In re Rafter Seven Ranches, L.P.

Rafter Seven Ranches, L.P. (Rafter) (defendant) purchased four used sprinkler systems from Ochs Irrigation (Ochs). C.H. Brown Company (Brown) (plaintiff) agreed to finance the purchase through lease agreements providing that Ochs would supply and install the sprinklers. Rafter authorized Brown to send lease payments to Ochs immediately, as the sprinklers were required for a planting season that would end on May 1. However, the first sprinkler system was not delivered and installed until late July and did not comply with the terms of the lease. Rafter used the sprinkler system in an effort to mitigate crop losses. Ochs delivered two more nonconforming systems. At the time of delivery, Rafter inspected the sprinklers, found them to be “junk,” and told Ochs to remove them. Ochs did not remove the sprinkler systems, which were left uninstalled in the fields. Ochs never delivered the fourth system. About six weeks later, Rafter notified Brown that the lease payments would not be made, and filed for Chapter 12 bankruptcy. Brown filed a claim in Rafter’s bankruptcy case to recover the lease payments. The bankruptcy court overruled Rafter’s objection, concluding that Rafter had accepted the sprinkler systems and failed to reject the systems in a timely manner. Rafter’s motion to reconsider was denied. Rafter appealed to the Bankruptcy Appellate Panel (BAP), which affirmed. Rafter again appealed.