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Bankruptcy Issues
Heinz v. Phoenix Corp., No. 94-6394 (6th Cir. 1996).
Sales agreement for stallion sold to Calumet Farm granted certain "lifetime breeding rights" to third parties. Calumet Farm later filed for Chapter 11 bankruptcy, and as debtor-in-possession claimed that the lifetime breeding rights were mere executory contracts and therefore the owners were left with mere unsecured claims. The bankruptcy court, district court, and court of appeals agreed, based on the perception that lifetime breeding rights were not ownership interests in the stallion.
In re Becker, 217 B.R. 231 (Bkrcy M.D. Tenn. 1998).
Sellers entered into an agreement to sell 12 horses to buyer. The contract provided for a down payment, with installment payments. Seller was to retain the registration papers, releasing one at a time as each installment was made. After buyer defaulted, seller sued and received a judgment. Seller then had the sheriff seize the horses upon an execution, and the horses were boarded with sellers as bailees. Buyer filed bankruptcy, and sought turnover of the horses and the registration papers. The court granted the turnover, holding that no executory contract existed because the claim had been reduced to judgment, and because, despite the seizure, the horses and the papers were property of the estate. The court required the sellers to be "adequately protected" as a condition of turnover, however.
In re Blankinship-Cooper, Inc., 43 B.R. 231, 39 UCC Rep. Serv. 1008 (Bkrcy N.D. Tex. 1984).
Bank had perfected security interest in stallion and in debtor's "general intangibles," and bank retained possession of the registration papers. Priority dispute arose with respect to the breeding rights, where a prior purchase money security interest existed on the horse. Bankruptcy court held that the breeding rights were not general intangibles and therefore the prior security interest prevailed. Moreover, possession of the registration papers gave no priority to the bank.
In re Bob Schwermer & Assoc., 27 B.R. 304 (Bkrcy N.D. Ill. 1983).
Bank filed financing statement with Illinois Secretary of State to perfect security interest in race horse. Held that security interest was properly perfected because race horse was not a farm product for purpose of perfection. Movement of race-horse following filing of financing statement, held not to defeat perfection.
In re Calumet Farm, Inc. (First City, Texas-Houston v. Due Process Stables), No. 92-268 (E.D. Ky. 1993).
Priority dispute between secured lender and transferee of breeding rights to stallion. Although the district court held that the immediate dispute was moot as to the breeding rights directly in issue, the district court gave guidance to the bankruptcy court as to resolution of the priority dispute as to future breeding rights. Purchaser for value of a season from a shareholder takes property severed from the shareholder's interest in the stallion, and thus does not bear the risk of the originating shareholder's bankruptcy.
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In re Fogerty (NCNB Nat'l Bank v. Fogerty), 114 B.R. 788, 11 UCC Rep. Serv. 2d 986 (S.D. Fl. 1990).
Lender's financing statement described certain mares but did not reference their offspring. The bankruptcy court held that the description was sufficient to perfect lender's security interest in the mare's foals. The court reasoned that because a mare's value is based on her ability to produce foals, a description of the mares was sufficient to alert third parties that a security interest in the mare's foals was being claimed.
In re McKillips, 15 BCD 1061 (Bkrcy. N.D. Ill. 1987).
Owner of a horse breeding and showing operation filed a petition under Chapter 12 of the Bankruptcy Code. The bankruptcy court held that he did not qualify as a "family farmer" under Chapter 12.
In re Race Horses, Inc., 207 B.R. 229, 1997 WL 160311 (Bkrcy. E.D. Ok. 1997).
Creditor of racetrack filed an involuntary Chapter 11 petition. The bankruptcy court dismissed the petition because the requisite number of creditors did not join the petition. Even though the petition had an adverse effect on the track's business, the court denied the track an award of costs, attorneys' fees, and damages.
In re Wildlife Center, Inc., 102 B.R. 321 (Bkrcy E.D.N.Y. 1989).
Debtor in possession, a horse breeding farm, filed adversary proceedings to compel turnover of Jockey Club registration papers and stallion service certificates held by the creditor auctioneer. The bankruptcy court refused to issue turnover orders, holding that Jockey Club registration papers and stallion service certificates are separate property than the horse itself. Possession of the papers perfected the auctioneer's security interest in them. Furthermore, the court reasoned, the auctioneer had a constructive trust claim to the papers due to the misconduct of the debtor.
In re Wolfson (Wolfson v. Equine Capital Corp.), 56 F.3d 52 (11th Cir. 1995).
Secured creditor of horse farm filed an adversary proceeding against bankrupt partner of horse farm claiming that the debt was nondischargeable in bankruptcy because farm and its partners failed to remit proceeds following sale of secured assets. A judgment in favor of the secured creditor was reversed by the court of appeals, which ruled that retention of proceeds by horse farm after it sold lender's collateral did not constitute sufficient cause to except debt from discharge because lender supposedly was aware of farm's actions.
Lee v. Cox, 18 UCC Rep. Serv. 807 (M.D. Tenn. 1976).
Seller of horses was to retain registration papers until horses were paid for in full. Buyer filed bankruptcy and the bankruptcy judge ordered the seller to turn over the registration papers, so the horses could be sold. On appeal, the district court held that the seller's possession of the registration papers perfected a security interest in them, and therefore the bankruptcy court had no authority to require the papers to be turned over to the debtor's estate. Moreover, under the contract of sale, the seller retained legal title to the papers.
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