12-50073-lmc Doc#63 Filed 01/31/12 Entered 01/31/12 16:29:53 Main Document Pg 1 of 7

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION ______________________________________ In re: Chapter 11 1 DELTA PRODUCE, L.P. , Case No. 12-50073-LMC Debtors Jointly Administered _______________________________________ RESPONSE BY THE INTERNATIONAL BANK OF COMMERCE TO THE AMENDED APPLICATION OF DEBTORS TO USE CASH COLLATERAL OF INTERNATIONAL BANK OF COMMERCE TO THE HONORABLE LEIF M. CLARK, UNITED STATES BANKRUPTCY JUDGE: Now Comes INTERNATIONAL BANK OF COMMERCE (IBC), Respondent herein, to file this its Response (the Response) to the Amended Application (the Amended Application) of Debtors, Delta Produce, L.P. and Superior Tomato-Avocado, Ltd., Alted, Ltd. and Staci Properties, Ltd. (jointly referred to herein as Debtors) to Use Cash Collateral of International Bank of Commerce, and would show unto the Court as follows. I. 1.1 1.2 1.3. 1.4 1.5 1.6 SPECIFIC RESPONSES

IBC admits the allegations contained within 1 of the Amended Application. IBC admits the allegations contained within 2 of the Amended Application. IBC admits the allegations contained within 3 of the Amended Application. IBC admits the allegations contained within 4 of the Amended Application. IBC admits the allegations contained within 5 of the Amended Application. IBC admits the allegations contained within 6 of the Amended Application.

Debtors are the following entities: Delta Produce, L.P. Case No. 12-50073-LMC-11, Superior Tomato-Avocado, Ltd. Case No. 12-50074-LMC-11, Atled, Ltd. Case No. 12-50075-LMC11 and Staci Properties, Ltd. Case No. 12-50110-LMC

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1.7

IBC has no personal knowledge of the allegations of facts contained within 7 of

the Amended Application but does not deny the facts and circumstances described by Debtor within 7 of the Amended Application. 1.8 IBC has no personal knowledge of the allegations of facts contained within 8 of

the Amended Application but does not deny the facts and circumstances described by Debtor within 8 of the Amended Application. 1.9 IBC has no personal knowledge of the allegations of facts contained within 9 of

the Amended Application but does not deny the facts and circumstances described by Debtor within 9 of the Amended Application. 1.10 IBC admits that an advance was made from loan proceeds of IBC to Debtors on

December 27, 2011 in the amount of $450,000.00 which advance was deposited by Debtors within Delta Produce Operating Account Number 11509601 on that same date. IBC further admits that those funds, together with other cash within the Account constitutes cash collateral of IBC with IBC having a first and prior lien on the $450,000.00 loan proceeds advance, together with other cash within Debtors account. IBC notes that other Debtors identified as Atled, Ltd. (Atled) and Staci Properties, Ltd. (Staci Properties), are principally property owning companies, whose accounts subject to IBC liens, do not appear to be accounts within which PACA Trust Funds were deposited or maintained, hence IBC asserts first lien on proceeds within the Atled and Staci Properties accounts in addition to non-PACA funds or deposits within Debtors accounts. 1.11 Paragraph 11 of the Amended Application contains no allegation of fact requiring

admissions or denial. However, to the extent that 11 of the Amended Application references the adequate protection Debtors are to provide to IBC, IBC acknowledges those

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representations and, would also require, as a condition for use of cash collateral, that Debtors turnover and repay to IBC any and all cash not considered to be PACA Trust Funds. II. 2.1 ARGUMENTS AND AUTHORITIES

Under Bankruptcy Code 363(a): Cash collateral means cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents, or profits of property.

Debtor can use property of the estate, including cash collateral if IBC provides its consent or, the Court, after notice and hearing authorizes such use. 11 U.S.C 363(c)(2)(B). 2.2 IBC is a secured creditor of the estate having extended prepetition loans on the

following basis: i. ii. iii. iv. Delta Note in the amount of $1,500,000.00 dated April 23, 2007; Delta Note in the amount of $2,000,000.00 dated April 1, 2007; Delta Note in the amount of $6,000,000.00 dated June 8, 2010; Staci Produce (Superior) Note in the amount of $2,000,00.00 dated March 3, 2005; v. Staci Properties (Superior) Note in the amount of $2,400,000.00 dated March 3, 2005; and vi. Alted, Ltd. Note in the amount of $1,300,000.00 dated December 12, 2005. IBC has previously tendered IBC Exhibit Nos. 1-16 as attachments to its reply of the Joint Motion of Some PACA Trust Beneficiaries and Debtors for Use of the PACA Trust Funds (Doc. No. 45) and at the hearing held January 13, 2012 providing interim use of cash collateral. IBC requests that the Court take judicial notice of those previously tendered exhibits.

