Case Summary:
This adversary proceeding was brought by the trustee against Farmers Bank to determine the validity of Farmers Bank’s security interest in proceeds from crop support contracts between Debtors and the USDA.  The parties reached a stipulated resolution.  In exchange, Farmers Bank released its claim on proceeds that had been paid to the Estate and the Trustee agreed to assist Farmers Bank in securing unpaid proceeds that the USDA had refused to pay.  The USDA was then joined.  The USDA argued that the PFC contracts were rejected and deemed that rejection a breach of the PFC contracts, which entitled the USDA to treat the contracts as void.  The Trustee and Farmers Bank argued that the PFC contracts were abandoned in the Chapter 11 case, leaving nothing to be rejected either before or after the case was converted.  The PFC contracts were abandoned by a proper order in the Chapter 11 case.  That abandonment removed the contracts from the chapter 11 estate and ended the Bankruptcy Court’s jurisdiction over them.  The abandoned status of the contracts was not altered by the conversion of the case to Chapter 7.  The effect of abandonment was to return all parties to the PFC contracts to their legal positions prior to the bankruptcy filing.

Statute/Rule References:
11 U.S.C. § 348 -- Conversion
11 U.S.C. § 365 -- Executory Contracts
11 U.S.C. § 541 -- Property of the Estate

Key Terms:
Abandonment
Executory Contracts