In re Tama Beef Packing, Inc.
| Citation | 290 B.R. 90 |
| Decision Date | 21 March 2003 |
| Docket Number | No. 02-6053 NI.,02-6053 NI. |
| Parties | In re TAMA BEEF PACKING, INC., Debtor. AgriProcessors, Inc., Interested Party-Appellant, v. Iowa Quality Beef Supply Network, L.L.C., Interested Party-Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Jeffrey W. Courter, Des Moines, Iowa, for appellant.
Mark A. Roberts, Cedar Rapids, Iowa, Leonard T. Strand, Lynn W. Hartman, Cedar Rapids, Iowa, appeared on the brief, for appellee.
Before KRESSEL, Chief Judge, DREHER, and FEDERMAN, Bankruptcy Judges.
On August 20, 2002, the bankruptcy court denied appellant AgriProcessors, Inc.'s claim for administrative expenses, and on September 10, 2002, the bankruptcy court denied AgriProcessors' motion to alter or amend. AgriProcessors appeals both Orders of the bankruptcy court. We reverse and remand.
On November 8, 2001, debtor Tama Beef Packing, Inc. (Tama) filed a Chapter 11 bankruptcy petition, and on December 18, 2001, the bankruptcy court converted the case to Chapter 7. Prior to the filing, Tama had negotiated a nonresidential real property lease with the City of Tama, Iowa (the City) in order to lease a special purpose meat-packing plant. The lease commenced on June 19, 2000, and ended on June 30, 2003. The rental payments under the lease totaled $1,080,000.00 to be paid as follows: $120,000 for the first year, payable at $10,000 per month; $360,000 for the second year, payable at $30,000 per month; and $600,000 for the third year, payable at $50,000 per month. On the petition date Tama had missed three monthly lease payments of $30,000 each.
On December 28, 2001, the Chapter 7 trustee filed a motion to extend the time to decide whether to assume or reject the lease with the City. The City objected to any extension and filed a motion to force the trustee to reject the lease immediately. The City claimed that it had accelerated the lease pre-petition due to Tama's default, and that the amount now due and payable was $937,749.70. The trustee responded that she was talking to several potential purchasers of the lease, and that she needed time to negotiate a sale. She also stated that the lease was the only asset of value in the estate, and that she had no liquid assets with which to cure the arrearage. The bankruptcy court ruled that the trustee had 60 days from the conversion, or until February 16, 2002, to assume or reject the lease, therefore, no extension was necessary.
On January 10, 2002, the City filed a request for a ruling that the trustee had made no post-petition lease payments, and it asked the bankruptcy court to order her to either immediately reject the lease or to make adequate protection payments. On January 25, 2002, the bankruptcy court denied the relief sought by the City and stated again that the trustee had until February 16, 2002, to decide whether to accept or reject the lease.
On February 15, 2002, the trustee again moved the bankruptcy court for more time to decide whether to accept or reject the lease. With that motion, the trustee attached a Letter of Intent, also dated February 15, 2002, from AgriProcessors. The trustee stated that AgriProcessors was interested in purchasing the lease from the bankruptcy estate, but that it required 45 days to complete its due diligence. She, therefore, requested an extension of 45 days, or until April 23, 2002. The Letter of Intent stated that the purchase agreement would contain a provision that should another buyer acquire the lease by making the trustee a higher offer, AgriProcessors would be entitled to recover the costs it incurred in negotiating the transaction, in an amount not to exceed $50,000.
On February 19, 2002, the bankruptcy court entered an Order that granted the trustee an extension of 10 days, or until the court could schedule a hearing. On that same date, the City filed a motion asking the bankruptcy court to rescind its order of extension, precipitating a hearing on February 21, 2002. At the hearing on February 21, 2002, the trustee, the City, General Electric Capital Corporation (GECC), and AgriProcessors appeared by counsel. And, for the first time, Iowa Quality Beef Supply Network. L.L.C. (Iowa Beef) entered its appearance. On February 22, 2002, the bankruptcy court denied the City's motion, but in so doing the court noted that the lease was Tama's most significant asset, and that the trustee had received a commitment from GECC to lend monies sufficient to reimburse the City for its ongoing expenses.
