12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 1 of 8

INRE:
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
CHAPTER 11
DELTA PRODUCE, L.P.
1
DEBTORS.





CASE NO. 12-50073-LMC
JOINTLY ADMINISTERED
DEBTORS' MOTION FOR CONTEMPT, SANCTIONS AND ATTORNEYS' FEES FOR
VIOLATION OF THE AUTOMATIC STAY AND FOR TURNOVER
OF PROPERTY OF THE ESTATE
TO THE HONORABLE LEIF M. CLARK, UNITED STATES BANKRUPTCY JUDGE:
NOW COMES Delta Produce, L.P. ("Delta"), Superior Tomato-Avocado, Ltd. ("Superior"),
Atled, Ltd. ("Atled") and Staci Properties, Ltd. ("Staci") (collectively, the "Debtors"), the Debtors in the
above captioned cases (the "Cases"), and hereby file this Motion for Contempt, Sanctions and Attorneys'
Fees for Violation of the Automatic Stay and for Turnover of Property of the Estate (the "Motion"), and
in support thereof, the Debtors respectfully represent as follows:
Jurisdiction and Venue
1. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. 1334 and
157. This is a core proceeding as that term is used in 157.
Parties
2. The Debtors request enforcement of the automatic stay, damages, sanctions, attorneys'
fees and restoration of property of the estate.
3. Respondent is Flat Iron Capital ("Flat Iron"), a company in the insurance premium finance
industry.
4. Debtors are Chapter 11 debtors in possession.
Background and Relief Requested
1
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-LMC-
11 and Staci Properties, Ltd.- Case No. 12-50110-LMC
L0578526.WPD
L & B 14013/0002/L0578526.WPD/2 Page 1 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 2 of 8
5. On January 3, 2012 (the "Petition Date"), the Debtors (with the exceptionofStaci which
filed its Chapter 11 case on January 9, 2012) filed voluntary petitions for relief under Chapter 11 of title
11 ofthe United States Code, 11 U.S.C. 101-1532 (as amended, the "Bankruptcy Code"). Since that
date, the automatic stay created by 11 U.S.C. 362(a) has remained in place with the exception ofStaci
where an estate was created on January 9, 2012.
6. The Debtors continue to manage and operate their businesses as debtors in-possession
pursuant to sections 1107 and 1108 of the Bankruptcy Code. No creditors' committee has been appointed
in these Cases by the United States Trustee. Further, no trustee or examiner has been requested or
appointed.
7. The statutory predicates for the relief requested herein are sections 362 and 542 of the
Bankruptcy Code.
8. Delta is a local produce company, dealing mainly with tomatoes and avocados, whose
major customer was HEB. Atled is an entity which owns the real property where Delta operated its
business pre-petition. Superior is also in the produce business and emphasizes its business in dealing
tomatoes and avocados as well as other produce. Staci owns the real property where Superior operated
its produce business pre-petition. Both Delta and Superior ceased operations pre-petition, and
furtl1emiore, do not have an.)l remaiilit'1g produce or to sell. Delta a..11d Superior bot..h have
perishable Agricultural Commodities Act (P ACA) claims that could affect all four ( 4) of the companies.
As such, the Debtors are affiliates as that term is defmed in section 101(2) of the Bankruptcy Code and
as used in Bankruptcy Rule 1015(b). Since the bankruptcy filings, the Debtors have streamlined their
operations by retaining only a few key employees to handle the winding down of the businesses.
9. Delta and Superior also own and/or lease certain tractors, trailers and other rolling stock
which were used in their prepetition operations to deliver produce. The Debtors anticipate liquidating
the real property and personal property in the near future. However, in order to maintain these hard
assets, some of which constitute collateral ofthe International Bank of Commerce ("IBC") and/or P ACA
claimants, the Debtors must continue to maintain insurance on them.
L0578526.WPD
L & B 14013/0002/L0578526.WPD/2 Page 2 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 3 of 8
10. As of the Petition Date( s ), the Debtors had a number of pre-petition insurance policies
in place including property and casualty insurance on these hard assets in addition to worker's
compensation and other types of insurance. Due to cash constraints and financial difficulties, the Debtors
had not made insurance premium payments prior to the Petition Date. As of the Petition Date, the
Debtors owed Flat Iron more than $100,000 in pre-petition insurance premium payments.
11. Due to the Debtors' non-payment, Flat Iron sent a notice to the Debtors dated January 11,
2012 notifying the Debtors of Flat Iron's intent to cancel insurance policies for Delta. In a similar letter
of same date, Flat Iron notified Superior of its intent to cancel insurance policies in the name of Superior.
Copies of these letters were received by the Debtors on January 17
1
\ and true copies of the letters are
attached hereto as Exhibit "A". Debtors or its agents clearly gave Flat Iron notice of the bankruptcy cases.
Debtors or their agents were informed that Flat Iron had the right to terminate the policies and collect the
unearned premiums which were collateral of Flat Iron.
