Court: United States Bankruptcy Court, M.D. Florida; March 4, 1987; Us Bankruptcy; United States Bankruptcy Court
Gerald and Louise Courington filed a Third Motion for Adequate Protection or Relief From Stay in a bankruptcy case involving Omni Contracting Company, Inc., the debtor. Previous motions by the Couringtons were either disapproved or denied due to procedural issues. A final evidentiary hearing was conducted regarding their motion. Gerald Courington, the sole stockholder of Omni at the relevant time, sold stock in the company on September 5, 1985, receiving a total of $50,000 in cash and two promissory notes totaling $300,000, despite claiming a purchase price of $400,000. A UCC-1 Financing Statement was recorded to perfect the security interest. Disputes led to an amended agreement on April 11, 1986, revising the purchase price to $395,000 plus $5,000 for additional shares. Notably, a $45,000 cash payment at closing was never made. The amended agreement stipulated principal reduction payments totaling $85,000 by specified dates. The Court determined that $135,000 had been paid, leaving an outstanding balance of $265,000 due to the Couringtons, not accounting for accrued interest on this unpaid balance.
Interest on a principal indebtedness of $265,000, accruing at 10% since April 1, 1986, accumulated to a total of $280,707.40 as of January 24, 1987. This total includes the principal amount, interest, and adjustments for prior payments and adequate protection payments. Per diem interest is calculated at $72.60. Security for the unpaid purchase price is established through an Amended Security Agreement and a UCC-1 Financing Statement, expanding collateral to include all current and future receivables and contract rights of the Debtor.
The court has conducted multiple hearings regarding Omni’s use of cash collateral, ultimately authorizing Omni to use it under the condition of providing adequate protection to the Couringtons, which includes monthly payments of $3,000 and a post-petition security interest in Omni's accounts receivable. The current consideration is whether the $3,000 monthly payments adequately protect the Couringtons’ security interest in the equipment. Testimony regarding equipment depreciation varies, with the court finding the estimate from Omni’s expert more credible. The Couringtons request an additional $7,500 for adequate protection for the equipment, while Omni's expert indicated significant pre-petition maintenance expenses.
Mr. Reid provided testimony indicating that Omni's pre-petition maintenance costs ranged from $15,000.00 to $20,000.00 per month, while post-petition expenses have decreased to $8,000.00 to $10,000.00 monthly. The Court determined that no additional adequate protection payments are necessary to compensate the Couringtons for any perceived decrease in the equipment's value. However, it emphasized the importance of maintaining the equipment to preserve its utility and value. Consequently, alongside previously ordered adequate protection, Omni is required to spend a minimum of $15,000.00 monthly on maintenance and maintain records of these expenditures. The Court also mandated regular monthly inspections by a Couringtons' representative to verify maintenance, ensuring these inspections do not disrupt Omni's operations. The Court's order from February 2, 1987, which kept the automatic stay in place, remains effective for the equipment listed in Exhibit 10, with no further relief from the stay deemed necessary. The Couringtons’ Third Motion for Adequate Protection was granted in part and denied in part: relief from stay was denied for equipment not covered by the February order, while adequate protection was granted with specific requirements: proof of insurance, minimum maintenance expenditures, and monthly inspections.
