In re Wagner

• Decision Date: 02 July 1992
• Docket Number: Bankruptcy No. X90-00310M,Adv. No. X90-0061M.
• Citation: 144 BR 430
• Parties: In re Arthur R. WAGNER and Sherry L. Wagner, Debtors. Arthur R. WAGNER, Plaintiff, v. FARMERS COOPERATIVE ELEVATOR COMPANY, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Iowa

144 B.R. 430 (1991)

In re Arthur R. WAGNER and Sherry L. Wagner, Debtors.

Arthur R. WAGNER, Plaintiff, v. FARMERS COOPERATIVE ELEVATOR COMPANY, Defendant.

Bankruptcy No. X90-00310M, Adv. No. X90-0061M.

United States Bankruptcy Court, N.D. Iowa.

September 13, 1991.

Supplemental Memorandum of Decision and Order July 2, 1992.

COPYRIGHT MATERIAL OMITTED

G.A. Cady, III, Hampton, Iowa, for plaintiff.

Lynn J. Wiese, Iowa Falls, Iowa, for defendant.

MEMORANDUM OF DECISION AND ORDER

WILLIAM L. EDMONDS, Bankruptcy Judge.

A debtor, in this chapter 11 case, seeks to recover $362,500.00 as a preferential payment to Farmers Cooperative Elevator Company (COOP). Trial took place on February 12, 1991 in Mason City, Iowa. This adversary proceeding is a core matter pursuant to 28 U.S.C. § 157(b)(2)(F). Prior to trial, the parties stipulated to a substantial number of facts.¹ Based on the stipulation, the court finds the following facts which are adopted from the parties' stipulation with minor, but insubstantial, editing.

FINDINGS BASED ON THE STIPULATIONS OF THE PARTIES

(Stipulation of January 15, 1991)

On the 30th day of October, 1985, Farmers Cooperative Elevator Company brought suit against Arthur R. Wagner in the District Court of Franklin County, Law No. 1324-1085, upon an open account. The Coop claimed that Wagner owed $261,338.81 plus interest for feed and supplies purchased by Wagner from the Coop. A portion of the account balance claimed against Wagner by the Coop was for "wet corn gluten" cattle feed, which was purchased by Wagner from the Coop and manufactured by ADM Feed Corporation, a subsidiary of Archer-Daniels Midlands Company.

Wagner counterclaimed against the Farmers Coop and brought a third-party action against defendants Archer-Daniels Midlands Company and ADM Feed Corporation claiming that the "wet corn gluten" feed was defective and that the defective nature of the product injured Wagner\'s cattle.

Farmers Cooperative Elevator Company then filed a cross-claim against Archer-Daniel Midlands Company and ADM Feed Corporation for any damages that may be awarded to Wagner against the Coop as a result of the defective condition of the "wet corn gluten" feed.

In a related proceeding Wagner had been custom feeding livestock for W & G Cattle Company and he had fed the "wet corn gluten" feed to cattle owned by W & G Cattle Company. W & G Cattle Company filed suit against Archer-Daniels Midland Company and ADM Feed Corporation in the Franklin County District Court on June 26, 1986, Law No. C1427-0686. Archer-Daniels Midland Company and ADM Feed Corporation then brought a third party action against Arthur R. Wagner claiming Wagner had improperly fed the livestock. These two cases were subsequently consolidated and tried together in April 1988.

During the trial Arthur R. Wagner, on April 29,² 1988, filed an Offer to Confess Judgment in favor of the Farmers Cooperative Elevator in the amount of $350,000. * * *

Thereafter, the Farmers Cooperative Elevator Company filed an Acceptance of the offer . . . and pursuant to the Offer to Confess and the Acceptance thereof, judgment was entered against Arthur R. Wagner in favor of the Farmers Cooperative Elevator Company on April 29 in the amount of $350,000 plus statutory interest. * * *

On the 6th day of April, 1988, after trial, the jury found for Arthur R. Wagner in his claim against Archer-Daniel Midlands Company and ADM Feed Corporation and awarded actual damages of $133,170 and punitive damages in the amount of $850,000. The jury also awarded Wagner damages against the Farmers Cooperative Elevator in the amount of $15,400. . . . Wagner\'s judgment against ADM was appealed by ADM to the Iowa Supreme Court.

Pending appeal the case was settled pursuant to the terms of the Mutual Release executed on November 21, 1989.

The Iowa Insurance Guaranty Fund issued check No. 014786 payable to the Duncan Law Firm Trust Account in the amount of $350,000 under date of October 19, 1989. This check was deposited into the Law Firm\'s trust account at Banker\'s Trust Company on October 23, 1989. A check from Shand, Morahan & Company, Inc. (General Accident Insurance Company of America) in the amount of $512,500 and the check from the Illinois Guaranty Fund in the amount of $150,000 were deposited in the trust account of Duncan, Jones, Riley & Finley on November 21, 1989. On November 27, 1989 the Law Firm made the following distributions from its trust account: $362,500 to the Farmers Cooperative Elevator Company; $327,985.44 to Arthur and Sherry Wagner; $7888 to W & G Cattle Company; and the balance was paid to the Law Firm of Duncan, Jones, Riley & Finley for payment of Wagner\'s and W & G\'s attorney fees.

