Sakowitz, Inc., In re, 90-6023
| Citation | 949 F.2d 178 |
| Decision Date | 26 December 1991 |
| Docket Number | No. 90-6023,90-6023 |
| Parties | In re SAKOWITZ, INC. Sakowitz, Inc. of Amarillo, Sakowitz, Inc. of Arizona, Sakowitz-Gulfgate, Inc., and Sakowitz of Oklahoma, Inc., Debtors. EVANS FUR COMPANY OF HOUSTON, INC., Appellant, v. The CHASE MANHATTAN BANK, N.A., InterFirst Bank Dallas, N.A. First Pennsylvania Bank, N.A., Security Pacific National Bank, and Amarillo National Bank, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Joanne M. Vorpahl, Warren W. Harris, Porter & Clements, Houston, Tex., Samuel B. Garber, VP, Gen. Counsel, Evans, Inc., Chicago, Ill., for Evans Fur Co. of Houston, Inc.
Mary M. Gregory, Baker & Botts, Houston, Tex., Howard C. Buschman, III, Stephen J. Shimshak, Laurie R. Binder, Milbank, Tweed, Hadley & McCloy, New York City, Alex T. Galbraith, Hoffman & Assoc., Houston, Tex., for Chase Manhattan Bank, N.A., et al.
Michael J. Durrschmidt, Hirsch & Westheimer, Houston, Tex., for other interested parties.
Appeals from the United States District Court for the Southern District of Texas.
Before REYNALDO G. GARZA, WIENER and BARKSDALE, Circuit Judges.
In this case we determine title to escrowed funds containing proceeds collected by bankrupt stores for sales on special credit accounts. We hold that the district court correctly affirmed the bankruptcy court's decision that these funds were not subject to either an express or implied trust in favor of the merchant who owned and sold the merchandise, but rather were subject to the Appellee-Banks' security interest.
This appeal arises out of an adversary proceeding in the bankruptcy of Sakowitz, Inc., Sakowitz, Inc. of Amarillo, Sakowitz, Inc. of Arizona, Sakowitz-Gulfgate, Inc., and Sakowitz of Oklahoma, Inc. (collectively "Sakowitz"). On November 18, 1985, The Chase Manhattan Bank, N.A., InterFirst Bank Dallas, N.A., First Pennsylvania Bank, N.A., Security Pacific National Bank, and Amarillo National Bank (collectively "the Banks") filed an adversary proceeding against Sakowitz and Evans Fur Company of Houston, Inc. ("Evans"), claiming title to certain escrowed funds as accounts receivable of Sakowitz. On February 9, 1987, the Banks filed their motion for summary judgment against Sakowitz and Evans. On August 12, 1987, the bankruptcy court entered an order granting the Banks' motion for summary judgment and awarding the Banks the escrowed funds.
Evans timely perfected an appeal to the district court which affirmed the bankruptcy court's order. Evans timely filed its notice of appeal to this Court on December 5, 1990. This Court has jurisdiction over this appeal under 28 U.S.C. § 158(d) (1988).
Before August 1, 1985, the date upon which Sakowitz petitioned for bankruptcy ("the Petition Date"), Sakowitz owned and operated department stores in the Southwest. Before the Petition Date, the Banks financed Sakowitz's operations, in consideration of which Sakowitz granted the Banks a valid and perfected security interest in accounts receivable and their proceeds.
Evans, a fur merchandiser, sold furs in Sakowitz stores pursuant to a sublease agreement dated July 1, 1980. The fur departments in the various Sakowitz stores were staffed and operated exclusively by Evans employees, who sold furs directly to customers and turned over cash and credit receipts to Sakowitz each day. All of the fur inventory belonged to Evans. Nevertheless, under the sublease the Evans fur departments were to be, to all appearances, Sakowitz departments. There was no indication that the furs were being sold by anyone other than Sakowitz. Evans used Sakowitz boxes, wrapping and stationary, and was permitted to advertise only under Sakowitz's name.
The sublease provided that
[a]ll monies received from customers through the sale of [Evans'] merchandise or any services offered by [Evans] shall be paid at the time of receipt to the cashier of [Sakowitz], who shall keep a full true and accurate record thereof ...
. . . . .
