Richard Earl Smith and Lynn Suzanne Smith

In re
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
RICHARD EARL SMITH and
LYNN SUZANNE SMITH,
Debtors.
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Case No. 	11-20767
Chapter 7
MEMORANDUM OPINION ON MOTION FOR RELIEF FROM AUTOMATIC
STAY FILED BY CENTRAL BANK & TRUST
On December 7, 20 11, this matter came before the court for an evidentiary
hearing, by video-conference, on the Motion for Relief from Automatic Stay filed by
Central Bank and Trust ("CB&T") and the Objection filed by Richard and Lynn Smith 1
("Debtors"). The parties were represented as stated on the record. The Court having
reviewed the file, arguments of the parties, testimony and exhibits, and based upon the
following, grants the motion.
Jurisdiction
This court has jurisdiction of this matter under 28 U.S.C. §§ 1334 and
157(b)(2)(G). The motion was brought under 11 U.S.C. 362(d). 2
Facts
The history of the banking institutes involved with these Debtors and the
transactions indicate that Debtors had an on-going financial relationship with the First
1 Richard Smith is referred to as Rick E. Smith or Rick Smith. Lynn Wiebe is now known as Lynn Smith.
2 Unless otherwise indicated, all chapter section and rule references are to the Bankruptcy Code and the
Federal Rules of Bankruptcy Procedure.
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State Bank of Thermopolis, Thermopolis, Wyoming going as far back as at least 1998.
On November 28,2005, the Articles of Amendment by Shareholders was filed with the
Wyoming Secretary of State changing the name of First State Bank of Thermopolis to
Bank of Wyoming. Thereafter, CB&T purchased First State Bank's assets after it failed.
Subsequently, Debtor, Rick E. Smith, executed a General Release and Loan
Reaffirmation Agreement ("Reaffirmation Agreement) for the benefit ofCB&T with
respect to loan Number 105147540. The Reaffirmation Agreement states:
... nothing herein is intended to affect in any way Note Holder's or its
successors' or assigns' security interest in the Property. As such,
BORROWER hereby reaffirms and ratifies his/their/their respective
obligations under the note and mortgage/deed of trust and all Loan related
loan documents."
The history of the filing UCC forms shows:
• 	On June 23,2000, the financing statement was filed with the Wyoming
Secretary of State, #2000-11955426. Rick Smith and Lynn Wiebe signed
the form as the debtors, describing the collateral, in part, as: "All
Equipment, Farm Products and Livestock... HORSES, TACK,
MACHINERY, 29 GELDING QUARTER HORSES AND ALL
PRODIGY THEREOF, whether any ofthe foregoing is owned now or
acquired later; whether any of the foregoing is not existing or hereafter
born or grown; all accession, additions, replacements and substitutions
relating to any of the foregoing ... "
• 	Document 2005-24866334 was filed on March 30, 2005, referencing and
continuing the UCC original document of2000-11955426 through June
23, 2010.
• 	September 22, 2009 CB&T filed "UCC3 Amendment, referencing the
original financing statement no. 2000-11955426, showing an assignment to
CB&T of the security interest.
• 	On April19, 2010, CB&T filed UCC3 Amendment for the purpose of
continuing the security interest and referencing the original financing
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statement of2000-11955426, continuing its security position through June
23, 2015.
On May 30,2008, Debtor, Rick E. Smith, executed a Promissory Note ("Note") in
favor ofBank of Wyoming, borrowing the amount of$170,200.00. The language ofthe
Note, describing the collateral securing the Note, states:
"Borrower acknowledges the Note is secured by UCC #s 2000-11955426
DATED 6/23/00 3 AND 1998-11285044 DATED 3/19/98; and FS
#0542616-1A01 DATED 11122/05 ALL FILED WITH THE WYOMING
SECRETARY OF STATE."
Debtors filed for Chapter 7 bankruptcy protection on July 15,2011. The
testimony by Dan Davis ofCB&T, reflects that the Debtors are in default, owing
$177,434.00.
Discussion
CB&T filed its motion for relief from the automatic stay so that it may foreclose
its security interest on the following collateral:
Machinery and equipment: 12 panels, 50 red river panels, 8 gates, 3
feeders, Jim Wise saddle, Jerry Beagley saddle, 6 bridles, 2 saddle pads, 7
year old blue roan gelding, 1 year old buckskin stud colt, 17 year old red
roan gelding, 35 head of goats, 2laptop computers, printer, video camera.
