1020-00005 · Greenfield Agricultural Partners · Receivership

memo-receivership-stay-analysis.docx DOCUMENT Litigation

32 / 37 ← → ✕

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Francesca Morano, Partner

FROM: Hannah Brinkley, Associate

DATE: December 22, 2022

RE: Analysis of Receivership Order and Automatic Stay — Impact on Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Circuit Court of Cook County, Case No. 2022-L-004831

MATTER NO.: C&H Matter No. 1020-00005

CLIENT: Greenfield Agricultural Partners LLC ("GAP")

I. Executive Summary

On December 12, 2022, the Circuit Court of Sangamon County, Illinois entered an Order Appointing Receiver over Prairie Basin Grain Co. ("PBGC") in Case No. 2022-CH-001247 (the "Receivership Order"). The court appointed Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, 500 East Monroe Street, Suite 300, Springfield, Illinois 62701, as receiver for all assets and operations of PBGC. The receivership was initiated by Heartland Prairie Bank, N.A. ("HPB"), PBGC's senior secured lender, which filed a Verified Petition for Appointment of Receiver on November 28, 2022, following PBGC's protracted default under its credit facility. GAP received formal notice of the Receivership Order and the accompanying automatic stay on December 19, 2022.

The Receivership Order includes a broad automatic stay of all pending litigation, proceedings, and enforcement efforts against PBGC or its assets. This stay directly and materially affects GAP's pending collection action in the Circuit Court of Cook County, Case No. 2022-L-004831, which asserts claims for breach of the Off-Take Agreement, account stated, unjust enrichment, and breach of personal guaranty against PBGC and its principal, Darren K. Musgrave.

This memorandum analyzes: (1) the scope and effect of the receivership stay on the Cook County action; (2) the key distinctions between the Illinois state-court receivership stay and the federal automatic stay under 11 U.S.C. § 362 of the Bankruptcy Code; (3) GAP's options for asserting its claims within the receivership proceeding in Sangamon County; and (4) whether the Musgrave Guaranty claim (Count II of the Cook County Complaint) may be pursued independently outside the receivership.

Based on my analysis, the key conclusions and recommendations are as follows. First, GAP should promptly file a Proof of Claim in the Sangamon County receivership proceeding asserting the full amount of its claim—including principal, accrued interest, and attorneys' fees and costs—totaling approximately $5,664,428.85. Second, GAP should consider voluntarily dismissing the Cook County action without prejudice pursuant to 735 ILCS 5/2-1009, as the stay renders continued prosecution of that action both impermissible and futile, and dismissal without prejudice preserves all of GAP's rights. Third, with respect to Count II, the Musgrave Guaranty claim is potentially not stayed because it is a personal obligation of Darren K. Musgrave and not an obligation of the receivership estate; however, practical considerations—including Musgrave's uncertain financial condition and the need to confirm the precise language of the stay provision—counsel in favor of preserving that claim while deferring active prosecution pending further investigation. Recovery prospects for unsecured creditors in the receivership appear limited, which makes the Musgrave Guaranty a potentially significant alternative or supplemental source of recovery.

II. Background

A. The Cook County Collection Action

On May 9, 2022, GAP filed a four-count Complaint in the Circuit Court of Cook County, Illinois, Law Division, Case No. 2022-L-004831, assigned to the Honorable Patricia Delacroix. The action arises out of PBGC's failure to make payments for agricultural commodities delivered by GAP under an Off-Take Agreement dated March 15, 2019 (the "Off-Take Agreement"), pursuant to which GAP agreed to supply, and PBGC agreed to purchase and pay for, specified quantities of corn and soybeans at agreed-upon pricing terms. The four counts of the Complaint are as follows:

Count I — Breach of Contract (Off-Take Agreement) against PBGC. GAP alleges that PBGC breached its payment obligations under the Off-Take Agreement by failing to pay for five separate deliveries of grain commodities. The total principal amount outstanding on the five unpaid invoices is $4,870,050.00. Pursuant to Section 7.3 of the Off-Take Agreement, past-due invoices accrue interest at the rate of 1.5% per month (equivalent to 18% per annum), calculated from the date each invoice became due.

Count II — Breach of Personal Guaranty against Darren K. Musgrave. GAP alleges that Darren K. Musgrave, the president, managing member, and majority owner of PBGC, executed a personal guaranty of PBGC's payment obligations under the Off-Take Agreement (the "Musgrave Guaranty," attached as Exhibit D to the Off-Take Agreement). The Musgrave Guaranty is an absolute and unconditional guaranty of payment, not merely of collection, and is subject to a cap of $2,000,000 in the aggregate. GAP alleges that Musgrave's obligations under the Musgrave Guaranty have been triggered by PBGC's failure to pay.

Count III — Account Stated against PBGC. GAP alleges that, through a course of dealing and PBGC's retention of invoices without objection, an account stated exists between GAP and PBGC reflecting a balance due to GAP of $4,870,050.00, and that PBGC has failed and refused to pay the stated account.

Count IV — Unjust Enrichment (Alternative) against PBGC. As an alternative theory of recovery, GAP alleges that PBGC received and accepted delivery of agricultural commodities from GAP, benefited from the same, and has been unjustly enriched by retaining the benefit of those commodities without payment, in the amount of $4,870,050.00.

The five unpaid invoices underlying the claims are as follows:

Each invoice carried standard net-30 payment terms as specified in the Off-Take Agreement. The earliest invoice (GAP-2021-3187) became past due in October 2021, and the most recent invoice (GAP-2022-0042) became past due in approximately February 2022. GAP made multiple informal and formal demands for payment prior to initiating litigation, including a formal pre-suit demand letter dated April 11, 2022, and forbearance correspondence exchanged through counsel in April and early May of 2022.

B. Procedural History of the Cook County Action

Service of the Summons and Complaint was completed on May 24, 2022. PBGC was served through its registered agent, Ridgeline Corporate Services LLC, in accordance with Illinois statutory requirements for service on a domestic limited liability company. Darren K. Musgrave was served personally at his residence at 1188 Windermere Lane, Champaign, Illinois 61822.

On June 27, 2022, PBGC and Musgrave, through the law firm of Bartlett, Reyes Linley CPAs LLP & Harkin LLP (lead partner Douglas M. Harkin; associate Nadia C. Petrov), filed a joint Answer and Affirmative Defenses. In the Answer, defendants admitted the existence of the Off-Take Agreement and the Musgrave Guaranty, but denied the amounts owed and asserted three affirmative defenses: (1) force majeure, based on alleged supply-chain disruptions and commodity market volatility arising from the COVID-19 pandemic and related economic disruptions; (2) commercial impracticability under Illinois common law and UCC § 2-615, on substantially the same factual basis; and (3) failure to mitigate, alleging that GAP failed to take reasonable steps to resell the commodities delivered to PBGC or otherwise reduce its damages.

GAP filed a Motion to Strike Affirmative Defenses on July 15, 2022, arguing that the force majeure and commercial impracticability defenses were legally insufficient as a matter of law because (a) the Off-Take Agreement's force majeure clause (Section 9.1) did not encompass general market conditions or commodity price fluctuations, (b) PBGC's payment obligations are not excused by impracticability under well-settled Illinois law, and (c) the factual predicates alleged did not rise to the level of impracticability in any event. On August 22, 2022, Judge Delacroix granted the motion in part and denied it in part: the force majeure and commercial impracticability defenses were stricken as legally insufficient, while the failure-to-mitigate defense survived as adequately pleaded.

A Case Management Conference was held on September 12, 2022, at which the court entered a scheduling order setting deadlines for fact discovery, expert discovery, and dispositive motions. GAP proceeded diligently with discovery, serving its First Set of Interrogatories (20 interrogatories) and First Request for Production of Documents (35 categories of documents) on PBGC and Musgrave on September 30, 2022. GAP also served Requests for Admission on October 14, 2022, seeking admissions regarding the authenticity and accuracy of the five invoices, the delivery and acceptance of the commodities, and the terms of the Off-Take Agreement and Musgrave Guaranty.

On November 4, 2022, Bartlett, Reyes Linley CPAs LLP & Harkin LLP filed a Motion to Withdraw as Counsel for PBGC and Musgrave, citing PBGC's failure to pay legal fees. The motion was supported by an affidavit of Douglas M. Harkin attesting to repeated demands for payment of outstanding legal fees and PBGC's inability or refusal to satisfy those obligations. Judge Delacroix granted the motion on November 18, 2022, after a brief hearing. As of the date of this memorandum, both PBGC and Musgrave are unrepresented by counsel. Notably, as an Illinois limited liability company, PBGC cannot appear or defend itself pro se—Illinois law requires that a corporate or limited liability company entity be represented by a licensed attorney in all court proceedings. See 735 ILCS 5/2-1301(d); Rein v. David A. Noyes & Co., 172 Ill. App. 3d 201, 204 (1st Dist. 1988). Musgrave, as an individual, may appear pro se, though he has not taken any steps to do so.

Discovery responses from PBGC and Musgrave—including responses to the First Set of Interrogatories, the First Request for Production of Documents, and the Requests for Admission—remain outstanding and are past due. GAP had been preparing a motion to compel prior to receiving notice of the receivership and the automatic stay. That motion is now stayed along with all other proceedings against PBGC.

C. PBGC's Financial Distress

PBGC's current financial distress is the product of several compounding adverse events that occurred in rapid succession beginning in late 2021.

Fire at Macon County Elevator Facility. On October 17, 2021, a fire severely damaged PBGC's grain elevator facility located at 2200 County Road 1400 East, Decatur, Illinois 62521 (Macon County). The fire resulted in the destruction of a significant quantity of stored grain inventory and caused structural damage to the elevator itself. The estimated total loss from the fire was approximately $3.2 million. PBGC carried property and casualty insurance through Triton Mutual Insurance Company ("Triton Mutual"); however, Triton Mutual has disputed coverage on the ground that PBGC allegedly allowed its premium payments to lapse prior to the fire. Separate coverage litigation between PBGC and Triton Mutual is pending, and the outcome of that dispute remains uncertain. The loss of the Macon County facility significantly reduced PBGC's storage capacity and operational capability.

Failed Hedging Strategy. In the fourth quarter of 2021, PBGC suffered catastrophic losses on a short corn futures hedging strategy. As corn prices rose sharply during Q4 2021 due to a combination of export demand, reduced crop estimates, and broader inflationary pressures, PBGC's short futures positions resulted in estimated mark-to-market losses of approximately $6.8 million. These losses, combined with margin calls, severely strained PBGC's liquidity.

Cessation of Trade Creditor Payments. Beginning in approximately January 2022, PBGC ceased making payments to its trade creditors, including GAP. GAP's five unpaid invoices span the period from September 2021 through January 2022 and reflect PBGC's deteriorating financial condition during this period.

Default Under HPB Credit Facility. In April 2022, Heartland Prairie Bank, N.A. formally declared PBGC in default under the Revolving Credit and Term Loan Agreement dated June 1, 2018 (the "Credit Agreement"), which provided an aggregate commitment of $45 million consisting of a revolving credit facility and a term loan. At the time of default, HPB's outstanding balance under the Credit Agreement was approximately $31.4 million. HPB's security interest, perfected under UCC Article 9, encumbers substantially all of PBGC's assets, including accounts receivable, inventory, equipment, real property interests, general intangibles, and proceeds of the foregoing.

Current Financial Condition. Based on information available as of November 2022, PBGC's total liabilities are estimated at approximately $58 to $62 million, while its total assets are estimated at approximately $35 to $40 million. This represents a significant shortfall, particularly for unsecured creditors. HPB's senior secured claim of approximately $31.4 million will consume the vast majority—if not all—of PBGC's available assets, leaving limited or no recovery for unsecured trade creditors such as GAP.

III. The Receivership Order

A. Procedural Posture of the Receivership

On November 28, 2022, Heartland Prairie Bank, N.A. filed a Verified Petition for Appointment of Receiver (the "Petition") in the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247. The Petition was filed in the Chancery Division, reflecting the equitable nature of receivership proceedings under Illinois law.

