In re Davidson Lumber Co., Bankruptcy No. 82-00442-BKC-TCB
| Decision Date | 29 April 1982 |
| Docket Number | 82-00443-BKC-TCB,Adv. No. 82-0225-BKC-TCB-A,82-0226-BKC-TCB-A.,Bankruptcy No. 82-00442-BKC-TCB |
| Citation | 19 BR 871 |
| Parties | In re DAVIDSON LUMBER CO., Davidson Timber Co., Debtors. CITICORP, et al., Plaintiffs, v. DAVIDSON LUMBER CO., Defendant. CITICORP, et al., Plaintiffs, v. DAVIDSON TIMBER CO., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
John L. Britton, Fort Lauderdale, Fla., Robert O'Malley, Miami, Fla., for plaintiffs.
Louis Phillips, Miami, Fla., for debtors.
Scott Baena, Miami, Fla., for petitioning creditors.
Jerry Markowitz, Miami, Fla., for creditors.
Irving Wolff, Miami, Fla., for S. Davidson.
These are two identical adversary complaints filed against two closely related corporations against whom an involuntary chapter 7 petition was filed. The complaints are filed by two major, secured creditors who seek a determination of the validity, priority and extent of their respective liens and relief from the automatic stay. The debtors have answered. The petitioning creditors, who initiated the involuntary proceeding, have been permitted to intervene as defendants and have also answered. The two matters were tried together on April 8 in accordance with the statutory imperative of 11 U.S.C. § 362(e). The record common to both matters is docketed in the lower numbered adversary proceeding but is applicable to both.
Plaintiffs' prayer for relief from the automatic stay or, in the alternative, for adequate protection was heard on an accelerated, emergency basis on March 17. The hearing resulted in an agreed order entered that day providing for additional financing and certain safeguards, which adequately protect the plaintiffs. Therefore, no further relief is sought with respect to the prayer for adequate protection.
It is not disputed that the plaintiffs hold duly executed security agreements granting a continuing security interest in the personal property and fixtures of the two defendants and their subsidiaries as well as a duly executed Collateral Assignment assigning to the plaintiffs the interests in certain leases owned by the defendants and their subsidiaries. The security was provided for a line of credit extended by the two plaintiffs which on March 11, 1982, the date these two involuntary petitions were filed, reflected an outstanding balance including interest owed to Citicorp of $1,712,270 and a balance including interest owed to Southeast Bank of $1,378,813.
The two alleged debtors concede the validity, amount and priority ahead of all other claims of the liens just described.
The petitioning creditors, who have intervened, have challenged the liens on four grounds, which may be summarized as follows:
(1) The creation of the lien is alleged to constitute a preferential transfer voidable under § 547(b) and, alternatively, a part of the asserted lien is alleged to be a voidable fraudulent transfer under § 548(a). This challenge is stricken because these statutory remedies may be asserted only by a bankruptcy trustee or, under § 1107(a), by a chapter 11 debtor-in-possession. The petitioning creditors fall in neither category and, therefore, lack standing to interpose these defenses. The striking of these allegations is, of course, without prejudice to their subsequent assertion by either a trustee or a debtor-in-possession if the further progress of these cases provides such persons.
(2) It is alleged that plaintiffs lost their security interest with respect to the proceeds of collateral received during the ten day period immediately preceeding bankruptcy under the provisions of § 679.306(4), Florida Statutes, which is U.C.C. § 9-306. This matter was tried before the involuntary petition and, therefore, all parties agreed to defer the complicated accounting presented by this issue until after the involuntary proceeding. An order for relief has since been entered. Jurisdiction is, therefore, reserved to resolve this issue.
(3) It is alleged that Southeast Bank charged and collected about $50,000 excessive interest under the provisions of its contractual agreements with the alleged debtors because their contract stipulated a lower rate of interest (15%) after maturity. The obligations matured on December 11, 1981. This objection is denied.
(4) With respect to a tax refund received in 1981 by the debtors in the approximate amount of $1.3 million, it is alleged that the plaintiffs' lien lapsed on the eleventh day after the debtors used this refund to purchase a certificate of deposit. The petitioning creditors rely on § 679.306(3), Florida Statutes. This objection is sustained.
Excessive Interest. Southeast's original line of credit notes of June 7, 1979 (Consolidated Master Promissory Note) stipulated that the debt would bear interest at 15% after maturity. By a letter agreement executed December 11, 1981 the maturity of the debt was accelerated, but Southeast Bank continued to charge interest at fluctuating rates up to 18½% after that date and up to the date of bankruptcy. It is estimated that the 15% rate would have produced about $50,000 less than was collected by Southeast during the three months in question.
Southeast's interest charges after maturity are based upon a May 13, 1980 agreement between the parties executed when Southeast replaced the original lender, Flagship. The sole purpose of the agreement was to modify all the interest rate provisions in all the loan documents, including the one that provided 15% after maturity, to provide a floating rate of 2½% above prime. The prime rate at that time already exceeded 15%. The agreement, therefore, explicitly supersedes all interest rates provided in the line of credit notes including the provision which the petitioning creditors rely upon:
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