The amount of rent shall be computed at the time of each monthly accounting, and shall then be deducted from the amount in the hands of [Sakowitz] belonging to [Evans]. The balance of such amount, less all deductions contemplated by this Sublease, shall be and remain the property of [Evans] and shall be remitted by [Sakowitz] to [Evans] ... As to funds which shall remain the property of [Evans] under the terms of this Article XV hereof, it is specifically understood and agreed that while the same are in the hands of [Sakowitz] they shall be held by [Sakowitz], in trust, for [Evans] and shall be so identified on [Sakowitz's] records.
According to the sublease, customers were permitted to purchase Evans' furs on credit extended by Sakowitz so long as the customer first received Sakowitz's approval for the credit sale. Sakowitz had various credit arrangements that could be used by such customers, including credit card sales, C.O.D. sales, lay-away sales and, particularly significant for this case, "special account" sales.
By the twentieth of every month, Sakowitz was obligated to pay Evans for "all sales made by [Evans] from the demised premises during the preceding calendar month," less rental payments due Sakowitz for Evans' use of its premises. Significantly for this case, the sublease reads:
Where any such sale may have been made on credit and so approved, the amount of such credit sale shall be included in the monthly settlements between [Sakowitz and Evans] ... and shall be included in the balance to be remitted by [Sakowitz to Evans] whether such credit sale has been, in fact, collected or not.
. . . . .
Where merchandise is sold by [Evans] on the C.O.D. or lay-away plan, if said transaction is handled in conformity with [Sakowitz's] rules pertaining to its own business, Evans shall be given full credit for the entire amount of such sale ... where a sale is made on the special account or lay-away plan and ... in the event any customer payments become delinquent pursuant to the customer's agreement made with [Sakowitz] at the time of sale, then [Sakowitz] shall remit to [Evans] the amount of such delinquencies.
[Emphasis added].
The sublease provided that "to the extent funds of [Evans] may be on hand with Sakowitz, [Sakowitz] shall advance for [Evans'] account the amount of all wages and salaries (less all payroll deductions ...) for [Evans'] department employees and shall pay such amounts, on [Evans'] behalf, to such employees on the regular payroll on which [Sakowitz] makes payroll payments to its own employees ..." Similarly, the sublease provided that Sakowitz would "disburse on written order of [Evans] or its properly appointed representatives, out of the funds of [Evans] on hand with [Sakowitz] all proper and legitimate expenses necessary for the conduct of the business of [Evans] ..."
Evans sold furs to approved customers primarily by way of the aforementioned "special accounts" which allowed these customers to make monthly payments, with the remainder of the purchase price after the initial downpayment amortized interest free over what was usually a twelve month period. With respect to sales on these special accounts, the sublease provided that "it is specifically understood and agreed that such will be collected by [Sakowitz], in trust for [Evans], and shall be so identified on [Sakowitz's] records ...". Nevertheless, Evans would eventually receive full credit for every sale it made, irrespective of whether Sakowitz was able to collect from the buyers.
Sakowitz did not segregate proceeds from credit accounts from sales made by Evans. Rather, Sakowitz deposited its collections from Evans sales into its general funds accounts. Sakowitz paid Evans, other lessees and its other creditors out of the same general corporate accounts.
Sakowitz filed for Chapter 11 relief on the Petition Date. Since September 6, 1985, the money collected by the debtors representing special account sales made by Evans prior to the Petition Date has been placed in an escrow account which exceeded $2 million as of the date of the bankruptcy court's decision.
Evans calls upon us to determine whether the district court erred in affirming the bankruptcy court's judgment that the litigants presented no genuine issues of material fact, that the sublease created no express or implied trust and that the relationship between Sakowitz and Evans was therefore one of debtor-creditor, and that the escrowed funds therefore come under the Banks' perfected security interest. For the reasons outlined below, we affirm.
Evans argues that the bankruptcy court erred in granting the Banks' motion for summary judgment, claiming that fact issues exist regarding industry practice and the intention of Evans and Sakowitz in drafting the sublease. Consequently, Evans maintains that this action must be reversed [i]t is almost axiomatic that any genuine issues of fact must somehow be shown to exist at the [lower] court level. Where the moving papers do not reveal the presence of a factual controversy and the opposing party manifests silent assent through inaction, the opposing party will not thereafter on appeal be heard to belatedly assert as grounds for reversal that some factual disputes implicit in the underlying arguments have yet to be resolved.
and remanded to the bankruptcy court for trial. To withstand a motion for summary judgment, the nonmoving party must show that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). It is up to the nonmoving party to "designate specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d
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