In re Blankenship Farms, LP

• Decision Date: 03 May 2019
• Docket Number: Case No. 16-10840
• Citation: 612 B.R. 570
• Parties: IN RE BLANKENSHIP FARMS, LP, Debtor.
• Court: U.S. Bankruptcy Court — Western District of Tennessee

612 B.R. 570

IN RE BLANKENSHIP FARMS, LP, Debtor.

Case No. 16-10840

United States Bankruptcy Court, W.D. Tennessee, Eastern Division.

Signed May 03, 2019

MEMORANDUM OPINION RE: CHAPTER 11 TRUSTEE'S MOTION FOR SUMMARY JUDGMENT AS TO CNH INDUSTRIAL CAPITAL AMERICA, LLC'S AMENDED MOTION FOR ALLOWANCE OF ADMINISTRATIVE EXPENSE CLAIM

Jimmy L. Croom, UNITED STATES BANKRUPTCY JUDGE

This matter is before the Court on the chapter 11 trustee's ("Trustee") motion for summary judgment as to CNH Industrial Capital America, LLC's ("CNHi") amended motion for allowance of an administrative expense claim. The Trustee asserts she is entitled to summary judgment as a matter of law pursuant to Federal Rule of Civil Procedure 56. The Court conducted a hearing on the Trustee's summary judgment motion on May 1, 2019.

This proceeding arises in a case referred to this Court by the Standing Order of Reference, Misc. Order No. 84-30 in the United States District Court for the Western District of Tennessee, Western and Eastern Divisions, and is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). This Court has subject matter jurisdiction over core proceedings pursuant to 28 U.S.C. §§ 157(b)(1)(A). This memorandum opinion shall serve as the Court's findings of facts and conclusions of law. Fed. R. Bankr. P. 7052.

I. FACTS

The parties in this matter filed a Joint Pre-trial Stipulations of Fact on April 10, 2019. These stipulations are as follows:

1. On April 27, 2016 (the "Petition Date"), James Trent Blankenship and Wendi Deann Blankenship (the "Blankenships") filed a petition for relief under Chapter 11 of the United States Bankruptcy Code in the Western District of Tennessee, Case No. 16-bk-10839 (the "Blankenships' Case"). Pursuant to Sections 1107 and 1108 of the Bankruptcy Code, the Blankenships operated and managed their farming business as debtors-in-possession during the bankruptcy case.

2. On or about July 25, 2017, the Blankenships' Case was converted to a Chapter 7 case under the Bankruptcy Code.

3. This Court appointed Marianna Williams as Chapter 7 Trustee for the Blankenships on or about July 26, 2017, and the Trustee has served as Chapter 7 Trustee from and since July 26, 2017.

4. As the Chapter 7 Trustee, Ms. Williams is vested with the exclusive ability to exercise control over property of the estate and manage the business of the Blankenships pursuant to Sections 541 and 704 of the Bankruptcy Code.

5. In the Blankenships' Petition and bankruptcy schedules (the "Blankenships Schedules"), the Blankenships listed certain farm equipment, described below in Stipulation No. 13, in which CNHi had a security interest (the "Collateral"), as having a value of $1,202,000.00.

6. CNHi did not request a separate/independent valuation of the Collateral on or after the Petition Date to assess the Blankenships' valuation.

7. Also on the Petition Date, Blankenship Farms L.P. (the "Farms Debtor") filed a petition for relief under Chapter 11 of the United States Bankruptcy Code in the Western District of Tennessee, Case No. 16-bk-10840 (the "Farms Case"). Pursuant to Sections 1107 and 1108 of the Bankruptcy Code, the Farms Debtor operated and managed its farming business as debtor-in-possession during the bankruptcy case.

8. This Court appointed Marianna Williams as Chapter 11 Trustee for the Farms Debtor on or about March 9, 2017, and the Trustee has served as Chapter 11 Trustee from and since March 9, 2017.

9. As the Chapter 11 Trustee, Ms. Williams is vested with the exclusive ability to exercise control over property of the estate and manage the business of the Farms Debtor pursuant to Sections 541, 1107, and 1108 of the Bankruptcy Code.

10. In the Farms Debtor's Petition and bankruptcy schedules (the "Farms Schedules"), the Farms Debtor listed the Collateral, described below in Stipulation No. 13, in which CNHi had a security interest, as having a value of $1,202,000.00.

11. CNHi filed proofs of claim evidencing its prepetition claim in the amount of $519,089.16, secured by nine (9) pieces of farming equipment described below (the "Collateral") in the Blankenships' Case as Claim No. 6 and in the Farms' Case as Claim No. 12.

12. The Blankenships operated as family farmers, both before and after the Petition Date, and generated revenue through the use of the Collateral of CNHi.

13. During the pendency of the Blankenships' Case and the Farms Case, the Blankenships and Farms used the following Collateral of CNHi:

a. two (2) 2208 Case IH Combine Headers, Serial No. CBJ030111 and Serial No. HAJ035217;

b. one (1) 8230 Case IH Combine, one (1) 2162 Case IH Combine Head and one (1) 9250 Unverferth Grain Cart, Serial No. YCG215997, Serial No. YCZN17892 and Serial No. B30170128;

c. two (2) 1245 Case IH Planters, Serial No. YDS042613 and Serial No. YDS042551;

d. one (1) 290 Case IH Magnum Tractor, Serial No. ZERD02119; and

e. one (1) True Tandem 3 Case IH Soil Preparation vertical tillage machine, Serial No. YED072229.

