In re Aznoe Agribiz, Inc.

416 B.R. 755

In re AZNOE AGRIBIZ, INC, Debtor.

No. 09-60528-12.

United States Bankruptcy Court, D. Montana.

September 24, 2009.

MEMORANDUM OF DECISION

RALPH B. KIRSCHER, Bankruptcy Judge.

In this Chapter 12 case, on August 12, 2009, the Debtor Aznoe Agribiz, Inc. (hereinafter "Aznoe" or "Debtor") filed an Objection (Docket No. 59) to Proof of Claim No. 9 filed by Kernaghans Service, Inc. ("KSI") on the grounds KSI perfected its statutory agricultural lien post-petition in violation of the automatic stay, 11 U.S.C. § 362(a), and that its lien is voidable under 11 U.S.C. § 546(b), 11 U.S.C. § 545, and 11 U.S.C. § 549. KSI filed a response contending that its post-petition perfection of its secured claim did not violate the stay by operation of § 362(b)(3), that it was entitled to perfect its lien post-petition under § 546(b)(1)(A) and is not voidable. The parties agreed to submit the Debtor's Objection on stipulated facts and briefs, which have been filed and reviewed by the Court together with applicable law. This matter is ready for decision. This memorandum contains the Court's findings of fact and conclusions of law.

This Court has jurisdiction in this Chapter 12 case under 28 U.S.C. § 1334(a). Debtor's Objection to KSI's secured claim is a core proceeding under 28 U.S.C. § 157(b)(2)(B) and (K) to determine the validity of the lien securing KSI's Proof of Claim 9. For the reasons set forth below the Debtor's Objection to KSI's Proof of Claim No. 9 will be overruled by separate Order.

FACTS

The parties stipulated to the following facts:

1. By agreement with Aznoe, KSI supplied herbicides and fertilizers pre-petition for Aznoe's winter wheat crop that Aznoe planted pre-petition in the Fall of 2008 and that Debtor is, or will be, harvesting post-petition in 2009.

2. As shown by KSI's original Proof of Claim 9, KSI's first sale or application was on or about September 19, 2008, and further sales or applications occurred at various pre-petition dates recited in Claim 9 up until December 3, 2008. After Debtor's bankruptcy filing¹ KSI made sales and application of fertilizers and herbicides through at least May 19, 2009.

3. KSI filed statutory agricultural liens with the Montana Secretary of State in June, 2009, asserting agricultural liens for the herbicides and fertilizer for pre-petition and post-petition sales or application of fertilizer and herbicides bearing the filing numbers recited on the attachments to its proof of claim filed August 1, 2009, as Claim 9² in this Chapter 12 case. KSI purported to perfect its statutory liens under MONT.CODE ANN. § 71-3-901, et seq. KSI asserted it may perfect a statutory lien post-petition for its pre-petition sales and applications of herbicides and fertilizer. Debtor asserts that such post-petition perfection for pre-petition sales and applications is not permitted; Debtor did not consent to KSI's filing of those liens.

4. Copies of the Montana UCC Filing Acknowledgments for liens filed by KSI were attached as Exhibit ("Ex.") "A" to Docket No. 61.

DISCUSSION

Debtor filed its Objection to KSI's Proof of Claim 9 on August 12, 2009. The law on objections and allowance of claims is well settled in the Ninth Circuit and this Court. This Court discussed the applicable law governing the burden of proof for allowance of claims in In re Eiesland, 19 Mont. B.R. 194, 208-09 (Bankr.D.Mont.2001):

A validly filed proof of claim constitutes prima facie evidence of the claim's validity and amount. F.R.B.P. 3001(f). The Ninth Circuit recently explained the general procedure for allocating burdens of proof and persuasion in determining whether a filed claim is allowable in Lundell v. Anchor Const. Specialists, Inc., 223 F.3d 1035, 1039 (9th Cir.2000):

A proof of claim is deemed allowed unless a party in interest objects under 11 U.S.C. § 502(a) and constitutes "prima facie evidence of the validity and amount of the claim" pursuant to Bankruptcy Rule 3001(f). See also Fed. R. Bankr.P. 3007. The filing of an objection to a proof of claim "creates a dispute which is a contested matter" within the meaning of Bankruptcy Rule 9014 and must be resolved after notice and opportunity for hearing upon a motion for relief. See Adv. Comm. Notes to Fed. R. Bankr.P. 9014.

Upon objection, the proof of claim provides "some evidence as to its validity and amount" and is "strong enough to carry over a mere formal objection without more." Wright v. Holm (In re Holm), 931 F.2d 620, 623 (9th Cir.1991) (quoting 3 L. King, Collier on Bankruptcy § 502.02, at 502-22 (15th ed.1991)); see also Ashford v. Consolidated Pioneer Mort. (In re Consol. Pioneer Mort.), 178 B.R. 222, 226 (9th Cir. BAP 1995), aff'd, 91 F.3d 151, 1996 WL 393533 (9th Cir.1996). To defeat the claim, the objector must come forward with sufficient evidence and "show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves." In re Holm, 931 F.2d at 623.

