Court Opinion

ID: 9399071
Source: CourtListenerOpinion
Date Created: 2023-06-01 20:01:11.845744+00
Date Added: 2024-06-11T17:19:38.628070
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                     File Name: 23b0001n.06

                      BANKRUPTCY APPELLATE PANEL
                                  OF THE SIXTH CIRCUIT

                                                              ┐
 IN RE: OGGUSA, INC., fka GenCanna Global USA, Inc.,
                                                              │
                                            Debtor.           │
 ______________________________________________               │
 OGGUSA, INC., fka GenCanna Global USA, Inc.,                 │
                                                              >   No. 22-8010
                                  Plaintiff-Appellant,        │
                                                              │
                                                              │
       v.
                                                              │
                                                              │
 LOUISVILLE DRYER COMPANY,                                    │
                                    Defendant-Appellee.       │
                                                              ┘

                         Appeal from the United States Bankruptcy Court
                        for the Eastern District of Kentucky at Lexington.
            No. 5:20-bk-50133; 5:20-ap-05032—Gregory R. Schaaf, Bankruptcy Judge.

                               Decided and Filed: June 1, 2023

   Before: BAUKNIGHT, DALES and GUSTAFSON, Bankruptcy Appellate Panel Judges.

                                    _________________

                                         COUNSEL

ON BRIEF: April A. Wimberg, V. Brandon McGrath, Gina M. Young, DENTONS
BINGHAM GREENEBAUM LLP, Louisville, Kentucky, for Appellant. F. Larkin Fore, FORE
LAW PLLC, Louisville, Kentucky, Chrisandrea Turner, STITES AND HARBISON, PLLC,
Lexington, Kentucky, for Appellee.
                                    _________________

                                          OPINION
                                    _________________

      SUZANNE H. BAUKNIGHT, Bankruptcy Appellate Panel Judge. This appeal involves
a contract dispute, with the main issue being who breached first.          OGGUSA, Inc. f/k/a
 No. 22-8010                           In re OGGUSA, Inc.                                  Page 2

“GenCanna” (“GenCanna”) and Louisville Dryer Co. (“LDC”) contracted by a series of
proposals under which LDC would manufacture equipment for use in GenCanna’s cannabinoid
(CBD) business.      During the time LDC was manufacturing the equipment, GenCanna
experienced financial difficulties. In March 2019, GenCanna breached the contract by failing to
make progress payments, but GenCanna obtained third-party financing to complete part of the
equipment from SQN Asset Income Fund V, L.P. (“SQN”).                  As part of the financing
arrangement, SQN, LDC, and GenCanna executed a Ratification and Partial Assignment on May
31, 2019 (the “Agreement”).       The Agreement incorporated the equipment manufacturing
proposals, including the payment and delivery terms, and brought SQN in as a party to the
contract and assignee of GenCanna’s rights to four of the six pieces of equipment (the “Assigned
Equipment”).

       Notwithstanding the infusion of funds from SQN, GenCanna continued to experience
financial difficulties. These financial difficulties led to a delay in construction of the facility
where the equipment was to be housed. GenCanna’s other facility was destroyed by fire.

       In October or November 2019, LDC informed SQN and GenCanna that the Assigned
Equipment was ready for delivery (with delivery defined as GenCanna’s loading the equipment
at the LDC facility). GenCanna, however, was unable to take possession of the Assigned
Equipment, and it remained at the LDC facility, taking up significant space long after LDC
finished building it. For the most part, LDC dealt directly with SQN in its attempt to deliver the
Assigned Equipment.

       Around the time the Assigned Equipment was completed, LDC became nervous about
GenCanna’s ability to pay the remainder owed on equipment that was not assigned under the
Agreement. LDC sent to GenCanna an email dated October 16, 2019 (the “October 16 Email”),
and a letter dated December 3, 2019 (the “December 3 Letter”), that accused GenCanna of being
in default, although it was later determined GenCanna was not behind on progress payments
because of the amounts that had been paid by GenCanna and SQN.

       Eventually, GenCanna was forced into an involuntary chapter 11 bankruptcy in January
2020 and quickly consented to the bankruptcy proceedings. GenCanna treated the Agreement as
 No. 22-8010                             In re OGGUSA, Inc.                            Page 3

executory, rejected it under 11 U.S.C. § 365(a), and demanded the return of $1,790,023. LDC
filed a proof of claim for the balance remaining due under the contract.

       Ultimately, after LDC refused to return any payments it received under the Agreement,
GenCanna filed an adversary proceeding against LDC on September 17, 2020. GenCanna
asserted that LDC breached the contract before rejection because LDC delivered none of the
equipment to GenCanna and did not return the payments made by GenCanna to LDC. Later, at
the summary judgment stage, GenCanna revised its argument to claim that the October 16 Email
and December 3 Letter in which LDC declared GenCanna in default evidenced LDC’s
anticipatory breach or repudiation of the Agreement.           LDC countered that GenCanna’s
postpetition rejection of the contract under § 365(a) was the first breach and that GenCanna
should be required to pay the amount due under the contract.

       After trial, the bankruptcy court ruled in favor of LDC on GenCanna’s claims, finding
that GenCanna had not established a pre-rejection breach by LDC resulting from an anticipatory
repudiation under Kentucky law because the October 16 Email and December 3 Letter did not
amount to an unequivocal and clear communication by LDC to cease performance under the
Agreement. Additionally, because the bankruptcy court ruled that LDC had not established
damages, it sustained GenCanna’s objection to LDC’s proof of claim. GenCanna timely filed
this appeal; LDC did not cross-appeal.

       Under applicable state law, the first party to breach cannot recover contract damages.
W. Ky. Coal Co. v. Nourse, 320 S.W.2d 311, 315 (Ky. Ct. App. 1959). GenCanna claimed that
LDC breached first through prepetition communications before it treated the contract as
executory and rejected it under 11 U.S.C. § 365. Mission Prod. Holdings, Inc. v. Tempnology,
LLC, 139 S. Ct. 1652, 1666, 203 L. Ed. 2d 876 (2019) (holding “that under Section 365,
a debtor’s rejection of an executory contract in bankruptcy has the same effect as a breach
outside bankruptcy”). Because GenCanna has failed to establish that the bankruptcy court relied
on clearly erroneous factual findings or that it misapplied the law, the bankruptcy court’s
conclusion that LDC was not the first party to breach is affirmed.
 No. 22-8010                           In re OGGUSA, Inc.                                  Page 4

                                     ISSUES ON APPEAL

       1.      Did the Bankruptcy Court incorrectly analyze OGGUSA, Inc. f/k/a
               GenCanna Global USA, Inc.’s breach of contract claim as a claim for
               anticipatory breach under Kentucky law?
       2.      Did the Bankruptcy Court incorrectly find that OGGUSA, Inc. did not
               meet its burden of proving Louisville Dryer Company breached the
               Agreement under Kentucky law?

