Antelope County Farmers Co-op. Ass'n v. Citizens State Bank of Clearwater, S-89-803

CourtSupreme Court of Nebraska
Citation240 Neb. 760,484 N.W.2d 822
Docket NumberNo. S-89-803,S-89-803
PartiesANTELOPE COUNTY FARMERS COOPERATIVE ASSOCIATION, doing business as Union Oil Company, Appellant, v. CITIZENS STATE BANK OF CLEARWATER, a Nebraska Banking Corporation, Appellee.
Decision Date29 May 1992

Syllabus by the Court

1. Summary Judgment. A summary judgment is properly granted when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue concerning any material fact or as to the ultimate inferences deducible from such fact or facts and that the moving party is entitled to judgment as a matter of law.

2. Summary Judgment: Appeal and Error. In appellate review of a summary judgment, the court views the evidence in a light most favorable to the party against whom the judgment is granted and gives that party the benefit of all reasonable inferences deducible from the evidence.

3. Bankruptcy: Jurisdiction: Liens: Debtors and Creditors. A bankruptcy court lacks the jurisdiction to either hear or decide private lien priority disputes between two creditors which do not directly or indirectly affect the debtor or his property.

4. Bankruptcy: Liens: Debtors and Creditors. A bankruptcy trustee occupies the status of a judgment lien creditor. The claim of a judgment lien creditor is inferior to that of a previously perfected statutory lien creditor.

5. Judgments: Res Judicata. The doctrine of res judicata dictates that any right, fact, or matter which has been expressly or directly adjudicated on the merits in a previous action before a court acting within its jurisdiction, or which was necessarily included in the determination of the previous action, is conclusively settled by the judgment in the previous action and may not be relitigated by the parties to the previous action, whether the claim, demand, purpose, or subject matter in subsequent litigation would or would not be the same as that in the previous litigation.

6. Bankruptcy: Liens: Debtors and Creditors. Confirmation of a bankruptcy plan will bind creditors and the debtor to the terms of that plan, but unless the underlying claim has been disallowed, the lien securing the claim is not extinguished by bankruptcy.

Rodney W. Smith, Neligh, for appellant.

Richard L. Spittler, Norfolk, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

GRANT, Justice.

Plaintiff, Antelope County Farmers Cooperative Association (Co-op), appeals the order of the district court for Antelope County sustaining the motion for summary judgment filed by defendant, Citizens State Bank of Clearwater (Bank), and dismissing Co-op's petition. Co-op's petition, filed December 23, 1988, alleged that Co-op had a first, valid, and perfected lien on the crops of Jack Jones and the proceeds therefrom and that in derogation of that status, the Bank converted proceeds of Jones' corn crop to the Bank's favor.

The Bank filed an answer which denied the priority of Co-op's lien and the allegations of conversion. The answer further alleged that Jones and his wife had filed bankruptcy, that the bankruptcy plan had been confirmed, that the plan provided for distribution of the corn crop check to the Bank, and that all creditors of the Joneses were bound to the terms of the bankruptcy plan.

The trial court found that the respective security interests of the parties had been determined by the bankruptcy court and that the determination was res judicata and would not be relitigated. The court sustained the Bank's motion for summary judgment and dismissed Co-op's petition, with prejudice and at Co-op's costs.

Co-op timely appealed. Co-op assigns three errors in this court. The assigned errors may be consolidated into one, alleging that the trial court erred in determining that the interest and priority of liens of the two parties had been "adjudicated in the United States Bankruptcy Court ... and [were] therefore res judicata and could not be relitigated."

The record shows the following relevant facts: Co-op alleged that between 1982 and 1986, it provided agricultural supplies and products to Jack Jones, a farmer in Clearwater, Nebraska, and that Jones has at all relevant times been indebted to Co-op for $65,000. In consideration of Co-op's extension of credit, Jones granted a security interest in his crops and the proceeds therefrom. A security agreement was executed, filed, and perfected.

On January 6, 1987, Jones and his wife, Neta Jones, filed a voluntary petition in bankruptcy, pursuant to 11 U.S.C. ch. 12 (1988), "Adjustment of Debts of a Family Farmer with Regular Annual Income." On June 10, 1987, the debtors filed their amended chapter 12 plan, which provided for four categories of creditors.

