12/06/2007 321 Proposed Order submitted by Elizabeth Thompson (RE: related document(s)77 Motion for Relief From Stay, filed by Creditor John P Murphy, Creditor Pro Plas LLC, Creditor John P. Murphy III Revocable Trust No 1, Creditor 10315 LLC). (Thompson, Elizabeth) (Entered: 12/06/2007)
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Doc 321
In Re:
Case No. 07-50935
Judge William S. Howard
Chapter 11
PRO MOLD, INC.
Debtor.
PRO PLAS LLC, JOHN P. MURPHY III REVOCABLE TRUST NO. 1, 10315 LLC AND JOHN P. MURPHY,
Movants,
v.
PRO MOLD, INC.,
Respondent.
ORDER ON MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PRO PLAS LLC, JOHN P. MURPHY III REVOCABLE TRUST NO. 1, 10315 LLC AND JOHN P. MURPHY
On the 19th day of November 2007, came on to be heard the Motion for Relief from Automatic Stay filed by Pro Plas LLC; John P. Murphy III Revocable Trust No. 1; 10315 LLC; and John P. Murphy ("Motion") (D.E. 77) filed in the above-styled and numbered case. The Court finds that all parties received notice as required by law of the filing of the Motion and the hearing thereon. Further, the Court finds as follows:
Jurisdiction and Bankruptcy Filing
1. The Court has jurisdiction regarding this matter pursuant to 28 U.S.C. §1334 and 28 U.S.C. §157 and the Local Rules for the United States District Court for the Eastern District of Kentucky.
2. This matter is a core proceeding pursuant to 28 U.S.C. §157(b)(2)(D).
3. On May 16, 2007 (the “Petition Date”), Debtor Pro Mold, Inc. ("Debtor Pro Mold"), filed its Voluntary Chapter 11 Petition for Relief in the United States Bankruptcy Court for the Eastern District of Kentucky, Lexington Division ("Court").
4. Debtor Pro Mold continued to operate its business and manage its financial affairs pursuant to Sections 1107 and 1108 of the Bankruptcy Code from May 16, 2007 until October 3, 2007, under the control of James N. Turek, Sr., Debtor Pro Mold's President during this period.
5. On October 3, 2007, this Court ordered the Appointment of a Chapter 11 Trustee.
6. The Office of the United States Trustee appointed Kenneth Henry to serve as the Chapter 11 Trustee ("Trustee").
7. Even with the appointment of a Chapter 11 Trustee, Debtor Pro Mold continues to struggle and its financial condition continues to decline.
Relief from the Automatic Stays of 11 U.S.C. §362
Introduction
8. Movants Pro Plas LLC; John P. Murphy III Revocable Trust No. 1; 10315 LLC; and John P. Murphy (collectively "Movants" or the "Murphy Entities") request relief from the automatic stay to foreclose on their respective security interests in Debtor Pro Mold's personal property (collectively, the "PMI Collateral").
9. The Murphy Entities also seek authority to apply the proceeds from the foreclosure sale of the PMI Collateral against the secured debts due and owing to the Murphy
Entities.
10. The Murphy Entities submitted affidavits and exhibits in compliance with this Court's Amended Order Rescheduling Evidentiary Hearing, (D.E. #265) ("Scheduling Order").
11. Debtor Pro Mold filed two responses with exhibits to the Motion (D.E. #102 and D.E. #214).
12. Other than the Murphy Entities, no other party complied with this Court's Scheduling Order by submitting proposed exhibits or affidavits, or participating in the preparation of a joint stipulation of fact, or objecting to the submissions of the Murphy Entities.
13. The Murphy Entities hold perfected security interests in the PMI Collateral, sufficient to entitle them to the relief requested in the Motion and the right to credit bid their debt in the event they foreclose on the PMI Collateral or the PMI Collateral is otherwise sold.
14. The Court makes no finding as to whether the security interests of the Murphy Entities in the PMI Collateral are avoidable under any applicable provision of the Bankruptcy Code or other applicable law.