(Statement of Issues on Appeal, Adv. Proc. 20-05032, ECF No. 155 at 2.)

       In its summary of the argument on appeal, GenCanna also suggests a third issue, arguing
that “even if LDC did not breach the Agreement with the [October 16] Email or the [December
3] Letter, in accordance with Kentucky law, LDC breached the Agreement when it failed to
return the deposits associated with the fourth Dryer and second Cooler.” (Appellant’s Br. at 22,
BAP Case 22-8010 ECF No. 16.) By this argument, GenCanna attempts to reframe its unjust-
enrichment claim (to recover amounts that it paid to LDC as “deposits”) as a breach-of-contract
claim, an argument that was not raised in the bankruptcy court and is made for the first time on
appeal. The Panel rejects this third aspect of the appeal largely because the bankruptcy court
dismissed the unjust-enrichment claim and GenCanna did not appeal that aspect of the court’s
decision. Moreover, any unjust-enrichment theory is inconsistent with the contract remedy
GenCanna elected to pursue.

                      JURISDICTION AND STANDARD OF REVIEW

       The United States District Court for the Eastern District of Kentucky has authorized
appeals to the Panel, and no party has timely filed to have this appeal heard by the district court.
28 U.S.C. §§ 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right
under 28 U.S.C. § 158(a)(1). “Orders in bankruptcy cases qualify as ‘final’ when they
definitively dispose of discrete disputes within the overarching bankruptcy case.” Ragone v.
Stefanik & Christie, LLC (In re Ragone), No. 20-8013, 2021 WL 1923658, at *1 (B.A.P. 6th Cir.
May 13, 2021) (quoting Ritzen Grp., Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582, 586
(2020)). “A judgment resolving all issues in an adversary proceeding is the quintessential
example of a final judgment from which an immediate appeal as of right lies under 28 U.S.C.
 No. 22-8010                           In re OGGUSA, Inc.                                 Page 5

§ 158(a)(1).” Limor v. Anderson (In re Scarbrough), No. 18-8028, 2019 WL 1418698, at *1
(B.A.P. 6th Cir. Mar. 28, 2019).

       To a large extent, the bankruptcy court’s ruling centers on the court’s determination as to
the legal significance of the communications between the parties after they formalized their
contract in the Agreement.     In reaching its conclusion, the bankruptcy court made factual
findings regarding the parties’ post-contracting intentions based on their conduct. To do so, the
bankruptcy court primarily relied on the witnesses’ testimony and the exhibits presented, but the
bankruptcy court also engaged in a certain amount of contract interpretation to determine
whether either party’s actions constituted a breach under Kentucky law.

       The bankruptcy court’s factual determinations are reviewed under a clearly erroneous
standard. Rockne’s, Inc. v. Dan Mazzola, Inc. (In re Dan Mazzola, Inc.), No. 19-8007, 2020 WL
529604, at *1 (B.A.P. 6th Cir. Jan. 28, 2020).

       “The particular factual findings of the bankruptcy court are reviewed for ‘clear
       error.’” In re Jackson, 554 B.R. 156, 159 (B.A.P. 6th Cir. 2016), aff’d, No. 16-
       4021, 2017 WL 8160941 (6th Cir. Oct. 18, 2017) (citations omitted).

       In this appeal, the factual finding that the bankruptcy court reached is that the
       franchise agreement had not been terminated prepetition. This finding required
       the bankruptcy court to interpret the contract. Questions of contract interpretation
       are reviewed de novo. Bender v. Newell Window Furnishings, Inc., 681 F.3d 253,
       259 (6th Cir. 2012); Kraus Anderson Capital, Inc. v. Bradley (In re Bradley),
       507 B.R. 192, 196 (B.A.P. 6th Cir. 2014).

Dan Mazzola, Inc., 2020 WL 529604, at *1.

        “[F]indings of fact . . . must not be set aside unless clearly erroneous, and the
       reviewing court must give due regard to the trial court’s opportunity to judge the
       witnesses’ credibility.” Fed. R. Civ. P. 52(a)(6); see In re Aubiel, 534 B.R. 300,
       302 (B.A.P. 6th Cir. 2015); Lester v. Storey (In re Lester), 141 B.R. 157, 160
       (S.D. Ohio 1991). “Factual findings are clearly erroneous only when the
       reviewing court ‘is left with the definite and firm conviction that a mistake has
       been committed.’” United States v. Ray, 803 F.3d 244, 265 (6th Cir. 2015)
       (quoting United States v. Navarro-Camacho, 186 F.3d 701, 705 (6th Cir. 1999)).
       “Where there are two permissible views of the evidence, the factfinder’s choice
       between them cannot be clearly erroneous.” Anderson v. City of Bessemer City,
       470 U.S. 564, 574, 105 S. Ct. 1504, 1511, 84 L. Ed. 2d 518 (1985) (citations
       omitted).
 No. 22-8010                               In re OGGUSA, Inc.                                         Page 6

In re Felix, 582 B.R. 915, 918 (B.A.P. 6th Cir. 2018.)

        Accordingly, the bankruptcy court’s interpretations of the Agreement must withstand de
novo review, but its factual findings, including with respect to the parties’ communications at the
heart of this appeal, must survive the more deferential review under the “clearly erroneous”
standard.

                                                  FACTS1

        GenCanna was part of an agricultural-technology company primarily engaged in the
development of hemp genetics and the production and distribution of hemp and CBD products.
LDC manufactures equipment including rotary dryers and coolers that can be used to process
hemp. The two companies contracted for LDC to manufacture and GenCanna to purchase four
large commercial dryers (each one roughly the size of a school bus) and two cooling units. LDC
manufactured three dryers and one cooler before GenCanna’s bankruptcy proceedings. The
appeal challenges the bankruptcy court’s determination that LDC did not breach the contract by
anticipatory repudiation before GenCanna’s rejection of it during the bankruptcy case.
GenCanna also asserts that LDC “breached” the contract by failing to return the payments that
GenCanna now characterizes as deposits, claiming that LDC would not have been entitled to
retain the payments under the Uniform Commercial Code (“UCC”) as adopted in Kentucky
notwithstanding GenCanna’s breach.

