12-50073-a998 Doc#379 Filed 10/26/12 Entered 10/26/12 09:34:15 Main Document Pg 1 of 4

IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION IN RE: DELTA PRODUCE, L.P.,1 DEBTOR. CASE NO. 5:12-BK-50073-LMC (CHAPTER 11) JOINTLY ADMINISTERED

____________________________________________________________________________ SPECIAL PACA TRUST COUNSEL LIMITED OBJECTION TO MOTION TO SELL PROPERTY FREE AND CLEAR OF LIENS ____________________________________________________________________________ NOW COMES SPECIAL PACA TRUST COUNSEL to Debtor Delta Produce, L.P. (Delta and/or Debtor), in the above-referenced case, and files its Limited Objection to the Motion to Sell Property Free and Clear of Liens [D.E. #336], and shows the Court as follows: 1. The Debtor proposes to sell a warehouse that is owned by Atled, Ltd. and has requested that the proceeds of such sale be delivered entirely to the first lien holder, International Bank of Commerce, (IBC). Special PACA Counsel states that it has no objection to the Motion to Sell Free and Clear. However, on behalf of PACA trust creditors of Delta Produce, L.P., Special PACA Counsel objects to the Debtors request that all of the proceeds of such sale be turned over to IBC. 2. Special PACA Counsel was appointed by means of a PACA Claims Procedure order

entered by Judge Clark. In that order Special PACA Counsel was authorized to collect PACA trust assets and file declaratory judgment actions to determine the status of any assets alleged to be PACA trust assets of either Delta or Superior. [D.E. #124, 14.]

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

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3.

Pursuant to the claims procedure order, Special PACA Counsel has filed an

adversary action against IBC (12-ap-05079-lmc; Delta Produce, L.P., and Superior TomatoAvocado, Ltd., ex rel PACA Trust Beneficiaries of the PACA Trust res of Delta Produce, L.P. and Superior Tomato-Avocado, Ltd. v. International Bank of Commerce). The claims in the adversary are claims to establish the extent of the PACA trust lien under Bankruptcy Rule 7001(2). A Motion to Dismiss or for More Definitive Statement is pending before the Court to be heard on November 2, 2012. 4. Special PACA Trust Counsel asserts under Section 363(p)(2) that PACA trust assets of Deltas predecessor, Delta Produce Marketing, Inc., were used to finance a portion of the propertys acquisition cost and is therefore subject to the PACA trust. Special PACA counsel does observe that under Section 362(p)(2) of the Bankruptcy Code, the burden of proving that the PACA trust creditors possess an interest would normally be upon the PACA trust creditors. However such is not the case under PACA. Under the PACA trust, it is the non-PACA trust creditors who must prove that an asset was not a PACA trust asset. Sanzone-Palmisano Co. v. M. Seaman Enterprises, Inc., 986 F.2d, 1010, 1012 (6th Cir. 1993); Ger-Nis International, LLC v. FJB, Inc., 2008 WL 2600074 (SDNY 2008). 5. Delta Produce Marketing, Inc. is the corporate predecessor of Delta, the Debtor.

Since the acquisition of Delta Produce Marketing, Inc. by Scott Jensen in 1998, Delta Produce Company has been continuously indebted to produce creditors. 6. The Atled warehouse would remain a PACA trust asset of Delta unless Delta paid

all of its unpaid PACA suppliers after the Atled building was acquired. In re Kornblum, 81.F3d, 280, 287 (2nd Cir, 1996). (Note that Kornblum arose in a bankruptcy context and the Second Circuit placed the burden of proving non-PACA trust status of an asset upon the non-PACA trust

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creditor, contrary to what Section 363 would require.) The evidence will be that the Debtor, Delta, or its predecessor entity, have continuously been in debt to produce creditors. Thus the building owned by Atled, the down payment of which came from Delta Produce Marketing, Inc., would still remain part of the PACA trust res of Delta. 7. However, Special PACA Counsel believes that current collections of PACA trust

assets under the claims procedure order are sufficient to cover most, but perhaps not all of PACA trust claims approved by the Court. A few collections and other issues remain pending. In any event, Special PACA Trust Counsel believes that no more than $400,000 of PACA trust assets need be held in the Courts registry. Special PACA Counsel has no objection to any additional proceeds beyond the $400,000 being turned over to IBC. WHEREFORE, Special PACA Counsel prays that the Court direct that the $400,000 sales proceeds from the Atled warehouse be deposited in the Courts registry. DATED: October 26, 2012. Respectfully submitted, STOKES LAW OFFICE LLP 3330 Oakwell Court, Suite 225 San Antonio, TX 78218 Telephone (210) 804-0011 Facsimile (210) 822-2595 By: /s/ Craig A. Stokes______________ Craig A. Stokes SBN 19267700 cstokes@stokeslawoffice.com

Special PACA Counsel for Delta Produce, L.P.