HPB filed the Petition in its capacity as PBGC's senior secured lender. HPB holds a perfected security interest under UCC Article 9 in substantially all of PBGC's assets, including but not limited to accounts receivable, inventory (including all grain and agricultural commodities in storage or in transit), equipment, fixtures, real property interests, general intangibles, deposit accounts, investment property, and all proceeds and products of the foregoing. HPB's security interest was perfected by the filing of UCC-1 financing statements with the Illinois Secretary of State and, as to real property, by the recording of mortgages and deeds of trust in the applicable county recording offices. HPB's outstanding balance under the Credit Agreement at the time of default was approximately $31.4 million, against an aggregate facility commitment of $45 million.

The Petition alleged that PBGC was in material default under the Credit Agreement, that PBGC was insolvent or in imminent danger of insolvency, that PBGC's assets were being wasted or diminished in value, and that the appointment of a receiver was necessary to preserve the assets for the benefit of all creditors and to ensure an orderly liquidation or restructuring of PBGC's business. The Petition was supported by the affidavit of Ronald P. Stratton, Senior Vice President and Chief Lending Officer of HPB.

After a hearing on December 12, 2022—at which PBGC appeared through interim counsel solely for purposes of the receivership proceeding—the Sangamon County court entered the Order Appointing Receiver. The court appointed Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, as receiver for all assets and operations of PBGC. Mr. Whitmore is a certified public accountant and a Certified Insolvency and Restructuring Advisor with extensive experience in receivership and insolvency matters. The receiver's counsel is Joanna M. Lockridge of Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701.

B. Key Provisions of the Receivership Order

The Receivership Order is comprehensive in scope and grants the receiver broad powers and authority over PBGC's assets, operations, and affairs. The key provisions relevant to GAP's interests are as follows:

Possession, Custody, and Control. The Receivership Order grants the receiver immediate possession, custody, and control of all assets of PBGC, including all real and personal property, contracts, accounts receivable, inventory (including all grain and agricultural supplies in storage at PBGC's elevator facilities), equipment, vehicles, bank accounts, deposit accounts, investment accounts, books and records, intellectual property, permits, licenses, and all other assets of every kind and nature, wherever located.

Authority to Operate and Liquidate. The receiver is authorized, in his discretion, to continue to operate PBGC's business to the extent necessary to preserve the value of its assets, to collect outstanding accounts receivable, to sell or otherwise liquidate assets in an orderly manner for the benefit of creditors, and to take all actions reasonably necessary to administer the receivership estate.

Automatic Stay. The Receivership Order imposes a broad automatic stay of all pending actions, proceedings, and enforcement efforts against PBGC or its assets during the pendency of the receivership. The stay language provides, in relevant part, that "all creditors, claimants, and other parties are hereby stayed and enjoined from commencing or continuing any action, proceeding, or enforcement effort against [PBGC] or any of its assets, and from taking any action to obtain possession of, or exercise control over, property of the receivership estate." This stay provision is a standard feature of Illinois receivership orders and serves the equitable purpose of ensuring that no individual creditor obtains a preference or priority over other similarly situated creditors through the pursuit of individual collection actions.

Claims Process. The Receivership Order directs all creditors to assert their claims against PBGC through the receivership proceeding. The order provides that the receiver shall establish a claims bar date and a claims process, and that creditors will be required to file proofs of claim setting forth the nature and amount of their claims and supporting documentation. The order reserves jurisdiction to the Sangamon County court to adjudicate all disputes regarding the validity, amount, priority, and classification of creditor claims.

Periodic Reporting. The receiver is required to provide periodic reports to the court and to creditors regarding the status of the receivership estate, including information about the receiver's administration of assets, collections, liquidation activities, operating expenses, and distribution prospects.

Priority of HPB's Secured Claims. The Receivership Order specifically addresses the priority of HPB's claims, acknowledging HPB's status as a senior secured creditor with a perfected security interest in substantially all of PBGC's assets. The order provides that HPB's secured claim shall be paid in full before any distribution to unsecured creditors, to the extent of the value of HPB's collateral, consistent with applicable law.

C. Notice to GAP

GAP received formal notice of the Receivership Order and the automatic stay on December 19, 2022. The notice was sent by the receiver's counsel, Lockridge Payne LLP, to GAP's principal business address and, separately, to Calderwood & Harkness LLP as counsel of record for GAP in the Cook County action. The notice directed all creditors to immediately cease all collection efforts and litigation activities against PBGC, and to contact the receiver or receiver's counsel to obtain information about the claims process and to file proofs of claim. The notice also advised creditors that violation of the automatic stay could result in sanctions, including contempt of the Sangamon County court.

Upon receipt of the notice, this office immediately ceased all litigation activity in the Cook County action, including suspending preparation of the motion to compel discovery responses that had been in progress at the time.

IV. Analysis of the Automatic Stay

A. Scope and Effect on the Cook County Action

The automatic stay imposed by the Sangamon County Receivership Order bars GAP from continuing to prosecute its claims against PBGC in the Cook County action. Specifically, the stay prevents GAP from pursuing Counts I, III, and IV of the Complaint—that is, the breach of contract, account stated, and unjust enrichment claims, all of which are asserted against PBGC—in Case No. 2022-L-004831. While the stay is in effect, GAP may not pursue discovery against PBGC, file motions directed at PBGC, seek entry of default or default judgment against PBGC, or take any other affirmative step to prosecute or advance the litigation against PBGC. The stay equally applies to the enforcement of any judgment that GAP might otherwise obtain against PBGC; even if a judgment had been entered prior to the Receivership Order, GAP would be barred from levying on PBGC's assets or otherwise collecting on that judgment outside the receivership.

As a practical matter, the stay's effect on the Cook County action is largely academic with respect to the PBGC claims. Even before the Receivership Order was entered, the Cook County litigation had effectively stalled. PBGC's counsel, Bartlett, Reyes Linley CPAs LLP & Harkin LLP, withdrew on November 18, 2022, leaving PBGC unrepresented. Because PBGC is a limited liability company organized under Illinois law, it cannot appear pro se and must be represented by a licensed attorney in all court proceedings. See 735 ILCS 5/2-1301(d). Absent retained counsel, PBGC could not have participated in discovery, filed responsive pleadings or motions, or appeared at hearings or trial. GAP's outstanding discovery requests remained unanswered, and PBGC was, in practical terms, in default of its discovery obligations. The receivership and the accompanying stay have now formalized what was already an effective litigation standstill.

The stay also serves a broader equitable purpose: it prevents any individual creditor from obtaining priority or a preferential position relative to other unsecured creditors through the pursuit of separate collection actions. In an insolvency context, this is critical. If the stay were not in effect, the most aggressive or best-positioned creditor could obtain a judgment and levy on PBGC's remaining assets, to the detriment of other similarly situated creditors. The receivership stay ensures that all claims against PBGC are channeled through the receivership, where they will be adjudicated and satisfied on a pro rata basis in accordance with established priority principles.

B. Distinction from Federal Bankruptcy Automatic Stay

Because GAP's management and advisors may be more familiar with the federal bankruptcy automatic stay under 11 U.S.C. § 362, it is important to identify the key distinctions between the Illinois state-court receivership stay and the federal bankruptcy stay. Although the two mechanisms serve broadly similar purposes—protecting the debtor's assets and ensuring an orderly claims process—they differ in significant respects.

Source of Authority. The Illinois receivership stay is an equitable remedy imposed by the appointing court through its specific order. It derives its authority from the court's inherent equitable powers and from Illinois statutory and common law governing receiverships. See 735 ILCS 5/2-415; People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285, 296 (1992). By contrast, the federal bankruptcy automatic stay arises by operation of statute under 11 U.S.C. § 362(a) and takes effect automatically upon the filing of a bankruptcy petition, without the need for any separate court order.

Scope. The scope of the receivership stay is defined by the specific language of the court's order. The stay may be narrower or broader than the federal bankruptcy stay, depending on the terms the appointing court chooses to include. In this case, the Sangamon County order contains broad language staying "all creditors, claimants, and other parties" from "commencing or continuing any action, proceeding, or enforcement effort against [PBGC] or any of its assets." By comparison, the federal bankruptcy stay under § 362(a) has comprehensive statutory reach, covering virtually all acts against the debtor or property of the estate, including the commencement or continuation of judicial, administrative, or other proceedings, the enforcement of judgments, acts to obtain possession of or exercise control over property of the estate, acts to create, perfect, or enforce liens, and setoff of debts, among others.

Exceptions. The federal bankruptcy automatic stay is subject to a series of enumerated statutory exceptions set forth in 11 U.S.C. § 362(b), which exempt from the stay, inter alia, criminal proceedings against the debtor, certain governmental regulatory actions, certain family law proceedings, and specific types of financial transactions. The receivership stay, by contrast, has no standard set of statutory exceptions; any exceptions depend entirely on the language of the specific court order. If the Sangamon County order does not enumerate exceptions, none exist unless the court subsequently modifies the order.

Sanctions for Violation. A violation of the federal bankruptcy automatic stay can result in damages (including actual damages, costs, and attorneys' fees), sanctions, and the voiding of actions taken in violation of the stay. See 11 U.S.C. § 362(k). A violation of the receivership stay constitutes contempt of the court that entered the Receivership Order—in this case, the Circuit Court of Sangamon County—and may be punished by contempt sanctions, including fines and, in extreme cases, incarceration.

Duration. The receivership stay remains in effect during the pendency of the receivership or until the court modifies or dissolves it. There is no fixed statutory termination date. The federal bankruptcy automatic stay continues until the case is closed, the case is dismissed, or a discharge is granted or denied, whichever occurs first. See 11 U.S.C. § 362(c).

Relief from Stay. A party subject to the receivership stay may petition the Sangamon County court for relief from the stay for cause shown. The standard for relief is within the court's equitable discretion. Similarly, under 11 U.S.C. § 362(d), a party in interest may request relief from the federal bankruptcy stay for cause, including the lack of adequate protection of an interest in property, or where the debtor has no equity in the property and the property is not necessary for an effective reorganization.

It is also important to note that PBGC has not filed for federal bankruptcy protection. The receivership is a state-court equitable proceeding, not a federal bankruptcy case. However, if PBGC were to file a petition under the Bankruptcy Code at any point during the receivership, the federal bankruptcy case would effectively supersede the state-court receivership, and the federal automatic stay under § 362 would replace the state-court receivership stay. Under such circumstances, the receiver's authority would likely be subject to the supervision of the bankruptcy court, and the receiver might be required to turn over the estate's assets to a bankruptcy trustee. GAP should be alert to any such filing, though at present there is no indication that a federal bankruptcy filing is imminent.

C. Whether GAP Can Seek Relief from the Stay

GAP could, in theory, petition the Circuit Court of Sangamon County for relief from the automatic stay to continue the Cook County collection action against PBGC. Such a motion would need to demonstrate cause for lifting the stay—for example, that GAP's claim involves issues unique to the parties that would be more efficiently resolved in the Cook County forum, or that the receivership process would cause undue delay or prejudice to GAP.

However, I do not recommend pursuing this option, for the following reasons:

First, the fundamental purpose of the receivership stay is to prevent individual creditors from obtaining priority through separate litigation, and a court is unlikely to grant relief that would undermine this core purpose. The Sangamon County court entered the stay precisely to ensure that all claims against PBGC are resolved within the receivership, and allowing GAP to continue its Cook County action would be inconsistent with the court's clear intent.

Second, even if GAP were permitted to continue the Cook County action and obtain a judgment against PBGC, that judgment would still be subject to the receivership's distribution scheme. A judgment against PBGC would not entitle GAP to levy on PBGC's assets outside the receivership or to leapfrog ahead of other unsecured creditors in the priority of distributions. The judgment would, at most, serve to liquidate GAP's claim amount for purposes of the receivership distribution—a function that can be equally well accomplished through the proof of claim process.