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2.3

As of January 4, 2012, IBC shows that the combined outstanding balance owed to

IBC by the Debtors amounts to $6,455,615.00. True and correct copies of the documents evidencing the outstanding indebtedness owed to IBC by Debtors is attached to the Joint Motion of Some PACA Trust Beneficiaries and Debtors for Use of the PACA Trust Funds (Doc. No. 45), including therein, copies of Deed of Trusts and Security Agreements confirming collateral rights of IBC within virtually all property owned by Debtors. In essence, IBC asserts a security interest which globally attaches to practically all of Debtors property including real property, furniture, fixtures and equipment, inventory, account receivables, general in tangible and funds on deposit at IBC. IBCs security interest constitutes a first and prior security interest above all other collateral rights of creditors and parties-in-interest including collateral rights to Debtors receivables/cash and proceeds derived there from. 2.4 IBC understands that PACA Trust Fund claims relates to: Perishable agricultural commodities received by a commission merchant, dealer or broker in all transactions, and all inventories of food or other products derived from perishable agricultural commodities, and any receivables or proceeds from the sale of such commodities or products. . . PACA at 7 U.S.C. 499e(c)(2) 2.5 IBC does not deny or dispute the effect of the PACA claims and the PACA Trust

Fund. IBC seeks to establish and maintain its interest in Debtors property to the extent such property is not subject to PACA Trust Fund claims or in excess of such rights and obligations. 2.6 Prior to filing date, on December 27, 2011, IBC advanced loan proceeds to Debtor

and more specifically, to Delta, in the amount of $450,000.00, which advance was deposited within Delta Operating Account, Account Number 11509601 (the Operating Account). The Operating Account had an existing balance of $80,546.98, which increased to $530,546.98 as a result of the IBC advance. Deposits within the Delta Operating Account grew to $805,223.00 on

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December 28, 2011 when a withdrawal transferred $62,000.00 to Debtors Account Number 0011511801, and $730,000.00 was transferred to Delta Account Number 3804027101, leaving a balance within the Delta Operating Account of $13,223.00. Subsequent thereto, through January 10, 2012, Delta Operating Account balance increased to the sum of $478,965.34. 2.7 As a condition for use of the cash collateral of IBC, IBC requires: i. Debtors to return IBCs loan advance made on December 27, 2011 in the amount of $450,000.00; ii. Debtors return and pay to IBC any and all other cash subject to the IBC security interest and liens, to the extent such cash does not constitute PACA Trust Funds; iii. Debtors segregate and account for any cash collateral within Debtors possession, custody or control as required under 11 U.S.C. 363(c)(4); iv. IBC receive replacement lien on any and all of Debtors property and that IBC receive a second lien on any PACA Trust Funds to the extent of any use of cash collateral by Debtor. v. vi. Debtors to provide regular accountings to IBC; Debtors to respond to IBCs inquiries concerning segregation of IBC cash collateral and use of IBC cash collateral; vii. Debtors instigate and pursue an aggressive marketing program, relating to any and all Debtors assets, including any assets upon which IBC asserts a lien.

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viii.

The entry of an order regarding use of cash collateral is without prejudice to IBC and that IBC may revoke its authority/consent for use of cash collateral at any time

ix.

On or before February 15, 2012 advice and institute a marketing effort designed to market and sale Debtors assets. PRAYER

WHEREFORE, PREMISES CONSIDERED, IBC respectfully requests that: (i) (ii) the Court acknowledge the liens of IBC on assets of Debtors; the Court condition the use of cash collateral upon adequate protection provided to IBC including replacement liens on any and all of Debtors assets; (iii) Debtors be required to provide regular and current accounting information to IBC relating to the use of IBC cash collateral; (iv) Debtors be required to turnover any cash collateral constituting loan proceeds made by IBC to Debtor on or after December 27, 2011, together with any and all other cash or proceeds held within Debtors accounts that does not constitute PACA Trust Funds; (v) Debtors be required to segregate and account for all cash collateral, distinguishing IBC cash collateral from PACA Trust Funds; and (vi) IBC be provided such other relief at law or in equity to which IBC may be justly entitled.

