Opinion
No. 11-18320
2011-12-14
In re: SDF, Inc., Debtor.
SO ORDERED
_________
U. S. BANKRUPTCY JUDGE
Judge Lipp
STIPULATION AND CONSENT ORDER REGARDING ADEQUATE
PROTECTION FOR USE OF CASH COLLATERAL
This stipulation, entered into by SDF, Inc., ("the debtor") and the UNITED STATES OF AMERICA, on behalf of the INTERNAL REVENUE SERVICE ("Service"), secured creditor herein, shall constitute the consent of the United States for the debtor's use of cash collateral and other assets securing the federal tax liens.
NOTICE TO CREDITORS AND INTERESTED PARTIES
Unless a party in interest files an objection hereto within 21 days from the date of this notice, the Court may enter an order approving this order without further hearing. Objections must be filed with the Court by January 4, 2012, and served upon undersigned counsel and the U.S. Trustee. Any objection must state the facts and legal grounds on which the objection is based. Interested parties may contact undersigned counsel if they have questions regarding this motion.
STIPULATION AND CONSENT ORDER
The debtor filed for Chapter 11 bankruptcy protection on April 20, 2011. Since that time the debtor has continued to operate as a debtor-in-possession pursuant to 11 U.S.C. § 1107. Prior to the filing of the debtor's bankruptcy petition, a duly authorized delegate of the Secretary of the Treasury filed Notices of Federal Tax Lien for unpaid tax liabilities of the debtor. The liens encumber all property or rights to property belonging to the debtor and secure unpaid taxes, penalties, and interest owed by the debtor. The Service is a secured creditor by virtue of its having filed Notices of Federal Tax Lien prior to the filing of the Chapter 11 petition.
The federal tax liens attach to all property or rights to property, whether real or personal, belonging to the debtor pursuant to 26 U.S.C. §§ 6321 and 6322, and the liens arose upon the date of assessment. The liens attach to the debtor's cash and cash equivalents, defined as cash collateral in 11 U.S.C. § 363(a). The filing of the Notices of Federal Tax Lien prior to the Chapter 11 petition perfected the lien interest of the Service against subsequent bona fide purchasers, and the liens are not avoidable under 11 U.S.C. § 545. The Service asserts a secured claim against the debtor's cash collateral in the amount of $181,582.46. Among the property securing the claims of the Service are cash or cash equivalents, accounts receivable, and proceeds of the accounts receivable. Such proceeds and cash constitute "cash collateral" within the meaning of 11 U.S.C. § 363(a).
Based on the agreement of the parties, the Court approves and orders financing for the debtor and adequate protection for the United States as follows:
1. The United States withdraws its Motion to Prohibit Use of Cash Collateral, filed on August 5, 2011. (See Dkt. # 28.)
2. The United States shall be granted post-petition replacement liens and security interests, co-extensive with the liens and security interests held by the Service immediately prior to the petition date and to the extent of any diminution of value of the debtor's cash collateral that existed on the petition date, on the following: all personal property of the debtor including all present and future cash collateral. Such security interest and liens as granted herein shall be in addition to all security interests and liens now existing in favor of the Service and not in substitution thereof, shall be effective as of the petition date, and shall require no further action by the debtor or the Service in order to be valid, perfected, and enforceable. Notwithstanding any termination of the debtor's authorization to use cash collateral under this Agreement, any and all liens granted under this Agreement shall continue in full force and effect until the obligations of the debtor to the Service are satisfied. This perfection shall be binding upon any subsequently appointed Trustee either in Chapter 11 or any other chapter of the Bankruptcy Code, and upon all creditors of the debtor who have extended or may hereafter extend credit to the debtor or the debtor-in-possession.
3. The liens of the Service shall not be subordinated, altered, or otherwise adversely affected by any financing under Section 364, any priority claimed or granted pursuant to 11 U.S.C. §§ 364, 503, 507(a)(2), et. seq., or any other provision of the Bankruptcy Code or by any other action of the debtor or any party, or the Court, unless specifically agreed to by the Service.