Third, the cost of petitioning for relief from the stay—including motion practice, briefing, and a hearing in Sangamon County—would likely outweigh any marginal benefit. GAP's claim is well-documented and supported by clear contractual terms, invoices, and delivery records. There is no reason to believe that the receiver will dispute the validity or amount of GAP's claim, and the proof of claim process should be sufficient to establish GAP's entitlement to a distribution.

For all of these reasons, I recommend that GAP not seek relief from the receivership stay.

V. GAP's Options for Asserting Claims in the Receivership

A. Filing a Proof of Claim

GAP should promptly file a Proof of Claim in the Sangamon County receivership proceeding, Case No. 2022-CH-001247, asserting its full claim against PBGC. The Proof of Claim should set forth the nature and basis of GAP's claim, the total amount claimed, and the supporting documentation. Specifically, the claim should include the following components:

Principal. The total outstanding principal on the five unpaid invoices is $4,870,050.00, as set forth in the table in Section II.A above. Each invoice reflects a documented delivery of agricultural commodities that was accepted by PBGC and for which payment was due under the Off-Take Agreement.

Accrued Interest. Pursuant to Section 7.3 of the Off-Take Agreement, past-due invoices accrue interest at the rate of 1.5% per month (equivalent to 18% per annum), calculated from the date each invoice became due. Based on the due dates of the five invoices and the accrual of interest through December 31, 2022, the estimated total accrued interest is approximately $492,341. A detailed interest calculation spreadsheet should be prepared and attached as an exhibit to the Proof of Claim.

Attorneys' Fees and Costs. Section 12.4 of the Off-Take Agreement contains a prevailing-party fee-shifting provision, which entitles the prevailing party in any action to enforce the agreement to recover its reasonable attorneys' fees and costs. Through January 31, 2023 (the estimated date by which the Proof of Claim will be filed), total Calderwood & Harkness professional fees incurred in connection with this matter are estimated at $287,415.50, and total costs and disbursements (including filing fees, service costs, court reporter fees, and related expenses) are estimated at $14,622.35, for a total of $302,037.85.

Total Claim. The total Proof of Claim amount is approximately $5,664,428.85, consisting of $4,870,050.00 in principal, $492,341.00 in accrued interest, and $302,037.85 in attorneys' fees and costs.

The Proof of Claim should be supported by the following documentation:

(a) The Off-Take Agreement dated March 15, 2019, including all exhibits and amendments thereto;

(b) The five unpaid invoices (GAP-2021-3187, GAP-2021-3244, GAP-2021-3301, GAP-2021-3358, and GAP-2022-0042);

(c) Delivery and acceptance records (bills of lading, weigh tickets, and PBGC acknowledgments of receipt) for each of the five deliveries;

(d) GAP's pre-suit demand letter dated April 11, 2022;

(e) Forbearance correspondence exchanged between GAP and PBGC (through respective counsel) in April and May 2022;

(f) A detailed interest calculation spreadsheet showing the accrual of interest at 1.5% per month from each invoice's due date through December 31, 2022;

(g) A summary of Calderwood & Harkness professional fees and costs incurred through January 31, 2023, together with the relevant fee-shifting provision (Section 12.4 of the Off-Take Agreement); and

(h) A copy of the Cook County Complaint and relevant pleadings, demonstrating that GAP has actively pursued its claim.

I recommend that the Proof of Claim be filed promptly. Although the receiver has not yet established a formal claims bar date, it is reasonable to anticipate that a bar date will be set in the near term—likely within 60 to 90 days of the Receivership Order. Filing the Proof of Claim early ensures that GAP's rights are preserved, demonstrates GAP's diligence and good faith, and positions GAP to participate in any early creditor communications or distributions.

B. Classification and Priority of GAP's Claim

GAP's claim will be classified as a general unsecured trade creditor claim. GAP does not hold a security interest, lien, or other priority position in any of PBGC's assets. GAP's claim arises from ordinary-course trade credit extended in connection with the sale and delivery of agricultural commodities, and GAP did not obtain or perfect any security interest in PBGC's assets in connection with the Off-Take Agreement.

This classification has significant implications for GAP's likely recovery. The receivership will distribute the proceeds of PBGC's assets in accordance with the priority scheme established by applicable law and the Receivership Order. That priority scheme, in relevant part, is as follows:

1. Administrative expenses of the receivership — including the receiver's fees and expenses, receiver's counsel fees, and costs of administering the estate;

2. Secured claims — principally HPB's senior secured claim of approximately $31.4 million, to the extent of the value of HPB's collateral;

3. Priority unsecured claims — if any (e.g., certain tax claims, employee wage claims);

4. General unsecured claims — including GAP's claim and the claims of other trade creditors; and

5. Equity interests — Darren K. Musgrave (72% owner) and any other equity holders.

Given the estimated financial condition of PBGC—with total liabilities of approximately $58 to $62 million and total assets of approximately $35 to $40 million—the shortfall is substantial. HPB's secured claim of approximately $31.4 million will consume the vast majority of the available assets. After satisfaction of HPB's claim and payment of administrative expenses, there is likely to be little or no remaining value for distribution to general unsecured creditors.

The potential sources of recovery for unsecured creditors include the following:

Surplus After HPB's Secured Claim. If the receiver is able to liquidate PBGC's assets for an amount in excess of HPB's secured claim (approximately $31.4 million) and administrative expenses, the surplus would be available for distribution to unsecured creditors. However, given the estimated total asset value of $35 to $40 million, the surplus—if any—is likely to be modest.

Triton Mutual Insurance Proceeds. The outcome of PBGC's pending coverage litigation against Triton Mutual Insurance Company could have a material impact on the receivership estate. If PBGC prevails and recovers the full $3.2 million in insurance proceeds for the Macon County fire loss, those proceeds could free up other assets for distribution to unsecured creditors, depending on whether the insurance proceeds are subject to HPB's security interest. This is a contingent and uncertain source of recovery.

Avoidance Actions and Preference Claims. The receiver may pursue avoidance actions or preference claims against parties who received payments or other transfers from PBGC in the period preceding the receivership, to the extent such transfers are recoverable under applicable Illinois law. Any recoveries from such actions would augment the receivership estate and could improve prospects for unsecured creditors. At this time, we have no information about whether the receiver intends to pursue such claims or the magnitude of any potential recoveries.

Realistic Assessment. Based on the information currently available, the realistic assessment is that recovery for general unsecured creditors in the receivership is likely to be modest—potentially in the range of cents on the dollar, and potentially zero if the surplus after HPB's secured claim and administrative expenses is insufficient. The exact recovery will depend on numerous variables, including the receiver's success in maximizing asset values through orderly liquidation, the outcome of the Triton Mutual insurance coverage dispute, and the total pool of allowed unsecured claims. GAP's total claim of approximately $5.66 million represents a significant unsecured claim, but it will share pro rata with all other allowed unsecured claims.

C. Monitoring the Receivership

Given the uncertainty surrounding recovery prospects and the potential for developments that could materially affect GAP's interests, Calderwood & Harkness should actively monitor all proceedings in the Sangamon County receivership. Specifically, I recommend the following:

Monitor Filings and Reports. C&H should monitor all filings in Case No. 2022-CH-001247, including the receiver's periodic reports to the court, any motions for authority to sell assets, any proposed distribution plans, and any objections to claims. We should arrange to receive electronic notifications of all docket activity, if the Sangamon County Circuit Clerk's office provides such a service, or alternatively make periodic inquiries of the receiver's counsel.

Attend Creditor Meetings and Hearings. To the extent the receiver convenes creditor meetings or the court schedules hearings on significant matters (such as asset sales, distribution proposals, or claims objections), C&H should attend—either in person or by telephone/video—to protect GAP's interests and to stay informed of developments.

Review Receiver's Reports. The Receivership Order requires the receiver to provide periodic reports to the court and to creditors. These reports should contain information about the value and status of PBGC's assets, the progress of any liquidation activities, the status of the Triton Mutual insurance litigation, and the receiver's assessment of distribution prospects. We should carefully review each report for information relevant to GAP's claim and recovery prospects.

Creditors' Committee. If the receiver or the court establishes a creditors' committee to represent the interests of unsecured creditors, GAP should consider whether to participate. Participation on a creditors' committee can provide greater access to information and a voice in key decisions (such as asset sales, settlement proposals, and distribution plans), but it also entails additional time and expense. The decision should be made in consultation with GAP's management based on the size and complexity of the receivership and GAP's proportional stake.

VI. Status of the Musgrave Guaranty Claim (Count II)

A. Scope of the Receivership Stay as to Musgrave

The Receivership Order appoints a receiver over PBGC and its assets. Critically, it does not place Darren K. Musgrave individually into receivership. The receiver's authority extends to PBGC's business, assets, and operations—not to the personal assets or obligations of PBGC's individual owner.

Count II of the Cook County Complaint asserts a claim for breach of the Musgrave Guaranty, which is a personal obligation of Darren K. Musgrave, individually, independent of PBGC's obligations. The Musgrave Guaranty (Exhibit D to the Off-Take Agreement) is an absolute and unconditional guaranty of payment, not of collection, subject to an aggregate cap of $2,000,000. Under the Musgrave Guaranty, Musgrave's obligation to pay is triggered directly by PBGC's failure to pay—it does not require GAP to first exhaust remedies against PBGC or to obtain a judgment against PBGC. The Musgrave Guaranty is a separate contractual obligation between GAP and Musgrave as an individual guarantor; it is not an asset or obligation of the PBGC receivership estate.

As a general matter, a receivership stay entered with respect to a corporate debtor should not extend to stay claims against individual guarantors who are not themselves subject to the receivership. The stay is designed to protect the receivership estate—i.e., the debtor entity's assets—from dissipation through individual creditor actions. A personal guaranty obligation, by contrast, is an independent obligation of the guarantor and is not an asset of the corporate debtor's estate. The receiver has no authority or standing to administer or adjudicate claims against third parties, including individual guarantors, unless the receivership order specifically provides otherwise.

That said, the precise scope of the receivership stay in this case depends on the exact language of the Sangamon County order. Some receivership orders contain broad language that purports to stay not only actions against the receivership entity, but also actions against "the debtor's officers, directors, affiliates, members, managers, and guarantors." If the Sangamon County order contains language of this type, the stay could arguably extend to Musgrave in his capacity as a guarantor, even though he is not the entity in receivership.

We have obtained and reviewed a copy of the Receivership Order. The stay provision refers to actions against "Prairie Basin Grain Co., LLC, or any of its assets." It does not expressly reference guarantors, officers, directors, or affiliates. Based on this language, it is my preliminary analysis that the stay does not extend to bar GAP's claim against Musgrave under the Musgrave Guaranty. However, I recommend that we confirm this interpretation—either by seeking informal guidance from receiver's counsel, Joanna M. Lockridge, or, if necessary, by filing a motion for clarification with the Sangamon County court—before taking any affirmative steps to prosecute the Musgrave Guaranty claim.

B. Practical Considerations Regarding the Musgrave Claim

Even assuming that the receivership stay does not bar prosecution of the Musgrave Guaranty claim, there are several practical considerations that bear on whether and when to pursue that claim.

Musgrave's Lack of Counsel. Musgrave is currently without legal representation following the withdrawal of Bartlett, Reyes Linley CPAs LLP & Harkin LLP on November 18, 2022. Unlike PBGC, Musgrave as an individual may appear pro se in the Cook County action. However, the withdrawal of counsel suggests that Musgrave may be experiencing personal financial difficulties that could affect his ability to retain new counsel and to satisfy any judgment.

Guaranty Cap. The Musgrave Guaranty is subject to a cap of $2,000,000 in the aggregate. While this is a substantial sum, it represents less than 40% of GAP's total principal claim and less than 36% of GAP's total claim (including interest and fees). The Musgrave Guaranty, even if fully collected, would not make GAP whole. However, in light of the limited recovery prospects for unsecured creditors in the receivership, a recovery of $2,000,000—or any significant portion thereof—on the Musgrave Guaranty would be meaningful.