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Respectfully submitted, MARTIN & DROUGHT, P.C. 2500 Bank of America Plaza 300 Convent Street San Antonio, Texas 78205-3789 (210) 227-7591 / (210) 227-7924 By: /s/ Michael G. Colvard Michael G. Colvard State Bar No. 04629200 ATTORNEYS FOR INTERNATIONAL BANK OF COMMERCE

CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the above and foregoing instrument was forwarded via United States Mail, First Class, postage prepaid, to the parties listed on the attached service list on January 31, 2012. /s/Michael G. Colvard Michael G. Colvard

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Delta Produce, LP 2001 S Laredo St San Antonio, TX 78207-7023 United States Trustee - SA12 US Trustee's Office 615 E Houston, Suite 533 PO Box 1539 San Antonio, TX 78295-1539 Dimare Newman, Inc. P.O. Box 517 Newman, CA 95360-0517 Craig A. Stokes Stokes Law Offices, LLP 3330 Oakwell Court, Suite 225 San Antonio, TX 78218 William R. Davis Jr Allen M. DeBard Langley & Banack, Inc 745 E Mulberry, Suite 900 San Antonio, TX 78212 Del Campo Supreme, Inc. 672 W. Frontage Rd. Noales, AZ 85621

A&A Transportation, Inc. 4741 College Park San Antonio, TX 78249

Divine Ripe, LLC 700 S. Bridge St., Suite C Hidalgo, TX 78557

Frank's Distributing of Produce P.O. Box 2020 Nogales, AZ 85628-2020

Harllee Packing, Inc. P.O. Box 8 Palmetto, FL 34220

Harvest Crown Co., Inc. P.O. Box 13578 Bakersfield, CA 93389 J-C Distributing, Inc. 2731 N. Donna Avenue Nogales, AZ 85621

IFCO Systems NA 5250 Tacco Drive San Antonio, TX 78244

Alamo Leasing 2010 NW Military Hwy. San Antonio, TX 78213 International Bank of Commerce 130 E. Travis San Antonio, TX 78205

Kingdom Fresh Produce, Inc. 2243 North Goolie Rd., #A Donna, TX 78537 Mission Produce, Inc. 2500 Vineyad Ave., Suite 300 Oxnard, CA 93036

Juniper Tomato Grower, Inc. P.O. Box 38 Greensboro, FL 32330

Rio Queen Citrus 4012 E. Goodwin Rd. Mission, TX 78574

Royal Flavor, LLC 2655 Melksee St. San Diego, CA 92154

Internal Revenue Service P.O. Box 7346 Philadelphia, PA 19101-7346

Valero Marketing & Supply P.O. Box 300 Amarillo, TX 79105-0300

A & D Carriers 4126 Luckenbach Rd. San Antonio, TX 78251

A&A Concepts, LLC 1219 S. Zarzamora St. San Antonio, TX 78207

Averitt Brokerage Co., Inc. 9999 Perrin Beitel, Suite B San Antonio, TX 78217 Coosemans Houston, Inc. 3124 Produce Row Houston, TX 77023

B. Catalani, Inc. 1500 S. Zarzamora, #326 San Antonio, TX 78207

Banana Distributing Company 1500 S. Zarzamora San Antonio, TX 78207

Fresh Farm Direct, LLC 106 Adams St., Suite 2A Monte Vista, CLO 81144

Gonzalez Mexican Produce 2501 W. Military Hwy., A-23 McAllen, TX 78503

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Harllee Packing, Inc. P.O. Box 8 Palmetto, FL 34220 Henry Avocado Corp. P.O. Box 300867 Escondidio, CA 92030-0867 Kitchen Pride P.O. Box 585 Gonzales, TX 78629

Le Best Banana Supply Co. P.O. Box 295 Hidalgo, TX 78557

M&P Logistics LP 1500 S. Zarzamora, #308 San Antonio, TX 78207

Maxim Egg Farms P.O. BOx 200805 Dallas, TX 75320-0805

Rio Bravo Produce 1006 S. Cesar Chavez Edinburg, TX 78542

Slankard Produce Co., Inc. 1500 S. Zarzamora San Antonio, TX 78207

Sunriver Sales P.O. Box 2738 Visalia, CA 93279

Touchstone & Associates 1500 S. Zarzamora St., #205 San Antonio, TX 78207

Willson Davis Company 1500 S. Zarzamora San Antonio, TX 78207

Robert E. Goldman 1 East Broward Blvd. Ste. 700 Fort Lauderdale, FL 33301

Tijerina & Sons, LLC c/o Zachary B. Aoki Thurman & Phillips, P.C. 8000 IH-10 West, Suite 1000 San Antonio, TX 78230