        In December 2018, through Proposal 4644-STD, LDC offered to manufacture three
rotary steam tube dryers at the price of $4,074,135 ($1,358,045 each), and through Proposal
4644-CCAC, LDC offered to manufacture one counter-current rotary air cooler. The parties
revised the dryer proposal on January 4, 2019, and revised the cooler proposal on January 11,
2019. LDC began working on the equipment in early 2019.

        In February 2019, LDC sent GenCanna two revised proposals that increased the purchase
order to four dryers and two coolers. The February proposals provided that “[t]he equipment [in]
this proposal is quoted FCA from point of origin, loaded on customer-supplied transport; all

        1
         The parties stipulated to most of the facts in this appeal. (Stipulations of Fact Between OGGUSA, Inc.
and Louisville Dryer Company (“Stipulations”), Adv. Proc. No. 20-05032, ECF. No 133, Feb. 8, 2022).
 No. 22-8010                            In re OGGUSA, Inc.                                   Page 7

permits, taxes, installation, and freight are the responsibility of the purchaser.” (Stipulations, No.
12.)   The February proposals included certain progress payment terms (“Progress Payment
Terms”), including a 30% project initiation payment and concluding with the final 10% due on
readiness to ship.

       GenCanna and LDC exchanged writings that confirmed their assent to the February
proposals, with the price for four dryers totaling $5,432,180 ($1,358,045 each) and the price for
two coolers totaling $603,674 ($301,837 each).

       GenCanna paid LDC $1,300,000 on January 2, 2019, as a down payment on the total
amount of $4,349,501 (“GenCanna Payment 1”). On January 15, 2019, GenCanna paid LDC
$490,023 (“GenCanna Payment 2”) for unrelated projects. Later, the parties agreed to apply
GenCanna Payment 2 to the purchase price of the four dryers and two coolers that are the subject
of this appeal. These two payments resulted in a total payment by GenCanna of $1,790,023.

       In March 2019, GenCanna failed to make payments per the Progress Payment Terms.
Following negotiations, GenCanna procured financing for three of the dryers and one of the
coolers from SQN. “On or around May 31, 2019, LDC, GenCanna and SQN entered into the
[Agreement]” (Stipulations, No. 18), with SQN becoming the assignee of the Assigned
Equipment (i.e., three dryers and one cooler).

       The Agreement is the only written “agreement” between LDC and GenCanna that covers
the entire purchase transaction. It incorporates the proposals for all four dryers and two coolers,
even though SQN was providing funding in exchange for assignment of only three dryers and
one cooler. The Agreement applied the two GenCanna Payments to the purchase price, as well
as a $3,600,000 payment from SQN received by LDC on May 31, 2019. This left a remaining
balance of $645,831 due (eventually) on the four dryers and two coolers. The Agreement set an
expected delivery date of early October 2019 for the first three dryers. Under the Agreement, the
delivery date for the fourth dryer would be determined after delivery of the first three. The
Agreement does not set a delivery date for the coolers.
 No. 22-8010                         In re OGGUSA, Inc.                                  Page 8

       On June 5, 2019, GenCanna emailed LDC to check on the progress of the equipment. On
June 26, 2019, GenCanna visited LDC’s facilities to inspect the equipment.        At the time,
GenCanna was building a new facility to house the equipment (the “Mayfield Facility”).

       On September 16, 2019, LDC received an email indicating that there would be further
delays regarding the readiness of the Mayfield Facility to receive the equipment. One month
later, on October 16, 2019, Mike Mercer, LDC’s President, sent the October 16 Email to
GenCanna stating:

       GenCanna remains in default under its contract with [LDC]. To mitigate the
       damages caused by GenCanna’s continuing default, [LDC] will, in a private sale
       begin immediately to attempt to resell the remaining [fourth] dryer.
       Please respond immediately if you have any objection to this action or wish to
       discuss the viability of a cure period.

(ECF No. 124-37.) Richard Drennen, GenCanna’s COO, immediately replied:

       Looping in our General Counsel under the circumstances but please know that we
       are close to a financing that should close on or before the end of the month, at
       which time we intend to pay the balance of the dryer.

(ECF No. 124-38; Stipulations, Nos. 30-33.)

       This email exchange is the primary basis for GenCanna’s assertion that LDC repudiated
the contract. The parties now agree that GenCanna was not in payment default at the time of the
email exchange, although both parties assumed at the time of the October 16 Email that
GenCanna was in default. LDC did not attempt to sell the fourth dryer and second cooler, which
were not complete when the October 16 Email was sent, and ultimately those two items were
never completed.

       On November 4, 2019, LDC provided notice to SQN that the Assigned Equipment was
ready for delivery. SQN responded that it would need to check with GenCanna on the state of
the Mayfield Facility. GenCanna never completed the Mayfield Facility, where it intended to
locate the equipment that LDC was manufacturing.

       On December 3, 2019, Trey Mathis, LDC’s Vice President and General Manager, sent
the December 3 Letter to GenCanna. The December 3 Letter proposed satisfaction of the
 No. 22-8010                          In re OGGUSA, Inc.                                  Page 9

remaining amount owed by GenCanna under the Agreement if GenCanna released any interest in
the equipment, which was identified as the materials to build the fourth dryer and second cooler.
It also contained a “Consent and Full Release.” (Adv. Proc. ECF No. 129-25.) GenCanna did
not sign the Consent and Full Release or agree to the terms of the December 3 Letter. GenCanna
now argues the December 3 Letter constituted a breach by LDC.

       The involuntary bankruptcy case was commenced against GenCanna on January 24,
2020. On February 6, 2020, GenCanna admitted it was insolvent, consented to the bankruptcy,
and filed voluntary petitions for its related entities. LDC filed a complaint against SQN in state
court on June 29, 2020, related to delivery of the Assigned Equipment. LDC and SQN reached a
settlement on August 6, 2020. The Assigned Equipment was delivered to a storage field in
western Kentucky at the direction of SQN and at SQN’s cost in October 2020. Both SQN and
LDC filed proofs of claim in GenCanna’s bankruptcy case.

