## Facts

- Arts Dairy, LLC operated a dairy farm and filed for Chapter 11 relief on April 14, 2009, continuing as debtor-in-possession.
- Robert McComber supplied Arts with “300 acres of Corn Silage” under a written agreement dated August 29, 2008.
- Arts agreed to pay in 12 monthly installments beginning September 2008.
- McComber delivered the silage shortly after the agreement; by the petition date, Arts had not paid in full.
- Arts scheduled McComber as an unsecured creditor with a noncontingent, liquidated, undisputed claim of about $95,889.90 for “Corn Silage.”
- The parties also had an undated manure-application payment plan listing monthly payments from October 2008 through September 2009.
- AgStar Financial Services, PCA, a secured lender with liens on Arts’s assets, moved to dismiss McComber’s adversary complaint.

## Issues

1. Whether the complaint plausibly stated a claim for relief sufficient to survive dismissal under Rule 12(b)(6), as applied in an adversary proceeding.
2. Whether the corn-silage agreement (considered with the related manure payment plan) was an executory contract under 11 U.S.C. § 365 as of the petition date.

## Decision

- The court granted AgStar’s Rule 12(b)(6) motion and dismissed the adversary complaint.
- The court held the pleaded facts showed McComber had completed his material performance by delivering the silage before the bankruptcy filing.
- Because only Arts’s obligation to pay remained, the corn-silage agreement was not an executory contract subject to assumption or rejection under § 365.
- McComber’s rights were limited to a prepetition unsecured claim for the unpaid price.

## Legal Principles

- A contract is executory under the Countryman test only when both parties have remaining obligations such that nonperformance by either would be a material breach excusing the other.
- An agreement for goods already delivered prepetition, with only the debtor’s installment payments remaining, is generally not executory for § 365 purposes.
- On a Rule 12(b)(6) motion, the court accepts well-pleaded facts as true, but conclusory labels (e.g., calling a completed sale “executory”) do not state a plausible claim absent facts showing mutual, material, unperformed obligations.

## Conclusion

The bankruptcy court dismissed the creditor’s attempt to force § 365 treatment because the pleadings described a completed prepetition delivery of silage and an unpaid balance, leaving no ongoing mutual performance sufficient to characterize the arrangement as an executory contract.


In re Arts Dairy, LLC, 417 B.R. 495 (Bankr. N.D. Ohio 2009)