In re Irasel Sand, LLC

569 B.R. 433, 2017 Bankr. LEXIS 1753
CourtUnited States Bankruptcy Court, S.D. Texas
DecidedJune 23, 2017
DocketCase No. 17-31148
StatusPublished
Cited by4 cases

This text of 569 B.R. 433 (In re Irasel Sand, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Irasel Sand, LLC, 569 B.R. 433, 2017 Bankr. LEXIS 1753 (Tex. 2017).

Opinion

MEMORANDUM OPINION REGARDING THE DISMISSAL OF THE DEBTOR’S CHAPTER 11 CASE

[Doc. No. 191]

Jeff Bohm, United States Bankruptcy Judge

I. Introduction

Irasel Sand, LLC (the “Debtor”), a company that provides sand used in fracking, failed to comply with a prior ruling of this Court that required it to either (1) obtain a final agreement on post-petition financing and use of cash collateral, or (2) face dismissal. The Court gave the Debtor thirteen days to comply with this ruling. The Debtor failed to obtain a final agreement on post-petition financing and use of cash collateral; therefore, the Court found that it was in the best interest of the estate and the creditors to dismiss the case for cause. Thus, the Court issued an order dismissing the above-styled Chapter 11 case. [Doc. No. 191], The findings of fact and conclusions of law set forth below memorialize this Court’s ruling.

II. Findings op Fact

On February 27, 2017, because of the oil and gas downturn of 2015, the Debtor attempted to file for relief under Chapter 11 (the “Petition”). [Doc. No. 1]; [Tape Recording, Mar. 3, 2017 Hearing at 2:19:47-2:20:02 P.M.]. The Court uses the term “attempted” because this case has a checkered history of proper filing. Louis Butler (“Mr. Butler”), the CEO of the [436]*436Debtor’s parent company, Irabel, Inc.1 (“Irabel”), signing on behalf of Irabel, solely approved the filing of the Debtor’s bankruptcy. [Doc. No. 1, p. 7 of 7]. However, at the time of the filing, Irabel and Select Sand, LLC (“Select Sand”) each owned a 50% interest in the Debtor. [Id. at p. 5 of 7]. Thus, a question arose as to whether Irabel, without approval from Select Sands, had the power to authorize the filing of the Petition. [Tape Recording, Mar. 3, 2017 Hearing at 2:08:08-2:11:22 P.M.]. While Select Sand subsequently ratified the Petition, [Doc. No. 24, p, 3 ¶ 6], the questionable filing at the outset has cast a pall over the integrity of the filing.

In addition to the problem concerning the filing of the Petition, the Debtor also faced another issue: whether it would be able to reach a final agreement with its debtor-in-possession (“DIP”) lender, Carousel Specialty Products (“Carousel”), to obtain post-petition financing and permission to use cash collateral. The Court held various emergency hearings regarding these issues, and issued interim orders approving certain post-petition financing and use of cash collateral. [Doc. Nos. 34 & 151]. The most recent interim order was entered after the hearing held on April 27, 2017. At that hearing, the Debtor asserted that it would be able to exit bankruptcy by October 2017 if: (1) it obtained an increase of $500,000.00 in financing from Carousel; (2) it completed various improvements worth over $1.0 million to increase productivity; and (3) it successfully entered into a “take or pay” contract with Sanchez Energy (“Sanchez”). [Apr. 27, 2017 Tr. 13:1-17:11, 20:3-21:13]. Based upon the record made at this hearing, the Court entered a ■ second interim order on May 3, 2017, and this order set forth that the final hearing on post-petition financing would be held on May 18,2017. [Doc. No. 151].

Then, on May 18, 2017, the Court held what it thought was to be the final hearing. However, the Debtor’s proposed counsel informed the Court that the Debtor had not yet reached a final agreement with Carousel regarding DIP financing and the use of cash collateral. [Tape Recording, May 18, 2017 Hearing at 2:35:00-2:35:11 P.M.]. The Court expressed its concern that if the parties could not reach an agreement, then “there’s no way [the Debtor] is going to be reorganized and I’m not going to let attorney time and court time be used when we have a patient that is dying a quick death.” [Id. at 5:10:00— 5:10:13 P.M.]. The Court then gave the Debtor until May 30, 2017 (i.e., thirteen days) to reach a final agreement on post-petition financing and cash collateral usage, or else face dismissal of the case. [Id. at 5:09:17-5:09:26 P.M.].

On May 30, 2017, the Debtor returned to Court and, in response to whether it had Reached a final agreement on post-petition financing and the use of cash collateral, proposed counsel stated that there was no agreement with either Carousel or any alternative lender. [Tape Recording, May 30, 2017 Hearing at 11:44:55-11:44:59 A.M.]. In addition, the parties informed the Court of other developments in the case, namely, that Carousel had finalized an agreement with Irabel’s receiver and Select Sand that would make Carousel the new 100% owner of the Debtor. Specifically, counsel for Carousel stated the following:

At this point, Carousel would like dismissal of the case. And, the reasons for that being we finalized the deal with Irabel’s receiver that was to purchase [437]*437the equity interest in the debtor through the receivership. The state court in Beaumont [presiding over Irabe’s receivership proceeding] has entered a final order approving that sale, so now, Carousel controls half the interest in ... Irasel, the debtor, through Irabel’s interest and has also signed an option agreement with Select Sand, the other 50% owner, or by it is acquiring 50% of Select Sand — or 100% in Select Sand’s interest in the debtor. Select Sand has also given a proxy to Carousel. The proxy allows Carousel to vote Select Sand’s interest. This morning, the unanimous consent was signed by the 100% owners of this debtor removing Irabel as the manager of the debtor and appointing Carousel — Mr. Mitchell in particular — as the new manager. And, as the new manager of the debtor, we would like this case to be dismissed at this time.

[Id. at 11:52:30-11:53:41 A.M.].

Based upon the above-referenced factual background, and the Debtor’s poor financial condition as reflected in the Debtor’s most recent monthly operating report, the Court finds cause to dismiss the case, as discussed below.

III. Conclusions of Law

A.Jurisdiction

The Court has jurisdiction over this case pursuant to 28 U.S.C. §§ 1334(b) and 157(a). Section 1334(b) provides that “the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 [the Bankruptcy Code], or arising in or related to cases under title 11.” District courts may, in turn, refer these proceedings to the bankruptcy judges for that district. 28 U.S.C. § 157(a). In the Southern District of Texas, General Order 2012-6 (entitled General Order of Reference) automatically refers all eligible cases and proceedings to the bankruptcy courts.

This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) because a dismissal of a case necessarily affects the administration of the bankruptcy estate. Additionally, this matter is a core proceeding under the general “catchall” language of 28 U.S.C. § 157(b)(2). See In re Southmark Corp., 163 F.3d 925, 930 (5th Cir.

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Cite This Page — Counsel Stack

Bluebook (online)
569 B.R. 433, 2017 Bankr. LEXIS 1753, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-irasel-sand-llc-txsb-2017.