In re Lexington Hospitality Group, LLC

(Bankr. E.D. Ky. Nov. 1, 2011)

The bankruptcy court grants the debtor’s motion regarding cash collateral use, because the property to be used (hotel revenue and post-petition restaurant revenue) was not subject to a perfected security interest. The court determines that the hotel revenue paid in cash was not subject to the creditor’s mortgage because it was not rent. A hotel customer does not obtain a real property interest in a hotel room, but instead has a license. The cash paid for the room is thus personal property. The creditor was not in possession of the cash or deposit accounts, and thus the lien was not perfected as to that cash. Hotel revenue paid from credit cards constituted an obligation that would be a “payment intangible” under Article 9. The creditor’s financing statement failed to identify payment intangibles as collateral. While it referenced an “all asset” security agreement, that was insufficient to perfect a security interest in payment intangibles. The creditor does not have a lien on post-petition restaurant revenue pursuant to 11 U.S.C. § 552. Opinion below

Judge: Schaaf

Attorneys for Debtor: DelCotto Law Group PLLC, Laura Day DelCotto, Jamie L. Harris, Sara A. Johnston

Attorneys for Creditors: Dinsmore & Shohl LLP, Martin B. Tucker, Sarah S. Mattingly

2017-11-01 – in re lexington hospitality group

Author: Matt Lindblom

 

Sunshine Heifers, LLC v. Citizens First Bank (In re Purdy)

(6th Cir. Aug. 31, 2017)

The Sixth Circuit affirms the bankruptcy court’s decision finding the bank had a superior interest in the proceeds of an auction of the debtor’s cattle. The appellant contended its interest as lessor was superior and that the Sixth Circuit had already determined it was entitled to the proceeds. The bankruptcy did not err in determining ownership of the cattle at the time of the auction after the prior remand. Opinion below.

Judge: Moore

Attorneys for Appellant: Keller & Almassian, Michael D. Almassian, Nicholas S. Laue

Attorneys for Bank: Kerrick Bachert PSC, Scott A. Bachert, Ashley D. Gerughty

2017-08-31 – in re purdy

Author: Matt Lindblom

Sunshine Heifers, LLC v. Purdy

(W.D. Ky. Aug. 15, 2016)

The district court affirms the bankruptcy court’s decision that proceeds of the auction of the debtor’s cattle were properly payable to the bank, which held a first priority security interest in the debtor’s assets. While the Sixth Circuit had reversed the bankruptcy court’s prior decision finding the second creditor’s lease of the cattle to be a second priority lien (rather than a true lease), the bankruptcy court’s decision here was not clearly erroneous and was based on the evidence presented at the hearing to determine ownership of the cattle auctioned. The bankruptcy court found that all of the cattle subject to the leases had been sold prior to the auction. Opinion below.

Judge: McKinley

Attorneys for Plaintiff: Keller & Almassian, PLC, Michael D. Almassian, Nicholas S. Laue

Attorneys for Defendants: Kerrick Bachert PSC, Ashley D. Gerughty, Scott A. Bachert

2016-08-15 – sunshine heifers v purdy

Author: Matt Lindblom

 

In re Purdy

(W.D. Ky. Sep. 2, 2015)

Following the Sixth Circuit’s reversal of the bankruptcy court’s finding that livestock leases were disguised security agreements (see Sunshine Heifers, LLC v. Citizens First Bank (In re Purdy)), the bankruptcy court determines the rights of the lessor and lessee debtor in the proceeds of the earlier sale of the livestock. After a lengthy discussion of testimony on the issue, the court ultimately concludes that the lessor is entitled to the proceeds. Opinion below.

2015-09-02 – in re purdy

Author: Matt Lindblom

Central Engineering & Construction Associates, Inc. v. Holcim (US), Inc. (In re Central Engineering & Construction Associates, Inc.)

(Bankr. S.D. Ind. Mar. 16, 2015)

The bankruptcy court grants summary judgment in favor of the debtor, holding the creditor does not have a security interest in personal property of the debtor. Prepetition, the creditor obtained a judgment against the debtor and filed a financing statement with the Indiana Secretary of State claiming the creditor had a security interest in the debtor’s personal property by virtue of the judgment. The bankruptcy court concludes that under Indiana law, in order to create a lien on personal property, a judgment creditor must issue and levy on execution. The judgment itself did not give rise to a lien. Opinion below.

2015-03-16 – in re central engineering

Author: Matt Lindblom

Sunshine Heifers, LLC v. Citizens First Bank (In re Purdy)

(6th Cir. Aug. 14, 2014)

The Sixth Circuit reverses the bankruptcy court’s decision holding that the livestock business’s leases of livestock to the debtor dairy farmer were per se security agreements such that the bank’s purchase money security interest trumped the livestock business’s interest in the livestock. The court applies Arizona state law (per the choice of law provision in the leases) and determines that the agreements are true leases—not security agreements—because they lacked an option for the dairy farmer to purchase the livestock. Judge Drain dissents, stating the “leases” should be considered security agreements because the economic life of the individual heads of cattle would not last the term of their lease. Opinion below.

2014-08-14 – in re purdy