Adequate Protection
15. On May 31, 2007 the Court signed and the Clerk entered the Agreed Emergency Cash Collateral Order or “Interim Cash Collateral Order”. (Exhibit 1) (D.E. #53).
16. The Court authorized Debtor Pro Mold’s emergency / interim use of cash collateral pursuant to 11 U.S.C. §363(c)(2)(B) pursuant to a 30 day budget as of May 17, 2007.
17. By further order of this Court, and the agreement of counsel for Debtor Pro Mold and counsel for the Murphy Entities, the Interim Cash Collateral Order and the original 30-day budget (excluding the critical vendor payments) continues in effect.
18. Debtor Pro Mold agreed to timely make all post-petition payments due to the Murphy Entities aside from the semi-annual $125,000 principal payments due under a $1,000,000 promissory note, due April 1, 2007 and October 1, 2007, pending further order of the Court.
19. Debtor Pro Mold continues to operate under the Interim Cash Collateral Order making all adequate protection payments to the Murphy Entities of principal and interest as set forth therein.
20. Debtor Pro Mold is current on its adequate protection payments. Debtor Pro Mold has not made the semi-annual $125,000 principal payments due under a $1,000,000 promissory note, due April 1, 2007 and October 1, 2007. (“The Court did not rule on the Murphy Entities’ request in regard to the $1,000,000 Promissory Note and reserved this matter for the final hearing on Debtor Pro Mold’s Motion to Use Cash Collateral.”) (Exhibit 1) (D.E. #53)
21. In addition, Debtor Pro Mold is current on its monthly rent payments to 10315, LLC for the premises in which Debtor Pro Mold has its office and operates its manufacturing facility.
22. Debtor Pro Mold's payments to the Murphy Entities suggests some level of adequate protection, but it is eroding.
23. Since its bankruptcy filing, Debtor Pro Mold's cash and accounts receivable declined significantly, but appears stable for September and October of 2007.
24. The Trustee represented to the Court that Debtor Pro Mold is able to cover payroll for the current week, scheduled to be paid on Friday, November 20, 2007.
25. The Trustee believes that Debtor Pro Mold can continue to make payroll, keep the doors open, produce product, manufacture goods for sale, and sell the goods.
26. On or before December 31, 2007, Debtor Pro Mold is required to pay St. Louis County real estate taxes and personal property taxes ("St. Louis County Taxes"), totaling more than $94,000.
27. If paid when due, the St. Louis County Taxes, will significantly diminish Debtor Pro Mold's cash and impair its ability to continue to operate.
28. Under the circumstances, whether the Murphy Entities are adequately protected is questionable, in light of the continuing decline in the value of the PMI Collateral.
29. The Court is faced with balancing the rights of the Murphy Entities against the interest of the other creditors.
30. The time is nigh to allow the Murphy Entities to pursue their state law remedies with respect to the PMI Collateral.
31. The Trustee's right to continue his efforts to find a buyer for Debtor Pro Mold must be short term.
32. Consequently, cause exists and it is therefore necessary to modify and condition the continuation of the automatic stay under 11 USC §362. Accordingly,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT,
Sale Agreement
A. The Motion shall be sustained 45 days from November 19, 2007 and the Murphy Entities shall be granted immediate relief from the automatic stay as described in ¶M below unless the Trustee, on or prior to that day, enters into a binding written contract with a qualified purchaser to purchase the assets of Debtor Pro Mold or the stock of Debtor Pro Mold for a sum greater than the balance under the note(s) secured by the assets to be sold ("Sale Agreement") and immediately files such Sale Agreement with the Clerk of the Court.
B. In connection with any such Sale Agreement, the proposed purchaser shall immediately deposit with the Trustee a minimum of $100,000 as earnest money in the form of a cashier's check or money order, a copy of which will be filed contemporaneously with the Sale Agreement with the Clerk of the Court.
C. In connection with any such Sale Agreement, the closing on the sale will occur within 30 days after the Sale Agreement is signed, subject only to the Court’s calendar.