* * * *

"If the objector produces sufficient evidence to negate one or more of the sworn facts in the proof of claim, the burden reverts to the claimant to prove the validity of the claim by a preponderance of the evidence." In re Consol. Pioneer, 178 B.R. at 226 (quoting In re Allegheny Int'l, Inc., 954 F.2d 167, 173-74 (3d Cir.1992)). The ultimate burden of persuasion remains at all times upon the claimant. See In re Holm, 931 F.2d at 623.

See also Knize, 210 B.R. at 778; Matter of Missionary Baptist Foundation of America, 818 F.2d 1135, 1143 (5th Cir. 1987); In re Stoecker, 143 B.R. 879, 883 (N.D.Ill.1992), aff'd in part, vacated in part, 5 F.3d 1022 (7th Cir.), reh'g denied (1993).

Thus, the Bank's Proof of Claim No. 2 is prima facie evidence of the validity and amount of its claim under Rule 3001(f), and the Debtor has the burden of showing sufficient evidence and to "show facts tending to defeat the claim by probative force equal to that of the allegations of the proofs of claim themselves." Lundell, 223 F.3d at 1039 (quoting Holm). This Court finds that Eric, as the objecting party, has not produced sufficient evidence to cause the burden to revert to the Bank to prove the validity and amount of its claim. Lundell, 223 F.3d at 1039 (quoting In re Consol. Pioneer, 178 B.R. at 226).

The analysis under Lundell v. Anchor Const. Specialists was reiterated by the Ninth Circuit in In re Los Gatos Lodge, Inc., 278 F.3d 890, 894 (9th Cir. 2002). Applying this analysis to the instant case, KSI's Proof of Claim 9 is given prima facie effect of the validity and amount by Rule 3001(f) because it include attachments detailing the fertilizers and chemicals sold, dates, and the applicable statutes based on which it asserts a secured claim. KSI's Proof of Claim 9 is entitled to prima facie treatment under Rule 3001(f), and the burden of proof to overcome the prima facie effect of Rule 3001(f) on Proof of Claim 9 is on the Debtor. Lundell, 223 F.3d at 1039 (quoting Holm); Eiesland, 19 Mont. B.R. at 208-09.

§ 362 — Automatic Stay.

Debtor argues that KSI violated the stay when it filed its agricultural liens after the petition date because the liens were not created until perfection, and § 362(a)(4) prevents creditors from creating, perfecting or enforcing any lien against the debtor.

Under 11 U.S.C. § 362(a), "[a] bankruptcy filing imposes an automatic stay of all litigation against the debtor." Christensen v. Tucson Estates, Inc. (In re Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir.1990) (citing 11 U.S.C. § 362(a)), except in those cases specifically enumerated in § 362(b). The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives debtors a breathing spell from creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits debtors to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove them into bankruptcy. S.Rep. No. 989, 95th Cong., 2d Sess. 54-55 (1978), reprinted in 1978 U.S.Code Cong. & Admin. News 5787, 5840-41.

In re Mittlestadt, 20 Mont. B.R. 46, 51 (Bankr.D.Mont.2002), quoting In re Westco Energy, Inc., 18 Mont. B.R. 199, 211-12 (Bankr.D.Mont.2000).

Actions taken in violation of the automatic stay are void, not merely voidable. Lone Star Sec. & Video, Inc. v. Gurrola (In re Gurrola), 328 B.R. 158, 175 (9th Cir. BAP 2005); In re Gruntz, 202 F.3d 1074, 1082 (9th Cir.2000); 40235 Washington Street Corp. v. Lusardi, 329 F.3d 1076, 1082 (9th Cir.2003); Schwartz v. United States, 954 F.2d 569, 570-71, 575 (9th Cir.1992); In re Deines, 17 Mont. B.R. 114, 115 (Bankr.D.Mont.1998); Hillis Motors, Inc. v. Hawaii Auto. Dealers' Assoc., 997 F.2d 581, 586 (9th Cir.1993). Thus, if KSI's perfection of its agricultural liens was done in violation of the stay, the perfection was void ab initio.

Section 362(a)(4) stays "any act to create, perfect, or enforce any lien against property of the estate." However, under 362(b)(3) the filing of a petition does not operate as a stay "of any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent that the trustee's rights and powers are subject to such perfection under section 546(b) of this title ...." In re Baldwin Builders, 232 B.R. 406, 410 (9th Cir. BAP 1999). Exceptions to the stay must be narrowly construed to further the purpose of the stay. Baldwin, 232 B.R. at 412, citing In re Glasply Marine Industries, Inc., 971 F.2d 391, 394-95 (9th Cir. 1992). On the other hand, "we are to follow the statutes as they are written." Baldwin, 232 B.R. at 411. When the language of a statute is plain, the sole function of the courts is to enforce it according to its terms unless the disposition required by the text is absurd. Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004); Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (200...