JBJ Kilpatrick Farms, Inc. et al v. Four Oaks Bank & Trust Company et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
COASTAL PLAINS PORK, LLC,
DEBTOR
CHAPTER 11
CASE NO. 09-08367-8-RDD
NEWKIRK FARMS, INC., JBJ
KILPATRICK FARMS, INC., PARKER’S
PORKERS, INC. and BOBCAT FARMS,
LLC,
PLAINTIFFS
v.
FIRST NATIONAL BANK, N.A.,
COOPERATIVE CREDIT COMPANY, THE
NORTH CAROLINA AGRICULTURAL
FINANCE AUTHORITY, and FOUR OAKS
BANK & TRUST COMPANY,
DEFENDANTS
ADVERSARY PROCEEDING NO.
09-00237-8-RDD
ORDER (1) DENYING THE MOTION FOR PARTIAL
SUMMARY JUDGMENT FILED BY NEWKIRK FARMS, INC.,
JBJ KILPATRICK FARMS, INC., PARKER’S PORKERS, INC., AND
THE MOTION FOR SUMMARY JUDGMENT FILED BY BOBCAT
FARMS, LLC AND (2) GRANTING THE CROSS-MOTION AND
MOTION FOR SUMMARY JUDGMENT FILED BY FIRST NATIONAL
BANK OF OMAHA DISMISSING PLAINTIFFS’ COMPLAINT
SO ORDERED.
SIGNED this 21 day of May, 2010.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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This matter came on to be heard on May 10, 2010 upon the following motions and
objections filed by the parties to this adversary proceeding:
1. 	Motion for Partial Summary Judgment (Docket No. 24);
2. 	Plaintiff First National Bank of Omaha’s (“FNBO”) Objection to the Motion for
Partial 	Summary 	Judgment 	Filed 	by 	Plaintiffs 	Newkirk 	Farms, 	Inc., 	JBJ
Kilpatrick Farms, Inc. and Parker’s Porkers (the “Moving Plaintiffs”), FNBO’s
Cross-Motion for Summary Judgment Against the Moving Plaintiffs, and FNBO’s
Motion for Summary Judgment Against Bobcat Farms, LLC (“Bobcat”) (Docket
No. 28); and,
3. 	Bobcat Farms, LLC’s (“Bobcat”) Objection to the Motion for Summary Judgment
filed 	by 	Defendant 	First 	National 	Bank, 	N.A.; 	Bobcat’s 	Cross-Motion 	for
Summary Judgment Against First National Bank, N.A., and Bobcat’s Motion for
Summary Judgment Against Defendants, Cooperative Credit Company, The
North Carolina Agricultural Finance Authority and Four Oaks Bank & Trust
Company (Docket No. 37).
Counsel for each of the following parties was present at the hearing:
Ocie F. Murray, Jr. 	Bobcat Farms, LLC
Trawick H. Stubbs, Jr. and William Kroll 	Newkirk Farms, Inc., JBJ Kilpatrick
Farms, Inc., and Parker’s Porkers, Inc.
Jason L. Hendren 	JBJ Kilpatrick Farms, Inc.
Amos U. Priester, IV and James J. Niemeier 	First National Bank of Omaha
Michael P. Flanagan 	James E. Maides and Elijah T. Morton
Jennifer K. Bennington 	Cooperative Credit Company.
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The Court has reviewed the Motions, the memoranda of law, and the following affidavits
filed in support thereof (the “Supporting Materials”):
1. 	Affidavit of Ronald G. Brown (Docket No. 30);
2. 	Affidavit of Christopher M. Kalkowski (Docket No. 31);
3. 	Affidavit of Henry Moore (Docket No. 37);
4. 	Supplemental Affidavit of Ronald G. Brown (Docket No. 53);
5. 	Affidavit of Baird Fussell Kilpatrick (Docket No. 57);
6. 	Affidavit of George Newkirk (Docket No. 58); and
7. 	Affidavit of Harry Parker (Docket No. 59).
Following its review of the Motions, the Supporting Materials, oral argument of counsel,
and being otherwise fully informed in the premises the Court hereby makes the following
findings of fact all of which are uncontroverted:
1. 	FNBO holds a perfected security interest in substantially all of the Debtor’s
assets. 	These assets included the sows, pigs and their proceeds (the “Livestock Collateral”) in
which the Plaintiffs assert a lien in this adversary proceeding.
2. 	Cooperative Credit Company (“CCC”) holds a perfected security interest in
substantially all of the Debtors’ assets. CCC’s interest is subordinated to FNBO’s interest in the
Debtor’s assets.
3. 	Newkirk Farms, Inc., JBJ Kilpatrick Farms, Inc., Parker’s Porkers, Inc., and
Bobcat Farms, LLC (collectively the “Plaintiffs”) each entered into contracts with the Debtor,
Coastal Plains Pork, LLC (“Debtor”), entitled CP Commercial Agreements (the “Production
Agreements”). 	The terms of the Production Agreements were identical in all pertinent respects
and provided for the prospective producers’ production of the Debtor’s genetically specific pigs
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for delivery and finishing by the Debtor.