12. IBC and the Debtor had submitted and agreed cash collateral order containing a 30 day
budget that allows for a certain amount ofiBC's cash collateral to be spent on insurance. The Debtors
are unable to afford to pay the amounts requested by Flat Iron in order to keep the pre-petition policies
in place and in existence post petition. The Debtor notified IBC ofFlat Iron's intent to cancel the policies,
fuid IBC placed "forced :h1surance" on the Debtors' assets at a cost i..11 excess of$8,000 per month.
13. Upon information and belief, Flat Iron is now requesting turnover of the "unearned
premiums" paid to the insurance companies at the inception of the insurance policies. The Debtors
content that these amounts are property ofthe estate, being held in trust by the insurance policy companies
for the Debtors.
Relief Requested
14. The Debtors request that the Court issue an Order holding Flat Iron in contempt for
violation of the automatic stay, award damages, grant sanctions and award attorneys' fees against Flat
Iron. The Debtors specifically request that the Court Order Flat Iron to pay its attorneys' fees for filing
L0578526.WPD
L & B 14013/0002/L0578526. WPD/2
Page 3 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 4 of 8
this Motion and subsequently prosecuting the same. Debtors request turnover of the unearned premiums
that constitute property of the estate.
and Authority
15. Insurance policies constitute property of the estate and parties are prohibited from
cancelling them bytheautomaticstayat 11 U.S.C. 362(a). Inre WMREnterprises, Inc., 163 B.R. 884,
886 (Bankr. N.D. Fla. 1994) (citing In re Big Squaw Mountain Corp., 122 B.R. 831 (Bankr. D. Me.
1990); Matter ofGulfTampa Drydock Co., 49 B.R. 154, 157 (Bankr. M.D. Fla. 1985). Flat Iron has not
moved the Court to lift the stay to cancel these pre-petition insurance policies. Threatening to cancel
insurance policies and subsequently cancelling them without leave from the Court to do so is a direct
violation of the automatic stay.
16. The attempted cancellation of an insurance contract is a violation of the automatic stay,
specificallysection362(a)(3). MatterofPester Refining, Co., 58 B.R. 189,192 (Bankr. S.D. Iowa 1985).
The insurance policy is an asset of the estate and an action to cancel a policy constitutes an attempt to
exercise control of property of the estate. Id at 192.
17. The Debtors have little unencumbered cash or other assets. IBC and the P ACA claimants
have a lien against almost all property of the estate. IBC consented to allow the Debtors to use a certain
SUiTI of cash to pay .. i.Jlsura..J.cc pretrJwus. The budgeted is no,:vhere near tl:te amou...11t Flat Iron has
requested in order to avoid cancellation of the insurance policies. As a result of the cancelled policies,
IBC has placed forced insurance on the Debtors' assets. The Debtors have been forced to give IBC liens
on what little unencumbered assets remain in order to use its cash collateral. As such, the Debtors have
incurred monetary damages as result of Flat Iron's cancellation of the Debtors' insurance policies.
18. These damages should be awarded in addition to the sanctions that the Court should
award against Flat Iron for violating the automatic stay.
19. "Actions taken in violation of the automatic stay are void." !d. at 191-92. Flat Irons notice
and any attempts to cancel pre-petition insurance policies is void. And furthermore, all unearned
premiums are property of the estate. These funds constitute property of the estate as of the Petition Date
L0578526.WPD
L & B 14013/0002/L0578526.WPD/2
Page 4 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 5 of 8
when those insurance policies were in place and were not cancelled. Certain bankruptcy cases have
looked at this issue when the debtor cancels an insurance policy and then subsequently files for
bankruptcy. See Waiwada v. Commercial Credit Plan Consumer Discount Co., (In re Waiwada), 248
B.R. 258 (Bankr. M.D. Penn. 2000). However, in the instant case, as of the Petition Date, the Debtors
had not cancelled any pre-petition insurance policies, nor did the Debtors have any intent to cancel them.
The notice of cancellation came after the Petition Date and therefore, any unearned premiums became
property of the estates on the Petition Date.
20. Debtors finally ask the Court to order Flat Iron to pay their attorneys' fees for fees
incurred in drafting, filing and prosecuting this Motion. But for Flat Iron's violation of the automatic stay,
Debtors would not have had to spend the resources to preserve and protect their estates from what appears
to be clearly unlawful actions. The Debtors are liquidating their estates and therefore, do not have the
resources as an operating debtor might have or be able to generate. Debtors request $10,000 in fees and
expenses associated with the prosecution of this Motion.
WHEREFORE, PREMISES CONSIDERED, the Debtors request that the Court enter orders
enforcing the automatic stay, and for such other relief, at law or in equity to which it may show itself
entitled.
