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UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION

In re:

§

Chapter 11

§

DELTA PRODUCE, L.P. 1 ,

§

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. SPECIFIC RESPONSES

1.1

IBC admits the allegations contained within ¶ 1 of the Amended Application.

1.2

IBC admits the allegations contained within ¶ 2 of the Amended Application.

1.3.

IBC admits the allegations contained within ¶ 3 of the Amended Application.

1.4

IBC admits the allegations contained within ¶ 4 of the Amended Application.

1.5

IBC admits the allegations contained within ¶ 5 of the Amended Application.

1.6

IBC admits the allegations contained within ¶ 6 of the Amended Application.

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

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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. ARGUMENTS AND AUTHORITIES

2.1 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.

Delta – Note in the amount of $1,500,000.00 dated April 23, 2007;

ii.

Delta – Note in the amount of $2,000,000.00 dated April 1, 2007;

iii.

Delta – Note in the amount of $6,000,000.00 dated June 8, 2010;

iv.

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. IBC’s 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

.”

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 Debtor’s 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 IBC’s 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. Debtors to provide regular accountings to IBC;

vi. Debtors to respond to IBC’s 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)

the Court acknowledge the liens of IBC on assets of Debtors;

(ii)

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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Service List Pg 1 of 2

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

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

Alamo Leasing

2010 NW Military Hwy.

San Antonio, TX 78213

International Bank of Commerce

130 E. Travis

San Antonio, TX 78205

Rio Queen Citrus

4012 E. Goodwin Rd.

Mission, TX 78574

Valero Marketing & Supply P.O. Box 300 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

Craig A. Stokes Stokes Law Offices, LLP

3330 Oakwell Court, Suite 225

San Antonio, TX 78218

A&A Transportation, Inc.

4741 College Park

San Antonio, TX 78249

Divine Ripe, LLC

700 S. Bridge St., Suite C

Hidalgo, TX 78557

Harvest Crown Co., Inc. P.O. Box 13578 Bakersfield, CA 93389

J-C Distributing, Inc.

2731 N. Donna Avenue

Nogales, AZ 85621

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

Royal Flavor, LLC

2655 Melksee St.

San Diego, CA 92154

A & D Carriers

4126 Luckenbach Rd.

San Antonio, TX 78251

B. Catalani, Inc.

1500 S. Zarzamora, #326

San Antonio, TX 78207

Fresh Farm Direct, LLC

106 Adams St., Suite 2A

Monte Vista, CLO 81144

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

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

Mission Produce, Inc.

2500 Vineyad Ave., Suite 300

Oxnard, CA 93036

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

A&A Concepts, LLC

1219 S. Zarzamora St.

San Antonio, TX 78207

Banana Distributing Company

1500 S. Zarzamora

San Antonio, TX 78207

Gonzalez Mexican Produce

2501 W. Military Hwy., A-23

McAllen, TX 78503

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Service List Pg 2 of 2

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

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

Rio Bravo Produce

1006 S. Cesar Chavez

Edinburg, TX 78542

Touchstone & Associates

1500 S. Zarzamora St., #205

San Antonio, TX 78207

Tijerina & Sons, LLC c/o Zachary B. Aoki

Thurman & Phillips, P.C.

8000 IH-10 West, Suite 1000

San Antonio, TX 78230

Henry Avocado Corp. P.O. Box 300867 Escondidio, CA 92030-0867

M&P Logistics LP

1500 S. Zarzamora, #308

San Antonio, TX 78207

Slankard Produce Co., Inc.

1500 S. Zarzamora

San Antonio, TX 78207

Willson Davis Company

1500 S. Zarzamora

San Antonio, TX 78207

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

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