In re Bearhouse, Inc.
| Decision Date | 22 January 1988 |
| Docket Number | CMS No. 87-394M,Bankruptcy No. ED 87-42M,87-434M.,87-186M and 87-209M,Adv. No. 87-134M,87-139M |
| Citation | 84 BR 552 |
| Parties | In re BEARHOUSE, INC., Debtor. FARMERS RICE MILLING COMPANY, INC., Plaintiff, v. Claude S. HAWKINS, Jr., Interim Trustee for Bearhouse, Inc., Defendant. Edward L. OLTMANN and Gary W. Shrum d/b/a E & G Agri and Virgie M. Reinhart and Virginia R. Ray d/b/a Wolfe Prairie Farms, Plaintiffs, v. BEARHOUSE, INC., Claude S. Hawkins, Jr., Interim Trustee, and National Bank of Commerce of Pine Bluff, Defendants. FARMERS RICE MILLING COMPANY, INC., Plaintiff, v. BEARHOUSE, INC., Aetna Casualty & Surety Company and National Bank of Commerce of Pine Bluff, Defendants. LADD FARMS, a Partnership Composed of Earl Ladd, Glenn Ladd, Clifton Ladd and Keith Ladd, Plaintiffs, v. Claude HAWKINS, Jr., Trustee, Bearhouse, Inc., and National Bank of Commerce of Pine Bluff, Defendants. LADD FARMS, a Partnership Composed of Earl Ladd, Glenn Ladd, Clifton Ladd and Keith Ladd, Plaintiffs, v. Claude HAWKINS, Jr., Interim Trustee, Bearhouse, Inc., National Bank of Commerce of Pine Bluff, Defendants. 553*553 FARMERS RICE MILLING COMPANY, INC., Plaintiff, v. Claude S. HAWKINS, Jr., Interim Trustee for Bearhouse, Inc., Defendant, National Bank of Commerce of Pine Bluff, Intervenor, Commodity Credit Corporation, Intervenor. |
| Court | U.S. Bankruptcy Court — Western District of Arkansas |
Charles R. Camp, Little Rock, Ark., for debtor.
Claude S. Hawkins, Jr., Ashdown, Ark., Trustee.
William Meeks, Hamburg, Ark., for Ladd Farms.
Terry F. Wynne, Pine Bluff, Ark., for Nat. Bank of Commerce of Pine Bluff.
Claude Skelton, Little Rock, Ark., for U.S. Dept. of Agriculture.
Thomas S. Streetman, Crossett, Ark., for Farmers Rice Mill. Co., Inc.
Bob Lawson, Little Rock, Ark., for U.F. Coleman and Monticello Gin & Elevator Co.
Larry McCord, Asst. U.S. Atty., Fort Smith, Ark., for Commodity Credit Corp.
William K. Ball, Monticello, Ark., for Edward L. Oltmann, Gary Shrum, Virgie & Virginia Ray.
Overton S. Anderson, Little Rock, Ark., for Aetna Cas. & Sur. Co.
On March 10, 1987, an involuntary petition was filed against Bearhouse, Inc. (Bearhouse). Bearhouse did not contest the petition, so an order was entered adjudicating Bearhouse a debtor under chapter 7. Hon. Claude S. Hawkins, Jr., was appointed interim trustee. On March 12, 1987, Bearhouse filed a motion to convert to chapter 11, and on April 13, 1987, an order was entered granting the motion. Hon. Claude S. Hawkins, Jr., was appointed trustee pursuant to 11 U.S.C. § 1104.
Bearhouse is an operator of five grain warehouse and storage facilities. These facilities are located at Arkansas City, Hamburg, Kelso, McGhee and Portland, Arkansas. The stock in Bearhouse is owned by Richard E. Griffin (Griffin), Robert E. Cockrum (Cockrum), James B. Young, and Lonnie Couch (Couch). Couch is the president of Bearhouse, Cockrum is the chairman of the board, and Griffin is the secretary. Bearhouse's grain storage facilities are licensed under the Federal Warehouse Act. See 7 U.S.C. § 241, et seq.
