In re G & L Packing Co., Inc., 80-00208
| Decision Date | 17 July 1984 |
| Docket Number | 82-CV-689 and 82-CV-690.,No. 80-00208,80-00208 |
| Citation | 41 BR 903 |
| Parties | In re G & L PACKING CO., INC., Debtor. Lawson BAST d/b/a Bast's Livestock Exchange, et al., Plaintiffs-Appellees, v. ORANGE MEAT PACKING CO., INC.; and Stephen D. Gerling, as Trustee in Bankruptcy of G & L Packing Co., Inc., Defendants, Marine Midland Bank, N.A., Defendant-Appellant. EMPIRE LIVESTOCK MARKETING COOPERATIVE, INC., Plaintiff-Appellee, v. Stephen D. GERLING, as Trustee in Bankruptcy of G & L Packing Co., Inc.; and Orange Meat Packing Co., Inc., Defendants, Marine Midland Bank, N.A., Defendant-Appellant. |
| Court | U.S. District Court — Northern District of New York |
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Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N.Y., for defendant-appellant; Paul B. Zuydhoek, William J. Brown, Buffalo, N.Y., of counsel.
McPhillips, Fitzgerald, Mayer & McLenithan, Glen Falls, N.Y., for plaintiffs-appellees Lawson Bast d/b/a Bast's Livestock Exchange, et al.; James E. Cullum, Glens Falls, N.Y., of counsel.
Mazza, Williamson & Clune, Ithaca, N.Y., for plaintiff-appellee Empire Livestock Marketing Cooperative, Inc.; Robert I. Williamson, Ithaca, N.Y., of counsel.
Bersani & Marshall, Syracuse, N.Y., for Orange Meat Packing Co., Inc.; Keith Wolfe, Syracuse, N.Y., of counsel.
Stephen D. Gerling, Trustee, Utica, N.Y., for G & L Packing Co., Debtor.
Frederick J. Scullin, Jr., U.S. Atty., Syracuse, N.Y., Joanne Schwartz, U.S. Dept. of Agr., Washington, D.C., for the U.S. as amicus curiae.
Marine Midland Bank, N.A. ("Marine") appeals from an order of the United States Bankruptcy Court for the Northern District of New York (Leon J. Marketos, Bkrtcy. J.) awarding plaintiff-appellees Lawson Bast d/b/a Bast's Livestock Exchange, et al. ("the Bast Group") and Empire Livestock Marketing Cooperative, Inc. ("Empire") (collectively "Plaintiffs") $623,676.74 plus interest based upon a finding that plaintiffs were unpaid cash sellers of livestock within the meaning of Section 206 of the Packers and Stockyards Act, 1921, as amended, 7 U.S.C. § 181 et seq., and that Orange Meat Packing Co., Inc. ("Orange") and G & L Packing Co., Inc. ("G & L") are a single integrated corporate entity for purposes of that section. The Court also directed that G & L's Trustee in Bankruptcy retain $69,918.74 of G & L's accounts receivable until the rights of certain nonparties are determined. In re G & L Packing Co., Inc., 20 B.R. 789 (N.D.N.Y.1982). As set forth herein, this court agrees with the findings and conclusions of Bankruptcy Court in this complex matter, and affirms that decision in all respects.
On February 25, 1980, Marine and two other creditors filed an involuntary petition in bankruptcy against G & L, a meat packing concern. The petitioners sought relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq., which relief was granted by order of the Bankruptcy Court on May 24, 1980.
