This matter is before the court on the motion of the debtor in possession, Phoenix Corporation, formerly Calumet Farm, Inc., for summary judgment determining that the defendants D. Wayne Lukas, Janice Heinz, Susan McGee, J.T. Lundy, Robert Perez, Northern Equine Thoroughbred Production, Ltd., Equine Capital Corporation, Matchmaker Financial Corporation, and Citizens Fidelity Bank, have no interest in the bankruptcy estate's interest in the proceeds of sale of the stallion CRIMINAL TYPE.

FINDINGS OF FACT:

Prior to September 15, 1987, CRIMINAL TYPE, a colt then racing in France, was wholly owned by the debtor, Calumet Farm, Inc. On September 15, 1987, the debtor sold a 25% interest in the colt to Calumet-Gussin No. 1, a Kentucky limited partnership. The Agreement of Purchase and Bill of Sale gave J.T. Lundy, the president of Calumet Farm, Inc., the exclusive right and authority to manage and supervise the boarding, training, development, racing, and subsequent breeding of the colt.

On February 8, 1990, Calumet Farm, Inc. sold another 25% interest in CRIMINAL TYPE to Jurgen Arnemann. The Agreement of Purchase and Sale provided that upon retirement from racing the colt would be delivered to Calumet Farm at Lexington, Kentucky to commence a breeding career. Under the terms of the agreement, from and after delivery of CRIMINAL TYPE to Calumet Farm to stand at stud, J.T. Lundy was to serve as thoroughbred manager. The agreement also provided that "[i]n the event of the death or incapacity of the Thoroughbred Manager or his resignation or discharge as the principal officer of Calumet, CRIMINAL TYPE shall nonetheless remain in the possession of Calumet for the purpose of continuing his breeding activities with the duties of Thoroughbred Manager to be assumed by J.T. Lundy's successor, as designated by Calumet."

The Agreement of Purchase and Sale between Calumet Farm, Inc. and Arnemann accorded lifetime breeding rights to CRIMINAL TYPE without cost to certain individuals as follows:

PART III - BREEDING RIGHTS - ANNUAL NOMINATIONS

D. Wayne Lukas was the trainer of CRIMINAL TYPE during the colt's racing career. Janice Heinz and Susan McGee were office employees of Calumet Farm, Inc. Gary R. Matthews was an attorney for the debtor.

J. T. Lundy resigned or his employment as president of Calumet Farm, Inc. was terminated in March or April of 1991.

Both Calumet Farm, Inc. and Calumet-Gussin No. 1 filed petitions for relief under chapter 11 of the Bankruptcy Code in this court on July 11, 1991, and as debtors in possession commenced orderly liquidation of the assets of the debtors. After the sale of Calumet Farm and the sale or relocation of the thoroughbred horses owned by the corporation, the debtor, Calumet Farm, Inc., changed its name to Phoenix Corporation, and is operating as debtor in possession under that name.

Phoenix Corporation commenced this adversary proceeding on June 26, 1992.

On July 14, 1992, both debtors in possession, Phoenix Corporation and Calumet-Gussin No. 1, filed a joint motion for an order authorizing sale of their respective 50% and 25% interests in the stallion CRIMINAL TYPE for $2,850,000 - $1,900,000 payable to Phoenix and $950,000 payable to Calumet-Gussin. After notice and hearing the motion was sustained. An order was entered July 30, 1992, authorizing the sale to the purchaser, Thoroughbred Breeders Club Co., 962 Tomikawa, Monbetsu-cho Saru-gun, Hokkaido, Japan. Concomitantly, Jurgen Arnemann, by separate agreement, sold his 25% interest in the stallion to the purchaser. Presumably, the stallion has been moved to Japan.

Phoenix was directed to place the $1,900,000 received by it, after payment of its share of the expenses for upkeep of the stallion, in an interest bearing escrow account pending further orders of the court. The $950,000 payable to Calumet-Gussin, after deduction of the partnership's share of the expenses for upkeep of the stallion, was paid directly to The Riggs National Bank, which held a perfected security interest in Calumet-Gussin's 25% interest in the stallion. The sale of the interests of the estates of the debtors in the stallion was free and clear of all claims, liens and encumbrances. Any claims, liens and encumbrances against Phoenix's interest in the stallion are attached to Phoenix's share of the proceeds of the sale.

An agreed order was entered January 20, 1994, whereby the defendant D. Wayne Lukas relinquished any and all claims and causes of action against Calumet arising out of his alleged breeding rights in CRIMINAL TYPE. He was dismissed as a defendant in this action and his counterclaims herein were likewise dismissed.

Pursuant to agreed orders entered on January 20, 1994 and April 11, 1994, the defendant Robert Perez was found to have no interest in the CRIMINAL TYPE sale proceeds. Perez released any and all claims and causes of action against Calumet arising out of his alleged breeding rights in CRIMINAL TYPE.

An agreed order was entered on February 4, 1994 acknowledging that the defendant Northern Equine Thoroughbred Productions, Ltd. claims no interest or lien on the proceeds of the sale of CRIMINAL TYPE. The claims of the debtor in possession against Northern Equine and Northern Equine's claims against the debtor were dismissed with prejudice.