4. 	The Plaintiffs, with the exception of Bobcat Farms, LLC, are each owners
controlled by individuals who are guarantors of the obligations of the Debtor to FNBO.
5. 	The Production Agreements each contained the following waiver provision by the
Plaintiffs:
1.10.1 	Grower understands and agrees that all Stock delivered to
Facilities and any offspring of Stock, to the extent applicable,
remain the sole and exclusive property of Coastal Plains during the
term and upon termination of this Agreement and until such time
as possession of all Stock and offspring of Stock shall have been
redelivered to Coastal Plains. 	Grower shall not in any way grant,
create, assume or permit the imposition or existence of, and shall at
all times keep the Stock (whether currently in possession of
Grower or hereafter delivered to Grower) free from any levy,
attachment, lien, mortgage, security interest, chattel mortgage,
pledge, encumbrance, claim, charge, or other judicial process of
any kind, statutory or otherwise (each a “Lien”).
6. 	The Plaintiffs, by their summary judgment motions, request that the Court enter
summary judgment declaring they hold valid boarding liens under N.C. Gen. Stat. § 44A-2(c) for
the duties they performed under the Production Agreements. 	N.C. Gen. Stat. § 44A-2(c)
provides such a lien in favor of only a “person engaged in the business of boarding animals.” 1
7. 	FNBO and CCC oppose the Plaintiffs’ motions for summary judgment. FNBO
has moved for summary judgment dismissing this case on the grounds the Plaintiffs do not
qualify for a lien under N.C. Gen. Stat. § 44A-2(c) arguing they are not engaged in the business
of boarding animals, they effectively waived any lien they could assert on the Debtor’s livestock
pursuant to § 1.10.1 of the Production Agreements; and they rendered any lien they could claim
1 Although the Plaintiffs in their briefs reference a possible claim pursuant to N.C. Gen. Stat. §
44A-2(a), Plaintiffs through their counsel, abandoned their assertion of that argument at oral
argument. Notwithstanding their abandonment, the Court finds that Plaintiffs would not qualify
to hold such a lien for the reasons articulated in this Order, including the nature of the duties they
performed and their waiver of any right to assert any such lien under § 1.10.1 of the Production
Agreement.
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unenforceable by surrendering possession of the pigs which are the only livestock for which
charges are due to the Plaintiffs under the Production Agreements.2
8. 	Viewing the Production Agreements in their entirety the Court finds the terms and
their meaning are clear and unambiguous. 	The Court finds that the Plaintiffs were engaged in
the production of the Debtor’s genetically specific swine for delivery and eventual finishing and
sale pursuant to the Production Agreements, and were not engaged in the “public boarding of
animals” within the meaning of N.C. Gen. Stat. § 44A-2(c). Accordingly they are not entitled to
assert a boarding lien on any of the Livestock Collateral.
9. 	The Court further finds that even if a boarding lien were available to Plaintiffs
under 	N.C. 	Gen. 	Stat. 	§ 	44A-2(c), 	the 	Plaintiffs, 	by 	their 	execution 	of 	the 	Production
Agreements, each agreed to the waivers contained in § 1.10.1 thereof, and thereby effectively
waived any right they could claim to assert any lien on the Livestock Collateral including any
statutory lien under N.C. Gen. Stat. § 44A-2.
10. 	Summary judgment is appropriate in those cases in which no issue of material fact
exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. § 56, See
also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
11. 	In this case the Court finds no issue of material fact exists and FNBO is entitled to
judgment dismissing the Plaintiffs’ Complaint as a matter of law.
12. 	For these reasons the Court finds that the Plaintiffs, Newkirk Farms, Inc., JBJ
Kilpatrick Farms, Inc., Parker’s Porkers, Inc. and Bobcat Farms, LLC claim of lien under N.C.
Gen. Stat. § 44A-2 is unsupported as a matter of law, and that their respective motions for partial
2 The Court notes FNBO has also argued that the Producer’s lien rights were rendered
unenforceable by their voluntary release of the animals. 	The Court need not address this point
because the grounds set forth herein sufficiently resolve the Plaintiffs’ claims and require
dismissal as a matter of law.
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summary judgment and summary judgment should be denied; the Cross-Motion for Summary
Judgment filed by FNBO should be granted; and that the Plaintiffs’ Complaint should be
dismissed with prejudice.3
Therefore, the motion for partial summary judgment filed by Newkirk Farms, Inc., JBJ
Kilpatrick Farms, Inc., and Parker’s Porkers, Inc. (Docket No. 24) is DENIED in its entirety; the
motion for summary judgment filed by Bobcat Farms, LLC (Docket No. 37) is DENIED in its
entirety; the motion for summary judgment filed by FNBO (Docket No. 28) is GRANTED in its
entirety. 	Furthermore, this Court hereby directs that a judgment be entered dismissing the
Plaintiffs’ Complaint in this adversary proceeding with prejudice.
SO ORDERED.
END OF DOCUMENT
3 The Complaint shall be dismissed in its entirety as Cooperative Credit Company, the North
Carolina Agricultural Finance Authority, and Four Oaks Bank & Trust Company are all similarly
situated defendants.
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