Shortly thereafter, a group of ten livestock sellers, referred to here collectively as the Bast Group, commenced an adversary proceeding against Stephen D. Gerling as Trustee in Bankruptcy of G & L; against Orange, a livestock slaughtering concern; and against Marine. In their amended complaint, filed April 28, 1980, the Bast Group alleged that they had made cash sales of livestock to Orange in the approximate aggregate amount of $254,956.43, that the amount remained unpaid, and that they have each complied with the notice and filing requirements for preserving their interest in the statutory trust provided by section 206 of the Packers and Stockyards Act. The Bast Group sought to recover the proceeds of the trust from G & L on the theory, inter alia, that Orange and G & L constitute a single integrated entity for purposes of the Packers and Stockyards Act trust provisions. Marine was named as a defendant on the ground that it had collected proceeds from G & L's sales, which proceeds were allegedly subject to the statutory trust.
On May 2, 1980, Empire commenced a similar adversary proceeding against the Trustee, Orange, and Marine. It alleged that it had made cash sales to Orange in the approximate aggregate amount of $368,721.30, that the amount remained unpaid, and that it had complied with the statutory notice and filing requirements. Empire's claims parallel those asserted by the Bast Group.
A joint trial for both actions was conducted by the Bankruptcy Court on September 23-25, 1981. Based on the evidence adduced at trial, including the parties' Stipulation of Facts, the Bankruptcy Court made 36 findings of fact. 20 B.R. at 793-800. Briefly, the court found as follows.
G & L is a New York corporation that was organized in 1955. Franklin B. Giruzzi was the President and 50% shareholder; his brother John Giruzzi was the Secretary/Treasurer and held the remaining 50% of the shares. G & L was a wholesale boneless meat company, a processor, and a purveyor of provisions. It would purchase beef carcasses from slaughterers, debone them, and sell those cuts of beef to stores, hotels, and restaurants. During the period of 1977-80, Franklin Giruzzi was in charge of the day-to-day operations of the business and made all the important business decisions.
G & L was financed, in part, by a line of credit extended to it by Marine. For collateral, G & L gave the bank a blanket security interest in its present and future inventories, accounts receivable, and contract rights; the bank perfected its security interest through timely filing.
In 1978-79, a period during which G & L and the industry as a whole suffered from a shortage of native beef, Franklin Giruzzi considered entering the slaughtering business to assure G & L's supply. After locating a defunct slaughtering concern in Dewitt, New York, Giruzzi sought financing. The Bankruptcy Court's findings read:
Orange was incorporated on August 28, 1979. Mrs. Angela Giruzzi, wife of Franklin Giruzzi, was the President, sole director, and sole stockholder of the corporation. However, Mrs. Giruzzi testified that she was unfamiliar with such facts as her ownership interest in Orange, the identity of Orange's attorneys or accountants, her status as its only director, any director meetings, the minutes of the corporation, or the certificate of incorporation. She played no active role in the management or business of Orange, except to affix her signature at her home to corporate checks and certain other documents according to her husband's direction. Franklin Giruzzi held no formal corporate position with Orange, yet had "a pervasive control over the establishment and operations of Orange," 20 B.R. at 795, ¶ 14, and was present at the DeWitt plant every day. Among his other activities at Orange, Franklin Giruzzi "instructed Orange buyers of cattle what livestock and at what price he expected them to purchase," id. at 796, ¶ 14, and "set . . . the price for slaughtered livestock sold to G & L from Orange in such a way that profit to Orange was not an absolute goal so long as the overall operation of Orange and G & L produced a net profit." Id. (Emphasis in original).
Orange obtained the plant in Dewitt through an arrangement with Key Bank of Central New York, which held a mortgage on the premises. It also maintained a corporate checking account at Key Bank which was used to pay for its purchases. Orange's daily purchases of livestock involved sizeable amounts in demand instruments (checks). A standard procedure was devised to cover Orange's overdrafts on its checking account: A Key Bank representative would contact G & L's accountant, who would then arrange for Marine to wire the necessary funds to Key Bank.
G & L's records indicate that, as of December 5, 1979, 100% of its native beef supply came from Orange. Orange did send invoices to G & L with respect to these sales, and an expert witness produced by Marine opined that a valid vendor-customer relationship existed between the two corporations. The expert witness also testified that there was no apparent co-mingling of funds between...
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