The defendants Equine Capital Corporation, Matchmaker Financial Corporation and Citizens Fidelity Bank & Trust Company are creditors of J. T. Lundy. Each claims a security interest in Lundy's breeding rights to CRIMINAL TYPE to secure payment of indebtedness owed to them by J. T. Lundy. The rights of these entities in and to the escrowed proceeds from the sale or CRIMINAL TYPE hinge on Lundy's interest therein.

On August 1, 1992, the defendants Janice Heinz and Susan McGee moved for an extension of time within which to answer or otherwise respond to the complaint herein. They were allowed until August 31, 1992 to respond. On August 26, 1992, Heinz and McGee moved for an order dismissing all causes of action against them in this adversary proceeding as moot on the grounds they had sold and assigned all their right, title and interest in and to the stallion CRIMINAL TYPE to Thoroughbred Breeders Club Co., the purchaser of the interests of Calumet, Calumet-Gussin, and Jurgen Arnemann in the stallion.

The plaintiff debtor in possession opposed this motion because of an unresolved issue regarding the obligation of the defendants Heinz and McGee to pay the debtor in possession the sum of $15,000 each for the exercise of their 1992 breeding rights to CRIMINAL TYPE pursuant to the terms of an agreed order entered in the Calumet Farm, Inc. bankruptcy case on March 25, 1992.

The agreed order provided that Heinz and McGee each would pay the debtor in possession $15,000 for breeding a mare to CRIMINAL TYPE during the 1992 breeding season if the breeding produced a foal that stood alone and nursed, and if the court determines "that claimants (or either of them) are not entitled to utilize said Lifetime Breeding Rights ... without paying the stud fee thereon...."

By their answer and counterclaim herein Heinz and McGee allege they each own one lifetime breeding right in and to the stallion CRIMINAL TYPE and therefore they each are entitled to breed one mare during each breeding season to CRIMINAL TYPE without cost during the lifetime of the stallion. They further allege that as a result of the sale of CRIMINAL TYPE to Thoroughbred Breeders Club Co. they each should be paid the fair market value, as determined by the court, of one lifetime breeding right from the proceeds derived from the sale of CRIMINAL TYPE to Thoroughbred Breeders Club Co.

CONCLUSIONS OF LAW:

The court agrees that in this matter the unresolved controversies between the debtor in possession and the defendants Janice Heinz and Susan McGee, and the debtor in possession and the defendants J. T. Lundy and his creditors, are controlled by the prior decision of the court on September 16, 1993, in adversary proceeding no. 92-5048, styled Phoenix Corporation, formerly known as Calumet Farm, Inc. v. Hill 'N Dale Farm of Gormley, Ontario, Canada, et al.

In that matter Heinz and McGee argued that a breeding right to a stallion, whether characterized as a contractual right or otherwise, constitutes a fractional interest in the stallion which entitled them to share in the proceeds from the sale of the stallion. This court, and the district court on appeal, rejected that argument, holding that Heinz and McGee had only unsecured claims against the debtor's estate. For the reasons stated in its prior opinion the court reaches the same conclusion in this case.

In this case, under the terms of the Agreement of Purchase and Bill of Sale dated February 8, 1990, Part III 1(c), J. T. Lundy was to receive four annual breeding nominations as compensation for his services as Thoroughbred Manager. His right to such compensation ceased when his employment by Calumet Farm, Inc. was terminated. Moreover, even if this were not so his entitlement to such breeding rights did not vest in him, any more so than did the breeding rights accorded to others by the agreement, an ownership interest in CRIMINAL TYPE.

The motion of the debtor in possession for summary judgment finding that the defendants Janice Heinz, Susan McGee, J. T. Lundy, Equine Capital Corporation, Matchmaker Financial Corporation, and Citizens Fidelity Bank and Trust Company have no interest in the escrowed proceeds from the sale of CRIMINAL TYPE other than as unsecured creditors of the debtor is sustained.

Dated: Jan.3, 1996

By the court -

_____________________________

JOE LEE, CHIEF JUDGE

Copies to:

Philip Hanrahan

James W. Gardner

J. Montjoy Trimble

Stephen M. O'Brien

Michael V. Brodarick

Robert L. Treadway

In conformity with the memorandum opinion of the court this day entered, IT IS ORDERED that the motion of the debtor in possession, Phoenix Corporation, formerly Calumet Farm, Inc., for summary judgment determining that the defendants Janice Heinz, Susan McGee, J. T. Lundy, Equine Capital Corporation, Matchmaker Financial Corporation, and Citizens Fidelity Bank, have no interest in the escrowed proceeds from the sale of the stallion CRIMINAL TYPE other than as unsecured creditors of the debtor is sustained. There being no just cause for delay, this is a final and appealable order.

Dated: Jan. 3, 1996

By the court -

_____________________________

JOE LEE, CHIEF JUDGE

Copies to:

Philip Hanrahan

James W. Gardner

J. Montjoy Trimble

Stephen M. O'Brien

Michael V. Brodarick

Robert L. Treadway