       GenCanna filed an adversary proceeding against LDC on September 17, 2020. In its
complaint, GenCanna asserted as Count I that LDC had breached the contract because as of the
petition date, it had not delivered any of the equipment to either GenCanna or SQN and refused
to return the deposits GenCanna had paid. (Compl., Adv. Proc. ECF No. 1, at ¶¶ 32-33. 41-47.)
GenCanna averred three additional claims against LDC: “Count II - Unjust Enrichment,” “Count
III – Turnover,” and “Count IV – Disallowance of Claim.” (Id. at 7.) Before trial, on a summary
judgment motion, the bankruptcy court dismissed Count II and Count III, leaving only the
contract-related claims (Count I and IV).

       By the time of the trial, GenCanna had changed its position concerning Count I to argue
that the October 16 Email and December 3 Letter constituted a breach by LDC based on LDC’s
assertion that GenCanna was in default and the demand for payment. The parties agree that, in
hindsight, GenCanna was not in payment default at the time of the October 16 Email because the
Assigned Equipment, which had been completed, had been fully paid for. Further, progress
payments were not yet due on the fourth dryer and second cooler under the terms of the
Agreement.
 No. 22-8010                                 In re OGGUSA, Inc.                                        Page 10

        The bankruptcy court held a trial on February 22, 2022. The proposals, the Agreement,
and the parties’ emails and letters were admitted as evidence. Gary Broadbent (GenCanna’s
General Counsel), Richard Drennen (GenCanna’s Chief Operating Officer), Alan Calderon
(GenCanna’s Chief Financial Officer), and Trey Mathis (LDC’s Vice President and General
Manager) testified. After trial, the bankruptcy court issued a written opinion finding that the
sending of the October 16 Email did not amount to an anticipatory breach of the contract. The
bankruptcy court instead found that the October 16 Email was nothing more than a
communication between the parties with no legal impact. (Mem. Op., Adv. Proc. ECF No. 140,
at 15 (“Ultimately, the October 16 email has no legal significance.”).) The bankruptcy court
found that “Mathis’s trial testimony revealed that LDC simply wanted to open a line of
communication to understand how GenCanna intended to proceed under the Agreement given its
financial circumstances.” (Id.) The bankruptcy court also found that “GenCanna did not treat the
[October 16 Email] as a repudiation of future performance by LDC [because] . . . Drennen
responded almost immediately to assure LDC that GenCanna was pursuing additional financing
and intended to satisfy its payment obligation.” (Id. at 14.)

        Likewise, the bankruptcy court concluded that the December 3 Letter was merely a
communication between the parties and not a breach by LDC, stating that the “December 3
Letter was intended as a walk-away resolution of the parties’ situation given the dire financial
circumstances facing GenCanna.” (Id. at 16.) The bankruptcy court noted that the December 3
Letter “did not refer to termination of the Agreement or the obligations thereunder.” (Id.) Thus,
the bankruptcy court found, “The December 3 Letter, like the October 16 Email, had no legal
effect on the parties’ relationship.” (Id.)

        The bankruptcy court did not address GenCanna’s alternative2 argument that GenCanna
made in its trial brief and in this appeal that LDC breached by its retention of the “deposits” after
GenCanna demanded their return following rejection.3                    But, as to those “deposits,” the

        2
         GenCanna asserts that “[e]ven if GenCanna breached the Agreement first, LDC is not entitled to retain the
full amount of the GenCanna Payments under the Kentucky UCC.” (Appellant’s Br. at 35; see also Pl.’s Trial Br. &
Witness List, Adv. Proc. ECF No. 134, at 19.)
        3
           GenCanna demanded return of the “deposits” only after it rejected the Agreement under 11 U.S.C. § 365.
(Trial Tr., Adv. Proc. ECF No. 156, at 11, 40.)
 No. 22-8010                                 In re OGGUSA, Inc.                                        Page 11

bankruptcy court reviewed the demand for turnover of the payments that GenCanna had made
relating to the fourth dryer and second cooler in two ways. First, the bankruptcy court dismissed
before trial the unjust-enrichment claim (Count II) (Mem. Op. at 10; Order, Adv. Proc. ECF No.
53). Second, the bankruptcy court gave several reasons for concluding that GenCanna was not
entitled to recover the “deposits” (or Excess Payment) under Count III, including failure to
prosecute the claim as well as a lack of merit.4 Thus, the bankruptcy court concluded that
GenCanna was not entitled to recover the “deposits” (or Excess Payment) under Count III, and as
with dismissal of the unjust-enrichment claim (Count II), GenCanna has not appealed that
portion of the bankruptcy court’s decision.

        The bankruptcy court’s rulings did not exclusively favor LDC: the court also found for
GenCanna by holding that LDC had not overcome the objection to its proof of claim because
“the final progress payment was not yet due” under the Agreement and proposals. (Id. at 17.)
Thus, the bankruptcy court sustained GenCanna’s objection and disallowed LDC’s proof of
claim. LDC did not appeal that ruling on Count IV.

                                                DISCUSSION

        GenCanna listed two issues on appeal. First, GenCanna asserts that the bankruptcy court
improperly analyzed GenCanna’s breach-of-contract claim as an “anticipatory breach” under
Kentucky law. In the second stated issue on appeal, GenCanna asserts that the bankruptcy court
erred in finding that GenCanna had not met its burden of proving that LDC breached the
agreement under Kentucky law. This opinion will also address issues raised in GenCanna’s
briefing that were not specifically stated in the listed issues on appeal. (Statement of Issues on
Appeal, Adv. Proc. 20-05032, ECF No. 155 at 2.)

        4
           Additionally, regarding GenCanna’s demand for turnover of the “deposits,” the bankruptcy court noted
that the $1,790,023 was akin to a progress payment earned by a contractor for performance under a construction
contract and that GenCanna had not provided any contrary explanation for how its “project initiation payment” had
been utilized by LDC. (Mem. Op. at 11-12 (citing American States Ins. Co. v. Glover Constr. Co. Inc. (In re Glover
Constr. Co., Inc.), 30 B.R. 873, 874 (Bankr. W.D. Ky. 1983) (explaining that “[p]rogress payments are those funds
which the owner contracts to pay periodically based upon satisfactory performance [- the] compensation enables the
contractor to embark on costly and lengthy projects without himself financing the enterprise,” and discussing the
contractor earning a legal and enforceable right to progress payments through performance)).)
 No. 22-8010                                  In re OGGUSA, Inc.                                          Page 12

I.     The bankruptcy court correctly analyzed GenCanna’s breach-of-contract
       claim as a claim for anticipatory breach under Kentucky law.

