Summary of a Recent
Judicial
Development in
Bankruptcy
Creditor's Motion for Adequate Protection Denied
Joshua Thomas CrainNational AgLaw Center Graduate Assistant
Summary of Decision
In Zink v. Vanmiddlesworth, 300 B.R. 394 (N.D. N.Y. 2003), the United States District Court for the Northern District of New York held that the bankruptcy judge did not err in denying plaintiffs' motion for adequate protection because they had not met their burden of proof.
Background
Debtors William and Frank Vanmiddlesworth were brothers involved in dairy farming. See id. Around April 7, 1998, Frank entered into a security agreement with Marine Midland Bank (MMB) that gave MMB an interest in dairy cattle then owned or thereafter acquired. See id. MMB filed a U.C.C.-1 in the appropriate county office. See id. Around November 26, 2001, the debtors entered into a contract with Robert and Ruth Zink for the purchase of 54 cows. See id. The Zinks had a purchase money security interest (PMSI) in the cattle. See id. On April 25, 2002, the debtors filed a Chapter 13 bankruptcy petition. See id. On May 17, 2002, the case was converted to Chapter 12. See id. The Zinks sought to have the automatic stay lifted or to have adequate protection. See id. The bankruptcy court denied the Zinks' motion and they appealed to the United States District Court for the Northern District of New York. See id.
Analysis and Holdings
The court stated that the Zinks had a PMSI in the cattle, but that they had not properly perfected the interest under New York law. See id. The court focused on the request for adequate protection. See id. The court explained that under Bankruptcy Code §§ 363 and 1205, the creditor is required to establish the need for adequate protection in the first instance. See id. The court explained that only after such burden was met by the creditor would the burden shift to the debtor to show either that adequate protection already existed or was not needed. See id. The court held that the Zinks had not met their burden and the bankruptcy court was correct to deny their motion. See id.
The case was decided on September 30, 2003; this summary was posted Mar. 24, 2005.