April 2015
• Docket Number: BAP No. 14–6036.
• Citation: 529 B.R. 711
• Parties: In re O & S TRUCKING, INC., Debtor. O & S Trucking, Inc., Debtor–Appellant v. Mercedes Benz Financial Services USA, doing business as Daimler Truck Financial, Claimant–Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

529 B.R. 711

In re O & S TRUCKING, INC., Debtor.

O & S Trucking, Inc., Debtor–Appellant
v.
Mercedes Benz Financial Services USA, doing business as Daimler Truck Financial, Claimant–Appellee.

BAP No. 14–6036.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted: Feb. 15, 2015.
Filed: April 7, 2015.

529 B.R. 712

Jonathan A. Margolies, argued, Kansas City, MO, appellant.

529 B.R. 713

Randall P. Mroczynski, argued, Costa Mesa, CA (Jay N. Selanders, on the brief), for appellee.

Before KRESSEL, SCHERMER and NAIL, Bankruptcy Judges.

Opinion

KRESSEL, Bankruptcy Judge.

The debtor, O & S Trucking, Inc., appeals from the bankruptcy court's¹ order confirming the debtor's third amended plan. For the reasons that follow, we dismiss the appeal for lack of jurisdiction.

BACKGROUND

On May 30, 2012, O & S Trucking, Inc. filed a voluntary chapter 11 petition. The debtor owned and operated a fleet of trucks, trailers and related equipment for hauling throughout the United States. It had a lease/purchase program pursuant to which independent contractor drivers could lease and ultimately acquire ownership of trucks. The debtor's trucks were financed or leased from a number of creditors, including Mercedes Benz Financial Services USA d/b/a Daimler Truck Financial. At the time of the bankruptcy filing, Daimler was the lessor with respect to 14 trucks and it held a security interest in 99 separate trucks that were operated by the debtor or its lessee drivers. Daimler also held a security interest in any driver lease payments and other proceeds generated by the debtor from the use of such trucks.

On June 14, 2012, Daimler filed a motion for “Adequate Protection or, in the Alternative, to Prohibit Use of Cash Collateral and Grant Relief from the Automatic Stay.” On June 26, 2012, it filed a subsequent “Motion to Prohibit Unauthorized Use and for Sequestration of Cash Collateral.” Daimler argued that the debtor was using cash collateral made up of the driver lease payments and other proceeds without its consent. Daimler requested that its cash collateral be segregated and that the court prohibit its use.

Daimler and the debtor immediately began negotiations on the motions. On August 7, 2012, to resolve both motions, they submitted an agreed order for the court's approval. The order provided that the debtor would deliver possession of 21 trucks to Daimler. Daimler would sell the trucks and give the debtor credit for the net proceeds received. The debtor was to retain 80 trucks subject to Daimler's security interest and would make adequate protection payments to “Daimler equal to 2% of the NADA values [of the trucks], as set forth in Exhibit A.” Exhibit A separately listed the make, model VIN and NADA value of the 80 trucks. It also computed the 2% payment figures. The order was silent as to Daimler's security interest in the driver lease payments and other proceeds generated by the use of the trucks.

On December 11, 2013, the debtor filed a “Motion for Determination of Secured Status and Request for Related Relief.” A hearing was set, but it was continued several times at the request of the parties. Meanwhile, Daimler filed an amended proof of claim in the amount of $2,743,171.94. The debtor objected to the claim. The court set a joint evidentiary hearing for the claim objection and the motion to determine the secured status of the claim.

At the time of the hearing, the debtor argued that the value assigned to each truck in Exhibit A of the agreed order was a binding valuation to be used for the remainder of the case. The debtor also

529 B.R. 714

argued that because the agreed order did not specifically provide for proceeds attributable to Daimler's trucks to be segregated, then Daimler's security interest in those proceeds was lost.

On May 13, 2014, the court entered an order sustaining the debtor's objection, in part, and determining the status of the secured claim. The court found that as of May 5, 2014, all but 23 of the vehicles had been surrendered to Daimler. At that time, the debtor had made adequate protection payments in the amount of $1,577,488.01. The court credited those adequate protection payments toward the total amount of the debt owed, before any determination was made as to how much of that debt was secured. Ultimately, the court found that Daimler had an allowed secured claim in the amount of $1,425,309.40 and an unsecured claim in the amount of $819,183.48, less any proceeds received by Daimler from the sale of vehicles previously surrendered by the debtor.

Additionally, the court correctly noted that § 552(b) of the Bankruptcy Code provides that if the debtor and a creditor entered into a security agreement before the filing of the petition, and if the security interest extends to proceeds, products, offspring, or profits of the collateral, then such security interest continues in any proceeds, products, offspring, or profits generated post-petition. In this case, the court determined that 25% of the debtor's operating fleet was comprised of Daimler's collateral. Therefore, Daimler was entitled to a security interest in 25% of the total amount of funds in the debtor's accounts, a sum of $51,909.40.

On May 27, 2014, pursuant to Federal Rule of Bankruptcy Procedure 9023, the debtor made a motion for reconsideration of the court's May 13 order. The debtor argued that the court's valuation of the trucks, which was lower than the parties' agreed valuation, was in error. As a result of the lower valuation, the debtor claimed it had paid an extra $25,980 in adequate protection payments because the payments were calculated using a percentage of the values of the trucks. If the values had been lower, as the court had determined they were, then the monthly payments would have necessarily been smaller. According to the debtor, the adequate protection payments were made to compensate the debtor for the eroding value of the trucks, therefore, the payments made in excess of the erosion value should be credited against the secured portion of Daimler's claim. On June 6, 2014, the court entered an order denying the debtor's motion for reconsideration.

On June 19, 2014, the debtor filed a notice of appeal of the May 13 and June 6 orders. Both orders were interlocutory and the debtor did not request, nor did it meet the requirements, for a grant of leave to appeal. We dismissed the appeal for lack of jurisdiction on September 15, 2014.

Meanwhile, on June 20, 2014, the debtor proposed a third amended plan of reorganization. It provided treatment of Daimler's claim as follows:

Subject to any adjustments as described below, the Class 3 Claimant shall be paid the total sum of values listed below on all equipment retained by Debtor as of the Effective Date with interest at the rate of 4.25% per annum over a term in accordance with the following schedule of equipment:

Type Year Value

...