D. If the sale is delayed or does not close for any reason, other than delay related to the Court’s calendar, within the time provided in ¶C, then the Murphy Entities will be granted immediate relief from the automatic stay as described in ¶M below.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED THAT,
Continuing Adequate Protection
E. The Trustee shall continue to timely make all post-petition Adequate Protection payments to the Murphy Entities in accordance with established practice, the Interim Cash Collateral Order, and the 30-day budget pending further order of the Court.
F. The Trustee shall continue to timely make all rent payments due to 10315 LLC for the premises in which Debtor Pro Mold has its office and manufacturing facility, except as provided in paragraph I.
G. The Trustee shall continue to timely pay Debtor Pro Mold's weekly payroll, monthly insurance, other ongoing operating expenses in accordance with the 30-day budget and otherwise continue to run and operate Debtor Pro Mold's business.
H. The Trustee shall pay all payroll taxes when due, in accordance with this Court’s Chapter 11 Operating Order and shall otherwise fully comply with this Court’s Chapter 11 Operating Order, except as provided in paragraph I below.
I. The Trustee shall pay any penalties and interest assessed for unpaid real estate and personal property taxes when due during the pendancy of this Order, but shall not be required to pay such taxes.
J. The Trustee shall continue to allow the Murphy Entities access to Debtor Pro Mold's premises and records to monitor the business operations and to determine the amount and condition of the PMI Collateral as well as whether Debtor Pro Mold has adequate cash.
K. The Trustee shall provide the Murphy Entities with at least weekly financial information in the form of a current Quickbooks backup copy accounting record download.
L. If necessary and requested by the Murphy Entities, the Court will add additional monitoring mechanisms.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED THAT,
Request for Immediate Relief
M. If for any reason, the Trustee does not: i) enter into a binding written agreement for the sale of the assets as set forth in paragraph A; or ii) pay any of the amounts identified in ¶¶ E, F, G, H, or I above, or is unable to continue to run and operate Debtor Pro Mold's business, then the following shall occur:
(1) The Murphy Entities may request immediate relief from the automatic stay of 11 U.S.C. §362;
(2) Notice on any such hearing for immediate relief is hereby shortened to 3 days and shall be given by facsimile, email, or telephone, in addition to being served by regular first class United States Mail.
(3) Any hearing on the Murphy Entities request for immediate relief will be heard by telephone.
N. Upon a showing that the Trustee did not timely pay any of the amounts identified in ¶¶ E, F, G, or H above, or that the Trustee cannot continue to run and operate Debtor Pro Mold's business, then the Murphy Entities shall immediately be granted relief from the automatic stay to proceed with their state court remedies and foreclose on the PMI Collateral.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED THAT,
Immediate Surrender
O. Concurrently with the granting of immediate relief, the Court shall also order the immediate surrender of Debtor Pro Mold's office and manufacturing facility to 10315, LLC.
P. In entering this Order, the Court is fashioning a remedy due to the diminution of the Murphy Entities adequate protection.
Q. Oral findings of fact and conclusions made by the Court at the hearing (the “Findings”) are incorporated herein by reference in their entirety.
R. The automatic stay of 11 U. S. C. § 362 shall remain in full force and effect as to the Murphy Entities until relief therefrom is granted pursuant to order entered in accordance with this Order.
Submitted by:
/s/ Elizabeth Lee Thompson
Elizabeth Lee Thompson
STITES & HARBISON
250 West Main
2300 Lexington Financial Center
Lexington, Kentucky 40507
(859) 226-2389
ethompson@stites.com
Pursuant to Local Rule 9022-1(c), Elizabeth Lee Thompson shall cause a copy of this order to be served on each of the parties designated to receive this order pursuant to Local Rule 9022-1(a) and shall file with the court a certificate of service of the order upon such parties within ten (10) days hereof.
Pro Mold, Inc.
Attorney for Debtor
Office of the U.S. Trustee
CWY Credit
Gregory R. Schaaf
Attorney for Official Unsecured Creditors’ Committee in Plasticon International, Inc.
Kenneth C. Henry
Attorney for Pro Mold Chapter 11 Trustee
Steven Palmer
Attorney for Plasticon Chapter 11 Trustee
Missouri Department of Revenue
Amended Master Service List No. 1 |