14. CNHi filed a Motion for Relief from the Automatic Stay or, in the Alternative, for Adequate Protection, on May 27, 2016 [D.E. 35] (the "Motion") in the Blankenships' Case. In that Motion, CNHi asserted that (a) the Blankenships purchased the Collateral and financed that purchase through CNHi and (b) CNHi was entitled to adequate protection for the use of the Collateral during the bankruptcy case.

15. The Blankenships filed their objection to CNHi's Motion on June 14, 2016 [D.E. 70], and asserted that the Collateral securing the claim of CNHi had "a value of $1,202,000 as of April 27, 2016." The Blankenships opposed the relief requested by CNHi "because (A) CNHi's secured claim is adequately protected, (B) the farming equipment securing CNHi's claims has a significant equity cushion in excess of CNHi's claims, and (C) the farming equipment securing CNHi's claims is necessary to an effective reorganization." Id. at page 4. The Debtors further asserted that "an enormous equity cushion exists to adequately protect CNHi. CNHi is not entitled to additional adequate protection." Id. at page 5. The Blankenships also asserted that the Collateral had been transferred to and was owned by the Farms Debtor.

16. The Blankenships opposed CNHi's Motion, asserting that "Farming long ago progressed past hand labors, and, now, farming equipment is necessary to conduct substantial farming operations. All of CNHi's equipment is essential for farming operations of the Debtors and Blankenship Farms LP." Id.

17. The Motion for Relief was originally set for hearing on June 16, 2016. The hearing on the Motion for Relief was continued seven times between June 16, 2016 and March 23, 2017.

18. The Collateral was used to conduct the farming operations of the Blankenships and of Blankenship Farms.

19. After CNHi filed the Motion for Relief in the Blankenships' case, the Blankenships, the Farms Debtor, and CNHi entered into negotiations wherein the Blankenships and the Farms Debtor offered to make periodic payments to CNHi as adequate protection for the continued use of the Collateral. Specifically, in October 2016, the Blankenships and the Farms Debtor offered to pay CNHi $6,000.00 per month as adequate protection, nunc pro tunc to the Petition Date, if CNHi would agree (a) to apply those payments to the principal balance of the debt, and (b) to forego any claim to post-petition interest and attorneys' fees.

20. CNHi did not accept this offer.

21. CNHi subsequently filed a second Motion for Relief from the Automatic Stay or, in the Alternative, for Adequate Protection in the Farms Case on February 22, 2017.

22. CNHi was granted relief from stay as to the Collateral by this Court on March 24, 2017 in both bankruptcy cases.

23. This Court never entered an order requiring the Blankenships or the Farms Debtor to make adequate protection payments to CNHi, in either bankruptcy case.

24. CNHi took possession of the Collateral on April 27, 2017.

25. After obtaining relief from stay, CNHi recovered the Collateral and sold the Collateral at private party foreclosure sales through its equipment remarketing website, Equipment Alley, as follows:

a. one (1) 2208 Case IH Combine Header, Serial No. CBJ030111, was sold for $6,500 at a private foreclosure sale on May 19, 2017, with the bill of sale executed on May 19, 2017. b. one (1) 2208 Case IH Combine Header, Serial No HAJ035217 was sold for $5,000 at a private foreclosure sale on November 16, 2017, with the bill of sale executed on November 16, 2017.

c. one (1) 8230 Case IH Combine, Serial No. YCG215997, was sold for $106,500 at a private foreclosure sale on October 26, 2017, with the bill of sale executed on November 6, 2017.

d. one (1) 2162 Case IH Combine Head, Serial No. YCZN17892 was sold for $32,000 at a private foreclosure sale on May 19, 2017, with the bill of sale executed on July 12, 2017.

e. one (1) 9250 Unverferth Grain Cart, Serial No. B30170128 was sold for $17,972 at a private foreclosure sale on July 24, 2017, with the bill of sale executed on July 27, 2017.

f. one (1) 1245 Case IH Planter, Serial No. YDS042613 was sold for $60,900 at a private foreclosure sale on August 9, 2017, with the bill of sale executed on August 14, 2017.

g. one (1) 1245 Case IH Planter, Serial No. YDS042551 was sold for $58,501 at a private foreclosure sale on August 9, 2017, with the bill of sale executed on August 11, 2017.

h. one (1) 290 Case IH Magnum Tractor, Serial No. ZERD02119 was sold for $99,500 at a private foreclosure sale on November 14, 2017, with the bill of sale executed on November 15, 2017.

i. one (1) True Tandem 3 Case IH Soil Preparation vertical tillage machine, Serial No. YED072229 was sold for $25,260 at a private foreclosure sale on November 28, 2017, with the bill of sale executed on November 28, 2017.

26. The Trustee held a public auction for the sale of other farm equipment owned by the Blankenships and the Farms Debtor in both bankruptcy cases in July 2017, but CNHi elected not to participate in the Trustee's public auction.

27. At the

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