In re Adventist Living Centers, Inc.
| Decision Date | 01 November 1994 |
| Docket Number | 92 A 1494.,Bankruptcy No. 92 B 21285 |
| Citation | 174 BR 505 |
| Parties | In re ADVENTIST LIVING CENTERS, INC., Debtor. FIRST TRUST NATIONAL ASSOCIATION, as Bondholder Liquidating Trustee of Liquidating Trust C Under the Second Amended Plan of Reorganization of Adventist Living Centers, Inc., Plaintiff, v. AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, in its capacity as Trustee under Trust Agreement No. 100895-07 and Belleville Associates, Ltd., a partnership, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Mark E. Leipold, Oppenheimer Wolff & Donnelly, Chicago, IL, for plaintiff.
Synde B. Keywell, Katten Muchin & Zavis, Chicago, IL, for defendants.
Adventist Living Centers, Inc. ("Debtor") leased a nursing home facility located in Belleville, Illinois known as Notre Dame Hills Convalescent Center ("Notre Dame") from Belleville Associates, Ltd. pursuant to a ten-year lease commencing on January 1, 1987 (the "Lease"). Belleville Associates, Ltd. was the owner of the real property on which Notre Dame was located, and a beneficiary under Trust No. 100985-07. The legal titleholder of that property was American National Bank and Trust Co. (collectively referred to as "Landlord"). The Lease required the Debtor to make monthly payments to the Landlord. Debtor tendered $100,000 to the Landlord to be held as a security deposit pursuant to the terms of the Lease. On June 19, 1990, the Debtor and Landlord entered into an agreement to modify the Lease ("June Agreement"). The Lease, as modified by the June Agreement, provided that the Landlord was not entitled to damages until the Lease was terminated.
On August 31, 1990, the Debtor's liabilities exceeded its assets by $4,766,134. As of that date, the Debtor owed the Landlord $315,9211 for unpaid rent and other obligations due under the Lease. Further on that date, Debtor owned outstanding accounts receivable attributable to Notre Dame. On August 31, 1990, Debtor and Landlord entered into an agreement whereby the Lease, as modified by the June Agreement, was terminated ("Agreement"). Paragraph 1 of the Agreement provides:
(a) Debtor shall be deemed to have sold, assigned and transferred to the Landlord all right, title and interest of Debtor in and to (i) all personal property of Debtor located at the facility, (ii) all contracts, leases and other agreements to which Debtor is a party insofar as they relate to the business and operations of the Facility . . . and (iii) all trade accounts receivable arising out of the business and operations of the Facility which have not been collected, other than the first $51,700 of such trade accounts receivable that are collected after such time, (b) the Landlord shall be deemed to have accepted such sale, assignment and transfer and to have assumed all such contracts, leases and other agreements, and (c) the Landlord shall cause the Facility to be operated by a duly licensed operator.
Paragraph 9 of the Agreement provides:
Landlord hereby releases, acquits and discharges the Debtor . . . from all claims, counterclaims, liabilities, causes of action, suits, debts, damages, judgments and demands which the Landlord had, has or may have against the Debtor arising out of or related to the Lease, the Facility and all transactions, agreements, negotiations, representations, facts or circumstances relating to the Lease or the Facility.
Also according to Paragraph 2 of the Agreement, the Debtor assigned its interest in the $100,000 security deposit to the Landlord and pursuant to Paragraph 7 the Debtor agreed to pay the Landlord $266,700 on or before September 1, 1992.
The Landlord operated Notre Dame from September 1, 1990 until June 30, 1992. During this time period, Landlord experienced $235,148 in losses. Pursuant to Paragraph 1 of the Agreement, the Landlord collected accounts receivable in the amount of $260,821.
On November 14, 1990, the Debtor filed a voluntary petition for relief pursuant to Chapter 11 of the Bankruptcy Code. At the time the Debtor's petition was filed, secured claims against the Debtor exceeded the amount of the Debtors' assets by $2,000,000. On April 29, 1992, this Court entered an order confirming the Debtor's Second Amended Plan of Reorganization ("Plan") which created the ALC Liquidating Estate. Among the assets of the estate were preference actions which pursuant to the Plan, the Trustee has the right to pursue. On November 13, 1992, the Trustee filed a complaint alleging that the transfer of the accounts receivable and the security deposit pursuant to the Agreement were preferential and fraudulent transfers which should be avoided. The Trustee filed a motion for partial summary judgment contending that there is no issue of material fact which precludes the Court from finding the transfer of the accounts receivable to the Landlord constituted a preferential transfer as a matter of law. The Landlord filed a cross-motion for partial summary judgment in its favor on the same issue. Further, the Landlord contends that summary judgment should be entered in its favor on the issue of whether the transfer of the accounts receivable constituted a fraudulent conveyance.
In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c); see also Donald v. Polk County, 836 F.2d 376, 378-79 (7th Cir.1988).
In 1986, the Supreme Court decided a trilogy of cases which encourage the use of summary judgment as a means to dispose of factually unsupported claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute." Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v. Railroadmens Federal Sav. & Loan Ass'n, 806 F.2d 146, 149 (7th Cir.1986)). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53. There is no genuine issue for trial, unless there is sufficient evidence favoring the nonmoving party for a rational trier of fact to find for the nonmoving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. "If the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted); see also Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir. 1987), cert. denied, 484 U.S. 977, 108 S.Ct. 488, 98 L.Ed.2d 486 (1987).
Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion may not rest upon the mere allegations or denials in its pleadings, rather its response must show that there is a genuine issue for trial. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53; Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356; Patrick v. Jasper County, 901 F.2d 561, 564-66 (7th Cir.1990). Moreover, all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Davis v. City of Chicago, 841 F.2d 186, 189 (7th Cir.1988); Marine Bank, Nat. Ass'n v. Meat Counter, Inc., 826 F.2d 1577, 1579 (7th Cir.1987); De Valk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 329 (7th Cir. 1987); Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1304, 94 L.Ed.2d 160 (1987); In re Calisoff, 92 B.R. 346, 350-51 (Bankr.N.D.Ill.1988). Furthermore, the existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under the applicable law. Donald v. Polk County, 836 F.2d at 379; Wallace v. Greer, 821 F.2d 1274, 1276 (7th Cir.1987); Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983).
District of Illinois adopted by the General Order of the Bankruptcy Court on May 6, 1986, requires that the party moving for summary judgment file a detailed statement of material facts as to which they contend there is no genuine issue. The statement must include specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the summary judgment relief sought. Rule 12 also requires that the party opposing the motion file a statement of material facts as to which there is a genuine issue. If the opposing party's Rule 12 statement fails to deny the facts set forth in the movant's statement, those facts will be deemed admitted. In the present proceeding, both parties filed a statement of facts.
After considering the pleadings, papers submitted by the parties, and arguments of counsel, the Court denies both motions for summary judgment on the issue of whether a preferential transfer occurred. The...
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