In re Blake

585 B.R. 539
CourtUnited States Bankruptcy Court, S.D. Illinois
DecidedMarch 6, 2018
DocketCase No. 16–60425
StatusPublished
Cited by1 cases

This text of 585 B.R. 539 (In re Blake) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Blake, 585 B.R. 539 (Ill. 2018).

Opinion

Laura K. Grandy, UNITED STATES BANKRUPTCY JUDGE

This case is before the Court for consideration of several matters: Objections to Confirmation of the Debtors' First Amended Plan filed by creditors Bunker Hill *542Supply Company ("Bunker Hill Supply") and First Financial Bank, N.A. ("First Financial"); First Financial's Motion to Reconsider or Modify Order Authorizing Use of Cash Collateral; and First Financial's Motion for Relief from Stay.

FACTS

Karl and Jenna Blake ("Debtors") operate a family farming operation in southeast Illinois. At one time, they had farmed as much as 2,200 acres. However, in 2015 the Debtors lost the majority of their leased ground, and on November 2, 2016, they filed a voluntary petition under Chapter 12 of the Bankruptcy Code in order to reorganize their farming operation. The Debtors' original schedules listed assets of $1,763,592.29 (Schedule A/B) and liabilities of $2,692,861.40 (Schedules D and E/F). Schedule A/B was subsequently amended on December 2, 2016 in order to remove several items of personal property that the Debtors had previously listed on their original schedule.1 This resulted in a reduction in the Debtors' total assets to $1,760,592.29.

On March 15, 2017, the Debtors filed their original Chapter 12 Plan of Reorganization ("Original Plan"), to which numerous creditors, including First Financial and Bunker Hill Supply, objected. First Financial is a secured creditor by virtue of a lien on the Debtors' crops, machinery, accounts, inventory, and general intangibles. It has filed a secured claim in the amount of $594,147.48. See Claim # 18-1. Conversely, Bunker Hill Supply is a wholly unsecured creditor. According to its proof of claim, Bunker Hill Supply is owed $352,456.27 for goods and services provided in relation to the Debtors' 2014 and 2015 farm inputs. See Claim # 8-1. Central to the objections of both First Financial and Bunker Hill Supply were assertions that the plan was infeasible and that the Debtors' assets were undervalued.

The objections to the Original Plan were ultimately resolved and, at a hearing on April 27, 2017, the Debtors were directed to file an amended plan in order to address the creditors' concerns. In the meantime, on March 31, 2017, the Debtors filed a motion seeking to use First Financial's cash collateral. In that motion, Debtors alleged that because they had been unable to secure financing for their 2017 crop, it was necessary for them to use the 2015 and 2016 crop proceeds as well as the 2016 government payments in order to operate. All of these funds constitute First Financial's cash collateral. In exchange, the Debtors offered to grant First Financial a replacement lien in their 2017 crop, crop insurance proceeds, and government payments. First Financial objected, arguing that because the Debtors had consistently lost money on their farming operation since 2007, the proposed replacement lien on non-existent crops was insufficient to protect its interest.

The Court conducted an evidentiary hearing on the Motion to Use Cash Collateral on May 4, 2017. After hearing the parties' testimony and considering the evidence presented, the Court granted the motion subject to certain conditions See In re Blake , No. 16-60425, 2017 WL 1906603 (Bankr. S.D. Ill. May 8, 2017). In exchange for the use of its cash collateral, First Financial was granted, inter alia , a first and paramount replacement lien on the Debtors' 2017 crop and related collateral. In addition, to the extent that the 2017 *543crops and collateral were insufficient to repay principal cash collateral plus 5.25% interest, First Financial was also awarded an administrative expense priority claim in accordance with 11 U.S.C. § 507(b) for any deficiency. Id. at *3.

On June 9, 2017, the Debtors filed a First Amended Chapter 12 Plan ("Amended Plan"). Notably, the Amended Plan adjusts the Debtors' cash flow projections in order to account for a change in crop type and for a reduction in the number of acres farmed.2 The Amended Plan also addresses the Debtors' use of First Financial's cash collateral pursuant to the May 8, 2107 Opinion, the treatment of certain governmental payments, and the surrender of certain equipment on which First Financial holds a first lien.

While several other creditors initially objected to the Amended Plan, those objections have since been resolved.3 The only remaining objectors, for purposes of this Opinion, are First Financial and Bunker Hill Supply. With regard to those creditors, the Amended Plan provides, in pertinent part:

CLASS G-1: The Class G creditor shall consist of creditor First Financial Bank NA, or its assignee, which is the holder of a blanket lien on farm equipment. The value of the farm equipment being retained is $104,085.00. This secured claim of $104,085.00 will be paid in annual installments, beginning February 15, 2018, in the amount of $24,207.39 which amortizes the claim over five (5) years at 5.25% interest. This claim is impaired and will be paid by the Trustee to the Class G creditor ....
CLASS G-2: The Class G creditor shall consist of creditor First Financial Bank, NA, or its assignee, which is the holder of a first lien on pre-petition crops and crop proceeds. The crop is yet to be fully liquidated as the estimate of the crop proceeds is, based on current prices and estimated bushels, is [sic] $220,000.00. The 2015 crop proceeds remaining is [sic] $50,935.99. The Debtors will use the proceeds for 2017 operating expenses with the interest paid by December 31, 2017 at 5.25%. The process will continue annually for the three year term of this plan with the principal being paid in full from the 2019 harvest. This claim is impaired.
CLASS G-3: The Class G-3 creditor shall consist of creditor First Financial Bank NA, or its assignee, which is the holder of a blanket lien on farm equipment. The value of the farm equipment being retained, in which other creditors have a first lien purchase money security interest (PMSI) is $4455.03. This secured claim of $4455.03 will be paid in annual installments, beginning February 15, 2018, in the amount of $1038.61 which amortizes the claim over five (5) years at 5.25% interest. This claim is impaired and will be paid by the Trustee to the Class G creditor..... 4
* * *
CLASS I: This class shall consist of all Debtors' under-secured and unsecured (including post-petition taxes realized *544from the sale of the debtors farm assets) creditors whose claims are filed and allowed by the Court.

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Cite This Page — Counsel Stack

Bluebook (online)
585 B.R. 539, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-blake-ilsb-2018.