On April 1, 1987, an order was entered pursuant to 11 U.S.C. § 557 authorizing the trustee to sell all of the grain stored at Bearhouse's facilities subject to all existing claims of ownership as this Court will determine in this memorandum opinion. The trustee's report of sale indicates the following grain was sold:
Rice
Hamburg 1,835,600.00 pounds
McGhee 2,868,150.00 pounds
Arkansas City 1,831,240.00 pounds
Kelso 3,661,800.00 pounds
____________________
Total 10,196,790.00 pounds
Oats
Hamburg 22,568.16 bushels
Kelso 3,838.13 bushels
McGhee and Hamburg (bagged) 27,757.20 bushels
____________________
Total 54,163.49 bushels
Soybeans
Hamburg 29,834.74 bushels
McGhee 8,612.28 bushels
Hamburg (bagged) 40.00 bushels
McGhee (bagged) 854.00 bushels
____________________
Total 39,341.02 bushels
Several hearings were held to determine the validity and amount of the claims of ownership of the sale proceeds from the grain sold. The record consists of the evidence received at hearings on April 1, 1987, June 26, 1987, July 8, 1987, and December 7, 1987.
The proceedings before the Court are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(B) and (K). The Court has jurisdiction to enter a final judgment in these proceedings. The following shall constitute the Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule of Procedure 7052.
U.F. Coleman, Jr., (Coleman) is a farmer who lives in Greenville, Mississippi, and farms near Lake Village, Arkansas. Coleman delivered 19,395.70 bushels of rice to Bearhouse's facilities at McGhee, Arkansas, between the 4th and the 11th of February 1987 and received scale tickets as evidence of delivery. All of Coleman's rice was placed in Bins 2 and 3 at McGhee, Arkansas. According to Coleman the rice was of a quality which made it suitable for milling as seed rice.
Coleman argues that he remains the owner of 19,395.70 bushels of rice because neither an agreement to sell his rice nor an actual sale occurred. Contrary to his argument, Coleman testified as follows:
Record at 257, June 26, 1987.
Record at 260, June 26, 1987.
Under Arkansas law, "unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods . . . even though a document of title is to be delivered at a different time or place." A.C.A. § 4-2-401(2) (1987). A sale consummates in the passing of title from the seller to the buyer. A.C.A. § 4-2-106(1) (1987).
The rice was delivered to Bearhouse pursuant to an oral contract of sale. The evidence establishes that title passed from Coleman to Bearhouse upon delivery of the grain to Bearhouse's facilities at McGhee. No bailment relationship existed on the day the bankruptcy petition was filed.
Coleman argues alternatively that title did not pass to Bearhouse upon delivery of the rice because A.C.A. § 2-17-303 (1987) provides that title does not pass to a warehouseman "unless such sales . . . are supported by a written document executed by the owner specifically conveying title to the grain to the public grain warehouseman." Coleman's argument is without merit for two reasons.
First, Section 2-17-303 was part of Act 401 of the Acts of Arkansas. Section 5 of Act 401 provides:
The provision of this Act shall apply to all public grain warehousemen and the operation of such public grain warehouses, unless such public grain warehouse is licensed under the provisions of the United States Warehouse Act, (39 STAT 486; 7 U.S.C. § 241-273) as amended.
Since Bearhouse is a federally licensed warehouse it is exempt from application of Section 2-17-303. Second, this Act has been construed to apply only in situations when grain is delivered for storage. See Farm Bureau Mut. Ins. Co. of Ark. v. Wright, 285 Ark. 228, 686 S.W.2d 778 (1985). Coleman's testimony clearly reflects that storage was not contemplated. Since Coleman's rice was sold to Bear-house, he did not own any of the rice sold by the trustee. Although Coleman has a claim as an unsecured creditor, he is not entitled to share in the proceeds of the sale of the rice sold by the trustee. See In re Fairfield Elevator Co., Inc., 14 U.C.C. 96 (S.D. Iowa 1973).
Scott Young is a farmer who lives in Portland, Arkansas. His father, James Young, owns twenty-five percent of the stock of Bearhouse. During the 1986 crop year, Scott Young leased farmland from Cockrum.1 Located on this farm are five 8,000 bushel capacity grain storage bins described as the C series bins. These bins are located approximately 100 yards east of Bearhouse's Hamburg facilities. Although the evidence is not clear, apparently Scott Young's lease did not include a lease of the C series bins.
On September 1, 1985, Cockrum and his wife, as owner and lessor, leased the C series bins to James Young for a term of one year beginning September 1, 1985, and ending August 31, 1986. On September 1, 1985, James Young subleased the C series bins to Bearhouse for the same period of time.
James Young also owned grain bins known as the H series bins which were located on his farm. He leased his H series bins to Bearhouse for the same period of time. Pursuant to these two leases, James Young was to receive one and one-half cents per bushel of grain stored in the bins. The C series and H series bins were included under Bearhouse's federal license.
Scott Young produced a crop of rice in 1986, and on the day the petition was filed against Bearhouse he had rice stored as follows:
C series bins: C-3 = 8,000.00...To continue reading
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