The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
In re Genmar Holdings, Inc., et al., BKY 09-43537 (Bankr. D. Minn. 2/26/10) (O’Brien, J.).
No Administrative Expense for Floor Plan Creditor for Debtor’s Repossession and Resale Of Boats
Textron Financial Corporation filed a motion for allowance of an administrative expense in the jointly administered Genmar cases. TFC floor planned boats with dealers, enabling them to purchase the boats from Genmar. Under their repurchase agreement, Genmar was obligated to repurchase any floor planned boats repossessed by TFC from dealers. When Genmar filed its bankruptcy petition, it was in possession of a number of boats subject to the repurchase agreement. Genmar sold the boats post-petition, but remitted no payments to TFC under the repurchase agreement. TFC sought allowance of an administrative expense claim for $129,449, the total repurchase price for the boats sold post-petition by Genmar that were subject to the repurchase agreement. The bankruptcy court denied the motion, finding that TFC’s claim was a pre-petition general unsecured claim under 11 U.S.C. § 506(a).
The court found that at best, TFC had a security interest in the boats, from when Genmar took possession of them from defaulting dealers through their later post-petition sales. However, that security interest was junior to Wells Fargo’s senior lien, and Wells Fargo was under-secured. When Genmar took possession of the boats, it constituted a foreclosure sale by TFC to Genmar under U.C.C. Article 9. As a result, TFC’s post-sale interest in the boats was limited to reservation of a purchase-money security interest, but TFC never perfected its security interests. Wells Fargo, however, did have a perfected security interest in all of the Genmar boats. Therefore, when Genmar filed bankruptcy, TFC’s claim became an unsecured pre-petition claim under 11 U.S.C. § 506(a). The court also briefly addressed two other arguments made by TCF: 1) even if TFC had a consignment interest, it would have been an unperfected purchase money security interest, junior to Wells Fargo’s lien; and 2) the repurchase agreement was not an executory contract because no performance was required by TFC under the agreement.
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.