         GenCanna asserts that “[t]he Bankruptcy Court wrongly framed GenCanna’s arguments
regarding LDC’s breach as an ‘anticipatory breach’ and not a repudiation[.]” (Appellant’s Br. at
13.) As stated, this issue raises whether the bankruptcy court improperly treated GenCanna’s
claim as one for anticipatory breach (and not the correctness of the finding that LDC’s conduct
was not an anticipatory breach). Indeed, GenCanna expressly argues that the bankruptcy court
“wrongly framed GenCanna’s arguments regarding LDC’s breach as an ‘anticipatory breach’
and not a repudiation.”          (Appellant’s Br. at 21 (emphasis added).)                 GenCanna, however,
unequivocally argued repeatedly to the bankruptcy court—and to this Panel—that the October 16
Email and December 3 Letter constituted anticipatory repudiation.                       To also argue that the
bankruptcy court “wrongly framed GenCanna’s arguments regarding LDC’s breach as an
‘anticipatory breach’ and not a repudiation” (Appellant’s Br. at 21) contradicts its arguments in
the trial brief and at trial, where GenCanna likewise appeared to use the terms interchangeably.5

         Thus, while also arguing to the contrary, GenCanna acknowledges that its breach-of-
contract claim is predicated on a finding of repudiation or anticipatory breach. In any event,
GenCanna’s challenge to the bankruptcy court’s framing of its breach-of-contract claim under
the doctrine of anticipatory breach must fail, as anticipatory breach and repudiation are
essentially equivalents.

         Anticipatory breach of contract is “an unequivocal repudiation or renunciation of
         an executory contract in advance of the time of performance.” Jordon v. Nickell,
         253 S.W.2d 237, 230 (Ky. 1952). Such a breach may, “at the election of the
         injured party, be regarded as an anticipatory breach and support an immediate
         action of damages without waiting for the time of performance.” Id. The

          5
            GenCanna argues on appeal that its only pending claim is for breach of contract, however stated.
Notwithstanding GenCanna’s challenge to the bankruptcy court’s application of the doctrine of anticipatory
repudiation, GenCanna clearly asserts just that—that LDC breached the Agreement by claiming that GenCanna was
in payment default and refusing to perform under the Agreement. (Appellant’s Br. at 14 “LDC breached the
Agreement when it called GenCanna in payment default and refused to perform under the Agreement.”)
Additionally, GenCanna quotes the Kentucky Revised Statute as support: “Where the seller fails to make delivery or
repudiates . . . the buyer may cancel and whether or not he has done so may in addition to recovering so much of the
price as has been paid (a) ‘cover’ and have damages . . . as to all goods affected whether or not they have been
identified to the contract; or (b) recover damages for nondelivery . . . .” (Id. (quoting Ky. Rev. Stat. Ann. § 355.2-
711(1)).)
 No. 22-8010                             In re OGGUSA, Inc.                            Page 13

       Restatement (Second) of Contracts § 253 states that “[w]here an obligor
       repudiates a duty before he has committed a breach by non-performance and
       before he has received all of the agreed exchange for it, his repudiation alone
       gives rise to a claim for damages for total breach.”
       “Courts determine whether anticipatory repudiation has occurred on a case-by-
       case basis, depending on the particular contract language involved.” Combs v.
       Int’l Ins. Co., 354 F.3d 568, 599 (6th Cir. 2004).

Hibbett Sporting Goods, Inc. v. ML Georgetown Paris, LLC, No. CV 5:18-524-DCR, 2019 WL
475001, at *2 (E.D. Ky. Feb. 6, 2019).

       Therefore, GenCanna’s challenge to the bankruptcy court’s framing of the issue fails.
There is no error of law. Unless GenCanna meets its burden to show that the bankruptcy court’s
factual conclusion on that question was clearly erroneous, the bankruptcy court’s decision must
be affirmed.

II.    The bankruptcy court did not err in finding that GenCanna failed to
       meet its burden of proving LDC breached the Agreement under
       Kentucky law.

       GenCanna’s brief asserts three distinct arguments regarding what constituted the breach
by LDC. First, it argues that the October 16 Email was a repudiation of the agreement and, thus,
a breach of contract. Second, it argues that the December 3 Letter was a breach of contract.
Finally, it argues that a postpetition assertion by LDC that it was ready, willing, and able to
perform if GenCanna remedied a non-existent payment default was a breach of contract. The
Panel has examined the bankruptcy court’s findings of fact and conclusions of law as to each and
finds no error.

       A.         The bankruptcy court did not err in holding that the October 16
                  Email was not a complete repudiation of the Agreement.

       On October 16, 2019, LDC sent GenCanna an email asserting that GenCanna was in
default under the Agreement. LDC proposed that it would immediately attempt to resell the
remaining dryer to mitigate the damages caused by the purported continuing default. The email
concluded by requesting an immediate response if GenCanna objected to the action or wished to
discuss the viability of a cure period. (Stipulations, No. 32, Adv. Proc. ECF No. 124-37).
 No. 22-8010                                    In re OGGUSA, Inc.                                             Page 14

GenCanna argues that the language in the October 16 Email amounted to “a complete
repudiation of the Agreement”:

         [it] was a breach of the Agreement because by LDC demanding payment that was
         not yet due and telling GenCanna that it was offering it a chance to cure, LDC
         was attempting to change the terms of the Agreement and add in more favorable
         terms that would allow it to ignore its obligations under the Agreement to finish
         the final Dryer and Cooler.

(Appellant’s Br. at 23.)

         GenCanna cites Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir. 2008)
(“A party breaches a contract [under Ohio law] if he fails to perform according to the terms of
the contract or acts in a manner that is contrary to its provisions.”) in support of its argument that
by sending the email that accused GenCanna of being in default and requesting payment, LDC
acted in a manner contrary to the provisions of the Agreement and, thus, breached the contract.
Acceptance of GenCanna’s argument, however, would require a hyper-technical definition of
breach, holding that any communication that suggested or asked for any alteration or deviation
from a contract would be an anticipatory breach subject to immediate remedies. Savedoff does
not stand for this proposition, nor does GenCanna provide any legal authority for such a reading.

