The Court hereby makes the following Findings of Fact and Conclusions of Law as a result of this Court's hearing on the Plaintiff's Motion for Preliminary Injunction held on the 13th day of May, 1993.


1. This Court has jurisdiction over the above-captioned action pursuant to 28 U.S.C. 157(b)(2) as it is a core proceeding and deals with the subject of violation of the automatic stay pursuant to 11 U.S.C. 362 and the general power of the United States Bankruptcy Court pursuant to 11 U.S.C. 105.

2. The Defendants, Fred G. Neikirk, Benny E. Ham and Luther Eaton are either attorneys or their principal place of business located within Pulaski County, Kentucky, or residents of Pulaski County, Kentucky, which is within the jurisdiction of the United States District Court for the Eastern District of Kentucky thereby providing venue for this Court.

3. Sim/Lake Cumberland, Inc ("SIM") is a corporation organized and existing under the laws of the Commonwealth of Kentucky and acting as the Debtor and Debtor-in-Possession in the above-captioned bankruptcy, having filed its petition for relief on the 15th day of October, 1992, and continues to operate its business and its affairs pursuant to 11 U.S.C. 1107 and 1108 of the United States Bankruptcy Code.

4. On or about the 3rd day of September, 1992, Eaton came to SIM to purchase a boat.

5. Eaton negotiated with Chris Terry, a sales person employed by SIM, and SIM and Eaton agreed that:

a. Eaton would purchase a used 1990 Gemini Model 17 boat (Serial No. TNP00324M990);

b. Eaton would transfer to SIM and pay to SIM:

i. A 1968 Evinrude (Serial No. 28288); and

ii. Four Thousand Five Hundred ($4,500.00) Dollars.

6. Within three (3) business days from the 3rd day of September, 1992, Eaton delivered the 1968 Evinrude and Four Thousand Five Hundred ($4,500.00) Dollars cash to SIM and took possession of the 1990 Gemini.

7. SIM deposited the sum of Four Thousand Five Hundred ($4,500.00) Dollars in an operational checking account located at The Citizens National Bank of Somerset ("CNB").

8. SIM was required to pay the sum of Six Thousand Five Hundred ($6,500.00) Dollars to CNB for the payoff amount on the Gemini under the floor plan for with CNB. Under previous business practice, SIM proposed the payment of Four Thousand Five Hundred ($4,500.00) Dollars by SIM, as well as CNB floor planning the trade-in Evinrude boat for the difference.

9. The plaintiff claims that on or about September 28, 1993, representatives of SIM met with employees of CNB at which time CNB was placed on notice that SIM was making a special deposit. SIM further claims that it requested that CNB not set-off or otherwise take any action against the deposit and that CNB agreed not to take any action against the deposit.

10. Thereafter CNB placed a hold on SIM's account and took all sums therein.

11. The Defendant Neikirk, was aware of the protection of SIM in filing its bankruptcy petition and seeking relief pursuant to 11 U.S.C. 1101, et. seq., prior to the 20th day of April, 1993.

12. On or about the 20th day of April, 1993, Eaton was presented to the Grand Jury of Pulaski County for testimony. On the same day, John Waller as General Manager of SIM, was served with a subpoena to appear before the Grand Jury on the 21st day of April, 1993. Waller appeared before the Grand Jury as required by the subpoena. Mr. Farris, of CNB, also testified before the Grand Jury of Pulaski County.

13. On the 27th day of April, 1993, Indictment No. 93-CR-00110-002 was filed in the Pulaski Circuit Court against Sycamore Island Marine, Inc., Dick Stewart, Owner/Chief Executive Officer, and John Waller, General Partner on two (2) counts, being:

a. Count I - Theft by Deception under KRS 514.040; and

b. Count II - Theft by Unlawful Taking or Disposition over Three Hundred ($300.00) Dollars pursuant to KRS 514.030.

14. The Defendant, Eaton, testified before this Court that his purpose in testifying before the Grand Jury was for the sole purpose of getting a Certificate of Origin from SIM, and CNB, so that he could utilize the boat that he had purchased from SIM.

15. There was no evidence that Stewart, as the President and Chief Executive Officer of the corporation, knew, or had reason to know of, the transaction between the Defendant, Eaton, and SIM at the time it took place, nor that he gave any direction regarding the same.

16. The Defendant, Neikirk, testified before this Court, as did Mr. Waller, General Manager of SIM, that there were negotiations between Mr. Neikirk and Mr. Waller for an alternative boat to be given to Mr. Eaton so that he may obtain a Certificate of Origin and license the boat.

17. This Court finds that the action of prosecuting Waller and Stewart was for the purpose of acquiring a Certificate of Origin for the 1990 Gemini boat purchased by Eaton from SIM and the same was the primary motivation for the testimony before the Grand Jury and the issuance of the indictment.

18. The Court further finds that the presence of Waller and Stewart are imperative to the reorganization of SIM, as their decisions regarding the reorganization process are imperative and crucial to any possible success of reorganization by the Debtor.

Based upon the foregoing Findings of Fact, this Court concludes as a matter of law that:

1. The Defendant, Eaton, was a buyer in the ordinary course of business seeking to purchase goods from a merchant dealing in goods of that kind. To that extent, KRS 355.9-307 states that:

(1) A buyer in ordinary course of business, subsection 9 of KRS 355.0-201, other than a person buying farm products from a person engaged in farming operations takes free of a security interest created by a seller even though the security interest is perfected and even though the buyer knows of its existence.

2. Being a buyer in the ordinary course of business, and not buying farm products from a person engaged in farming operations, the Defendant, Eaton, took the 1990 Gemini free and clear of any and all liens of CNB, regardless of the differences existing between CNB and SIM.

3. The testimony of the Defendant Eaton, leaves no other alternative to this Court except to conclude that the primary motivation and purpose in going before the Grand Jury was to extract a Certificate of Origin from CNB and/or SIM so that Eaton would be able to utilize his boat during the boating season.

4. Under the law of the Commonwealth of Kentucky as defined by case authority, the conclusion of this Court as to the principal motivation of Eaton shows that this is a civil action and matter, rather than criminal. See, Smith v. Kidd, 246 S.W.2d. 155 (1951); Flynn v. Songer, Ky., 399 S.W.2d. 491 (1966); and Figuccion v. Prudential Insurance Company of America, 273 Ky., 287, 116 S.W.2d. 291 (1938).

5. This Court pursuant to 11 U.S.C. 105, has the authority to enter injunctive relief when it affects the property of the bankruptcy estate, State of Missouri v. United States Bankruptcy Court, Etc., 647 F.2d. 768 (8th Cir. 768), or where necessary to carry out the provisions of the Bankruptcy Code, Howard v. Allard, 122 B.R. 696 (W.D.Ky. 1991).

6. As this Court has the authority to protect the integrity of the bankruptcy process, and not be hindered with criminal actions which are instead true civil causes of action, this Court concludes as a matter of law that it must enjoin the criminal prosecution of the Debtor and/or its principals or officers which would unduly interfere with the administration of the debtor's estate. In re Alan I. W. Frank Corporation, 19 B.R. 41 (Bkrtcy.E.D.Pa. 1982).

A separate order of preliminary injunction will be entered herein.

Dated this ______ day of _____________________, 1993.







Bruce D. Atherton, Esq.

Benny E. Ham, Esq.

Fred G. Neikirk, Esq.

Luther Eaton