Musgrave's Personal Financial Condition. Musgrave's ability to satisfy a $2,000,000 guaranty judgment is uncertain. Musgrave owns 72% of PBGC's equity interests, which are now likely worthless given PBGC's insolvency. If Musgrave's personal wealth was concentrated in his PBGC ownership, his net worth may have been severely impaired. On the other hand, Musgrave may hold other personal assets—real estate, investment accounts, or other business interests—that could be reached to satisfy a guaranty judgment. At this point, GAP does not have sufficient information about Musgrave's personal financial condition to make an informed decision about whether active prosecution of the guaranty claim is cost-effective.

discovery into Musgrave's Assets. If GAP decides to pursue the Musgrave Guaranty claim, it would be prudent to conduct discovery into Musgrave's personal assets and financial condition before investing significant additional resources in the litigation. Post-judgment discovery and asset-search investigations are also available, but obtaining pre-judgment information about collectability can inform the litigation strategy and prevent expenditure of resources on a claim that may ultimately prove uncollectable.

Recommendation. I recommend that GAP preserve the Musgrave Guaranty claim in full but defer active prosecution pending further analysis of three key issues: (1) the exact scope of the receivership stay language as it relates to guarantors (confirmed by review of the Receivership Order and, if necessary, by consultation with receiver's counsel or a motion for clarification); (2) Musgrave's personal financial condition and ability to satisfy a guaranty judgment (through informal investigation, asset searches, or, if warranted, formal discovery); and (3) whether pursuing Musgrave concurrently with the receivership is cost-effective for GAP, considering the anticipated costs of litigation against Musgrave weighed against the realistic prospects of collection.

Statute of Limitations. If the Cook County action is voluntarily dismissed without prejudice as to all defendants—including Musgrave—GAP's right to refile the Musgrave Guaranty claim will be preserved, subject to the applicable statute of limitations. The Musgrave Guaranty is a written contract governed by Illinois law, and the applicable limitations period is ten years under 735 ILCS 5/13-206. GAP's claim under the Musgrave Guaranty accrued no later than February 18, 2022 (the date the most recent invoice, GAP-2022-0042, became past due under the Off-Take Agreement's net-30 payment terms). Accordingly, the statute of limitations on the guaranty claim will not expire until February 18, 2032, providing GAP with ample time to investigate, assess, and, if warranted, refile the claim against Musgrave.

VII. Recommendations

Based on the foregoing analysis, I recommend the following course of action:

A. Immediate Steps

1. Comply with the Automatic Stay. GAP must immediately cease all litigation activity in the Cook County action, Case No. 2022-L-004831. No discovery may be propounded or enforced, no motions may be filed, and no affirmative steps may be taken to advance the litigation against PBGC while the receivership stay is in effect. This office has already suspended all active work on the Cook County litigation upon receipt of the receivership notice on December 19, 2022, and should continue to refrain from any activity that could be construed as a violation of the stay.

2. Contact Receiver's Counsel. GAP should promptly send a letter to the receiver's counsel, Joanna M. Lockridge of Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701, formally asserting GAP's claim against PBGC, providing a preliminary summary of the claim and its basis, and requesting information about the claims process and the anticipated claims bar date. I recommend that this letter be sent no later than January 10, 2023. The letter should also request that GAP and C&H be placed on the receiver's service and notice list to receive copies of all filings, reports, and communications issued in the receivership proceeding.

3. Prepare and File Proof of Claim. GAP should prepare and file a comprehensive Proof of Claim in Sangamon County Case No. 2022-CH-001247 asserting the full amount of its claim, including principal of $4,870,050.00, accrued interest of approximately $492,341.00, and attorneys' fees and costs of $302,037.85, for a total of approximately $5,664,428.85. The Proof of Claim should be supported by the documentation described in Section V.A above. I recommend that the Proof of Claim be filed as soon as practicable and in any event well in advance of any claims bar date established by the receiver.

4. Advise GAP Management. GAP's management—specifically Thomas R. Greenfield (Managing Member), Margaret A. Greenfield-Wu (Chief Operating Officer), and Caleb Jennings (Chief Financial Officer)—should be promptly advised of the receivership, the automatic stay, its impact on the Cook County collection action, and the realistic prospects for recovery. I recommend scheduling a conference call or in-person meeting during the first week of January 2023 to discuss the situation, present the available options, and obtain client direction on the recommended course of action. A separate client memorandum summarizing these issues in non-technical terms should be prepared and provided to GAP's management in advance of the meeting.

B. Voluntary Dismissal of the Cook County Action

I recommend that, after the Proof of Claim is filed in the Sangamon County receivership, GAP file a Notice of Voluntary Dismissal Without Prejudice as to all counts and all defendants in the Cook County action, Case No. 2022-L-004831, pursuant to 735 ILCS 5/2-1009.

A voluntary dismissal without prejudice will preserve GAP's right to refile the action at any future date, subject to the applicable statutes of limitations, if the receivership stay is lifted, the receivership is terminated, or GAP's claim is not fully satisfied through the receivership process. Maintaining the Cook County action on the court's docket serves no practical purpose while the automatic stay is in effect: GAP cannot prosecute the action, PBGC cannot appear (lacking counsel), and any judgment obtained would be unenforceable outside the receivership. Keeping the case open merely accrues administrative costs and creates a risk—however remote—that GAP could inadvertently take an action that violates the stay.

Under 735 ILCS 5/2-1009, a plaintiff may voluntarily dismiss an action without prejudice at any time before trial, as of right, if no counterclaim has been filed. PBGC and Musgrave did not file any counterclaim in the Cook County action; their responsive pleading consisted of an Answer and Affirmative Defenses only. Accordingly, GAP's right to voluntary dismissal without prejudice is clear and should not be contested.

The dismissal should encompass all four counts and all defendants, including Musgrave. Although GAP may wish to preserve the Musgrave Guaranty claim for future prosecution, dismissal without prejudice achieves this goal while simplifying the procedural posture. As discussed in Section VI.B above, the ten-year statute of limitations on the written guaranty claim provides ample time for GAP to investigate Musgrave's financial condition and refile the claim if warranted.

C. Musgrave Guaranty

GAP should take the following steps with respect to the Musgrave Guaranty claim:

1. Preserve the Claim. GAP must not release, waive, settle, or otherwise compromise the Musgrave Guaranty claim without careful analysis and a deliberate decision that doing so is in GAP's best interest. The claim should be expressly preserved in any correspondence, dismissal filings, or communications with the receiver, receiver's counsel, or Musgrave.

2. Monitor the Statute of Limitations. The ten-year statute of limitations under 735 ILCS 5/13-206 for written contracts governs the Musgrave Guaranty claim. The claim accrued no later than February 18, 2022, giving GAP until February 18, 2032, to refile. This date should be calendared and tracked by both C&H and GAP.

3. Investigate Musgrave's Financial Condition. Before making a decision about whether to refile the Musgrave Guaranty claim, GAP should conduct an investigation into Musgrave's personal assets and financial condition. This investigation could include public records searches (real property records, UCC filings, litigation searches), asset-search services, and, if GAP decides to refile, formal discovery directed at Musgrave's personal finances.

4. Retain Right to Refile Independently. If the voluntary dismissal of the Cook County action covers all defendants including Musgrave, GAP retains the right to refile the Musgrave Guaranty claim independently—i.e., in a separate action solely against Musgrave—at any time before the statute of limitations expires. This flexibility may be valuable, as GAP can choose the timing and forum for the guaranty claim based on the results of its investigation into Musgrave's financial condition and the outcome of the receivership.

D. Ongoing Monitoring

1. Receivership Proceedings. C&H should monitor all filings, reports, and proceedings in Sangamon County Case No. 2022-CH-001247 on an ongoing basis. Key events to monitor include the establishment of a claims bar date, the filing of the receiver's initial and periodic reports, any proposed asset sales or distributions, any objections to claims, and any motions to terminate or modify the receivership.

2. Triton Mutual Insurance Litigation. C&H should track the status and outcome of PBGC's pending coverage litigation against Triton Mutual Insurance Company. A favorable outcome for PBGC in that litigation could yield up to $3.2 million in insurance proceeds, which could augment the receivership estate and potentially improve recovery prospects for unsecured creditors. Conversely, an unfavorable outcome would confirm that the fire loss is uninsured and further diminish the available asset base.

3. Local Counsel. GAP should consider whether to retain local counsel in Springfield, Illinois, to monitor the receivership proceedings, attend hearings, and coordinate with receiver's counsel on GAP's behalf. Alternatively, C&H could request that Lockridge Payne LLP (receiver's counsel) provide formal notices of all receivership filings and hearings, which would reduce the need for separate local counsel but would not provide independent advocacy on GAP's behalf. I recommend discussing this option with GAP's management to balance cost considerations against the benefits of active participation in the receivership.

VIII. Conclusion

The Receivership Order entered on December 12, 2022, by the Circuit Court of Sangamon County effectively prevents GAP from continuing its Cook County collection action against PBGC. The automatic stay bars all pending litigation and enforcement efforts against PBGC and its assets, and GAP must comply with the stay immediately and in full.

GAP's best course of action is to assert its full claim—totaling approximately $5,664,428.85 in principal, accrued interest, and attorneys' fees and costs—through the receivership process by filing a Proof of Claim in Sangamon County Case No. 2022-CH-001247, and to voluntarily dismiss the Cook County action without prejudice pursuant to 735 ILCS 5/2-1009. The dismissal without prejudice preserves all of GAP's rights and eliminates the administrative burden and risk associated with maintaining a stayed action on the Cook County docket.

Recovery prospects for general unsecured creditors in the receivership appear limited. HPB's senior secured claim of approximately $31.4 million will consume the vast majority of PBGC's estimated $35 to $40 million in assets. After satisfaction of HPB's claim and the payment of administrative expenses, there is likely to be little remaining value for distribution to unsecured creditors. The outcome of the Triton Mutual insurance coverage dispute and any avoidance actions pursued by the receiver could improve these prospects, but the realistic expectation at this time is that unsecured creditor recovery will be modest at best.

The Musgrave Guaranty claim, with its $2,000,000 cap, should be preserved as a potential alternative or supplemental source of recovery. The guaranty is a personal obligation of Darren K. Musgrave and is likely not subject to the receivership stay, though the precise scope of the stay language should be confirmed before any action is taken. Musgrave's personal financial condition is uncertain and requires investigation before GAP can make an informed decision about the cost-effectiveness of pursuing the guaranty claim. The ten-year statute of limitations under 735 ILCS 5/13-206 provides ample time for this investigation.

A detailed client memorandum recommending these steps should be prepared and transmitted to GAP's management promptly, ideally before the end of December 2022 or during the first week of January 2023, to ensure that GAP's management is fully informed and can provide direction on the recommended course of action.

I am available to discuss this analysis and the recommended next steps at your convenience.

Hannah Brinkley, Associate Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606

cc: File (Matter No. 1020-00005)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and other authorized personnel of Calderwood & Harkness LLP in connection with the representation of Greenfield Agricultural Partners LLC. Do not distribute, copy, or disclose to any third party without prior authorization.

