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Jade Scott Clements & Sherry Louise Clements, Ch. 12, BK19-41806-TLS (Apr. 22, 2021)

Unexpected excess funds remain after the sale of farm equipment by the senior secured creditor. The Chapter 12 trustee proposes to pay the funds to unsecured creditors, but another creditor also claims rights to them, and the debtors would like to use them in their farming operation.

The court had granted relief from the automatic stay to sell the equipment because the evidence indicated the debtor sold the equipment to another creditor, so it was no longer property of the estate.

The buyer moved for summary judgment as to the proceeds, claiming superior rights as the owner of the equipment. However, the court denied the motion, finding that factual issues exist as to the terms of the parties’ sale and lease-back agreement. The law-of-the-case doctrine did not apply because the court had not ruled on the scope of the sale-lease agreement or the alleged breach of that contract when it ruled on the motion for relief from the stay. The creditor’s alternative argument regarding unjust enrichment also requires a factual inquiry.

Thursday, April 22, 2021
Judge Thomas L. Saladino