4. The debtor shall make adequate protection payments to the United States pursuant to the following payment schedule until confirmation of the debtor's plan or until the case is dismissed or converted:
+---------------------------------------------------------------------+ ¦ Payment No. ¦ Amount ¦ Due Date ¦ +-------------+--------+----------------------------------------------¦ ¦1 ¦$1,500 ¦January 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦2 ¦$1,500 ¦February 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦3 ¦$1,500 ¦March 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦4 ¦$1,500 ¦April 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦5 ¦$1,500 ¦May 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦6 ¦$1,500 ¦June 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦7 ¦$2,000 ¦July 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦8 ¦$2,000 ¦August 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦9 ¦$2,000 ¦September 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦10 ¦$2,000 ¦October 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦11 ¦$2,000 ¦November 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦12 ¦$2,000 ¦December 1, 2012 ¦ +-------------+--------+----------------------------------------------¦ ¦13 ¦$3,000 ¦January 1, 2013 ¦ +-------------+--------+----------------------------------------------¦ ¦ ¦ ¦Commencing February 1, 2013, and due on ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦the 1st day of each month thereafter, until ¦ ¦14 + ¦$3,000 ¦ ¦ ¦ ¦ ¦confirmation of the debtor's plan or until the¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦case is dismissed or converted. ¦ +---------------------------------------------------------------------+ Payments made payable to the United States Treasury, shall be sent to Anita Y. Jackson, Internal Revenue Service, Insolvency Group 4, 31 Hopkins Plaza, 11th Floor, Baltimore, Maryland 21201.
5. The debtor is authorized to use cash collateral and other real and personal property in which the Service holds a lien interest for the purpose of paying the reasonable, necessary, and ordinary expenses of operating the business which accrue from and after the filing date to the extent authorized herein, subject to the terms and the conditions of this Stipulation, until the debtor defaults by failing to comply with one of the terms set forth herein.
6. In the event that the debtors defaults under the terms of this Agreement and continues to use cash collateral five days after receiving written notice of such default from the Service without curing any alleged default, and in the event that such use of cash collateral erodes the Service's secured position, then the Service shall be entitled to an administrative claim with priority pursuant to 11 U.S.C § 507 of the Bankruptcy Code to the extent of the erosion of the Service's position. Any such administrative claim shall survive any conversion of the debtor's Chapter 11 proceeding to a Chapter 7 proceeding. The Service will further be allowed to petition the Bankruptcy Court to lift the automatic stay provided by 11 U.S.C. § 362 to proceed with administrative collection action.
7. Except as provided herein (such as for the purpose of paying the reasonable, necessary, and ordinary expenses of operating the business as stated in paragraph 5), the debtor may not make any payments of cash collateral to or for the benefit of itself, its employees, insiders, affiliates, or any corporation, partnership, sole proprietorship, or any other individual or entity related to or affiliated with the debtor, without the express prior written consent of the Service. The debtor shall not use cash collateral during the pendency of this Stipulation for any purpose which is not authorized by the Bankruptcy Code or by an Order of the Court.
8. The priority of the post-petition liens granted to the Service and the priority of the post-petition liens of all other secured creditors will be based on the priority each secured creditor held in the property of the debtor as of the petition date. Such priority shall be determined by agreement of the secured creditors and/or by order or judgment of the Court.
9. This Stipulation and Consent Order, as approved by the Bankruptcy Court, shall be sufficient and conclusive evidence of the validity, enforceability, priority, and perfection of the security interest and liens granted to the Service as adequate protection hereunder, whether or not the Service elects to file or record a financing statement or other documents, or takes such other steps as may otherwise be required to obtain, evidence, or perfect such security interests or liens under applicable law.
10. The debtor and the Service agree that this Stipulation is the entire agreement between the parties and shall be binding upon approval by the Bankruptcy Court and upon such approval shall be deemed effective as of the petition date. Any amendments, modifications or extensions shall be binding upon approval by the Bankruptcy Court and such approval shall be deemed effective as of the petition date.
