Official Unsecured Creditors' Committee v. Northern Trust Co. (In Re Ellingsen MacLean Oil Co.)

98 B.R. 284, 10 U.C.C. Rep. Serv. 2d (West) 189, 1989 Bankr. LEXIS 403, 1989 WL 26550
CourtUnited States Bankruptcy Court, W.D. Michigan
DecidedMarch 17, 1989
Docket20-80014
StatusPublished
Cited by12 cases

This text of 98 B.R. 284 (Official Unsecured Creditors' Committee v. Northern Trust Co. (In Re Ellingsen MacLean Oil Co.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Official Unsecured Creditors' Committee v. Northern Trust Co. (In Re Ellingsen MacLean Oil Co.), 98 B.R. 284, 10 U.C.C. Rep. Serv. 2d (West) 189, 1989 Bankr. LEXIS 403, 1989 WL 26550 (Mich. 1989).

Opinion

OPINION

DAVID E. NIMS, Jr., Bankruptcy Judge.

This matter is before the court on a motion for summary judgment. On February 2, 1984, thirteen related debtors filed voluntary petitions seeking reorganization under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 1101-1146. On December 15, 1986, the Official Unsecured Creditor’s Committee (Committee) and Mobil Oil Company (Mobil) filed this adversary proceeding seeking declaratory relief. In their prayer, Committee and Mobil asks:

*287 that a determination be made as to the validity and extent of the claimed security interest of the Banks; that this Court enter an Order adjudging that the banks claimed security interest does not attach to any preferential transfer recoveries made or to be made by the Debtor; that such proceeds should not be turned over to said Banks’ but rather should be held by the Debtors for distribution pursuant to the Bankruptcy Code and any Plan of Reorganization which may be filed herein....

On January 21, 1987, the Northern Trust Company filed a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Subsequently, Committee and Mobil filed a first amended complaint on February 26, 1987. Thereafter, on March 18, 1987, the Northern Trust Company filed a motion to strike or dismiss the amended complaint. However, the Northern Trust Company withdrew this motion on July 27,1987. Also on that same date, the Northern Trust Company and First National Bank & Trust (“the Banks”) filed a motion to dismiss the first amended complaint, attaching the affidavit of Theodore Tice thereto. By submitting matters outside the pleadings, the motion to dismiss was converted to a motion for summary judgment. Fed.R.Civ.P. 12(b).

On October 21, 1987, Soo Line Railroad (Soo Line) filed a motion for authority to intervene. After notice and a hearing, the court allowed Soo Line to intervene. Soo Line filed its complaint, and subsequently submitted briefs against the Banks’ motion to dismiss.

I. JURISDICTION

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 1334. This adversary proceeding constitutes a core proceeding. 28 U.S.C. § 157(b)(2)(k).

II. FACTS

Prior to filing bankruptcy, Ellingsen MacLean Oil Company, Inc., and the twelve other Debtors, (the entire group of thirteen petitioners will be referred to as “the Debtors”) operated wholesale oil and petroleum products businesses in the States of Michigan and Wisconsin. The Banks financed many of the Debtors’ operations. Pursuant to a prepetition loan agreement, the Banks claimed valid, perfected, first security interest, liens and encumbrances in all of the Debtors’ assets, including their accounts receivable, inventory, equipment, machinery, general intangibles and particular real estate and fixtures. On February 2, 1984, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code.

After filing, the Debtors operated as Debtors in possession and experienced further financial trouble. 1 The Banks had security interest in substantially all the debt- or’s assets. The debtors were unable to secure additional financing. The Debtors and the Banks entered into an Agreed Order which allowed the debtors to use their assets, including cash collateral. Further, the Agreed Order allowed the Debtors to borrow an additional $500,000 from the Banks. In order to obtain the additional financing the Debtors granted the Banks a security interest in all property of the estate pursuant to § 364 of the Bankruptcy Code. 11 U.S.C. § 364. The Debtors also agreed to make adequate protection payments to the Banks.

The Debtors financial woes continued and when the Debtors failed to make the adequate protection payments, the Banks brought a motion for relief from stay. In order to settle the motion for relief from stay, the Debtors entered into another financing agreement, the Amended Order. The Amended Order authorized the extension of new credit, including an immediate advance of $60,000 cash and $175,000 made available in the form of a letter of credit. As an incentive for the Banks to extend this additional credit, the Debtors agreed to “settle all controversies regarding the va *288 lidity of the Banks’ security interest ... by waiving any objection they may have with respect thereto....” The order further specifically stated that the validity of the liens granted “shall not be affected on appeal by reversal or modification of the authorization contained herein unless this Order is stayed pending appeal.” After an emergency telephonic hearing, the bankruptcy court entered the Amended Order. The Committee immediately appealed the Amended Order. However, the Committee failed to obtain a stay pending appeal as required by § 364(e). 11 U.S.C. § 364(e). As a result, the district court and the court of appeals dismissed the Committee’s appeal. Unsecured Creditors’ Committee v. First National Bank & Trust Co. of Escanaba (In re Ellingsen MacLean Oil Co.), 834 F.2d 599 (6th Cir.1987).

As part of its operation, one of the debtors, Bay De Noc Oil Co., Inc., leased property from Soo Line in Marquette, Michigan. Another debtor, Wisconsin Oil Co., Inc., leased property from Soo Line in Rhinelan-der, Wisconsin. These two Debtors had facilities for bulk oil storage and filling stations. These Debtors owe Soo Line for both prepetition and postpetition rent. Soo Line claims to be an unsecured claimant as to the prepetition rent and an administrative claimant as to the postpetition rent. Soo Line also claims the Debtors contaminated the leasehold properties as a result of leakage from storage tanks located on the properties. Further, Soo Line claims it or its successor may ultimately be liable for the contamination under applicable state and federal law. As of this date the Debtors have not been held liable on any environmental claims.

This adversary proceeding involves two separate funds held by the estate. One fund represents preference proceeds total-ling $256,000 obtained by the Debtors by exercising their avoiding powers. 2 The other fund represents a distribution from a partnership interest held by one of the debtors, H.S. Ternus Oil Company (Ter-nus). Ternus was a general partner in Marquette Developers pursuant to a partnership agreement dated January 2, 1969. Ternus held a 5.55% interest in the partnership. The principal asset of the partnership was a shopping center.

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98 B.R. 284, 10 U.C.C. Rep. Serv. 2d (West) 189, 1989 Bankr. LEXIS 403, 1989 WL 26550, Counsel Stack Legal Research, https://law.counselstack.com/opinion/official-unsecured-creditors-committee-v-northern-trust-co-in-re-miwb-1989.