Invoice No.	Amount	Description
GAP-2021-3187	$892,500.00	Corn delivery, September 2021
GAP-2021-3244	$936,750.00	Corn delivery, October 2021
GAP-2021-3301	$1,224,000.00	Soybean delivery, November 2021
GAP-2021-3358	$741,600.00	Corn delivery, December 2021
GAP-2022-0042	$1,075,200.00	Soybean delivery, January 2022
Total	$4,870,050.00

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Francesca Morano, Partner
FROM: Hannah Brinkley, Associate
DATE: December 22, 2022
RE: Analysis of Receivership Order and Automatic Stay — Impact on Greenfield Agricultural Partners LLC v. Prairie Basin Grain Co. et al., Circuit Court of Cook County, Case No. 2022-L-004831
MATTER NO.: C&H Matter No. 1020-00005
CLIENT: Greenfield Agricultural Partners LLC ("GAP")
I. Executive Summary
On December 12, 2022, the Circuit Court of Sangamon County, Illinois entered an Order Appointing Receiver over Prairie Basin Grain Co. ("PBGC") in Case No. 2022-CH-001247 (the "Receivership Order"). The court appointed Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, 500 East Monroe Street, Suite 300, Springfield, Illinois 62701, as receiver for all assets and operations of PBGC. The receivership was initiated by Heartland Prairie Bank, N.A. ("HPB"), PBGC's senior secured lender, which filed a Verified Petition for Appointment of Receiver on November 28, 2022, following PBGC's protracted default under its credit facility. GAP received formal notice of the Receivership Order and the accompanying automatic stay on December 19, 2022.
The Receivership Order includes a broad automatic stay of all pending litigation, proceedings, and enforcement efforts against PBGC or its assets. This stay directly and materially affects GAP's pending collection action in the Circuit Court of Cook County, Case No. 2022-L-004831, which asserts claims for breach of the Off-Take Agreement, account stated, unjust enrichment, and breach of personal guaranty against PBGC and its principal, Darren K. Musgrave.
This memorandum analyzes: (1) the scope and effect of the receivership stay on the Cook County action; (2) the key distinctions between the Illinois state-court receivership stay and the federal automatic stay under 11 U.S.C. § 362 of the Bankruptcy Code; (3) GAP's options for asserting its claims within the receivership proceeding in Sangamon County; and (4) whether the Musgrave Guaranty claim (Count II of the Cook County Complaint) may be pursued independently outside the receivership.
Based on my analysis, the key conclusions and recommendations are as follows. First, GAP should promptly file a Proof of Claim in the Sangamon County receivership proceeding asserting the full amount of its claim—including principal, accrued interest, and attorneys' fees and costs—totaling approximately $5,664,428.85. Second, GAP should consider voluntarily dismissing the Cook County action without prejudice pursuant to 735 ILCS 5/2-1009, as the stay renders continued prosecution of that action both impermissible and futile, and dismissal without prejudice preserves all of GAP's rights. Third, with respect to Count II, the Musgrave Guaranty claim is potentially not stayed because it is a personal obligation of Darren K. Musgrave and not an obligation of the receivership estate; however, practical considerations—including Musgrave's uncertain financial condition and the need to confirm the precise language of the stay provision—counsel in favor of preserving that claim while deferring active prosecution pending further investigation. Recovery prospects for unsecured creditors in the receivership appear limited, which makes the Musgrave Guaranty a potentially significant alternative or supplemental source of recovery.
II. Background
A. The Cook County Collection Action
On May 9, 2022, GAP filed a four-count Complaint in the Circuit Court of Cook County, Illinois, Law Division, Case No. 2022-L-004831, assigned to the Honorable Patricia Delacroix. The action arises out of PBGC's failure to make payments for agricultural commodities delivered by GAP under an Off-Take Agreement dated March 15, 2019 (the "Off-Take Agreement"), pursuant to which GAP agreed to supply, and PBGC agreed to purchase and pay for, specified quantities of corn and soybeans at agreed-upon pricing terms. The four counts of the Complaint are as follows:
Count I — Breach of Contract (Off-Take Agreement) against PBGC. GAP alleges that PBGC breached its payment obligations under the Off-Take Agreement by failing to pay for five separate deliveries of grain commodities. The total principal amount outstanding on the five unpaid invoices is $4,870,050.00. Pursuant to Section 7.3 of the Off-Take Agreement, past-due invoices accrue interest at the rate of 1.5% per month (equivalent to 18% per annum), calculated from the date each invoice became due.
Count II — Breach of Personal Guaranty against Darren K. Musgrave. GAP alleges that Darren K. Musgrave, the president, managing member, and majority owner of PBGC, executed a personal guaranty of PBGC's payment obligations under the Off-Take Agreement (the "Musgrave Guaranty," attached as Exhibit D to the Off-Take Agreement). The Musgrave Guaranty is an absolute and unconditional guaranty of payment, not merely of collection, and is subject to a cap of $2,000,000 in the aggregate. GAP alleges that Musgrave's obligations under the Musgrave Guaranty have been triggered by PBGC's failure to pay.
Count III — Account Stated against PBGC. GAP alleges that, through a course of dealing and PBGC's retention of invoices without objection, an account stated exists between GAP and PBGC reflecting a balance due to GAP of $4,870,050.00, and that PBGC has failed and refused to pay the stated account.
Count IV — Unjust Enrichment (Alternative) against PBGC. As an alternative theory of recovery, GAP alleges that PBGC received and accepted delivery of agricultural commodities from GAP, benefited from the same, and has been unjustly enriched by retaining the benefit of those commodities without payment, in the amount of $4,870,050.00.
The five unpaid invoices underlying the claims are as follows:
Each invoice carried standard net-30 payment terms as specified in the Off-Take Agreement. The earliest invoice (GAP-2021-3187) became past due in October 2021, and the most recent invoice (GAP-2022-0042) became past due in approximately February 2022. GAP made multiple informal and formal demands for payment prior to initiating litigation, including a formal pre-suit demand letter dated April 11, 2022, and forbearance correspondence exchanged through counsel in April and early May of 2022.
B. Procedural History of the Cook County Action
Service of the Summons and Complaint was completed on May 24, 2022. PBGC was served through its registered agent, Ridgeline Corporate Services LLC, in accordance with Illinois statutory requirements for service on a domestic limited liability company. Darren K. Musgrave was served personally at his residence at 1188 Windermere Lane, Champaign, Illinois 61822.
On June 27, 2022, PBGC and Musgrave, through the law firm of Bartlett, Reyes Linley CPAs LLP & Harkin LLP (lead partner Douglas M. Harkin; associate Nadia C. Petrov), filed a joint Answer and Affirmative Defenses. In the Answer, defendants admitted the existence of the Off-Take Agreement and the Musgrave Guaranty, but denied the amounts owed and asserted three affirmative defenses: (1) force majeure, based on alleged supply-chain disruptions and commodity market volatility arising from the COVID-19 pandemic and related economic disruptions; (2) commercial impracticability under Illinois common law and UCC § 2-615, on substantially the same factual basis; and (3) failure to mitigate, alleging that GAP failed to take reasonable steps to resell the commodities delivered to PBGC or otherwise reduce its damages.
GAP filed a Motion to Strike Affirmative Defenses on July 15, 2022, arguing that the force majeure and commercial impracticability defenses were legally insufficient as a matter of law because (a) the Off-Take Agreement's force majeure clause (Section 9.1) did not encompass general market conditions or commodity price fluctuations, (b) PBGC's payment obligations are not excused by impracticability under well-settled Illinois law, and (c) the factual predicates alleged did not rise to the level of impracticability in any event. On August 22, 2022, Judge Delacroix granted the motion in part and denied it in part: the force majeure and commercial impracticability defenses were stricken as legally insufficient, while the failure-to-mitigate defense survived as adequately pleaded.
A Case Management Conference was held on September 12, 2022, at which the court entered a scheduling order setting deadlines for fact discovery, expert discovery, and dispositive motions. GAP proceeded diligently with discovery, serving its First Set of Interrogatories (20 interrogatories) and First Request for Production of Documents (35 categories of documents) on PBGC and Musgrave on September 30, 2022. GAP also served Requests for Admission on October 14, 2022, seeking admissions regarding the authenticity and accuracy of the five invoices, the delivery and acceptance of the commodities, and the terms of the Off-Take Agreement and Musgrave Guaranty.
On November 4, 2022, Bartlett, Reyes Linley CPAs LLP & Harkin LLP filed a Motion to Withdraw as Counsel for PBGC and Musgrave, citing PBGC's failure to pay legal fees. The motion was supported by an affidavit of Douglas M. Harkin attesting to repeated demands for payment of outstanding legal fees and PBGC's inability or refusal to satisfy those obligations. Judge Delacroix granted the motion on November 18, 2022, after a brief hearing. As of the date of this memorandum, both PBGC and Musgrave are unrepresented by counsel. Notably, as an Illinois limited liability company, PBGC cannot appear or defend itself pro se—Illinois law requires that a corporate or limited liability company entity be represented by a licensed attorney in all court proceedings. See 735 ILCS 5/2-1301(d); Rein v. David A. Noyes & Co., 172 Ill. App. 3d 201, 204 (1st Dist. 1988). Musgrave, as an individual, may appear pro se, though he has not taken any steps to do so.
Discovery responses from PBGC and Musgrave—including responses to the First Set of Interrogatories, the First Request for Production of Documents, and the Requests for Admission—remain outstanding and are past due. GAP had been preparing a motion to compel prior to receiving notice of the receivership and the automatic stay. That motion is now stayed along with all other proceedings against PBGC.
C. PBGC's Financial Distress
PBGC's current financial distress is the product of several compounding adverse events that occurred in rapid succession beginning in late 2021.
Fire at Macon County Elevator Facility. On October 17, 2021, a fire severely damaged PBGC's grain elevator facility located at 2200 County Road 1400 East, Decatur, Illinois 62521 (Macon County). The fire resulted in the destruction of a significant quantity of stored grain inventory and caused structural damage to the elevator itself. The estimated total loss from the fire was approximately $3.2 million. PBGC carried property and casualty insurance through Triton Mutual Insurance Company ("Triton Mutual"); however, Triton Mutual has disputed coverage on the ground that PBGC allegedly allowed its premium payments to lapse prior to the fire. Separate coverage litigation between PBGC and Triton Mutual is pending, and the outcome of that dispute remains uncertain. The loss of the Macon County facility significantly reduced PBGC's storage capacity and operational capability.
Failed Hedging Strategy. In the fourth quarter of 2021, PBGC suffered catastrophic losses on a short corn futures hedging strategy. As corn prices rose sharply during Q4 2021 due to a combination of export demand, reduced crop estimates, and broader inflationary pressures, PBGC's short futures positions resulted in estimated mark-to-market losses of approximately $6.8 million. These losses, combined with margin calls, severely strained PBGC's liquidity.
Cessation of Trade Creditor Payments. Beginning in approximately January 2022, PBGC ceased making payments to its trade creditors, including GAP. GAP's five unpaid invoices span the period from September 2021 through January 2022 and reflect PBGC's deteriorating financial condition during this period.
Default Under HPB Credit Facility. In April 2022, Heartland Prairie Bank, N.A. formally declared PBGC in default under the Revolving Credit and Term Loan Agreement dated June 1, 2018 (the "Credit Agreement"), which provided an aggregate commitment of $45 million consisting of a revolving credit facility and a term loan. At the time of default, HPB's outstanding balance under the Credit Agreement was approximately $31.4 million. HPB's security interest, perfected under UCC Article 9, encumbers substantially all of PBGC's assets, including accounts receivable, inventory, equipment, real property interests, general intangibles, and proceeds of the foregoing.
Current Financial Condition. Based on information available as of November 2022, PBGC's total liabilities are estimated at approximately $58 to $62 million, while its total assets are estimated at approximately $35 to $40 million. This represents a significant shortfall, particularly for unsecured creditors. HPB's senior secured claim of approximately $31.4 million will consume the vast majority—if not all—of PBGC's available assets, leaving limited or no recovery for unsecured trade creditors such as GAP.
III. The Receivership Order
A. Procedural Posture of the Receivership
On November 28, 2022, Heartland Prairie Bank, N.A. filed a Verified Petition for Appointment of Receiver (the "Petition") in the Circuit Court of Sangamon County, Illinois, Case No. 2022-CH-001247. The Petition was filed in the Chancery Division, reflecting the equitable nature of receivership proceedings under Illinois law.
HPB filed the Petition in its capacity as PBGC's senior secured lender. HPB holds a perfected security interest under UCC Article 9 in substantially all of PBGC's assets, including but not limited to accounts receivable, inventory (including all grain and agricultural commodities in storage or in transit), equipment, fixtures, real property interests, general intangibles, deposit accounts, investment property, and all proceeds and products of the foregoing. HPB's security interest was perfected by the filing of UCC-1 financing statements with the Illinois Secretary of State and, as to real property, by the recording of mortgages and deeds of trust in the applicable county recording offices. HPB's outstanding balance under the Credit Agreement at the time of default was approximately $31.4 million, against an aggregate facility commitment of $45 million.
