In re James

368 B.R. 800 (2006)

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In re James

United States Bankruptcy Court for the Eastern & Western Districts of Arkansas
368 B.R. 800 (2006)

Facts

The Jameses (debtors) d/b/a Sammy James Farms entered into a lease with the Morrisons (creditors) d/b/a McCaughan Farms under which the Jameses agreed to pay annual rent of $189,963 due by the beginning of each December to the Morrisons to grow crops on the Morrisons’ land. In 2005, Sammy James Farms obtained a $1,150,000 loan from a bank (creditor) to grow its crops and gave the bank a security interest in all its crops growing or to be grown in the county, including the crops on the Morrisons’ land. On April 21, 2005, the bank properly filed a financing statement to perfect its security interest. In December 2005, the Jameses failed to pay the annual rent to the Morrisons. The 2005 crops were harvested and stored. Thereafter, the Jameses filed for bankruptcy. Before June 2006, the Morrisons sued the Jameses and Sammy James Farms to foreclose their landlords’ lien for the unpaid rent, which ultimately resulted in a priority dispute between the Morrisons and the bank as to the 2005 crops. The bank argued that Arkansas law prohibited the assignment of the landlords’ lien without notice. Conversely, the Morrisons argued that their statutory landlords’ lien was perfected before the Jameses filed for bankruptcy and that they had timely and properly sought foreclosure of the lien.

Rule of Law

Issue

Holding and Reasoning (Mixon, J.)

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