The only creditor in "Class (a)" was Antelope County, to which the debtors owed taxes. "Class (b)" creditors were those with security interests in the Joneses' "farmstead" and were listed as the Federal Land Bank and the Bank. "Class (c)" creditors were those creditors secured by interests in farm equipment and crops and were listed as the Co-op, with a security interest of $65,110.64, and the Bank, with a security interest of $178,500. In addition, the Bank had a lien on the Joneses' motor vehicles. Finally, "Class (d)" creditors were those creditors who were not secured by any interest in the debtors' property. This class listed eight creditors. Among them were the Bank (unsecured for the amount of $109,888, representing "excess debt over value of collateral") and Co-op (unsecured for the entire amount owed by the debtors to Co-op, for the reason that there was "no equity for security interests to attach.")

The plan provided that as to claims in "Class (c)," the debtors would retain the motor vehicles and pay off the debt owed on them. The plan then stated: "Debtors propose to surrender the remaining motor vehicles, farm equipment, 1986 corn crop of approximately 7,000 bushels and the Cargill bean check in the amount of $862.56 to the Citizens State Bank within ten days of confirmation of this Plan."

"Class (d)" creditors were to "be paid all of Debtors' disposable income for a period of three years, in the sum of $0.00 per year."

On July 27, 1987, the U.S. Bankruptcy Court for the District of Nebraska held a confirmation hearing on the debtors' amended plan. The hearing was attended by the debtors' attorney and the trustee. The plan was confirmed.

In July 1987, the 1986 corn crop was sold for $8,990 to Foxley Cattle Company. The check, made out to Co-op, the Bank, and the debtors, was turned over to the Bank according to the terms of the plan, but when the Bank asked Co-op to endorse the check, Co-op refused. On September 4, 1987, the Bank filed an application for contempt, praying that the bankruptcy court find Co-op in contempt and compel it to endorse the check.

In October 1987, the parties filed a stipulation that Co-op would endorse the check, while "not waiving any rights or causes of action that it may have [in] regard to said moneys." In exchange, the Bank agreed to withdraw its application for contempt. Co-op then brought this conversion action in the Antelope County District Court.

A summary judgment is properly granted when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue concerning any material fact or as to the ultimate inferences deducible from such fact or facts and that the moving party is entitled to judgment as a matter of law. Flamme v. Wolf Ins. Agency, 239 Neb. 465, 476 N.W.2d 802 (1991); Gottsch v. Bank of Stapleton, 235 Neb. 816, 458 N.W.2d 443 (1990). In appellate review of a summary judgment, the court views the evidence in a light most favorable to the party against whom the judgment is granted and gives that party the benefit of all reasonable inferences deducible from the evidence. Spittler v. Nicola, 239 Neb. 972, 479 N.W.2d 803 (1992).

Co-op contends that summary judgment was improper because there are genuine issues of fact which have not been determined, specifically priority and interest in the check for the corn crop.

Because we are concerned with former property of a debtor in bankruptcy, it is first necessary for this court to determine if it has jurisdiction. It has been stated:

Although bankruptcy courts by statute may hear "any or all cases under title 11 and any or all core proceedings arising under title 11 or arising in or related to a case under title 11," 28 U.S.C. § 157(a) (1988), they may not entertain cases involving noncore, unrelated matters.

In re Gallucci, 931 F.2d 738, 741 (11th Cir.1991).

Title 28 U.S.C. § 157(b)(2)(K) (1988) provides that "[c]ore proceedings include ... determinations of the validity, extent, or priority of liens." We are concerned in this case with the determination of the validity and priority of two conflicting liens, but § 157(b)(2)(K) is not dispositive of the issue. The bankruptcy courts and federal courts have interpreted this statute " 'as empowering [bankruptcy courts] only to make "determinations of the validity, extent, or priority of liens" upon property of the estate.' " (Emphasis in original.) In re McKinney, 45 B.R. 790 (Bankr.W.D.Ky.1985).

Numerous bankruptcy cases have defined "core" and "related" proceedings. In McKinney, the U.S. Bankruptcy Court for the Western District of Kentucky stated:

It should go without saying that mere possession by the trustee of a disputed asset cannot confer jurisdiction if it is otherwise without a statutory basis.

....

"... [W]e hold that a bankruptcy court lacks the jurisdiction to either hear or decide private lien priority disputes between two creditors which do not directly or indirectly affect the debtor or his property."

McKinney, 45 B.R. at 792 (cited with approval in In re Gallucci, supra ).

In Matter of Xonics, Inc., 813 F.2d 127 (7th Cir.1987), the court held that a dispute between...

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