         Kentucky law offers the correct approach.                    “Under Kentucky law, the doctrine of
anticipatory repudiation ‘requires unequivocal words or conduct evidencing an intent to
repudiate the contract.’” Upton v. Ginn, 231 S.W.3d 788, 792 (Ky. Ct. App. 2007) (quoting
Brownsboro Rd. Rest., Inc. v. Jerrico, Inc., 674 S.W.2d 40, 42 (Ky. Ct. App. 1984)); see also
U.C.C. § 2-610 cmt. 1 (Unif. L. Comm’n 1977), as codified at Ky. Rev. Stat. Ann. § 355.2-610,6
quoted in Upton, 231 S.W.3d at 791 (“[A]nticipatory repudiation centers upon an overt
communication of intention or an action which renders performance impossible or demonstrates
a clear determination not to continue with performance.”). The bankruptcy court correctly
applied Kentucky law. (Mem. Op. at 14 (citing Upton, 231 S.W.3d at 791).)

         6
           The Kentucky legislature provided that the Official Comments of the National Conference of
Commissioners on Uniform State Laws “represent the express legislative intent of the General Assembly and shall
be used as a guide for interpretation of this chapter, except that if the text and the official comments conflict, the text
shall control.” Ky. Rev. Stat. Ann. § 355.1–103(3). There is no conflict here.
 No. 22-8010                           In re OGGUSA, Inc.                                Page 15

       The bankruptcy court analyzed the language of the October 16 Email and the December 3
Letter, as well as the behavior of the parties in response to those communications, and held that
LDC did not express “an unequivocal and clear determination by LDC to cease performance
under the Agreement.” (Mem. Op. at 13.) In reaching its conclusion, the bankruptcy court relied
in large part on the language of the October 16 Email that specifically requested a response to the
proposal. “LDC expressly asked GenCanna to respond if it had ‘any objection’ to the proposed
private sale or ‘wish[ed] to discuss the viability of a cure period.’ (Id. (citation to record
omitted).) The bankruptcy court further noted that “[t]he record also confirms GenCanna did not
treat the email as a repudiation of future performance by LDC. GenCanna’s Drennen responded
almost immediately to assure LDC that GenCanna was pursuing additional financing and
intended to satisfy its payment obligation.” (Id. at 14 (citing Adv. Proc. ECF No. 124-38).) The
bankruptcy court also found important that Mr. Broadbent, GenCanna’s general counsel at the
time, “did not testify that he viewed the October 16 Email as a termination; he understood the
October 16 Email as a request to discuss issues involving the final dryer and cooler.” (Mem. Op.
at 14.) The record supports the bankruptcy court’s factual finding regarding Mr. Broadbent’s
interpretation. (Tr. at 50:7-17.)

       The record also supports the bankruptcy court’s conclusion that at the time of the October
16 Email, both parties assumed that GenCanna was in payment default. (Tr. at 30:23-25.) The
parties and the bankruptcy court subsequently acknowledged that GenCanna was not actually in
payment default at the time of the October 16 Email. The bankruptcy court did not err in
rejecting GenCanna’s assertion that the mistaken accusation regarding payment default showed
LDC’s unequivocal unwillingness to perform unless the terms of the contract were changed.
LDC’s willingness to negotiate and try to work something out with GenCanna, even when it
thought, albeit incorrectly, that GenCanna was in default, is consistent with the bankruptcy
court’s finding that LDC had not expressed an unequivocal repudiation.

       The bankruptcy court considered all the testimony and determined that the October 16
Email was a mere communication between the parties about next steps under the contract, not an
unequivocal repudiation.     The exhibits and trial testimony support the bankruptcy court’s
conclusion that LDC did not express an unequivocal intention not to perform its obligations.
 No. 22-8010                          In re OGGUSA, Inc.                                Page 16

GenCanna has failed to persuade the Panel that the bankruptcy court made erroneous factual
findings or misapplied the law in reaching its conclusion that the October 16 Email did not
repudiate the contract.

       B.      The bankruptcy court properly found that the December 3 Letter
               was not a repudiation of the contract.

       GenCanna also asserts that the December 3 Letter is evidence that LDC repudiated the
Agreement. (See Appellant’s Br. at 11 (“There was no further attempt at resolution with LDC
because LDC unequivocally, for the second time, declined to abide by the terms of the
Agreement.”).) GenCanna cites Mr. Mathis’s affidavit in support of summary judgment as
evidence that LDC “refused to complete the remaining Dryer and Cooler unless the final
payment was received.” (Appellant’s Br. at 11 (citing Adv. Proc. ECF No. 129-32, Pl. Trial Ex.
FF ¶ 21).)

       In its brief, LDC asserts that the December 3 Letter was “an attempt to address the
problems caused by GenCanna’s or SQN’s failure to accept the [Assigned Equipment].”
(Appellee’s Am. Br. at 14, BAP Case No. 22-8010 ECF No. 20.) “LDC needed to know how to
proceed because LDC was still obligated to complete the final Dryer and final Cooler.” (Id.)
LDC asserts that it “had performed work and purchased and received parts for the remaining”
dryer and cooler. (Id. at n.8 (citing Adv. Proc. ECF No. 104-15, T. Mathis Affidavit; Trial Tr. at
171-72).)

       The bankruptcy court determined that, based on the testimony,

       the December 3 Letter was intended as a walk-away resolution of the parties’
       situation given the dire financial circumstances facing GenCanna. The cessation
       of construction at the Mayfield Facility and lien problems were exacerbated by
       the destruction of GenCanna’s only operating processing facility in early
       November. Any manufacturer would feel insecure on these facts and look for a
       solution.
       The settlement offer did not refer to termination of the Agreement or the
       obligations thereunder. Broadbent, the recipient of the December 3 Letter, did not
       testify that he viewed it as an anticipatory repudiation of the Agreement by LDC.
       He took no action on the letter because it simply was not one of GenCanna’s more
       pressing problems in November and December 2019.
 No. 22-8010                          In re OGGUSA, Inc.                                Page 17

(Mem. Op. at 16.) The bankruptcy court also noted that “there is no evidence that LDC took any
steps to sell or otherwise dispose of the unfinished dryer and cooler (or its components) after
sending the December 3 Letter.” (Id.) The bankruptcy court found that such evidence might
have supported the assertion of repudiation but that the absence of such evidence supported “the
conclusion that LDC only intended to propose a resolution.” (Id.) The bankruptcy court
concluded that “[t]he December 3 Letter, like the October 16 Email, had no legal effect on the
parties’ relationship; it was an offer of settlement by LDC that GenCanna did not accept.” (Id.)

