In re Kors, Inc., Bankruptcy No. 80-00255

Decision Date10 November 1981
Docket NumberBankruptcy No. 80-00255,Adv. No. 81-0007.
Citation15 BR 444
CourtU.S. Bankruptcy Court — District of Vermont
PartiesIn re KORS, INC., Debtor. The FIRST NATIONAL BANK OF BOSTON, Plaintiff, v. KORS, INC., (and now David D. Robinson, Esq., Trustee), Defendants.

Dennis I. Greene, and Charles H. Gibbs, Jr., Woodstock, Vt., for The First Nat. Bank of Boston.

David D. Robinson, trustee pro se.

Peter Banse, Rutland, Vt., for debtor.

Andrew R. Field, Montpelier, Vt., for S.B.I.C., of Vermont, Inc.

James S. Abatiell, Rutland, Vt., for Rutland Industrial Development.

William C. Dagger, Bernard R. Dick, and Donald H. Hackel, Rutland, Vt., for The Howard Bank.

Michael S. Bancroft of RIDC and as Chairman of the Creditors' Committee.

John Paul Faignant, Rutland, Vt., for Rextrusion Systems, Inc.

George T. Faris, IV, Montpelier, Vt., for Small Business Administration.

FINDINGS OF FACT, MEMORANDUM, CONCLUSIONS AND ORDER

CHARLES J. MARRO, Bankruptcy Judge.

This is an adversary proceeding on the Revised Complaint of The First National Bank of Boston for relief from stay under § 362(d) of the Bankruptcy Code.

This matter came on for hearing, after the issuance of a revised Complaint and the filing of an Answer by the Trustee. Neither party, although given an opportunity, introduced any testimony or exhibits at said hearing. From the records of the case, pleadings and representations of counsel at the hearing, the following Findings of Fact are made and Conclusions reached:

FINDINGS OF FACT

The Debtor filed a Voluntary Petition for Relief under Chapter 11 of the Bankruptcy Code on November 24, 1980. At the time of the filing it was indebted to The First National Bank of Boston in the amount of $473,669.29.

The Debtor's obligations to The First National Bank of Boston, Plaintiff, are secured by perfected first lien in all the Debtor's accounts, contract rights, general intangibles, and all other rights to the payment of money in any case where an account has risen from the sale of goods and interest of the Debtor in such goods and inventory.

Certified copies of the U.C.C. filings with the Secretary of State indicating the perfected first lien are on file with the Court.

As of the date of filing, the value of the security in the inventory, accounts receivable, and the right to proceed therefrom, was $350,000.00.

See this Court's Order entered May 20, 1981.

On August 14, 1981 this Court entered an Order converting the case from Chapter 11 to Chapter 7 liquidation. This Order was supported by a Memorandum, Findings of Fact and Conclusions, which included findings that on March 1, 1981 the Debtor turned over to First National Bank of Boston accounts receivable having a book value of $154,000.00 but an actual value of approximately $23,000.00 resulting in a diminution of the collateral subject to the security interest of First National Bank of Boston of $131,000.00 and that the Debtor has no unencumbered assets to furnish adequate protection to The First National Bank of Boston for the decrease in the value of this collateral.

No evidence has been produced by the Trustee or other parties to show that the Trustee's operation of the business under the Court's Order dated August 28, 1981 and subsequent orders of this Court have resulted in an increase in the cash collateral and/or equity of the Debtor's estate.

MEMORANDUM AND CONCLUSIONS

The evidence clearly establishes that the value of the collateral subject to the security interest of The First National Bank of Boston has been diminished and that there has been an operating loss of substantial size since the Petition under Chapter 11 was filed. It further appears that the Debtor has no assets unencumbered from which to give The First National Bank of Boston adequate protection. The net result will be that this bank will suffer a substantial loss from the liquidation of its security.

From the Disclosure Statement and the application of the proper figures to inventory, it appears that the Debtor has had an operating loss of $102,378.00 for the period of November 24, 1980 to May 28, 1981.

The Bankruptcy Code provides that the party requesting relief from the automatic stay has the burden of proof on the issue of the debtor's equity in property; and the...

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