11. Each right, power, and remedy of the Service provided in this Stipulation, or now or hereafter existing in law or at equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Stipulation or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or the beginning of exercise by the Service of any one or more of any such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Service of any or all other such rights, powers, or remedies.
12. Nothing in this Stipulation shall constitute an admission by the Service that the protection provided to them shall not at some time become inadequate to fully and properly protect their interests and at any time the Service may, individually or jointly, apply to the Court for additional adequate protection, if the parties are unable to reach an agreement concerning additional adequate protection. Further, nothing in this Stipulation shall bind the Service or constitute an agreement by it to treatment of its claims under any plan of reorganization.
13. Pursuant to Federal Bankruptcy Rule 9014, a copy of this Stipulation was served upon all entities and individuals entitled to notice. This Stipulation is subject to the approval of the United States Bankruptcy Court for the District of Maryland. In the event any other person, corporation, association, or other entity seeks an order pursuant to the Bankruptcy Code for adequate protection, or is otherwise given adequate protection of its interests in this proceeding, the parties to this Stipulation respectfully request that they be given an opportunity to be heard prior to the entry of such Order.
For the debtor, SDF Inc.,
_________
CHARLES MAYNARD
(Filed With Permission)
For the United States,
_________
ANDREW C. STRELKA
Trial Attorney, Tax Division
U.S. Department of Justice
(Filer)
CERTIFICATION OF CONSENT
I HEREBY CERTIFY that the terms of the copy of the consent order submitted to the Court are identical to those set forth in the original consent order.
_________
ANDREW C. STRELKA
Trial Attorney, Tax Division
U.S. Department of Justice
CERTIFICATE OF SERVICE
IT IS HEREBY CERTIFIED that service of the foregoing STIPULATION AND CONSENT ORDER , including the NOTICE, has been made today, December 14, 2011, through first class U.S. mail on all the parties listed in the mailing matrix attached as Exhibit 1, and via the CM/ECF system on the following:
Debtor's Attorney
Charles Maynard
U.S. Trustee
US Trustee - Greenbelt, 11
Jeanne M. Crouse
Leander D. Barnhill
_________
ANDREW C. STRELKA
End of Order.
+-----------------------------------------------------------------------------+ ¦Label Matrix for ¦ ¦ ¦ ¦local noticing ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦0416-0 ¦ ¦ ¦ ¦ ¦c/o Becket and Lee LLP ¦ ¦ ¦Case 11-18320 ¦ ¦2802 Apple Green Lane ¦ ¦ ¦POB 3001 ¦ ¦ ¦District of Maryland ¦ ¦Bowie, MD 20716-3834 ¦ ¦ ¦Malvern, PA 19355-0701 ¦ ¦ ¦Greenbelt ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦Mon Dec 5 16:29:20 ¦ ¦ ¦ ¦EST 2011 ¦ ¦ ¦ +---------------------+-------------------------------+-----------------------¦ ¦US Trustee - ¦United States ¦Branch of ¦ ¦Greenbelt 11 ¦ ¦Reorganization ¦ ¦ ¦U.S. Department of Justice, Tax¦ ¦ ¦6305 