The Petition alleged that PBGC was in material default under the Credit Agreement, that PBGC was insolvent or in imminent danger of insolvency, that PBGC's assets were being wasted or diminished in value, and that the appointment of a receiver was necessary to preserve the assets for the benefit of all creditors and to ensure an orderly liquidation or restructuring of PBGC's business. The Petition was supported by the affidavit of Ronald P. Stratton, Senior Vice President and Chief Lending Officer of HPB.
After a hearing on December 12, 2022—at which PBGC appeared through interim counsel solely for purposes of the receivership proceeding—the Sangamon County court entered the Order Appointing Receiver. The court appointed Gareth J. Whitmore, CPA, CIRA, of Whitmore Strauss Advisory LLC, as receiver for all assets and operations of PBGC. Mr. Whitmore is a certified public accountant and a Certified Insolvency and Restructuring Advisor with extensive experience in receivership and insolvency matters. The receiver's counsel is Joanna M. Lockridge of Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701.
B. Key Provisions of the Receivership Order
The Receivership Order is comprehensive in scope and grants the receiver broad powers and authority over PBGC's assets, operations, and affairs. The key provisions relevant to GAP's interests are as follows:
Possession, Custody, and Control. The Receivership Order grants the receiver immediate possession, custody, and control of all assets of PBGC, including all real and personal property, contracts, accounts receivable, inventory (including all grain and agricultural supplies in storage at PBGC's elevator facilities), equipment, vehicles, bank accounts, deposit accounts, investment accounts, books and records, intellectual property, permits, licenses, and all other assets of every kind and nature, wherever located.
Authority to Operate and Liquidate. The receiver is authorized, in his discretion, to continue to operate PBGC's business to the extent necessary to preserve the value of its assets, to collect outstanding accounts receivable, to sell or otherwise liquidate assets in an orderly manner for the benefit of creditors, and to take all actions reasonably necessary to administer the receivership estate.
Automatic Stay. The Receivership Order imposes a broad automatic stay of all pending actions, proceedings, and enforcement efforts against PBGC or its assets during the pendency of the receivership. The stay language provides, in relevant part, that "all creditors, claimants, and other parties are hereby stayed and enjoined from commencing or continuing any action, proceeding, or enforcement effort against [PBGC] or any of its assets, and from taking any action to obtain possession of, or exercise control over, property of the receivership estate." This stay provision is a standard feature of Illinois receivership orders and serves the equitable purpose of ensuring that no individual creditor obtains a preference or priority over other similarly situated creditors through the pursuit of individual collection actions.
Claims Process. The Receivership Order directs all creditors to assert their claims against PBGC through the receivership proceeding. The order provides that the receiver shall establish a claims bar date and a claims process, and that creditors will be required to file proofs of claim setting forth the nature and amount of their claims and supporting documentation. The order reserves jurisdiction to the Sangamon County court to adjudicate all disputes regarding the validity, amount, priority, and classification of creditor claims.
Periodic Reporting. The receiver is required to provide periodic reports to the court and to creditors regarding the status of the receivership estate, including information about the receiver's administration of assets, collections, liquidation activities, operating expenses, and distribution prospects.
Priority of HPB's Secured Claims. The Receivership Order specifically addresses the priority of HPB's claims, acknowledging HPB's status as a senior secured creditor with a perfected security interest in substantially all of PBGC's assets. The order provides that HPB's secured claim shall be paid in full before any distribution to unsecured creditors, to the extent of the value of HPB's collateral, consistent with applicable law.
C. Notice to GAP
GAP received formal notice of the Receivership Order and the automatic stay on December 19, 2022. The notice was sent by the receiver's counsel, Lockridge Payne LLP, to GAP's principal business address and, separately, to Calderwood & Harkness LLP as counsel of record for GAP in the Cook County action. The notice directed all creditors to immediately cease all collection efforts and litigation activities against PBGC, and to contact the receiver or receiver's counsel to obtain information about the claims process and to file proofs of claim. The notice also advised creditors that violation of the automatic stay could result in sanctions, including contempt of the Sangamon County court.
Upon receipt of the notice, this office immediately ceased all litigation activity in the Cook County action, including suspending preparation of the motion to compel discovery responses that had been in progress at the time.
IV. Analysis of the Automatic Stay
A. Scope and Effect on the Cook County Action
The automatic stay imposed by the Sangamon County Receivership Order bars GAP from continuing to prosecute its claims against PBGC in the Cook County action. Specifically, the stay prevents GAP from pursuing Counts I, III, and IV of the Complaint—that is, the breach of contract, account stated, and unjust enrichment claims, all of which are asserted against PBGC—in Case No. 2022-L-004831. While the stay is in effect, GAP may not pursue discovery against PBGC, file motions directed at PBGC, seek entry of default or default judgment against PBGC, or take any other affirmative step to prosecute or advance the litigation against PBGC. The stay equally applies to the enforcement of any judgment that GAP might otherwise obtain against PBGC; even if a judgment had been entered prior to the Receivership Order, GAP would be barred from levying on PBGC's assets or otherwise collecting on that judgment outside the receivership.
As a practical matter, the stay's effect on the Cook County action is largely academic with respect to the PBGC claims. Even before the Receivership Order was entered, the Cook County litigation had effectively stalled. PBGC's counsel, Bartlett, Reyes Linley CPAs LLP & Harkin LLP, withdrew on November 18, 2022, leaving PBGC unrepresented. Because PBGC is a limited liability company organized under Illinois law, it cannot appear pro se and must be represented by a licensed attorney in all court proceedings. See 735 ILCS 5/2-1301(d). Absent retained counsel, PBGC could not have participated in discovery, filed responsive pleadings or motions, or appeared at hearings or trial. GAP's outstanding discovery requests remained unanswered, and PBGC was, in practical terms, in default of its discovery obligations. The receivership and the accompanying stay have now formalized what was already an effective litigation standstill.
The stay also serves a broader equitable purpose: it prevents any individual creditor from obtaining priority or a preferential position relative to other unsecured creditors through the pursuit of separate collection actions. In an insolvency context, this is critical. If the stay were not in effect, the most aggressive or best-positioned creditor could obtain a judgment and levy on PBGC's remaining assets, to the detriment of other similarly situated creditors. The receivership stay ensures that all claims against PBGC are channeled through the receivership, where they will be adjudicated and satisfied on a pro rata basis in accordance with established priority principles.
B. Distinction from Federal Bankruptcy Automatic Stay
Because GAP's management and advisors may be more familiar with the federal bankruptcy automatic stay under 11 U.S.C. § 362, it is important to identify the key distinctions between the Illinois state-court receivership stay and the federal bankruptcy stay. Although the two mechanisms serve broadly similar purposes—protecting the debtor's assets and ensuring an orderly claims process—they differ in significant respects.
Source of Authority. The Illinois receivership stay is an equitable remedy imposed by the appointing court through its specific order. It derives its authority from the court's inherent equitable powers and from Illinois statutory and common law governing receiverships. See 735 ILCS 5/2-415; People ex rel. Burris v. Progressive Land Developers, Inc., 151 Ill. 2d 285, 296 (1992). By contrast, the federal bankruptcy automatic stay arises by operation of statute under 11 U.S.C. § 362(a) and takes effect automatically upon the filing of a bankruptcy petition, without the need for any separate court order.
Scope. The scope of the receivership stay is defined by the specific language of the court's order. The stay may be narrower or broader than the federal bankruptcy stay, depending on the terms the appointing court chooses to include. In this case, the Sangamon County order contains broad language staying "all creditors, claimants, and other parties" from "commencing or continuing any action, proceeding, or enforcement effort against [PBGC] or any of its assets." By comparison, the federal bankruptcy stay under § 362(a) has comprehensive statutory reach, covering virtually all acts against the debtor or property of the estate, including the commencement or continuation of judicial, administrative, or other proceedings, the enforcement of judgments, acts to obtain possession of or exercise control over property of the estate, acts to create, perfect, or enforce liens, and setoff of debts, among others.
Exceptions. The federal bankruptcy automatic stay is subject to a series of enumerated statutory exceptions set forth in 11 U.S.C. § 362(b), which exempt from the stay, inter alia, criminal proceedings against the debtor, certain governmental regulatory actions, certain family law proceedings, and specific types of financial transactions. The receivership stay, by contrast, has no standard set of statutory exceptions; any exceptions depend entirely on the language of the specific court order. If the Sangamon County order does not enumerate exceptions, none exist unless the court subsequently modifies the order.
Sanctions for Violation. A violation of the federal bankruptcy automatic stay can result in damages (including actual damages, costs, and attorneys' fees), sanctions, and the voiding of actions taken in violation of the stay. See 11 U.S.C. § 362(k). A violation of the receivership stay constitutes contempt of the court that entered the Receivership Order—in this case, the Circuit Court of Sangamon County—and may be punished by contempt sanctions, including fines and, in extreme cases, incarceration.
Duration. The receivership stay remains in effect during the pendency of the receivership or until the court modifies or dissolves it. There is no fixed statutory termination date. The federal bankruptcy automatic stay continues until the case is closed, the case is dismissed, or a discharge is granted or denied, whichever occurs first. See 11 U.S.C. § 362(c).
Relief from Stay. A party subject to the receivership stay may petition the Sangamon County court for relief from the stay for cause shown. The standard for relief is within the court's equitable discretion. Similarly, under 11 U.S.C. § 362(d), a party in interest may request relief from the federal bankruptcy stay for cause, including the lack of adequate protection of an interest in property, or where the debtor has no equity in the property and the property is not necessary for an effective reorganization.
It is also important to note that PBGC has not filed for federal bankruptcy protection. The receivership is a state-court equitable proceeding, not a federal bankruptcy case. However, if PBGC were to file a petition under the Bankruptcy Code at any point during the receivership, the federal bankruptcy case would effectively supersede the state-court receivership, and the federal automatic stay under § 362 would replace the state-court receivership stay. Under such circumstances, the receiver's authority would likely be subject to the supervision of the bankruptcy court, and the receiver might be required to turn over the estate's assets to a bankruptcy trustee. GAP should be alert to any such filing, though at present there is no indication that a federal bankruptcy filing is imminent.
C. Whether GAP Can Seek Relief from the Stay
GAP could, in theory, petition the Circuit Court of Sangamon County for relief from the automatic stay to continue the Cook County collection action against PBGC. Such a motion would need to demonstrate cause for lifting the stay—for example, that GAP's claim involves issues unique to the parties that would be more efficiently resolved in the Cook County forum, or that the receivership process would cause undue delay or prejudice to GAP.
However, I do not recommend pursuing this option, for the following reasons:
First, the fundamental purpose of the receivership stay is to prevent individual creditors from obtaining priority through separate litigation, and a court is unlikely to grant relief that would undermine this core purpose. The Sangamon County court entered the stay precisely to ensure that all claims against PBGC are resolved within the receivership, and allowing GAP to continue its Cook County action would be inconsistent with the court's clear intent.
Second, even if GAP were permitted to continue the Cook County action and obtain a judgment against PBGC, that judgment would still be subject to the receivership's distribution scheme. A judgment against PBGC would not entitle GAP to levy on PBGC's assets outside the receivership or to leapfrog ahead of other unsecured creditors in the priority of distributions. The judgment would, at most, serve to liquidate GAP's claim amount for purposes of the receivership distribution—a function that can be equally well accomplished through the proof of claim process.