Livestock: 10 year old brown gelding, 9 year old sorrel gelding and
5 year old sorrel gelding, running p saddle, courts saddle, 11 bridles, 6 tie
downs and 4 saddle pads.
The Debtors argue: (1) the collateral is not properly perfected; and (2) if the
collateral is properly perfected, Debtors and Debtors' landlord are entitled to set-off the
3 Emphasis added.
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expense of caring for and feeding the horses and goats. Additionally, Debtors assert, and
CB&T concedes, that the two lap-tops, printer and video camera are not part of the
collateral. Therefore those items are deleted from this motion.
CB&T seeks relief under§ 362(d), which provides:
"[T]he court shall grant relief from the stay under subsection (a) of
this section, such as by terminating, annulling, modifying, or conditioning
such stay (I) for cause, including the lack of adequate protection of an
interest in property of such party in interest (2) .with respect to a stay of an
act against property .. .ifthe debtor does not have an equity in such property;
and, (b) such property is not necessary to an effective reorganization."
The party requesting reliefhas the burden of proof on the issue of the debtor's
equity in property; and the party opposing such relief has the burden of proof on all other
issues. 4
The Debtors assert that the collateral is not properly perfected under Wyoming
law. Wyo. Stat.§§ 34.1-9-Sll(a) and (b) state:
"(a) A secured party of record with respect to a financing statement
is a person whose name is provided as the name of the secured party .. .in an
initial financing statement that has been filed. 	If an initial financing
statement is filed under section 34.1-9-514(a), the assignee named in the
initial financing statement is the secured party of record with respect to the
financing statement.
(b) If an amendment of a financing statement which provides the
name of a person as a secured party... is filed, the person named in the
amendment is a secured party of record. If an amendment is filed under
section 34.1-9-514(b ), the assignee named in the amendment is a secured
party of record."
In this case, the court finds that the assignment filed by CB&T on September 29,
4 11 U.S.C. §362 (g)(l) and (2).
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2009 complies with the Wyoming Statutes making CB&T the secured party of record.
Section 34.1-9-510 states, "A continuation statement that is not filed with the six (6)
month period .. .is ineffective." The court's review of the continuation statements reflect
that each was timely filed. 	The court finds that the collateral was properly secured.
The court's review of the Debtors' petition and schedules indicates that the
Debtors claim portions of CB&T' s collateral as exempt. The general rule is that debtors'
exempt property is not available to creditors. However, property secured by a lien that is
not avoided is an exception. Therefore the listed collateral is not exempt.
In determining if relief from the automatic stay is appropriate the court finds that
the Debtors have not provided adequate protection to CB&T for its interest in the
collateral; there is not any equity in the collateral as the amount owed is far beyond the
value of the collateral as the Debtors list the value of the collateral in the amount of
$3,830.00; and the Debtors are chapter 7 debtors and have not argued or presented
evidence that the collateral is necessary for an effective reorganization. Therefore, cause
exists for the court to grant the motion for relief from the automatic stay.
Finally, Debtors argue that they are entitled to a set-off in the amount of$1,450.00
for the care and feeding of the horses and goats. Additionally, they assert a claim on
behalf of their landlord in the amount of$10,150.00 for pasture.
To recover reasonable and necessary costs of preserving collateral, the debtor-in-
possession must expend the funds primarily to benefit the crediter, who must in fact
directly benefit from the expenditure. The debtors have an independent duty of
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reasonable care regarding the property in their possession. 5 In this case, the Debtors
intended to retain the property and were willing to repurchase it from the chapter 7
trustee. Only after CB&T asserted its claim was there any discussion of debts owed for
feeding and pasturing the animals. The Debtors are asserting the claims to diminish any
benefit to the creditor. The set-up is denied.
Therefore the court finds that the collateral is properly perfected under the laws of
the State of Wyoming, that cause exists for the motion for relief from stay to be granted;
and demands of set-off for the care of the animals is denied.
This opinion constitutes the court's findings of fact and conclusions oflaw. A
separate order shall be entered pursuant to Fed. R. Bankr. P. 9021.
DATED this 	9 	day of December, 2011.
Service to:
Thomas Fasse
Frank Watkins
5 Brookfield Production Credit Association v. Barron. 738 F.2d 951 (8 1h Cir. 1984)
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