Ivy Lane, Suite ¦Division ¦Sec. & Exch. Commission¦ ¦600 ¦ ¦ ¦ ¦ ¦PO Box 227 ¦3475 Lenox Road NE ¦ ¦Greenbelt, MD ¦ ¦(Suite 1000) ¦ ¦20770-6305 ¦Ben Franklin Station ¦ ¦ ¦ ¦Washington, DC 20044-0227 ¦Atlanta, GA 30326-3235 ¦ +---------------------+-------------------------------+-----------------------¦ ¦Comptroller of the ¦ ¦Maryland Department of ¦ ¦Treasury ¦(p)INTERNAL REVENUE SERVICE ¦Labor ¦ ¦ ¦ ¦ ¦ ¦Compliance Division, ¦CENTRALIZED INSOLVENCY ¦Licensing & Regulation ¦ ¦Room 409 ¦OPERATIONS ¦ ¦ ¦ ¦ ¦1100 N Eutaw Street, ¦ ¦301 W. Preston Street¦PO BOX 7346 ¦Room 401 ¦ ¦ ¦ ¦ ¦ ¦Baltimore, MD ¦PHILADELPHIA PA 19101-7346 ¦Baltimore, MD ¦ ¦21201-2305 ¦ ¦21201-2201 ¦ +---------------------+-------------------------------+-----------------------¦ ¦Prince George's ¦ ¦State of Maryland DLLR ¦ ¦County ¦ ¦ ¦ ¦ ¦Secretary of the Treasury ¦Division of ¦ ¦Treasurer Division ¦ ¦Unemployment Insurance ¦ ¦ ¦15th and Pennsylvania Ave., ¦ ¦ ¦Room 1090 ¦N.W. ¦1100 N. Eutaw Street, ¦ ¦ ¦ ¦Room 401 ¦ ¦Upper Marlboro, MD ¦Washington, DC 20220-0001 ¦ ¦ ¦20772 ¦ ¦Baltimore, MD ¦ ¦ ¦ ¦21201-2201 ¦ +---------------------+-------------------------------+-----------------------¦ ¦U.S. ¦ ¦Virginia Department of ¦ ¦Attorney-District of ¦ ¦Taxation ¦ ¦MD ¦US Trustee ¦ ¦ ¦ ¦ ¦Taxing Authority ¦ ¦4th floor ¦c/o Jeanne M. Crouse ¦Consulting Serv. ¦ ¦ ¦ ¦ ¦ ¦36 S. Charles St. ¦6305 Ivy Lane, Suite 600 ¦Bankruptcy Counsel ¦ ¦ ¦ ¦ ¦ ¦Baltimore, MD ¦Greenbelt, MD 20770-6305 ¦PO Box 2156 ¦ ¦21201-3020 ¦ ¦ ¦ ¦ ¦ ¦Richmond, VA 23218-2156¦ +---------------------+-------------------------------+-----------------------¦ ¦ ¦Charles Maynard ¦ ¦ ¦Brian Wise ¦ ¦ ¦ ¦ ¦401 East Jefferson Street ¦ ¦ ¦6409 Gallery Street ¦ ¦ ¦ ¦ ¦Suite 208 ¦ ¦ ¦Bowie, MD 20720-3870 ¦ ¦ ¦ ¦ ¦Rockville, MD 20850-2613 ¦ ¦ +-----------------------------------------------------------------------------+
The preferred mailing address (p) above has been substituted for the following entity/entities as so specified by said entity/entities in a Notice of Address filed pursuant to 11 U.S.C. 342(f) and Fed.R.Bank.P. 2002 (g)(4).
+-----------------------------------------------------------+ ¦Internal Revenue Service ¦(d)Internal Revenue Service ¦ +------------------------------+----------------------------¦ ¦Centralized Insolvency Section¦Federal Payment Levy Program¦ +------------------------------+----------------------------¦ ¦PO Box 21126 (DP-N-781) ¦PO Box 57 Stop 686 ¦ +------------------------------+----------------------------¦ ¦Philadelphia, PA 19114 ¦Bensalem, PA 19020 ¦ +-----------------------------------------------------------+
The following recipients may be/have been bypassed for notice due to an undeliverable (u) or duplicate (d) address.
+----------------------------------------------------+ ¦(d)American Express Bank, FSB¦End of Label Matrix ¦ +-----------------------------+----------------------¦ ¦c o Becket and Lee LLP ¦Mailable recipients 16¦ +-----------------------------+----------------------¦ ¦POB 3001 ¦Bypassed recipients 1 ¦ +-----------------------------+----------------------¦ ¦Malvern, PA 19355-0701 ¦Total 17 ¦ +----------------------------------------------------+