In re Purdy
490 B.R. 530
Bankr. W.D. Ky.2013Background
- Debtor dairyman operates on leased property; CFB holds a perfected security interest in livestock, crops, farm products, and equipment via multiple Agricultural Security Agreements and UCC filings; Sunshine provided five dairy cow leases to Debtor for hundreds of cattle; leases are long-term (50 months) with Debtor to replace cows and assign milk proceeds; pre-petition milk and cattle proceeds largely flowed through Debtor's CFB account; post-petition, milk proceeds may be governed by §552(b) depending on lease characterization; petition filed under Chapter 12; CFB contends it has superior liens and Sunshine contends its leases are true leases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Sunshine leases are true leases or disguised secured transactions. | Sunshine argues leases are true leases. | CFB argues the leases are security agreements. | Leases are disguised secured transactions (not true leases). |
| Whether CFB's security extends to post-petition milk proceeds under §552(b). | Sunshine contends post-petition milk proceeds are not subject to pre-petition security. | CFB asserts security extends to post-petition proceeds. | CFB's security attaches to post-petition milk proceeds under §552(b). |
Key Cases Cited
- Butner v. United States, 440 U.S. 48 (U.S. Supreme Court 1979) (treats security interests and property rights under bankruptcy law (permanent framework))
- In re Wiegmann, 95 B.R. 90 (Bankr.S.D.Ill. 1989) (post-petition milk proceeds may be product of pre-petition livestock per §552(b))
- In re Buehne Farms, Inc., 321 B.R. 239 (Bankr.S.D.Ill. 2005) (lease-like arrangements may be disguised financing)
- In re Lawrence, 41 B.R. 36 (Bankr.D.Minn. 1984) (post-petition milk not within §552(b) when treated as finished product)
- In re Phoenix Equipment Co., Inc., 2009 WL 3188684 (Bankr.D.Ariz. 2009) ((no official reporter; cited for lease/security discussion))