Third, the cost of petitioning for relief from the stay—including motion practice, briefing, and a hearing in Sangamon County—would likely outweigh any marginal benefit. GAP's claim is well-documented and supported by clear contractual terms, invoices, and delivery records. There is no reason to believe that the receiver will dispute the validity or amount of GAP's claim, and the proof of claim process should be sufficient to establish GAP's entitlement to a distribution.
For all of these reasons, I recommend that GAP not seek relief from the receivership stay.
V. GAP's Options for Asserting Claims in the Receivership
A. Filing a Proof of Claim
GAP should promptly file a Proof of Claim in the Sangamon County receivership proceeding, Case No. 2022-CH-001247, asserting its full claim against PBGC. The Proof of Claim should set forth the nature and basis of GAP's claim, the total amount claimed, and the supporting documentation. Specifically, the claim should include the following components:
Principal. The total outstanding principal on the five unpaid invoices is $4,870,050.00, as set forth in the table in Section II.A above. Each invoice reflects a documented delivery of agricultural commodities that was accepted by PBGC and for which payment was due under the Off-Take Agreement.
Accrued Interest. Pursuant to Section 7.3 of the Off-Take Agreement, past-due invoices accrue interest at the rate of 1.5% per month (equivalent to 18% per annum), calculated from the date each invoice became due. Based on the due dates of the five invoices and the accrual of interest through December 31, 2022, the estimated total accrued interest is approximately $492,341. A detailed interest calculation spreadsheet should be prepared and attached as an exhibit to the Proof of Claim.
Attorneys' Fees and Costs. Section 12.4 of the Off-Take Agreement contains a prevailing-party fee-shifting provision, which entitles the prevailing party in any action to enforce the agreement to recover its reasonable attorneys' fees and costs. Through January 31, 2023 (the estimated date by which the Proof of Claim will be filed), total Calderwood & Harkness professional fees incurred in connection with this matter are estimated at $287,415.50, and total costs and disbursements (including filing fees, service costs, court reporter fees, and related expenses) are estimated at $14,622.35, for a total of $302,037.85.
Total Claim. The total Proof of Claim amount is approximately $5,664,428.85, consisting of $4,870,050.00 in principal, $492,341.00 in accrued interest, and $302,037.85 in attorneys' fees and costs.
The Proof of Claim should be supported by the following documentation:
(a) The Off-Take Agreement dated March 15, 2019, including all exhibits and amendments thereto;
(b) The five unpaid invoices (GAP-2021-3187, GAP-2021-3244, GAP-2021-3301, GAP-2021-3358, and GAP-2022-0042);
(c) Delivery and acceptance records (bills of lading, weigh tickets, and PBGC acknowledgments of receipt) for each of the five deliveries;
(d) GAP's pre-suit demand letter dated April 11, 2022;
(e) Forbearance correspondence exchanged between GAP and PBGC (through respective counsel) in April and May 2022;
(f) A detailed interest calculation spreadsheet showing the accrual of interest at 1.5% per month from each invoice's due date through December 31, 2022;
(g) A summary of Calderwood & Harkness professional fees and costs incurred through January 31, 2023, together with the relevant fee-shifting provision (Section 12.4 of the Off-Take Agreement); and
(h) A copy of the Cook County Complaint and relevant pleadings, demonstrating that GAP has actively pursued its claim.
I recommend that the Proof of Claim be filed promptly. Although the receiver has not yet established a formal claims bar date, it is reasonable to anticipate that a bar date will be set in the near term—likely within 60 to 90 days of the Receivership Order. Filing the Proof of Claim early ensures that GAP's rights are preserved, demonstrates GAP's diligence and good faith, and positions GAP to participate in any early creditor communications or distributions.
B. Classification and Priority of GAP's Claim
GAP's claim will be classified as a general unsecured trade creditor claim. GAP does not hold a security interest, lien, or other priority position in any of PBGC's assets. GAP's claim arises from ordinary-course trade credit extended in connection with the sale and delivery of agricultural commodities, and GAP did not obtain or perfect any security interest in PBGC's assets in connection with the Off-Take Agreement.
This classification has significant implications for GAP's likely recovery. The receivership will distribute the proceeds of PBGC's assets in accordance with the priority scheme established by applicable law and the Receivership Order. That priority scheme, in relevant part, is as follows:
1. Administrative expenses of the receivership — including the receiver's fees and expenses, receiver's counsel fees, and costs of administering the estate;
2. Secured claims — principally HPB's senior secured claim of approximately $31.4 million, to the extent of the value of HPB's collateral;
3. Priority unsecured claims — if any (e.g., certain tax claims, employee wage claims);
4. General unsecured claims — including GAP's claim and the claims of other trade creditors; and
5. Equity interests — Darren K. Musgrave (72% owner) and any other equity holders.
Given the estimated financial condition of PBGC—with total liabilities of approximately $58 to $62 million and total assets of approximately $35 to $40 million—the shortfall is substantial. HPB's secured claim of approximately $31.4 million will consume the vast majority of the available assets. After satisfaction of HPB's claim and payment of administrative expenses, there is likely to be little or no remaining value for distribution to general unsecured creditors.
The potential sources of recovery for unsecured creditors include the following:
Surplus After HPB's Secured Claim. If the receiver is able to liquidate PBGC's assets for an amount in excess of HPB's secured claim (approximately $31.4 million) and administrative expenses, the surplus would be available for distribution to unsecured creditors. However, given the estimated total asset value of $35 to $40 million, the surplus—if any—is likely to be modest.
Triton Mutual Insurance Proceeds. The outcome of PBGC's pending coverage litigation against Triton Mutual Insurance Company could have a material impact on the receivership estate. If PBGC prevails and recovers the full $3.2 million in insurance proceeds for the Macon County fire loss, those proceeds could free up other assets for distribution to unsecured creditors, depending on whether the insurance proceeds are subject to HPB's security interest. This is a contingent and uncertain source of recovery.
Avoidance Actions and Preference Claims. The receiver may pursue avoidance actions or preference claims against parties who received payments or other transfers from PBGC in the period preceding the receivership, to the extent such transfers are recoverable under applicable Illinois law. Any recoveries from such actions would augment the receivership estate and could improve prospects for unsecured creditors. At this time, we have no information about whether the receiver intends to pursue such claims or the magnitude of any potential recoveries.
Realistic Assessment. Based on the information currently available, the realistic assessment is that recovery for general unsecured creditors in the receivership is likely to be modest—potentially in the range of cents on the dollar, and potentially zero if the surplus after HPB's secured claim and administrative expenses is insufficient. The exact recovery will depend on numerous variables, including the receiver's success in maximizing asset values through orderly liquidation, the outcome of the Triton Mutual insurance coverage dispute, and the total pool of allowed unsecured claims. GAP's total claim of approximately $5.66 million represents a significant unsecured claim, but it will share pro rata with all other allowed unsecured claims.
C. Monitoring the Receivership
Given the uncertainty surrounding recovery prospects and the potential for developments that could materially affect GAP's interests, Calderwood & Harkness should actively monitor all proceedings in the Sangamon County receivership. Specifically, I recommend the following:
Monitor Filings and Reports. C&H should monitor all filings in Case No. 2022-CH-001247, including the receiver's periodic reports to the court, any motions for authority to sell assets, any proposed distribution plans, and any objections to claims. We should arrange to receive electronic notifications of all docket activity, if the Sangamon County Circuit Clerk's office provides such a service, or alternatively make periodic inquiries of the receiver's counsel.
Attend Creditor Meetings and Hearings. To the extent the receiver convenes creditor meetings or the court schedules hearings on significant matters (such as asset sales, distribution proposals, or claims objections), C&H should attend—either in person or by telephone/video—to protect GAP's interests and to stay informed of developments.
Review Receiver's Reports. The Receivership Order requires the receiver to provide periodic reports to the court and to creditors. These reports should contain information about the value and status of PBGC's assets, the progress of any liquidation activities, the status of the Triton Mutual insurance litigation, and the receiver's assessment of distribution prospects. We should carefully review each report for information relevant to GAP's claim and recovery prospects.
Creditors' Committee. If the receiver or the court establishes a creditors' committee to represent the interests of unsecured creditors, GAP should consider whether to participate. Participation on a creditors' committee can provide greater access to information and a voice in key decisions (such as asset sales, settlement proposals, and distribution plans), but it also entails additional time and expense. The decision should be made in consultation with GAP's management based on the size and complexity of the receivership and GAP's proportional stake.
VI. Status of the Musgrave Guaranty Claim (Count II)
A. Scope of the Receivership Stay as to Musgrave
The Receivership Order appoints a receiver over PBGC and its assets. Critically, it does not place Darren K. Musgrave individually into receivership. The receiver's authority extends to PBGC's business, assets, and operations—not to the personal assets or obligations of PBGC's individual owner.
Count II of the Cook County Complaint asserts a claim for breach of the Musgrave Guaranty, which is a personal obligation of Darren K. Musgrave, individually, independent of PBGC's obligations. The Musgrave Guaranty (Exhibit D to the Off-Take Agreement) is an absolute and unconditional guaranty of payment, not of collection, subject to an aggregate cap of $2,000,000. Under the Musgrave Guaranty, Musgrave's obligation to pay is triggered directly by PBGC's failure to pay—it does not require GAP to first exhaust remedies against PBGC or to obtain a judgment against PBGC. The Musgrave Guaranty is a separate contractual obligation between GAP and Musgrave as an individual guarantor; it is not an asset or obligation of the PBGC receivership estate.
As a general matter, a receivership stay entered with respect to a corporate debtor should not extend to stay claims against individual guarantors who are not themselves subject to the receivership. The stay is designed to protect the receivership estate—i.e., the debtor entity's assets—from dissipation through individual creditor actions. A personal guaranty obligation, by contrast, is an independent obligation of the guarantor and is not an asset of the corporate debtor's estate. The receiver has no authority or standing to administer or adjudicate claims against third parties, including individual guarantors, unless the receivership order specifically provides otherwise.
That said, the precise scope of the receivership stay in this case depends on the exact language of the Sangamon County order. Some receivership orders contain broad language that purports to stay not only actions against the receivership entity, but also actions against "the debtor's officers, directors, affiliates, members, managers, and guarantors." If the Sangamon County order contains language of this type, the stay could arguably extend to Musgrave in his capacity as a guarantor, even though he is not the entity in receivership.
We have obtained and reviewed a copy of the Receivership Order. The stay provision refers to actions against "Prairie Basin Grain Co., LLC, or any of its assets." It does not expressly reference guarantors, officers, directors, or affiliates. Based on this language, it is my preliminary analysis that the stay does not extend to bar GAP's claim against Musgrave under the Musgrave Guaranty. However, I recommend that we confirm this interpretation—either by seeking informal guidance from receiver's counsel, Joanna M. Lockridge, or, if necessary, by filing a motion for clarification with the Sangamon County court—before taking any affirmative steps to prosecute the Musgrave Guaranty claim.
B. Practical Considerations Regarding the Musgrave Claim
Even assuming that the receivership stay does not bar prosecution of the Musgrave Guaranty claim, there are several practical considerations that bear on whether and when to pursue that claim.
Musgrave's Lack of Counsel. Musgrave is currently without legal representation following the withdrawal of Bartlett, Reyes Linley CPAs LLP & Harkin LLP on November 18, 2022. Unlike PBGC, Musgrave as an individual may appear pro se in the Cook County action. However, the withdrawal of counsel suggests that Musgrave may be experiencing personal financial difficulties that could affect his ability to retain new counsel and to satisfy any judgment.
