Rio Valley Motors Company L.L.C.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
RIO VALLEY MOTORS COMPANY, LLC
Debtor. 	No. 11-06-11866 SS
FINDINGS OF FACT AND CONCLUSIONS OF LAW
ON MOTION TO FILE ADMINISTRATIVE CLAIM
This matter came before the Court for trial of Auto-Owners
Insurance Company’s (“AOIC”) Motion to File Administrative Claim
(doc 164), and the objection thereto by Debtor (doc 201). 	AOIC
appeared through its attorney Guebert, Bruckner & Bootes, P.C.
(Christopher J. DeLara). 	Debtor appeared through its attorney
Walter L. Reardon, Jr. 	This is a core proceeding. 	28 U.S.C. §
157(b)(2)(A). 	This matter involves a claim by AOIC for the value
of a vehicle delivered to Debtor, a car dealership, around the
time of the filing of its Chapter 11 case, for which the selling
dealer was not paid. 	The Court finds that AOIC is entitled to an
administrative claim.
FACTS
1. 	Debtor, a car dealership in northern New Mexico, filed its
Chapter 11 case on October 13, 2006.
2. 	In the car dealership business, it is common practice to
trade inventory between dealerships. 	Usually the trade
involves making adjustments to the floor financing of the
vehicles at the dealerships. 	In a small percentage of
cases, however, the trade of the vehicles is accompanied by
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1 Actually, Winslow presented a claim to AOIC and received
the value of the F-250 Super Duty. 	AOIC is now pursuing
Winslow’s claim.
2 Neither party presented documentary evidence such as
credit card receipts or phone records to bolster its version of
the events.
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a trade of checks to pay for the vehicles. 	AOIC’s claim
results from a failure of a check-for-check transaction.
3. 	Winslow Ford (“Winslow”), an Arizona dealership, initiated
contact with the Debtor in October 2006. 	Winslow wanted a
$38,152.80 Chevy Suburban in Debtor’s inventory. 	Debtor
wanted a $43,520.64 Ford F-250 Super Duty in Winslow’S
inventory. 	The parties agreed to swap the vehicles and to
swap checks to pay for them. 	When the dust settled, Winslow
ended up with the Chevy Suburban and no money 1 and Debtor
ended up with $38,152.80 and the Ford F-250 Super Duty.
Debtor promptly sold the Ford F-250 to a customer for a
profit.
4. 	The parties called four witnesses in total. 	The Court finds
that each witness was intent on being truthful and accurate,
yet there are two conflicting versions of the facts. 2 	Under
the first version, presented by AOIC, the vehicle swap took
place on October 17, 2006. 	Under the second version,
presented by Debtor, the vehicle swap took place on or about
October 11, 2006. 	As discussed in more detail below, the
Court does not need to decide which set of facts is more
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convincing because AOIC is entitled to an administrative
expense claim under either.
CONCLUSIONS OF LAW
1. 	Isaac v. Temex Energy, Inc. (In re Amarex, Inc.), 853 F.2d
1526 (10 th Cir. 1988) is the controlling Tenth Circuit case
on administrative expenses under Bankruptcy Code §
503(b)(1)(A). 	To receive priority as an administrative
expense, the expense must fulfill both of the following
prongs: 1) the expense must arise out of a transaction
between the creditor and either the trustee or the
debtor-in-possession; and 2) the consideration supporting
the creditor's right to payment must be both supplied to and
beneficial to the debtor-in-possession in the operation of
the business. 	Id. at 1530. 	If the transaction in this case
occurred on October 17 th then it was a transaction with the
debtor-in-possession and was beneficial to the debtor-in-
possession. 	It therefore is entitled to administrative
priority.
2. 	Section 503(b)(9) gives administrative priority to “the
value of any goods received by the debtor within 20 days
before the date of commencement of a case under this title
in which the goods have been sold to the debtor in the
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3 The statute does not require demand on the debtor by the
creditor to return the goods as a condition of making the claim.
See §546(c)(2).
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ordinary course of such debtor’s business.” 3 	If the
transaction in this case occurred on October 11 th then it
falls under § 503(b)(9) and is entitled to administrative
priority.
3. 	The pleadings in this case and AOIC’s portion of the
evidence in this case were all directed to an administrative
expense under Section 503(b)(1). 	E.g., Motion to File
Administrative Claim, at 2, doc 164, and Auto-Owners
Insurance Company’s Reply in Support of Motion to File
Administrative Claim, at 1 (“Finally, Auto-Owners did not
violate the automatic stay becasue the transaction occurred
post-petition,....”). 	Doc 189. 	However, at the conclusion
of Debtor’s case AOIC moved to conform the pleadings to the
evidence to also seek relief under Section 503(b)(9). 	See
Fed.R.Civ.P. 15(b), incorporated into Rule 7015, F.R.B.P.
Although “rule 15(b) mandates liberal amendments to conform
pleadings to the evidence,” Dunn v. Ewell (In re Santa Fe
Downs, Inc.), 611 F.2d 815, 817 (10 th Cir. 1980), in this
instance Debtor clearly objected. 	The Court took the
objection under advisement, and now overrules it, since the
heart of the factual and legal dispute, and therefore the
evidence, focused on exactly when the F-250 was delivered to
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the Debtor. 	AOIC may have become aware of §503(b)(9) rather
late in the game, but it is clear that Debtor was fully
aware of that provision. 	And even if Debtor’s knowledgeable
counsel were not thinking of that provision throughout the
trial, Debtor was not prejudiced by its being raised
explicitly so late in the trial.
4. 	Debtor argued that AOIC violated the automatic stay in the
course of trying to deal with this problem, and therefore
should be estopped from making the administrative claim.
The Court is not ruling on whether AOIC did violate the
stay; its refusal to cooperate with the process of providing
the purchaser of the F-250 a title may well have constituted
a violation of the stay in light of the protections afforded
AOIC by the Code and as evidenced in this judgment.
However, the time to have dealt with the alleged stay
violation was when it was occurring rather than now, at
least in the circumstances of this case.
The Court therefore grants AOIC’s motion.
CONCLUSION
If the vehicle swap occurred postpetition, AOIC is entitled
to an administrative expense claim under Section 503(b)(1). 	If
it occurred prepetition, AOIC is entitled to an administrative
expense claim under Section 503(b)(9). 	A separate Order will
enter.
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Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	March 24, 2008
copies to:
Walter L Reardon, Jr
3733 Eubank Blvd NE
Albuquerque, NM 87111-3536
Auto-Owners Insurance Company
c/o Atty Christopher J. Delara
PO Box 93880
Albuquerque, NM 87199-3880
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