On March 12, 2002, the trustee filed a motion to assume and assign to AgriProcessors Tama's unexpired lease with the City. The trustee attached the Assignment and Assumption Agreement (the Agreement) submitted by AgriProcessors. The Agreement provided that AgriProcessors would pay to the trustee a minimum of $50,000 for disbursement to creditors of the estate. Section (9) of the Agreement contained a provision as follows:
9. Effect of Termination. Notwithstanding any provision otherwise contained in this Agreement, the Bankruptcy Estate agrees that if the Agreement is terminated pursuant to Section 8(d) above, then AgriProcessors shall be entitled to submit an administrative claim to the Bankruptcy Court in an amount not to exceed $50,000 to allow AgriProcessors to recover a portion of its costs and expenses associated with this transaction.1
On March 12, 2002, the bankruptcy court held a hearing on the trustee's motion to extend time to assume or reject the lease and entered an order granting that motion in part and denying it in part. The court noted that the trustee had that day filed her motion to assume the lease and assign it to AgriProcessors. It also noted that, while Iowa Beef indicated that it had an offer on the table with the City, any benefit from that offer would flow solely to the City, not to the creditors of the bankruptcy estate. The court pointed out certain flaws in the Agreement. It found that the Agreement lacked commitment in that it offered no earnest money. The Agreement also failed to offer protection to the City for costs incurred since the first extension and prior to closing. The court, thus, refused to extend the time unless AgriProcessors posted an initial irrevocable payment in the amount of $100,000 as an advance under the provisions of the Agreement. The court then conditionally approved the motion to extend time provided AgriProcessors made an irrevocable payment of $100,000 to the trustee before March 15, 2002, at 4:30 p.m. AgriProcessors made the payment, and on March 15, 2002, the court entered a final order extending the time to assume or reject until April 12, 2002. In addition, at the trustee's request, the court clarified the nature of the $100,000 payment. The court held that, in the event the trustee accepted a higher offer from another purchaser, the trustee would return the sum of $100,000 to AgriProcessors, otherwise, the $100,000 payment would be irrevocable and subject to disbursement by the trustee. While the court amended the Agreement by requiring an irrevocable payment from AgriProcessors, it did not disturb the termination clause.
On April 1, 2002, the City objected to the trustee's motion to assume the lease and assign it to AgriProcessors. As part of its objection, the City cited the termination clause in the Agreement. On April 3, 2002, the trustee amended her motion to assume and assign the unexpired lease. She still wished to assume the lease, but she now had received an offer from Iowa Beef, and so she wanted to delay her decision as to which entity would be the assignee. Iowa Beef had offered the trustee $110,000 for the assignment of the lease and the right to negotiate the terms for curing the default directly with the City. AgriProcessors objected to the trustee's motion to amend the motion to assume and assign on the grounds that the negotiating procedures were not clearly spelled out in her motion. On April 3, the court granted the trustee's motion to amend.
On April 18, 2002, the bankruptcy court granted the trustee's motion to assume the lease and assign it to Iowa Beef, the highest bidder. In its Order the court reiterated that it had previously expressed concerns about AgriProcessors commitment, and had only granted an earlier extension upon payment by AgriProcessors of an irrevocable payment of $100,000 to the trustee. By making that payment, AgriProcessors committed itself, at the direction of the court, to participate in the assumption and assignment process until the court either granted or denied the trustee's motion. In the end, Iowa Beef offered the trustee the sum of $153,000 for the assignment of the lease, while AgriProcessors offered the trustee $130,000.
On May 7, 2002. the court ordered the trustee to refund to AgriProcessors the $100,000 payment it had made on March 15, 2002. On June 3, 2002 AgriProcessors filed an application for payment of administrative expenses in the amount of $46,964.99. On July 1, 2002, Iowa Beef filed an objection to the application.2 On July 9, 2002, the bankruptcy court held a hearing at which the trustee fully supported AgriProcessors application. Nonetheless, on August 20, 2002, the court denied AgriProcessors' application. The bankruptcy court rested its decision on its determination that the actions of AgriProcessors had not benefitted the estate. The court further noted that outside of bankruptcy AgriProcessors would not have been entitled to be paid its cost of making its offer if it lost the bidding. On August 30, 2002, AgriProcessors filed a motion to alter or amend the court's Order, and on September 10, 2002, the court denied such request. On September 20, 2002, AgriProcessors filed its notice of appeal from both Orders.
A bankruptcy appellate panel shall not set aside findings of fact unless clearly erroneous, giving due regard to the opportunity of the...
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In re Rancher's Legacy Meat Co.
...strictly and narrowly in order to ensure preservation of the estate for the benefit of all creditors. In re Tama Beef Packing, Inc., 290 B.R. 90 (B.A.P. 8th Cir. 2003) ; In re Patch Graphics, 58 B.R. 743, 745 (Bankr. W.D. Wis. 1986) ; see also In re Baldwin-United Corp., 43 B.R. 443 (S.D. O......
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In re Rancher's Legacy Meat Co.
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