In re Karsten Gering, LLC
| Decision Date | 04 December 2015 |
| Docket Number | CASE NO. BK15-40935 |
| Court | U.S. Bankruptcy Court — District of Nebraska |
| Parties | IN THE MATTER OF: KARSTEN GERING, LLC, a Nebraska limited liability company, Debtor. |
Hearing was held in Omaha, Nebraska, on November 9, 2015, on an objection to claim of Platte Valley Bank filed by creditor Harry Karsten (Fil. #44). Erin M. McCartney appeared for Debtor, Stacy C. Bach appeared as the Chapter 7 trustee, Phillip Kelly appeared for Platte Valley Bank ("Platte Valley") and as special counsel for the Chapter 7 trustee, Kristen Krueger and Donald L. Swanson appeared for creditor Harry Karsten, and Richard P. Garden, Jr. also appeared for Platte Valley. Evidence and briefs were received, and this matter is now ready for decision.
The movant, Harry Karsten, is the managing member of Debtor, as well as a creditor and a guarantor of Debtor's obligation to Platte Valley. He is objecting to Platte Valley's proof of claim on the grounds that Platte Valley's sale of collateral was not commercially reasonable. Mr. Karsten asserts that Platte Valley should have accepted either a higher bid offered by him or one allegedly made by a third party and brought to Platte Valley's attention by Mr. Karsten. He also alleges Platte Valley failed to take reasonable steps to market the collateral before selling it to Debtor's landlord for insufficient consideration.
Most of the relevant facts are undisputed. Some are not. Mr. Karsten suggests that a trial is necessary with live witness testimony and the opportunity for cross-examination before this court can make any findings of fact regarding any disputed issues of fact. While that is, in and of itself, a true statement, such a trial may not be necessary if the issues presented to the court can be finally decided based on the law and the undisputed facts. For purposes of this order, the undisputed facts are as follows:
1. Karsten Gering, LLC, a Nebraska limited liability company, filed a Chapter 7 voluntary petition on June 10, 2015.
3. Triplephil, LLC owned the building in which Debtor operated its business. On July 1, 2015, Triplephil, LLC filed its proof of claim asserting pre-petition rent owed in the amount of $20,000.00.
4. Prior to bankruptcy filing, Debtor ceased business operations. However, property of the bankruptcy estate, including inventory and related equipment of Debtor remained on the business property owned by Triplephil, LLC.
5. On June 30, 2015, Triplephil, LLC filed a motion for relief from stay (Fil. # 12) due to Debtor's failure to pay rent. Triplephil, LLC sought relief for the purpose of exercising its remedies available under state law, including eviction, collection of rent, and disposal of the assets of the estate remaining on the property.
6. On July 3, 2015, the Chapter 7 trustee filed a motion to approve a public auction sale (Fil. #17) of the inventory, building materials, and other assets located at the Triplephil building. On July 20, 2015, Platte Valley objected to the trustee' motion (Fil. #21). Subsequently, the trustee withdrew her motion to sell at public auction (Fil. #37).
7. On July 28, 2015, a stipulation was filed (Fil. #32) between and among Debtor, Platte Valley, and the Chapter 7 trustee. Under the terms of that stipulation, Debtor acknowledged its loan agreement with Platte Valley and that it was in default under the terms of the loan. The stipulation then specifically provided:
The parties stipulate and agree that Platte Valley Bank shall have relief from stay to take possession of the inventory collateral to liquidate the collateral to satisfy its secured claim. In order to insure maximum value, the first potential purchasers to be solicited are current manufactured housing producers.
8. As part of the stipulation, the parties also agreed that if the sale proceeds did not satisfy Platte Valley's claim, Platte Valley preserved the right to pursue other collateral. The final paragraph of the stipulation provides that by signing the stipulation, the trustee consents to relief from stay and abandons the property located at the Triplephil building. Notice of the stipulation and opportunity to object were provided pursuant to Local Rule 9013-1. No objections were filed, and the stipulation was approved on August 20, 2015 (Fil. #41).
9. In the meantime, on August 12, 2015, Triplephil's motion for relief from the automatic stay was granted (Fil. #40).
10. On September 2, 2015, an attorney for Platte Valley sent by email (and, it appears, by United States mail) a notification of disposition of collateral. The notice was provided to Debtor, Mr. Karsten, and to Mr. Karsten's attorney, Donald L. Swanson. The notice was apparently givenpursuant to the Uniform Commercial Code, and described the collateral subject to the notice as "[a]ll the inventory, equipment, intellectual property, general intangibles, trailer chassis and all other property subject to Platte Valley Bank's security interest." The notice stated that Platte Valley will sell the collateral at private sale sometime after September 14, 2015.
11. On September 3, 2015, an agreement was entered into among the Chapter 7 trustee, Platte Valley, and Triplephil, LLC. Under the terms of that agreement, Triplephil agreed to purchase all of the inventory, equipment, and intellectual property located at the Triplephil property, together with certain trailer frames, by payment of $50,000.00 on September 15, 2015. The agreement further provided that Triplephil would be making an administrative expense claim for rent for the months of June, July, and August, but Triplephil agreed that it would not have an administrative claim for any rent for the month of September 2015. Finally, under the agreement, the parties acknowledged that Platte Valley would be required to give notice of sale to comply with the Uniform Commercial Code.
12. On September 11, 2015, the attorney for Mr. Karsten contacted an attorney for Platte Valley to state that, among other things, he would be interested in bidding for the property in excess of the amount offered by Triplephil. Therefore, at 5:30 P.M. on Monday, September 14, 2015, Platte Valley's attorney emailed Mr. Karsten's attorney asking if he had a bid he wanted to make in writing. At 8:35 A.M. on September 15, 2015, the attorney for Mr. Karsten responded to Platte Valley's attorney with the following:
13. On September 16, 2015, Platte Valley's attorney wrote to Mr. Karsten's attorney stating:
I am writing to advise you that the Bank has considered Mr. Karsten's offer to purchase the inventory and collateral subject to the UCC sale. The Bank has rejected that offer. Taking into consideration all the circumstances, the Bank believes a commercial and reasonable sale is one to Triplephil. The Bank will proceed to close that transaction today. That sale will produce $50,000 in cash to reduce the amount of the debt and will help the Bank avoid significant exposure for rent expense that was being made by Triplephil.
14. The sale then closed and the $50,000.00 payment was made by Triplephil.
15. Two days later, on September 18, 2015, Mr. Karsten filed his objection (Fil. #44) to Platte Valley's proof of claim on the grounds that it failed to comply with Article 9 of the Uniform Commercial Code when disposing of the sale collateral.
Specifically, Mr. Karsten alleges that Platte Valley's disposition of the collateral was not commercially reasonable because Platte Valley failed to consider Mr. Karsten's competing bid and a bid from a third party. Further, he alleges that Platte Valley made no marketing efforts and failed to comply with the stipulation regarding the need to first solicit current manufactured housing companies. Therefore, Mr. Karsten asserts that the claim of Platte Valley should be reduced to reflect the proceeds that would have been realized if the sale was conducted in a commercially reasonable manner.
Platte Valley's resistance to the claim objection alleges, inter alia, that: (i) Mr. Karsten lacks standing to object as the allowance or disallowance of the claim will have no pecuniary effect on him or the estate; (ii) Mr. Karsten has presented no evidence of the value of the sale collateral and, therefore, has failed to meet his burden of overcoming the prima facie validity of the claim; (iii) the objection is based on post-petition events which may not be...
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