The plaintiff, Arthur R. Wagner, filed for relief under Chapter 11 of the Bankruptcy Code on February 23, 1990.

At all times material hereto, the Law Firm of Duncan, Jones, Riley & Finley was legal counsel for the plaintiff, Arthur R. Wagner.

(Supplemental Stipulation, Exhibit 2)

The Iowa Insurance Guarantee Fund, Shand, Morahn (sic) and Company, Inc. (General Accident Insurance Company of America) and the Illinois Guarantee Fund were at all times material hereto either insurers for Archer Daniels Midland Company and/or ADM Feed Corporation, a subsidiary of Archer Daniels Midland Company, or guaranty funds acting on behalf of an insurer or receivorship, and that all moneys paid to the Duncan Law Firm Trust Account, the Farmers Cooperative Elevator Company and/or Arthur Wagner from said insurance companies of funds were paid pursuant to the terms of the Mutual Release. . . . (Exhibit E).

(Supplemental Stipulation, Exhibit 3)

As of the date of the filing of the debtor\'s petition (2/23/90) the Hampton State Bank owned a secured claim against the debtor secured by first and paramount liens and security interests in the following non-exempt assets of the debtor, which assets have the following indicated fair market values:

                Item                         Fair Market Value
                Farm machinery and
                  equipment (listed
                  on attached Exhibit
                  "1")                         $232,030.00
                Livestock (listed on
                  Exhibit "2")                 $383,294.50
                Motor vehicles (listed
                  on Exhibit "3")              $ 43,100.00
                                               ___________
                Total                          $658,424.50
                

After payment of the Hampton State Bank in full, the sum of $22,715.26 would be available to pay priority and unsecured creditors.

On the date of the filing of the debtor\'s petition (2/23/90) the Commodity Credit Corporation owned a secured claim versus debtor secured by a first and paramount lien and security interest in the following assets of the debtor, which lien has the fair market value of $102,744.00:

                Item                        Fair Market Value
                Crops                          $137,522.76
                

After payment of the claim of the Commodity Credit Corporation in full, the sum of $34,778.76 would be available to pay priority and unsecured creditors.

On the date of the filing of the debtor\'s petition (2/23/90), the debtor Arthur R. Wagner owned an undivided interest in real estate (160 acres described as NW¼, § 35-92-20 Frankliin (sic) County, Iowa), said 160 acres was subject to valid and enforceable mortgages to:

a. Farm Credit in the amount of $38,735.00

b. Glee and Thelma Wagner (contract sellers) in the amount of $37,342.00

c. Metropolitan Life Insurance Company in the amount of $147,923.00

The mortgage debt upon the afore-described real estate is in excess of the fair market value of said parcel.

On the date of the filing of the debtor\'s petition, Steven Recker owned a priority claim against the debtor for wages incurred during the month immediately prior to the date of the debtor\'s bankruptcy filing in the amount of $1,282.65. * * * The said claim constitutes a prior claim in accordance with 11 U.S.C. § 507(a)(3)(A).

At the date of the debtor\'s bankruptcy filing the debtors owned the following additional assets which would constitute property of the estate and which would be available for distribution to priority and unsecured creditors in a Chapter 7 proceeding in addition to the overplus listed in paragraphs 1 and 2 above:

                Cash in bank                 $ 7,000.00
                Commodity account balance    $ 4,000.00
                                             __________
                Total                        $11,000.00
                

The total funds available for distribution to priority and unsecured creditors would be less than $69,000.00.

On the date of the filing of the debtor\'s petition, the debtor Arthur R. Wagner owed valid and enforceable unsecured claims in the total amount of $519,186.53.

Any claim of the Farmers Cooperative Elevator in a Chapter 7 proceeding would not be entitled to any priority treatment in accordance with 11 U.S.C. § 507.

ADDITIONAL FINDINGS

Based upon the evidence, the court issues the following additional findings.

Arthur Wagner's Offer to Confess Judgment to Coop and Coop's acceptance (Exhibits D and E) apparently followed from a settlement "Agreement" entered into by the two parties sometime in early 1988. The agreement bore the caption of the state court consolidated actions and was introduced at the preference trial as Exhibit A. The agreement stated:

1. THAT for valuable and mutual considerations hereby exchanged, Arthur R. Wagner hereby admits a balance owing on his account of $350,000.00 and authorizes the above Court to enter judgment in this matter against him in favor of the Farmers Cooperative Elevator Co. in such amount.

2. THAT Farmers Cooperative Elevator Co. accepts such admission and upon entry by the above Court of judgment in its favor in such amount against Arthur R. Wagner acknowledges the same to be in full and complete satisfaction of any and all sums owing it by the said Arthur R. Wagner upon those open accounts identified in its Petition as filed herein.

3. THAT it is further agreed by and between Farmers Cooperative Elevator Co. and Arthur R. Wagner that in the event said Arthur

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