L0578526.WPD
L & B 14013/0002/L0578526.WPD/2
LANGLEY & BANACK, INCORPORATED
Trinity Plaza II
745 E. Mulberry, Suite 900
San Antonio, 78212
210.736-66 Te ephone
210.735-68 9 Tel copier
ATTORNEYS FOR DEBTORS and
DEBTORS IN POSSESSION
Page 5 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 6 of 8
CERTIFICATE OF SERVICE
I hereby certifY that a true and correct copy of the foregoing Debtors ' Motion for Contempt,
Sanctions and Attorneys' Fees for Violation of the Automatic Stay and for Turnover of Property of the
Estate was served on the parties listed on the attached matrix, v ~ a . . t lass mail, postage-prepaid and/or
by electronic means for all Pacer system participants on this ay of January, 2012.
Flat Iron Capital ~
1700 Lincoln St. 12th Floor
Denver, CO 80203
800-800-2767
L0578526.WPD
L & B 14013/0002/L0578526.WPD/2
Page 6 of 6
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 7 of 8
A&A Transporation, Inc.
4741 College Park
San Antonio, TX 78249
Bonaza 2001
Dimare Newman, Inc.
P.O. Box 517
Newman, CA 95360-0517
Harllee Packing, Inc.
P.O. Box 8
Palmetto, FL 34220
J -C Distributing, Inc.
2731 N. DorinaAvenue
Nogales, AZ 85621
Mission Produce, Inc.
2500 Vinyard Ave., Suite 300
Oxnard, CA 93036
Royal Flavor, LLC
2655 Melksee St.
San Diego, CA 92154
A&D Carriers
4126 Luckenbach Road
San Antonio, TX 78251
B. Catalani
1500 S. Zarzamora, Unit 236
San Antonio, TX 78207
Delta Produce Marketing
2201 S. Laredo
San Antonio, TX 78207
Alamo Leasing
2010 NW Military Hwy.
San Antonio, TX 78213
Del Camp Supreme, Inc.
672 W. Frontage Road
Noales, AZ 85621
Divine Ripe, LLC
700 S. Bridge St., Suite C
Hidalgo, TX 78557
Harvest Crown Co, Inc.
P.O. Box 13578
Bakersfield, CA 93389
Juniper Tomato Grower, Inc.
P.O. Box 38
Greensboro, FL 32330
Rio Queen Citrus
4012 E. Goodwin Rd.
Mission, TX 78574
Slankard Produce Co., Inc.
1500 S. Zarzamora
San Antonio, TX 78207
A&A Concepts, LLC
1219 S. Zarzamora St.
San Antonio, TX 78207
Banana Distributing
1500 S. Zarzamora, Unit 401
San Antonio, TX 78207
Fresh Farm Direct, LLC
106 Adams St., Suite 2A
Monte Vista, CO 81144
Bernardi & Associates
557 E. Frontage Road
Nogales, AZ 85621
Delta Produce Marketing
2001 S. Laredo St.
San Antonio, TX 78207
Frank's Distributing of Produce
P.O. Box 2020
Nogales, AZ 85628-2020
IFCO Systems NA
5250 Tacco Drive
San Antonio, TX 78244
Kingdom Fresh Produce, Inc.
2243 North Goolie Rd., #A
Donna, TX 78537
United States Trustee
615 E. Houston St., #533
San Antonio, TX 78205
Valero Marketing & Supply
P.O. Box300
Amarillo, TX 79105-0300
Averitt Brokerage Co., Inc.
9999 Perrin Beitel, Suite B
San Antonio, TX 78217
Coosemans Houston, Inc.
3124 Produce Row
Houston, TX 77023
Gonzalez Mexican Produce
2501 W. Military Hwy., A-23
McAllen, TX 78503
12-50073-lmc Doc#51 Filed 01/24/12 Entered 01/24/12 13:49:00 Main Document Pg 8 of 8
Harllee Packing, Inc.
P.O. Box 8
Palmetto, FL 34220
Le Best Banana Supply Co.
P.O. Box295
Hidalgo, TX 78557
Rio Bravo Produce
1006 S. Cesar Chavez
Edinburg, TX 78542
Touchstone & Associates
1500 S. Zarzamora St., #205
San Antonio, TX 78207
Internal Revenue Service
P.O. Box 7346
Philadelphia, P A 19101-7346
Henry Avocado Corp.
P.O. Box 300867
Escondidio, CA 92030-0867
M&P Logistic LP
1500 S. Zarzamora, Unit 306
San Antonio, TX 78207
Slankard Produce
1500 S. Zarzamora St.
San Antonio, TX 78207
Willson Davis Co.
1500 S. Zarzamora St., #103
San Antonio, TX 78207
Craig A. Stokes
Stokes Law Offices, LLP
3330 Oakwell Court, Suite 225
San Antonio, TX 78218-3066
Kitchen Pride
P.O. Box 585
Gonzales, TX 78629
Maxim Egg Farms
P.O. Box 200805
Dallas, TX 75320-0805
Sunriver Sales
P.O. Box 2738
Visalia, CA 93279
International Bank of Commerce
130 E. Travis St.
San Antonio, TX 78205-1601
Robert E. Goldman, Esq.
1 East Broward Blvd., Ste. 700
Fort Lauderdale, FL 33301