Pogge v. Powers (In re Smith)

302 B.R. 865, 52 U.C.C. Rep. Serv. 2d (West) 521, 2003 Bankr. LEXIS 1629
CourtUnited States Bankruptcy Court, C.D. Illinois
DecidedDecember 11, 2003
DocketBankruptcy No. 01-72622; Adversary No. 02-7163
StatusPublished

This text of 302 B.R. 865 (Pogge v. Powers (In re Smith)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, C.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pogge v. Powers (In re Smith), 302 B.R. 865, 52 U.C.C. Rep. Serv. 2d (West) 521, 2003 Bankr. LEXIS 1629 (Ill. 2003).

Opinion

OPINION

LARRY L. LESSEN, Bankruptcy Judge.

The issue before the Court is whether the Trustee may avoid the landlord liens of the Defendants, all of whom leased farmland to the Debtor on a crop share agreement.

The material facts are not in dispute. The Debtor, Donald Smith, filed a petition pursuant to Chapter 7 of the Bankruptcy Code on July 2, 2001. The Debtor was a farmer who grew crops on land owned by others. At the time of filing, the Debtor had growing crops on land leased from one of the Defendants, Robert Powers, on a 50/50 crop share basis. The Trustee hired [867]*867Greg Leach to harvest all of the growing crops, and Mr. Leach delivered the crops to the Ramsey grain elevator. Ramsey paid the Trustee for the Debtor’s one-half of the crops; Ramsey paid Mr. Powers directly the sum of $1,641.73 for the landlord’s share of the crops.

At the time of filing, the Debtor also had crops growing on land leased from another Defendant, David Estrop, on a 50/50 crop share basis. Mr. Leach harvested the crops for the Trustee and delivered them to the Ramsey grain elevator. Ramsey paid the Trustee for the Debtor’s one-half of the crops; Ramsey paid David Estrop directly the sum of $1,809.83 for the landlord’s share of the crops.

The Debtor also had crops growing at the time of filing on land leased from another Defendant, Mark Estrop, on a 50/50 crop share basis. Mr. Leach harvested the crops for the Trustee and delivered the crops to the Ramsey grain elevator. Ramsey paid the Trustee for the Debtor’s one-half of the crops; Ramsey paid Mark Estrop directly the sum of $1,809.83 for the landlord’s share of the crops.

None of the landlords had written security agreements granting them independent, consensual landlords’ hens in the Debtor’s crops. Therefore, their only hens are the Illinois statutory landlords’ hens.

The Trustee has filed this adversary complaint for the purpose of setting aside the landlords’ hens and recovering the post-petition transfers of crops. The Trustee rehes on three theories to support her position. First, she argues that the landlords failed to perfect their crop hens under the Illinois Commercial Code, and therefore she may avoid the hens pursuant to her status as a hypothetical hen creditor under 11 U.S.C. § 544. Second, she argues that she may avoid the transfers under 11 U.S.C. § 549 as unauthorized post-petition transfers. Third, she argues that she may avoid the landlords’ statutory hen for rent under 11 U.S.C. § 545(3) and (4).

The Court will start with the Trustee’s claim under 11 U.S.C. § 545(3) and (4), which provide as follows:

The trustee may avoid the fixing of a statutory hen on property of the debtor to the extent that such lien-
(3) is for rent; or
(4) is a hen of distress for rent.

The Bankruptcy Code defines a “statutory lien” as a

hen arising solely by force of a statute on specified circumstances or conditions, or hen of distress for rent, whether or not statutory, but does not include security interest or judicial hen, whether or not such interest or hen is provided by or is dependent on a statute and whether or not such interest or hen is made fully effective by statute.

11 U.S.C. § 101(53).

Illinois law provides a landlord with a statutory lien on a tenant’s crops for the payment of rent:

Every landlord shall have a hen upon the crops grown or growing upon the demised premises for the rent thereof, whether the same is payable wholly or in part in money or specific articles of property or products of the premises, or labor, and also for the faithful performance of the terms of the lease.

735 ILCS 5/9-316.

The Illinois statutory landlord hen provision of 735 ILCS 5/9-316 clearly falls within the definition of a statutory hen set forth in 11 U.S.C. § 101(53). Therefore, it may be avoided by a trustee in bankruptcy pursuant to 11 U.S.C. § 545. In re Marshall, 239 B.R. 193, 196 (Bankr.S.D.Ill.1999); In re Hilligoss, 69 B.R. 781, 782 [868]*868(Bankr.C.D.Ill.1986), aff'd 849 F.2d 280 (7th Cir.1988).

The Defendants concede that the Trustee has the authority to avoid their liens under 11 U.S.C. § 545. However, they argue that the Trustee should be barred from asserting a claim under § 545 because she did not include counts under § 545 in her original complaint. The counts under § 545 were added in April, 2003, eight months after the original adversary complaint was filed. The § 545 counts were added after the pretrial in March, 2003. The Trustee included the § 545 counts in her Motion for Summary Judgment.

Federal Rule of Bankruptcy Procedure 7015, which incorporates by reference Federal Rule of Civil Procedure 15(a), provides in relevant part as follows:

A party may amend the party’s pleadings once as a matter of course at any time before a responsive pleading is served or, if the pleading is one to which no responsive pleading is permitted and the action has not been placed on the trial calendar, a party may so amend it at any time within 20 days after it is served. Otherwise a party may amend the party’s pleadings only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires;

Fed.R.Bankr.P. 7015(a). This rule gives judges broad discretion to grant or deny motions to amend. Wilson v. American Trans Air, Inc., 874 F.2d 386, 391 (7th Cir.1989). The Seventh Circuit follows a liberal policy of allowing amendments to pleadings in order that cases may be decided on the merits. Stern v. U.S. Gypsum, Inc., 547 F.2d 1329, 1334 (7th Cir.1977), cert. denied, 434 U.S. 975, 98 S.Ct. 533, 54 L.Ed.2d 467 (1977). The United States Supreme Court has set forth the following guidelines for determining whether to allow an amendment:

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Bluebook (online)
302 B.R. 865, 52 U.C.C. Rep. Serv. 2d (West) 521, 2003 Bankr. LEXIS 1629, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pogge-v-powers-in-re-smith-ilcb-2003.