In re a & S Livestock Inc.

• Decision Date: 31 May 2011
• Docket Number: Bankruptcy No. 11–10092(1)(11).,Adversary No. 11–1011.
• Citation: 449 B.R. 525
• Court: U.S. Bankruptcy Court — Western District of Kentucky
• Parties: In re A & S LIVESTOCK, INC., Debtor(s).First & Farmers National Bank, Plaintiff(s)v.A & S Livestock, Inc., Defendant(s).

449 B.R. 525

In re A & S LIVESTOCK, INC., Debtor(s).First & Farmers National Bank, Plaintiff(s)

v.A & S Livestock, Inc., Defendant(s).

Bankruptcy No. 11–10092(1)(11).

Adversary No. 11–1011.

United States Bankruptcy Court, W.D. Kentucky.

May 31, 2011.

Robert C. Chaudoin, Bowling Green, KY, Plaintiff(s).Scott A. Bachert, Bowling Green, KY, for Defendant(s).

MEMORANDUM–OPINION

JOAN A. LLOYD, Bankruptcy Judge.

This matter came before the Court on May 17, 2011 for an evidentiary hearing on the Motion for Preliminary Injunction of Defendant A & S Livestock, Inc. (“A & S”). The Court heard the testimony of the witnesses and reviewed the documentary evidence submitted. Following the hearing, the Court GRANTED A & S's Motion for Preliminary Injunction and Plaintiff First & Farmers National Bank (“the Bank”) requested that the Court issue a ruling as to whether the bank has a security interest in any cattle supplied by MMB Livestock, LLC (“MMB”) to A & S. For the following reasons, the Court determines that the Bank has no security interest in any of the cattle supplied to A & S by MMB.

FACTUAL BACKGROUND

Mark Antle is the owner of A & S. In 2004, A & S began its business of backgrounding cattle. Backgrounding cattle involves purchasing cattle, vaccinating and feeding the cattle and essentially getting the cattle ready for sale to a feed lot. A & S's profit was made when the cattle was sold to the feed lot approximately 90 days after they were initially purchased. In November 2008, A & S and Antle entered into a revolving credit agreement with the Bank for $1.5 million. The loan's purpose was for debt consolidation. Antle and his wife pledged their real estate as collateral for the loan, their existing head of cattle and miscellaneous items of equipment. The Bank extended A & S a line of credit. The Note matured on November 5, 2009 and was extended for an additional 90 days. Once it matured it was not renewed.

By 2009, A & S changed its business from purchasing cattle for backgrounding to receiving cattle from MMB. A & S then performed all services in connection with the backgrounding operation and MMB then sold the cattle. MMB and A & S split the profit on the cattle sold. MMB owned the cattle and A & S provided only labor for the operation and any equipment used in the backgrounding operation. The cattle were bought and sold in MMB's name.

In December 2010, MMB and A & S entered into a written Cattle Backgrounding Agreement. This Agreement was filed with and approved by the Bankruptcy Court. The written agreement memorialized the verbal agreement that MMB and A & S had been working under since June 2009.

LEGAL ANALYSIS

Following the evidentiary hearing on Debtor's Motion for Preliminary Injunction, the Bank requested the Court to enter a finding as to whether the Bank has a security interest on the cattle supplied by MMB to A & S for the backgrounding operation. The Court finds that the Bank has no security interest in the livestock supplied by MMB to...