Guaranty Cap. The Musgrave Guaranty is subject to a cap of $2,000,000 in the aggregate. While this is a substantial sum, it represents less than 40% of GAP's total principal claim and less than 36% of GAP's total claim (including interest and fees). The Musgrave Guaranty, even if fully collected, would not make GAP whole. However, in light of the limited recovery prospects for unsecured creditors in the receivership, a recovery of $2,000,000—or any significant portion thereof—on the Musgrave Guaranty would be meaningful.
Musgrave's Personal Financial Condition. Musgrave's ability to satisfy a $2,000,000 guaranty judgment is uncertain. Musgrave owns 72% of PBGC's equity interests, which are now likely worthless given PBGC's insolvency. If Musgrave's personal wealth was concentrated in his PBGC ownership, his net worth may have been severely impaired. On the other hand, Musgrave may hold other personal assets—real estate, investment accounts, or other business interests—that could be reached to satisfy a guaranty judgment. At this point, GAP does not have sufficient information about Musgrave's personal financial condition to make an informed decision about whether active prosecution of the guaranty claim is cost-effective.
discovery into Musgrave's Assets. If GAP decides to pursue the Musgrave Guaranty claim, it would be prudent to conduct discovery into Musgrave's personal assets and financial condition before investing significant additional resources in the litigation. Post-judgment discovery and asset-search investigations are also available, but obtaining pre-judgment information about collectability can inform the litigation strategy and prevent expenditure of resources on a claim that may ultimately prove uncollectable.
Recommendation. I recommend that GAP preserve the Musgrave Guaranty claim in full but defer active prosecution pending further analysis of three key issues: (1) the exact scope of the receivership stay language as it relates to guarantors (confirmed by review of the Receivership Order and, if necessary, by consultation with receiver's counsel or a motion for clarification); (2) Musgrave's personal financial condition and ability to satisfy a guaranty judgment (through informal investigation, asset searches, or, if warranted, formal discovery); and (3) whether pursuing Musgrave concurrently with the receivership is cost-effective for GAP, considering the anticipated costs of litigation against Musgrave weighed against the realistic prospects of collection.
Statute of Limitations. If the Cook County action is voluntarily dismissed without prejudice as to all defendants—including Musgrave—GAP's right to refile the Musgrave Guaranty claim will be preserved, subject to the applicable statute of limitations. The Musgrave Guaranty is a written contract governed by Illinois law, and the applicable limitations period is ten years under 735 ILCS 5/13-206. GAP's claim under the Musgrave Guaranty accrued no later than February 18, 2022 (the date the most recent invoice, GAP-2022-0042, became past due under the Off-Take Agreement's net-30 payment terms). Accordingly, the statute of limitations on the guaranty claim will not expire until February 18, 2032, providing GAP with ample time to investigate, assess, and, if warranted, refile the claim against Musgrave.
VII. Recommendations
Based on the foregoing analysis, I recommend the following course of action:
A. Immediate Steps
1. Comply with the Automatic Stay. GAP must immediately cease all litigation activity in the Cook County action, Case No. 2022-L-004831. No discovery may be propounded or enforced, no motions may be filed, and no affirmative steps may be taken to advance the litigation against PBGC while the receivership stay is in effect. This office has already suspended all active work on the Cook County litigation upon receipt of the receivership notice on December 19, 2022, and should continue to refrain from any activity that could be construed as a violation of the stay.
2. Contact Receiver's Counsel. GAP should promptly send a letter to the receiver's counsel, Joanna M. Lockridge of Lockridge Payne LLP, 120 South Sixth Street, Suite 1800, Springfield, Illinois 62701, formally asserting GAP's claim against PBGC, providing a preliminary summary of the claim and its basis, and requesting information about the claims process and the anticipated claims bar date. I recommend that this letter be sent no later than January 10, 2023. The letter should also request that GAP and C&H be placed on the receiver's service and notice list to receive copies of all filings, reports, and communications issued in the receivership proceeding.
3. Prepare and File Proof of Claim. GAP should prepare and file a comprehensive Proof of Claim in Sangamon County Case No. 2022-CH-001247 asserting the full amount of its claim, including principal of $4,870,050.00, accrued interest of approximately $492,341.00, and attorneys' fees and costs of $302,037.85, for a total of approximately $5,664,428.85. The Proof of Claim should be supported by the documentation described in Section V.A above. I recommend that the Proof of Claim be filed as soon as practicable and in any event well in advance of any claims bar date established by the receiver.
4. Advise GAP Management. GAP's management—specifically Thomas R. Greenfield (Managing Member), Margaret A. Greenfield-Wu (Chief Operating Officer), and Caleb Jennings (Chief Financial Officer)—should be promptly advised of the receivership, the automatic stay, its impact on the Cook County collection action, and the realistic prospects for recovery. I recommend scheduling a conference call or in-person meeting during the first week of January 2023 to discuss the situation, present the available options, and obtain client direction on the recommended course of action. A separate client memorandum summarizing these issues in non-technical terms should be prepared and provided to GAP's management in advance of the meeting.
B. Voluntary Dismissal of the Cook County Action
I recommend that, after the Proof of Claim is filed in the Sangamon County receivership, GAP file a Notice of Voluntary Dismissal Without Prejudice as to all counts and all defendants in the Cook County action, Case No. 2022-L-004831, pursuant to 735 ILCS 5/2-1009.
A voluntary dismissal without prejudice will preserve GAP's right to refile the action at any future date, subject to the applicable statutes of limitations, if the receivership stay is lifted, the receivership is terminated, or GAP's claim is not fully satisfied through the receivership process. Maintaining the Cook County action on the court's docket serves no practical purpose while the automatic stay is in effect: GAP cannot prosecute the action, PBGC cannot appear (lacking counsel), and any judgment obtained would be unenforceable outside the receivership. Keeping the case open merely accrues administrative costs and creates a risk—however remote—that GAP could inadvertently take an action that violates the stay.
Under 735 ILCS 5/2-1009, a plaintiff may voluntarily dismiss an action without prejudice at any time before trial, as of right, if no counterclaim has been filed. PBGC and Musgrave did not file any counterclaim in the Cook County action; their responsive pleading consisted of an Answer and Affirmative Defenses only. Accordingly, GAP's right to voluntary dismissal without prejudice is clear and should not be contested.
The dismissal should encompass all four counts and all defendants, including Musgrave. Although GAP may wish to preserve the Musgrave Guaranty claim for future prosecution, dismissal without prejudice achieves this goal while simplifying the procedural posture. As discussed in Section VI.B above, the ten-year statute of limitations on the written guaranty claim provides ample time for GAP to investigate Musgrave's financial condition and refile the claim if warranted.
C. Musgrave Guaranty
GAP should take the following steps with respect to the Musgrave Guaranty claim:
1. Preserve the Claim. GAP must not release, waive, settle, or otherwise compromise the Musgrave Guaranty claim without careful analysis and a deliberate decision that doing so is in GAP's best interest. The claim should be expressly preserved in any correspondence, dismissal filings, or communications with the receiver, receiver's counsel, or Musgrave.
2. Monitor the Statute of Limitations. The ten-year statute of limitations under 735 ILCS 5/13-206 for written contracts governs the Musgrave Guaranty claim. The claim accrued no later than February 18, 2022, giving GAP until February 18, 2032, to refile. This date should be calendared and tracked by both C&H and GAP.
3. Investigate Musgrave's Financial Condition. Before making a decision about whether to refile the Musgrave Guaranty claim, GAP should conduct an investigation into Musgrave's personal assets and financial condition. This investigation could include public records searches (real property records, UCC filings, litigation searches), asset-search services, and, if GAP decides to refile, formal discovery directed at Musgrave's personal finances.
4. Retain Right to Refile Independently. If the voluntary dismissal of the Cook County action covers all defendants including Musgrave, GAP retains the right to refile the Musgrave Guaranty claim independently—i.e., in a separate action solely against Musgrave—at any time before the statute of limitations expires. This flexibility may be valuable, as GAP can choose the timing and forum for the guaranty claim based on the results of its investigation into Musgrave's financial condition and the outcome of the receivership.
D. Ongoing Monitoring
1. Receivership Proceedings. C&H should monitor all filings, reports, and proceedings in Sangamon County Case No. 2022-CH-001247 on an ongoing basis. Key events to monitor include the establishment of a claims bar date, the filing of the receiver's initial and periodic reports, any proposed asset sales or distributions, any objections to claims, and any motions to terminate or modify the receivership.
2. Triton Mutual Insurance Litigation. C&H should track the status and outcome of PBGC's pending coverage litigation against Triton Mutual Insurance Company. A favorable outcome for PBGC in that litigation could yield up to $3.2 million in insurance proceeds, which could augment the receivership estate and potentially improve recovery prospects for unsecured creditors. Conversely, an unfavorable outcome would confirm that the fire loss is uninsured and further diminish the available asset base.
3. Local Counsel. GAP should consider whether to retain local counsel in Springfield, Illinois, to monitor the receivership proceedings, attend hearings, and coordinate with receiver's counsel on GAP's behalf. Alternatively, C&H could request that Lockridge Payne LLP (receiver's counsel) provide formal notices of all receivership filings and hearings, which would reduce the need for separate local counsel but would not provide independent advocacy on GAP's behalf. I recommend discussing this option with GAP's management to balance cost considerations against the benefits of active participation in the receivership.
VIII. Conclusion
The Receivership Order entered on December 12, 2022, by the Circuit Court of Sangamon County effectively prevents GAP from continuing its Cook County collection action against PBGC. The automatic stay bars all pending litigation and enforcement efforts against PBGC and its assets, and GAP must comply with the stay immediately and in full.
GAP's best course of action is to assert its full claim—totaling approximately $5,664,428.85 in principal, accrued interest, and attorneys' fees and costs—through the receivership process by filing a Proof of Claim in Sangamon County Case No. 2022-CH-001247, and to voluntarily dismiss the Cook County action without prejudice pursuant to 735 ILCS 5/2-1009. The dismissal without prejudice preserves all of GAP's rights and eliminates the administrative burden and risk associated with maintaining a stayed action on the Cook County docket.
Recovery prospects for general unsecured creditors in the receivership appear limited. HPB's senior secured claim of approximately $31.4 million will consume the vast majority of PBGC's estimated $35 to $40 million in assets. After satisfaction of HPB's claim and the payment of administrative expenses, there is likely to be little remaining value for distribution to unsecured creditors. The outcome of the Triton Mutual insurance coverage dispute and any avoidance actions pursued by the receiver could improve these prospects, but the realistic expectation at this time is that unsecured creditor recovery will be modest at best.
The Musgrave Guaranty claim, with its $2,000,000 cap, should be preserved as a potential alternative or supplemental source of recovery. The guaranty is a personal obligation of Darren K. Musgrave and is likely not subject to the receivership stay, though the precise scope of the stay language should be confirmed before any action is taken. Musgrave's personal financial condition is uncertain and requires investigation before GAP can make an informed decision about the cost-effectiveness of pursuing the guaranty claim. The ten-year statute of limitations under 735 ILCS 5/13-206 provides ample time for this investigation.
A detailed client memorandum recommending these steps should be prepared and transmitted to GAP's management promptly, ideally before the end of December 2022 or during the first week of January 2023, to ensure that GAP's management is fully informed and can provide direction on the recommended course of action.
I am available to discuss this analysis and the recommended next steps at your convenience.
Hannah Brinkley, Associate Calderwood & Harkness LLP 225 West Wacker Drive, Suite 4000 Chicago, Illinois 60606
cc: File (Matter No. 1020-00005)
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and other authorized personnel of Calderwood & Harkness LLP in connection with the representation of Greenfield Agricultural Partners LLC. Do not distribute, copy, or disclose to any third party without prior authorization.
Invoice No. | Amount | Description
GAP-2021-3187 | $892,500.00 | Corn delivery, September 2021
GAP-2021-3244 | $936,750.00 | Corn delivery, October 2021
GAP-2021-3301 | $1,224,000.00 | Soybean delivery, November 2021
GAP-2021-3358 | $741,600.00 | Corn delivery, December 2021
GAP-2022-0042 | $1,075,200.00 | Soybean delivery, January 2022
Total | $4,870,050.00

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

Record

Parties

Dates

Amounts