Bankruptcy Case No. 04-32052.United States Bankruptcy Court, S.D. Illinois.
April 26, 2005
OPINION
GERALD FINES, Chief Judge, Bankruptcy
This matter having come before the Court on a Motion to Amend Judgment and a Motion for Stay of Order Pending Reconsideration/Appeal filed by the Debtors; the Court, having heard arguments of counsel, having reviewed written memoranda filed by the parties, and being otherwise fully advised in the premises, makes the following findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
On March 3, 2005, this Court entered an Order granting adequate protection to Creditor, Ag Lease or Loan, LLC, US Bank, as successor in interest to Firstar Bank Hillcrest Bank. This Court’s Order indicated that the Debtors were to resume making monthly payments in the amount of $11,431.76, by virtue of a milk assignment, which the Debtors were to provide through their present dairy until such time as the Movant, Ag Lease, was paid in full. The Court further ordered the Debtors to immediately identify 212 milking
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cows as collateral of the Movant, by placing ear tags in both ears of the milking cows, using tags to be provided by the Movant. Movant was also allowed inspection of the Debtors’ dairy herd on an unannounced basis, as frequently as every 30 days to ensure that the Debtors were carrying out the orders of this Court. Finally, the Debtors were ordered to keep records concerning all cows identified as collateral of Movant, including their offspring, and to pay Movant the proceeds of any culled cows serving as collateral for Movants from the date of the March 3, 2005, Order, until otherwise directed. It is this Order which the Debtors seek to be amended and further seek to have stayed pending this Court’s reconsideration and/or appeal to the United States District Court for the Southern District of Illinois.
In considering this matter, the Court has reviewed its Order of March 3, 2005, and the Opinion also entered on March 3, 2005, supporting the Order. The Court has also reviewed the testimony of the Debtors giving rise to this Court’s March 3, 2005, Opinion and Order. At the time of entering the Opinion of March 3, 2005, the Court had found that the Debtors’ testimony at hearing on the Motion for Relief from Stay and Adequate Protection was not credible, and, in fact, a review of that testimony leads the Court to conclude that the Debtors’ testimony was best characterized as evasive and uncooperative. It is clear from the evidence before the Court that the Debtors ignored the duties which they had pursuant to their agreements with Ag Lease. The Debtors’ conduct in this regard resulted in a dissipation of the collateral of Ag Lease, by commingling that collateral (dairy cows) with collateral of other creditors and failing to properly segregate and identify dairy cattle and their offspring, as required in the agreements with Ag Lease. This being the case, the Court finds that its Order of March 3, 2005, granting Ag Lease adequate protection payments in the amount of $11,431.76 per month was proper. Given the conduct of the Debtors, it is clear that Ag Lease is not adequately protected in its collateral interest, and that this lack of adequate protection is a direct result of the conduct of the Debtors.
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In addition to its allowance of monthly adequate protection payments, the Court ordered that the Debtors should immediately identify 212 milking cows as the collateral of Movant, Ag Lease, and that the milking cows should be tagged with tags to be provided by the Movant. At this time, the Court is advised that there is a clear dispute among Debtors’ various secured creditors as to the validity and priority of liens secured by the Debtors’ dairy herd. While the Court finds that this dispute is largely generated by the conduct of the Debtors, it must conclude that the order for the Debtors to immediately identify 212 milking cows as collateral of Movant, Ag Lease, was premature. It is now apparent that an adversarial proceeding must be filed in order to determine the validity and priority of the various liens asserted by Debtors’ secured creditors as to their dairy cattle. Thus, the Court finds that its Order of March 3, 2005, should be amended by striking that provision ordering the Debtors to immediately identify 212 milking cows as collateral of Movant, Ag Lease, by placing ear tags in both ears of said cattle, using tags to be provided by Movant, Ag Lease. The Court finds that the Order of March 3, 2005, should otherwise remain in force as originally entered; that Movant, Ag Lease, should receive adequate protection payments in the amount of $11,431.76; and that said payment should be made by way of a milk assignment which the Debtors must execute at the earliest possible moment. This payment shall continue until Debtors are able to confirm a Chapter 11 plan of reorganization, or the Court orders otherwise.
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ORDER
For the reasons set forth in an Opinion entered on the26th day of April 2005;
IT IS HEREBY ORDERED that:
A. The Motion to Amend Judgment filed by the Debtors isALLOWED to the extent that this Court’s Order of March 3, 2005, is amended to delete paragraph B of said Order, which directed: “Debtors must immediately identify 212 milking cows as collateral of Movants by placing ear tags in both ears, using tags provided by the Movants;” and the Order of March 3, 2005, is otherwise to remain in effect as entered;
B. Motion for Stay of Order Pending Reconsideration/Appeal isDENIED.
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