C M Heavy Machinery, LLC
24-80617
| Bankr. E.D. Okla. | Jun 27, 2025Background
- C M Heavy Machinery, LLC, an Oklahoma-based supplier to the oil industry, filed for Chapter 11 bankruptcy on August 8, 2024, immediately before a state foreclosure hearing initiated by its largest secured creditor, Great Plains National Bank.
- The bankruptcy was prompted by financial strain tied to an $8+ million loan from Great Plains (secured by nearly all assets), the destruction of valuable inventory in a fire, ongoing business losses, and internal bookkeeping and tax filing failures.
- Debtor’s records were unreliable and mixed with personal finances of the sole owner, Clint Meadors; major assets were incorrectly reported, and no meaningful action was taken to correct errors for over eight months despite court assurances.
- Postpetition, the business generated little income, failed to collect over $1 million in receivables, and made no substantive progress in reducing a $4.5 million IRS claim.
- The U.S. Trustee and Great Plains moved to convert the case to Chapter 7 for gross mismanagement and incapacity to rehabilitate; the debtor only sought to correct issues after the evidentiary hearing.
Issues
| Issue | Plaintiff's Argument (Great Plains) | Defendant's Argument (Debtor/Meadors) | Held |
|---|---|---|---|
| Gross mismanagement of the estate | Persistent misreporting, commingled finances, no corrections or action to fix records, personal use of funds | Problems acknowledged, but claimed steps would be taken and errors predated bankruptcy | Court agreed with Great Plains – found gross mismanagement |
| Continuing diminution of the estate and no rehabilitation | Assets declining, accounts uncollected, negative cash flow, idle equipment | Claimed postpetition profits and hope for insurance claim recovery | Court found no rehabilitation likely, estate’s value decreasing |
| Existence of unusual circumstances precluding conversion | No unusual circumstances present justifying continued Chapter 11 | Claimed future corrections/actions and pending litigation may improve situation | Court found no unusual circumstances to warrant continuation |
| Best interests of creditors: conversion vs. dismissal | Conversion to Chapter 7 would permit trustee to investigate, liquidate, pursue claims | Sought to continue under Chapter 11, asserting eventual recovery for creditors | Court converted to Chapter 7 for creditor/estate benefit |
Key Cases Cited
- Hall v. Vance, 887 F.2d 1041 (10th Cir. 1989) (bankruptcy court has broad discretion under § 1112(b))
- In re Gateway Access Solutions, Inc., 374 B.R. 556 (Bankr. M.D. Pa. 2007) (debtor-in-possession's duty to provide accurate financial reports; lack of management can constitute gross mismanagement)
- In re Taub, 427 B.R. 208 (Bankr. E.D.N.Y. 2010) (standard for continuing diminution and likelihood of rehabilitation under § 1112(b))
- In re Fall, 405 B.R. 863 (Bankr. N.D. Ohio 2009) (pattern of mismanagement supports conversion)