Summary of a Recent
Judicial Development in
Bankruptcy

Contract Seller Failed to Establish Pig
Feeder Acted Maliciously

Jeffrey A. Peterson
National AgLaw Center Graduate Assistant

In In re Gehl, 325 B.R. 269 (Bankr. N.D. Iowa 2005), debtor Roger P. Gehl ("Debtor") entered into a "Pig Finder MAP-Multiple Fill Purchase Agreement" ("Agreement") with Farmland Industries, Inc. ("Farmland"). See id. at 272. The Agreement provided that Farmland would deliver approximately 500 weaner pigs per month to the Debtor, and that upon receipt of the pigs the Debtor would remit payment within 48 hours. See id. at 273. The Agreement was later assigned by Farmland to Land O'Lakes Farmland Feed, L.L.C. ("Land O'Lakes"). See id. The debtor received pigs from Land O' Lakes that were diseased but not identified as diseased until after the 48-hour return period allowed for in the Agreement. See id. The Debtor withheld payment in response, and Land O' Lakes obtained an arbitration award against the Debtor. See id. at 274. The Debtor filed a Chapter 7 bankruptcy petition in January of 2004, and Land O' Lakes filed a complaint to determine the indebtedness non-dischargeable under §§ 523(a)(2)(A) and (a)(6). See id.

The United States Bankruptcy Court for the Northern District of Iowa held that Land O' Lakes failed to prove in accordance with § 523(a)(2)(A) that the Debtor acted with fraudulent intent because it failed to show that the Debtor did not intend to pay Land O'Lakes when the Agreement was executed and the pigs originally ordered. See id. The court further held that Land O' Lakes failed to prove the Debtor acted willfully and maliciously in accordance with § 523(a)(6) because it failed to show that the Debtor's actions of withholding payment were willful or malicious as opposed to merely a negotiation tactic. See id. at 276.

The case was decided on April 11, 2005; this summary was posted Nov. 6, 2006.