- Wells Fargo Bank v. Sonora Desert Dairy (In re Sonora Desert Dairy, LLC) 9th Cir. B.A.P., BAP Nos. AZ-13-1471-KiDJu, AZ-13-1555-KiDJu, (January 5, 2015) [NOT FOR PUBLICATION]
- The 9th Circuit Bankruptcy Appellate Panel in an unpublished opinion vacated an order by the bankruptcy court authorizing a postpetition financing loan from creditor AgStar Financial Services, to the Debtor. The Bankruptcy Appellate Panel affirmed the second order appealed by Wells Fargo authorizing the debtors to receive additional postpetition advances from AgStar. The Appellate Panel remanded the first postpetition order to the bankruptcy court for further proceedings consistent with it's memorandum.
- Procedural context:
- Debtors filed their chapter 11 bankruptcy cases on January 6, 2012. The bankruptcy court entered a stipulated order on Debtors' first interim cash collateral motion on January 24, 2012. The bankruptcy court issued at least sixteen interim cash collateral orders. Debtors filed their initial chapter 11 plan and disclosure statement on March 21, 2012. Debtors filed their first amended chapter 11 plan and disclosure statement on June 4, 2012. Wells Fargo moved for relief from stay with respect to the dairy herd on June 28, 2012. The bankruptcy court denied Wells Fargo's request for stay relief on November 9, 2012, on the basis that it was adequately protected. On July 18, 2012, Debtors filed their motion for an order: (1) authorizing postpetition financing from AgStar on a secured basis; (2) compromising and restructuring AgStar's debt under Rule 9019; and (3) granting AgStar relief from stay ("First AgStar DIP Motion"). The bankruptcy court court entered an interim order approving Debtors' continued use of cash collateral and approved the DIP loan proposed by Wells Fargo (the "DIP Loan") for $500,000 and denied approval of the First AgStar DIP Motion on November 9, 2012. On May 9, 2013, AgStar moved for relief from stay under § 362(d)(1) and (d)(2) to foreclose on the Dairy Property. Wells Fargo moved for relief from stay again on May 31, 2013. AgStar opposed Wells Fargo's second stay relief motion. On June 12, 2013, Debtors filed a motion to: (1) authorize a DIP loan from AgStar for $315,000 for winding down purposes (the "AgStar DIP Loan"); (2) grant AgStar and Wells Fargo conditional relief from stay; (3) authorize the sale of the Dairy Property under § 363(f); (4) approve the bidding procedures for the Dairy Property; (5) set the date for the auction; and (6) grant other related relief (the "Second AgStar DIP Motion"). Wells Fargo opposed the Second AgStar DIP Motion. A hearing on the Second AgStar DIP Motion was held on June 26, 2013. The bankruptcy court entered an order granting the Second AgStar DIP Motion on July 12, 2013. Wells Fargo timely moved to amend the AgStar DIP Order on July 19, 2013. The bankruptcy court entered a minute entry on September 10, 2013, granting Wells Fargo's motion to amend. Wells Fargo timely filed its notice of appeal on November 14, 2013. Creditor Wells Fargo Bank, N.A. ("Wells Fargo") appeals: (1) an order authorizing a postpetition financing loan from creditor AgStar Financial Services, FLCA, as loan servicer and attorney-in-fact for First National Bank of Altus ("AgStar"); and (2) a supplemental order authorizing the debtors to receive additional postpetition advances from AgStar.
- The debtors ("Debtors") consist of five entities owned and operated by Robert Lueck ("Lueck"), a dairy farmer with 37 years of experience in the dairy business. Debtors filed their chapter 11 bankruptcy cases on January 6, 2012, in response to Wells Fargo's assertion that it was going to seek the appointment of a receiver. On the petition date, Debtors’ assets consisted primarily of: (1) a 518 acre property on which Debtors conducted their dairy operations (the "Dairy Property"); (2) a 1,373 acre farm known as the Arlington Farm; and (3) a dairy herd of approximately 8,000 animals, related feed inventory and milk production. In September 2010, an appraisal by AgStar valued the Arlington Farm at $13.7 million and the Dairy Property at $23 million (the "Debtors' Appraisal") for a total of $36.7 million. AgStar and Wells Fargo comprise Debtors’ two largest secured creditors. Debtors owed AgStar, their real estate lender, approximately $14.7 million as of the petition date (the "AgStar Prepetition Loan"). Debtors secured this loan by first liens on the Dairy Property and the Arlington Farm. Debtors owed Wells Fargo approximately $11.5 million on an operational revolving line of credit (the "Wells Fargo Prepetition Loan"). Debtors secured the Wells Fargo Prepetition Loan by Debtors' personal property, including the dairy herd, feed inventory and milk proceeds. The United States Trustee appointed a creditors’ committee ("Committee") consisting primarily of Debtors' feed suppliers, who asserted approximately $3.3 million in unsecured nonpriority claims. In their first-day cash collateral motion, Debtors contended that as of the petition date the Dairy Property and Arlington Farm had a value no less than $36.7 million, based on Debtors' Appraisal and Lueck's opinion. The bankruptcy court entered a stipulated order on Debtors' first interim cash collateral motion on January 24, 2012. A series of interim cash collateral motions followed, the bankruptcy court issued at least sixteen interim cash collateral orders. Debtors filed their initial chapter 11 plan and disclosure statement on March 21, 2012. Debtors filed their first amended chapter 11 plan and disclosure statement on June 4, 2012. Debtors ultimately withdrew their first amended plan. The record does not indicate that a second or subsequent plan was filed.
- KIRSCHER, DUNN and JURY, Bankruptcy Judges
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