       GenCanna asks the Panel to interpret the December 3 Letter as an unequivocal breach
and not a settlement offer because it had felt “threatened” by LDC’s October 16 Email and the
December 3 Letter showed “no willingness to wait for performance to be due or abide by the
Progress Payment Terms schedule.” (Appellant’s Br. at 10-11.) GenCanna also asserts that the
fact that the fourth dryer and second cooler were never finished supports its assertion that LDC
repudiated. GenCanna places a great deal of emphasis on the fact that no progress payments on
the fourth dryer and second cooler had been missed under the terms of the Agreement. But
GenCanna does not acknowledge the trial testimony that LDC had begun work on those pieces
of equipment.    Mr. Mathis’s affidavit describing the progress made on those pieces was
unrefuted. (See Adv. Proc. ECF No. 33-2, ¶ 19.) Importantly, the Agreement did not have
specific deadlines for those pieces and specifically provided that delivery terms for the fourth
dryer would be set after delivery of the Assigned Equipment. Simply, there was evidence that
LDC had begun work on the fourth dryer and second cooler and no evidence that LDC had not
made adequate progress on them before rejection by GenCanna in the bankruptcy case.

       The bankruptcy court’s conclusion that the December 3 Letter was not a clear repudiation
was not clearly erroneous. The bankruptcy court considered the language in the December 3
Letter and saw it for what it was—an attempt at a workout given that GenCanna was in financial
difficulty. LDC did not state that it would not perform unless the terms of the contract were
changed, and the fact that LDC was mistaken in its assumption that GenCanna was in payment
default does not make the court’s conclusion erroneous. With its insistence on unequivocal
expression, the doctrine of anticipatory breach leaves ample room for contracting parties to
propose modifications, adjustments, and practical solutions in the face of uncertainty. See, e.g.,
 No. 22-8010                                In re OGGUSA, Inc.                                       Page 18

Upton v. Ginn, 231 S.W.3d 788, 791 (Ky. Ct. App. 2007) (refusing to find that the buyer’s
demand for an adjustment of the contract price was a repudiation). Moreover, the law cannot be
so rigid as to treat a contracting party’s mistaken suggestion that another party breached as itself
a repudiation.

        When the October 16 Email was sent, LDC had completed the first three dryers and first
cooler. The parties had not yet set any timetable for completion of the rest of the equipment.
Under the terms of the Agreement, the parties were not obligated to set any deadlines for
completion of the final dryer until after delivery of the Assigned Equipment. Accordingly, LDC
had not failed to perform under the Agreement, and it was not in breach. The bankruptcy court
appropriately analyzed the October 16 Email and December 3 Letter to determine if they
constituted an anticipatory breach, a repudiation, or a renunciation of the executory contract. For
the reasons stated above, the bankruptcy court’s conclusion that there was no repudiation is
affirmed.

        C.       GenCanna did not establish that LDC’s postpetition retention of
                 deposits constituted a breach of contract.

        Finally, GenCanna asserts that a postpetition assertion by LDC that it was ready, willing,
and able to perform if GenCanna remedied a non-existent payment default was a breach of
contract. In this alternative “breach” claim, GenCanna also argues that “[e]ven if [it] breached
the Agreement first, LDC is not entitled to retain the full amount of the GenCanna Payments
under the Kentucky UCC.” (Appellant’s Br. at 35.) Although GenCanna raised this identical
argument to the bankruptcy court in its trial brief (compare Appellant’s Br. at 35-37 with Pl.’s
Trial Br. & Witness List, Adv. Proc. ECF No. 134, at 19-23)7, the bankruptcy court did not
directly address it in the Memorandum Opinion. That failure, however, appears proper because
under Kentucky law, the party who breaches first cannot seek damages.8

        7
         LDC asserts that GenCanna raised this argument for the first time on appeal and without citing it as an
issue. (Appellee’s Am. Br. at 29.) LDC is incorrect that the argument is raised for the first time on appeal.
GenCanna made the same argument, practically verbatim, in its Trial Brief before the bankruptcy court. (See Adv.
Proc. ECF No. 134.)
        8
        The Panel also notes that the bankruptcy court sustained GenCanna’s objection to LDC’s proof of claim
(Mem. Op. at 17), which sought to recover the remaining payment that would have been due under the Agreement
 No. 22-8010                                  In re OGGUSA, Inc.                                          Page 19

         GenCanna tries to couch the argument as a breach-of-contract claim by stating that even
if GenCanna breached first, “LDC breached the Agreement by retaining excess payments
because (i) it was only entitled to keep its anticipated profits, and (ii) LDC failed to take any
efforts to mitigate.” (Appellant’s Br. at 37.) By this assertion, however, GenCanna conflates a
breach by LDC with GenCanna’s unjust-enrichment claim and its claim for turnover of the
“deposits,” neither of which are the subject of this appeal.

         Moreover, under Kentucky law, the first party to breach cannot seek damages. See W.
Ky. Coal Co. v. Nourse, 320 S.W.2d 311, 315 (Ky. Ct. App. 1959) (“[A] party who commits the
first breach of a contract is deprived of the right to complain of a subsequent breach by the other
party.”); ClubSpecialists Int’l, LLC v. Keeneland Ass’n, Inc., No. 5:16-CV-345-KKC, 2018 WL
2050134, at *4 (E.D. Ky. May 2, 2018) (“Kentucky law deprives a party who commits the first
breach of a contract of the right to complain of a subsequent breach by the other party[.]”) Thus,
if GenCanna breached first by its postpetition rejection of the Agreement, then LDC’s failure to
return the “deposits” to GenCanna cannot properly be characterized as a breach of the
Agreement by LDC, absent a contractual provision requiring the return.