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CERTIFICATE OF SERVICE I hereby certify that on the 26th day of October, 2012, I electronically filed the foregoing instrument with the Clerk of the Court using the CM/ ECF system which will send a notice of electronic filing to all parties of record. I further certify that a copy of the foregoing pleading was mailed to all of Deltas produce creditors, listed in the Attached Exhibit A.

/s/ Craig A. Stokes_____________________ Craig A. Stokes

12-50073-a998 Doc#379-1 Filed 10/26/12 Entered 10/26/12 09:34:15 Exhibit Pg 1 of 2

William R. Davis Langley & Banack, Inc. 745 E. Mulberry, Suite 900 San Antonio, TX 78212-3141 United States Trustee - SA12 US trustees Office 615 E. Houston, Suite 533 P.O. Box 1539 San Antonio, Texas 78295-1539 A&A Transportation, Inc. 4741 College Park San Antonio, TX 78249

A&A Concepts, LLC 1219 s. Zarzamora Street San Antonio, TX 78207

Alamo Leasing 2010 NW Military Highway San Antonio, TX 78213

Averitt Brokerage Co., Inc. Mr. David Faubion 9999 Perrin Beitel, Suite B San Antonio, TX 78217

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

Daimler Trust c/o Stephen G. Wilcox PO Box 11509 Fort Worth, TX 76110-0509 Divine Ripe, LLC c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Harvest Crown Co., Inc. P. O. Box 13578 Bakersfield, CA 93389-3578

Del Campo Supreme, Inc. 672 W. Frontage Rd. Nogales, AZ 85621-9633

Dimare California P. O. Box 517 Newman, CA 95360-0517

Franks Distributing of Produce P. O. Box 2020 Nogales, AZ 85628-2020

Harllee Packing, Inc. P.O. Box 8 Palmetto, FL 34220-0008

IFCO Systems NA 5250 Tacco Drive San Antonio, TX 78244-1007

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

Irigoyen Farms, Inc. 14801 S. Clovis Ave. Selma, CA 93662-9641

J-C Distributing, Inc. 2731 N. Donna Avenue Nogales, AZ 85621-4140

JFJ Company 127 N. San Gabriel San Antonio, TX 78237-1531

W. Scott Jensen c/o Randall A. Pulman Pulman, Cappuccio, Pullen & Benson, LLP 2161 NW Military Highway, Suite 400 San Antonio, Texas 78213 Key Equipment Finance 600 travis St., 14th Floor Houston, TX 77002-3009

Le Best Banana Supply Co., Inc. P. O. Box 295 Hidalgo, Texas 78557-0295

Muller Trading Company, Inc. c/o Jason R. Klinowski, Esq. FREEBORN & PETERS LLP 311 S. Wacker Dr., Suite 3000 Chicago, IL 60606 Market Dispatch Services, Inc. c/o Celinda Baez Guerra Flume Law Firm, LLP 1020 NE Loop 410, Suite 200 San Antonio, TX 78209

Kingdon Fresh Produce, Inc. 2243 North Goolie Rd., #A Donna, TX 78537-5688

M & P Produce, Inc. 1500 Zarzamora #308 San Antonio, TX 78207-7284

Main Street Bank 23970 U. S. 59 North Kingwood, TX 77339-1535

Malena Produce 947 E. Frontage Rd. Rio Rico, AZ 85648-6264

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

Mecca Family Farms, Ltd. P. O. Box 541779 Lake Worth, FL 33454-1779

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Muller Trading Company, Inc. Bruce W. Akerly CANTEY HANGER LLP 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 Rio Bravo Produce 1006 S. Cesar Chavez Edinburg, TX 78542-4211 Steven E. Nurenberg MEUERS LAW FIRM, PL 5395 Park Central Court Naples, FL 34109 Paccar Financial Corp. PO Box 676014 Dallas, TX 75267-6014

Rio Queen Citrus, Inc. c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Willson Davis Co. c/o Joe R. Hinojosa Barkhurst & Hinojosa, P.C. 110 Broadway, Suite 350 San Antonio, Texas 78205

Slankard Produce 1500 So. Zarzamora St. San Antonio, TX 78207-7284

Sunriver Sales c/o Michael J. Black BURNS & BLACK, PLLC 750 Rittiman Road San Antonio, Texas 78209 Visalia Produce Sales Mr. George M. Matoian PO Box 190 Kingsburg, CA 93631

Vaughan Foods, Inc. Ms. Sonya Logan 216 NE 12th Street Moore, OK 73160

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Exhibit A