Matter of Karl A. Neise, Inc., Bankruptcy No. 81-01424-BKC-SMW

• Decision Date: 23 October 1981
• Docket Number: 81-01425-BKC-JAG.,Bankruptcy No. 81-01424-BKC-SMW
• Citation: 16 BR 600
• Parties: In the Matter of KARL A. NEISE, INC., Modern Tools Corp., Debtors.
• Court: U.S. Bankruptcy Court — Southern District of Florida

16 B.R. 600 (1981)

In the Matter of KARL A. NEISE, INC., Modern Tools Corp., Debtors.

Bankruptcy Nos. 81-01424-BKC-SMW, 81-01425-BKC-JAG.

United States Bankruptcy Court, S.D. Florida.

October 23, 1981.

Britton, Cohen, Miami, Fla., for debtor.

Irving Wolff, Miami, Fla., for Carla & Jaryn.

Steven R. Brownstein, Miami, Fla., for Continental Bank.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SIDNEY M. WEAVER, Bankruptcy Judge.

THIS CAUSE came on to be heard upon applications filed by secured creditors for adequate protection and for an order prohibiting the use, sale or lease of collateral by the herein Debtors. This Court, having heard the testimony of witnesses and having examined the evidence presented, having observed the candor and demeanor of the witnesses, having considered the arguments of counsel, and being otherwise fully advised in the premises, does hereby make the following findings of fact and conclusions of law:

Applicants are Continental Bank, which asserts a perfected first lien in the Debtors' inventory, equipment and accounts receivable, and Carla Holdings, Inc. ("Carla") and Jaryn Enterprises, Inc., ("Jaryn"), which jointly claim a second lien. At the hearing on the applications, Continental Bank withdrew its application, and Carla and Jaryn and the Debtors presented testimony and documentary evidence.

Continental Bank claims it is owed approximately $190,000.00; Carla and Jaryn claim that they are owed approximately $300,000.00. Carla and Jaryn, however, were unable to produce and introduce in evidence an original promissory note evidencing the debt claimed. After considering the testimony presented and examining documents in evidence, including a financial statement prepared by the Debtors prior to the inception of these Chapter 11 proceedings, it appears to the Court that there is little if any equity beyond the first lien in the Debtors' inventory, equipment and accounts receivable. It further appears that the Debtors are currently acquiring additional inventory on a cash basis, thereby increasing the value of their inventory. This Court has also considered the Report of the Examiner appointed by this Court, which was filed subsequent to the hearing on this matter and which absolves the Debtors' management of any misconduct.

Title 11 U.S.C. § 363(e) provides that, on the request of an entity having an interest in property of a debtor, the Court shall prohibit or condition such use, sale or lease of such property as is necessary to provide adequate protection of such interest. The burden of proof on the issue of adequate protection falls on the Debtors. The term "adequate protection" is illustrated by example, rather than defined with precision, in 11 U.S.C. § 361, and includes periodic cash payments, the grant of an additional replacement lien, or such other relief as the Court may...