         Even if GenCanna had preserved the issue for appeal9, if GenCanna’s argument can be
understood to challenge whether LDC incurred actual damages for GenCanna’s postpetition
breach that were less than the Excess Payment retained by LDC, GenCanna failed to present

for the fourth dryer and second cooler. LDC conceded in its closing argument before the bankruptcy court that it
could not show that it was entitled to the remaining payment even assuming that GenCanna’s postpetition rejection
of the Agreement constituted a breach. This finding, however, concerns LDC’s failure to meet its burden of
showing that it was entitled to recover the remainder of the contract price as requested in its proof of claim. Thus,
aside from the 11 U.S.C. § 542 claim and the unjust-enrichment claim, GenCanna raised no claim for a
determination of LDC’s damages from GenCanna’s breach.
         9
           This “refund” argument does not directly flow from the issues stated on appeal. Those issues both relate
to whether LDC breached the Agreement and the bankruptcy court’s legal analysis of that question. GenCanna did
not raise in the statement of issues on appeal the question of whether LDC must refund part or all of the Excess
Payment even if GenCanna breached the Agreement. Accordingly, the bankruptcy court’s prior dismissal of Count
II, which alleged unjust enrichment, was not appealed. Further, neither GenCanna’s brief nor its reply mention
§ 542, and the amount sought is different from the amount sought in Count III. (Compare Compl., Adv. Proc. ECF
No. 1, at ¶ 53 ($1,790,023), with Appellant’s Br. at 36, 37 ($1,014,051).) Based on the foregoing, the Panel
concludes that the “refund” argument in GenCanna’s brief does not arise from an appeal of the dismissal of Count
III; however, to the extent that it does, the argument has been waived. See In re Murray Energy Holdings Co., 640
B.R. 558, 565 (B.A.P. 6th Cir. 2022) (“Issues that are not properly developed are waived on appeal.” (citations
omitted)).
 No. 22-8010                                  In re OGGUSA, Inc.                                          Page 20

evidence at trial from which the bankruptcy court could determine whether the Excess Payment
exceeded actual damages that LDC might have been allowed to retain under the UCC. (See
Mem. Op. at 13 n.7.) As the bankruptcy court properly stated, “LDC made no effort at trial to
establish its damages in accordance with the Uniform Commercial Code” (Mem. Op. at 17); nor
did GenCanna present evidence from which the bankruptcy court could have awarded GenCanna
a refund under the UCC. (See id. at 13 n.7.)

III.     GenCanna has failed to prove that it is entitled to any refund of the
         amount paid to LDC.

         Finally, in another attempt to recover what it perceives as a “windfall”10 (Appellant’s Br.
at 34) retained by LDC, GenCanna argues that it is entitled to damages because LDC never
finished the equipment. (Id. at 32.) GenCanna argues that LDC received $5,390,023 of the total
$6,035,854 purchase price but that it only delivered $4,375,972 worth of equipment (i.e., the
value of the Assigned Equipment). “Therefore, LDC retained $1,014,051 . . . that GenCanna
paid towards the final Dryer and Cooler, which LDC never finished or delivered.” (Id.) In its
Trial Brief, GenCanna asserted that the amount retained by LDC “is well beyond the rejection
damages that would be supported by the written agreement and the [UCC].” (Adv. Proc. ECF
No. 134 at 2.) It makes the same argument here.

                Kentucky law is well settled that GenCanna is entitled to recover damages
         for breach of contract in this situation. If a seller fails to make delivery or
         repudiates an agreement, the buyer may cancel and recover the price it has paid
         towards the goods in question. See KRS § 355.2-711(1); Emerald Int’l Corp. v.
         WWMV, LLC, No. CIV.A. 14-109-DLB-JG, 2014 WL 7358846, at *9 (E.D. Ky.
         Dec. 23, 2014); Princesse D’Isenbourg Et Cie Ltd. v. Kinder Caviar, Inc., No.
         CIV.A. 3:09-29-DCR, 2011 WL 720194, at *6 (E.D. Ky. Feb. 22, 2011).

(Appellant’s Br. at 32.)

         GenCanna has failed to articulate any principled basis on which the bankruptcy court, or
this Panel, could require LDC to refund any payments received under the Agreement. GenCanna
has failed to persuade the Panel how any refund request at this point differs from its unjust-

         10
           Although this argument also appears to be an attempt to couch the dismissed unjust-enrichment claim
that was not appealed as a claim for breach of contract, because the Statement of Issues included the issue of breach,
the Panel will address the argument.
 No. 22-8010                          In re OGGUSA, Inc.                                Page 21

enrichment claim, which the bankruptcy court dismissed pre-trial over GenCanna’s objection
under Rule 56, a ruling that GenCanna did not appeal.

       Most fundamentally, under the laws of Kentucky (and elsewhere), “unjust enrichment is
unavailable when the terms of an express contract control.”         Furlong Dev. Co., LLC v.
Georgetown-Scott Cnty. Plan. & Zoning Comm’n, 504 S.W.3d 34, 40 (Ky. 2016). Here, the
Agreement clearly governs the parties’ relationship, as GenCanna asserted when it sought to
reject it as an “executory contract” under 11 U.S.C. § 365 and when it articulated its arguments
on appeal. This precludes GenCanna’s insistence on a refund that is grounded, one way or
another, on unjust enrichment.

       To the extent GenCanna seeks to support its refund claim by citing Kentucky contract
law, the Panel’s finding that the bankruptcy court did not err in its conclusion that LDC did not
breach the Agreement, coupled with GenCanna’s breach that occurred by operation of law on
rejection under 11 U.S.C. § 365, preclude GenCanna, as the party who first breached, from
seeking damages under the Agreement. See W. Ky. Coal Co. v. Nourse, 320 S.W.2d 311, 315
(Ky. Ct. App. 1959); ClubSpecialists Int’l, LLC v. Keeneland Ass’n, Inc., No. 5:16-CV-345-
KKC, 2018 WL 2050134, at *4 (E.D. Ky. May 2, 2018).

                                        CONCLUSION

       After considering the testimony of witnesses, the stipulations of the parties, and the
evidence presented, the bankruptcy court reached its conclusion that LDC did not repudiate the
Agreement.     The court also concluded that GenCanna was the first party to breach the
Agreement by rejecting it under 11 U.S.C. § 365. Under Kentucky law, as the first breaching
party, GenCanna cannot recover contract damages. Further, GenCanna has not established that
the bankruptcy court relied on clearly erroneous factual findings or that it misapplied the law.
Accordingly, the bankruptcy court’s judgment is AFFIRMED.