Stamp Farms, which was previously owned and operated by Michael Stamp based in Decatur, Michigan, filed for Chapter 11 bankruptcy protection in November 2012. The court held an auction on Feb. 5, 2013, to sell the farm's assets in bulk, including irrigation equipment and unexpired three- and five-year leases on a farm that once claimed to operate across 46,000 acres.

Boersen submitted the so-called stalking horse bid of $22.8 million for the bulk of Stamp Farm assets. Such bidders are typically known by the debtors and are asked to submit a bid in order to establish a floor against unreasonably low offers.

THE LAWSUIT

According to the CHS lawsuit, Boersen Farms received a notice of default and termination of the $145.3 million loan on Aug. 14.

As collateral, CHS says it is entitled to Boersen Farms' current crop in the ground that includes about 25,000 acres of corn and about 58,000 acres of soybeans, valued at an estimated $49.7 million, according to the lawsuit.

In addition, CHS lays claim to 56,415 bushels of corn stored from the 2016 crop at three storage locations.

"The value of the crops subject to CHS Capital's security interest is less than the indebtedness owed," the lawsuit said. "There is no equity cushion to protect CHS Capital. The appointment of a receiver is necessary to prevent further dissipation of CHS Capital's crop collateral."

The lawsuit levels a number of allegations against Boersen Farms.

First, CHS alleges the farm "fraudulently and intentionally misrepresented to CHS Capital the quantity of harvested 20l6 grain available for sale, which quantity and resulting expected sale proceeds were included in the budget.

"To induce CHS Capital to forbear from exercising its legal right to take possession of the 2016 harvested crops, defendants fraudulently and intentionally misrepresented the volume of harvested 2016 grain by over $6 million to create the illusion of sufficient revenue to offset expenses. Further, the defendants failed to comply with the budget."

The lawsuit said that, because of "misrepresentations" about the quantity and quality of the 2016 crop in storage, Boersen Farms "have insufficient remaining 2016 crop and crop proceeds to pay the expenses to harvest the 2017 crop. The defendants will run out of cash in late August, and will have no money to pay for the expenses of harvesting the soybeans in September."

CHS said in the lawsuit it would be willing to provide funds for harvest to a receivership, but not to Boersen Farms itself.

In addition, CHS alleges the farm sold grain to third parties without notifying the lender.

Some of the larger transactions include about 495,000 bushels of corn to BF Funding LLC, "a newly created entity formed to thwart CHS Capital's Food Security Act notices. Proceeds from these grain sales of approximately $1.9 million were not delivered to CHS Capital, in violation of the security agreements," the lawsuit said.

"Similarly, the borrowers delivered 594,604 bushels of corn to Poet LLC, an Indiana purchaser outside the normal geographic scope of the borrower's historical sales of grain." That sale, according to the lawsuit, generated about $2.2 million in proceeds.

According to a news report that aired on Wood TV 8 in Grand Rapids, Boersen Farms faces a number of other smaller lawsuits totaling about $3 million.

The farm also has been sued by equipment companies and others, and the lawsuit alleges Boersen farms used more than $200,000 in CHS' cash collateral to buy a $614,000 house.

When asked about the real estate transaction, Knight said proceeds from grain sales were "used in the farming operation."

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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