Navistar Financial Corp. v. Knaus (In re Knaus)

W.D. Missouri

Navistar Financial Corp. v. Knaus (In re Knaus)

68 B.R. 8, 1986 Bankr. LEXIS 5262

CourtDistrict Court, W.D. Missouri

DecidedSeptember 24, 1986

DocketBankruptcy No. 84-02303-3

StatusPublished

This text of 68 B.R. 8 (Navistar Financial Corp. v. Knaus (In re Knaus)) is published on Counsel Stack Legal Research, covering District Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Navistar Financial Corp. v. Knaus (In re Knaus), 68 B.R. 8, 1986 Bankr. LEXIS 5262 (W.D. Mo. 1986).

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Opinion

ORDER GRANTING MOVANT’S MOTION FOR RELIEF FROM THE AUTOMATIC STAY

DENNIS J. STEWART, Chief Judge.

Movant seeks relief from the automatic stay with respect to certain combine parts and appanages which the debtor added to the combine (in which movant admittedly has a valid and perfected security interest) subsequent to the date of commencement of the chapter 11 proceedings which preceded the within chapter 7 proceedings. At the request of the parties,¹ the court convened its hearing on the issues made by the motion on July 15, 1986, whereupon the movant appeared by counsel, Donald G. Scott, Esquire, and the debtor appeared personally and by counsel, Stephen B. Strayer, Esquire, and the trustee in bankruptcy appeared personally and as his own counsel. The evidence which was then adduced showed that the parts in question² were added to the combine while the debtor was still a debtor-in-possession under the provisions of chapter 11 of the Bankruptcy Code; that they were added to the combine at a not insignificant expense to himself³; that he added them only because he anticipated using the combine in his reorganization proceedings, but those chapter 11 proceedings were thereafter converted to chapter 7 proceedings; that most of the parts which were added were necessary and intrical to the working of the combine and were replacements for worn or ruined [9]*9parts⁴; that the governing security interest applied to such repairs, accessions, or replacements⁵; and that the parts involved are of the type which would ordinarily be found on a combine.

This court sympathizes with a debtor’s plight who improves secured property in anticipation of a successful reorganization proceeding and then loses the value of the improvements to the secured creditor when the chapter 11 proceedings are converted to straight liquidation under chapter 7. But the credible testimony which has been adduced in this case fails.to show that the position of the secured creditor was improved by the accessions to its original collateral. The evidence clearly demonstrates, as observed above, that the accessions were necessary to keep the combine in running condition. The debtor offered no evidence to the effect that these accessions brought the value of the combine above the value which it had as of the date of commencement of the within title 11 proceedings. And, under the Bankruptcy Code, it was the debtor’s duty to protect the secured creditor from a “decline (in value) during the case.” Legislative History of section 361 of the Bankruptcy Code; S.R. No. 95-989, 95th Cong., 2nd Sess. (1978) 49, 53-54, U.S.Code Cong. & Admin. News 1978, p. 5787. The evidence otherwise permits an inference only that the accessions were necessary to prevent a decline in value, for it shows, as observed above, that the accessions were necessary to keep the combine in working condition. “If the security agreement extends to proceeds, products, rents, or profits (or to accessions) of the property in question, then the proceeds would continue to be subject to the terms of the security agreement ... except that to the extent that ... the expenditure resulted in an improvement in the position of the secured party,” they would not continue to be subject to the security interest. Legislative History of Section 552 of the Bankruptcy Code; S.R. No. 95-989, 95th Cong., 2d Sess. (1978) 91, U.S.Code Cong. & Admin.News 1978, p. 5787 (Emphasis added.) There is no sufficient statement or showing that the mov-ant’s position has been improved by the accessions. This court therefore concludes that the accessions are subject to the mov-ant’s security interest. It is therefore

ORDERED that the movant’s motion for relief from the automatic stay be, and it is hereby, granted.

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ORDER GRANTING MOVANT’S MOTION FOR RELIEF FROM THE AUTOMATIC STAY

DENNIS J. STEWART, Chief Judge.

Movant seeks relief from the automatic stay with respect to certain combine parts and appanages which the debtor added to the combine (in which movant admittedly has a valid and perfected security interest) subsequent to the date of commencement of the chapter 11 proceedings which preceded the within chapter 7 proceedings. At the request of the parties,¹ the court convened its hearing on the issues made by the motion on July 15, 1986, whereupon the movant appeared by counsel, Donald G. Scott, Esquire, and the debtor appeared personally and by counsel, Stephen B. Strayer, Esquire, and the trustee in bankruptcy appeared personally and as his own counsel. The evidence which was then adduced showed that the parts in question² were added to the combine while the debtor was still a debtor-in-possession under the provisions of chapter 11 of the Bankruptcy Code; that they were added to the combine at a not insignificant expense to himself³; that he added them only because he anticipated using the combine in his reorganization proceedings, but those chapter 11 proceedings were thereafter converted to chapter 7 proceedings; that most of the parts which were added were necessary and intrical to the working of the combine and were replacements for worn or ruined [9]*9parts⁴; that the governing security interest applied to such repairs, accessions, or replacements⁵; and that the parts involved are of the type which would ordinarily be found on a combine.

This court sympathizes with a debtor’s plight who improves secured property in anticipation of a successful reorganization proceeding and then loses the value of the improvements to the secured creditor when the chapter 11 proceedings are converted to straight liquidation under chapter 7. But the credible testimony which has been adduced in this case fails.to show that the position of the secured creditor was improved by the accessions to its original collateral. The evidence clearly demonstrates, as observed above, that the accessions were necessary to keep the combine in running condition. The debtor offered no evidence to the effect that these accessions brought the value of the combine above the value which it had as of the date of commencement of the within title 11 proceedings. And, under the Bankruptcy Code, it was the debtor’s duty to protect the secured creditor from a “decline (in value) during the case.” Legislative History of section 361 of the Bankruptcy Code; S.R. No. 95-989, 95th Cong., 2nd Sess. (1978) 49, 53-54, U.S.Code Cong. & Admin. News 1978, p. 5787. The evidence otherwise permits an inference only that the accessions were necessary to prevent a decline in value, for it shows, as observed above, that the accessions were necessary to keep the combine in working condition. “If the security agreement extends to proceeds, products, rents, or profits (or to accessions) of the property in question, then the proceeds would continue to be subject to the terms of the security agreement ... except that to the extent that ... the expenditure resulted in an improvement in the position of the secured party,” they would not continue to be subject to the security interest. Legislative History of Section 552 of the Bankruptcy Code; S.R. No. 95-989, 95th Cong., 2d Sess. (1978) 91, U.S.Code Cong. & Admin.News 1978, p. 5787 (Emphasis added.) There is no sufficient statement or showing that the mov-ant’s position has been improved by the accessions. This court therefore concludes that the accessions are subject to the mov-ant’s security interest. It is therefore

ORDERED that the movant’s motion for relief from the automatic stay be, and it is hereby, granted.

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Bluebook (online)

68 B.R. 8, 1986 Bankr. LEXIS 5262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/navistar-financial-corp-v-knaus-in-re-knaus-mowd-1986.