Pitman Farms v. ARKK Food Company, LLC, No. 22-2011 (8th Cir. 2023)
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The Trustee for the bankrupt debtor, Simply Essentials, LLC, filed a Motion to Compromise under Federal Rule of Bankruptcy Procedure 9019(b) and a Motion to Sell Property Free and Clear of Liens under 11 U.S.C. Section 363(f). Pitman Farms, the owner of Simply Essentials, who is also a creditor in this action, objected. Pitman Farms argued that the sale included Chapter 5 avoidance actions and that such actions are not part of the bankruptcy estate under 11 U.S.C. Section 541(a). The bankruptcy court granted the motion, finding Chapter 5 avoidance actions are part of the bankruptcy estate. Pitman Farms filed a motion to appeal the decision. The Bankruptcy Court certified Pitman Farms’ motion to appeal, and the Eighth Circuit granted permission to appeal.
The Eighth Circuit affirmed. The court agreed with the bankruptcy court’s conclusion that Chapter 5 avoidance actions are the property of the estate and affirmed the order approving the Trustee’s motion to sell the property of the estate. The court explained that to the extent that Pitman Farms argues the property is created in a third period of time, a time that is equivalent to the moment the bankruptcy proceeding commences, we disagree. Finding such a period of time existed “would frustrate the bankruptcy policy of a broad inclusion of property in the estate[.]”
Court Description: [Melloy, Author, with Smith, Chief Judge, and Erickson, Circuit Judge] Bankruptcy. The bankruptcy court did not err in approving the Trustee's motion to approve a proposed compromise and sale of certain avoidance actions the estate held against a creditor in the action, who also objected to the compromise and sale; Held: Chapter 5 avoidance actions are part of the bankruptcy estate under 11 U.S.C. Sec. 541(a) and can be sold as property of the estate. [ August 18, 2023 ]
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