In re Big Idea Productions, Inc.

• Decision Date: 24 July 2007
• Docket Number: Bankruptcy No. 03 B 35893.,Adversary No. 07 A 00092.
• Citation: 372 B.R. 388
• Court: U.S. Bankruptcy Court — Northern District of Illinois
• Parties: In re BIG IDEA PRODUCTIONS, INC., Debtor. Big Idea Liquidating Creditor Trust, f/k/a Big Idea Productions, Inc., Plaintiff, v. Safeco Insurance Company of America, and Lyrick Studios, Inc., Defendants.

Page 388

372 B.R. 388

In re BIG IDEA PRODUCTIONS, INC., Debtor Big Idea Liquidating Creditor Trust, f/k/a Big Idea Productions, Inc., Plaintiff, v. Safeco Insurance Company of America, and Lyrick Studios, Inc., Defendants.

Bankruptcy No. 03 B 35893.

Adversary No. 07 A 00092.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

July 24, 2007.

COPYRIGHT MATERIAL OMITTED

Matthew T. Gensburg, Amanda K. Grace, Greenberg Taurig LLP, Chicago, IL, for Plaintiff.

T. Scott Leo, Jennifer Watt, Leo & Weber, P.C., Chicago, IL, for Defendant.

William T. Neary, Chicago, IL, U.S. Trustee.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the motion of Safeco Insurance Company of America ("Safeco") for summary judgment pursuant to Federal Rule of Bankruptcy Procedure 7056, which incorporates by reference Federal Rule of Civil Procedure 56, on the complaint filed by Walker Nell Consultants, Inc., not individually, but solely in its capacity as the trustee of the plaintiff, Big Idea Liquidating Creditor Trust ("Creditor Trust") which seeks declaratory judgment against Safeco and Lyrick Studios, Inc. ("Lyrick"). For the reasons set forth herein, the Court grants the motion of Safeco for summary judgment. The Court holds that the surety bond proceeds that are at issue in this dispute are subject to a prior and superior claim of Safeco, as the surety, who paid those proceeds to Lyrick as judgment creditor of the debtor Big Idea Productions, Inc. ("Big Idea"). The surety bond proceeds are not property of the bankruptcy estate to be paid pursuant to the terms of the plan of reorganization to other claimants, including the other unsecured creditors.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. A bankruptcy court has jurisdiction to determine what constitutes properly of the bankruptcy estate. Messina v. Am. Citrus Prods. Corp. (In re Messina), Adv. No. 03 A 01803, 2003 WL 22319416, at *5 (Bankr.N.D.Ill. Sept.29, 2003); Knopfler v. Schraiber (In re Schraiber), 97 B.R. 937, 942 (Bankr. N.D.Ill.1989). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O). All Am. Laundry Serv. v. Ascher (In re Ascher), 128 B.R. 639, 643 (Bankr.N.D.Ill. 1991).

II. APPLICABLE STANDARDS FOR SUMMARY JUDGMENT

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 Estate of Allen v. City of Rockford, 349 F.3d 1015, 1019 (7th Cir.2003).

The primary purpose of granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute. Trautvetter v. Quick, 916 F.2d 1140, 1147 (7th Cir.1990); Far Ties v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v. Railroadmens Fed. Says. & Loan Ass'n of Indianapolis, 806 F.2d 146, 149 (7th Cir. 1986)). Where the material facts are not in dispute, the sole issue is whether the moving party is entitled to a judgment as a matter of law, ANR Advance Transp. Co. v. Bhd. of Teamsters, Local 710, 153 F.3d 774, 777 (7th Cir.1998).

On a motion for summary judgment, "[t]he court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003) (internal quotation omitted). Summary judgment is the "put up or shut up moment in a lawsuit, when a party must show what evidence it has that would convince a trier of fact to accept its version of the events" Hammel v. Eau Galle Cheese Factory, 407 F.3d 852, 859 (7th Cir.2005) (internal quotation omitted).

In 1986, the United States Supreme Court decided a trilogy of cases that encourages 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 Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538(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 248, 106 S.Ct. 2505; Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Matsushita, 475 U.S. at 585-86, 106 S.Ct. 1348.

All reasonable inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Roger Whitmore's Auto. Servs., Inc. v. Lake County, Ill., 424 F.3d 659, 666-67 (7th Cir.2005); Parkins v. Civil Constructors of Ill., Inc., 163 F.3d 1027, 1032 (7th Cir.1998). The existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under applicable law. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Fritcher v. Health Care Serv. Corp., 301 F.3d 811, 815 (7th Cir.2002). "`Factual disputes that are irrelevant or unnecessary will not be counted.'" Fritcher, 301 F.3d at 815 (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). "[S]ummary judgment is not an appropriate occasion for weighing the evidence; rather, the inquiry is limited to determining if there is a genuine issue for trial." Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir.1990). The Seventh Circuit has noted that trial courts must remain sensitive to fact issues where they are actually demonstrated to warrant denial of summary judgment. Opp v. Wheaton Van Lines, Inc., 231 F.3d 1060, 1065-66 (7th Cir.2000); Szymanski v. Rite-Way Lawn Maint. Co., 231 F.3d 360, 364 (7th Cir. 2000).

The "party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and identifying those portions of the `pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548 (quoting FED. R.CIV.P. 56(c)). 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. 2505; Celotex, 477 U.S. at 323, 106 S.Ct. 2548; Matsushita, 475 U.S. at 587, 106 S.Ct. 1348; Patrick v. Jasper County, 901 F.2d 561, 565 (7th Cir.1990). The manner in which this showing can be made depends upon which party will bear the burden of persuasion at trial. If the burden of persuasion at trial would be on the non-moving party, the party moving for summary judgment may satisfy Rule 56's burden of production either by submitting affirmative evidence that negates an essential element of the non-moving party's claim or by demonstrating that the non-moving party's evidence is insufficient to establish an essential element of the non-moving party's claim. See Union Nat'l Bank of Marseilles v. Leigh (In re Leigh), 165 B.R. 203, 213 (Bankr.N.D.Ill. 1993).

Local Bankruptcy Rule 7056-1 of the Local Bankruptcy Rules for the United States Bankruptcy Court for the Northern District of Illinois, which deals with summary judgment motions, was modeled after LR 56.1 of the Local Rules of the United States District Court for the Northern District of Illinois. Hence, the case law construing LR 56.1 and its predecessor Local Rule 12 applies to Local Bankruptcy Rule 7056-1.

Pursuant to Local Bankruptcy Rule 7056, a motion for summary judgment imposes special procedural burdens on the parties. Specifically, the Rule requires the moving party to supplement its motion and supporting memorandum with a statement of undisputed material facts ("7056-1 statement"). The 7056-1 statement "shall consist of short numbered paragraphs, including within each paragraph specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph. Failure to submit such a statement constitutes grounds for denial of the motion." Local Bankr.R. 7056-1B.

The party opposing a summary judgment motion is required by Local Rule 7056-2 to respond ("7056-2 statement") to the movant's 7056-1 statement, paragraph by paragraph, and to set forth any material facts that would require denial of summary judgment, specifically referring to the record for support of each denial of fact. Local Bankr.R. 7056-2. The opposing party is required to respond "to each numbered paragraph in the moving party's statement" and to make "specific references to the affidavits, parts of the record, and other supporting materials relied upon[.]" Local Bankr.R. 7056-2A(2)(a). Most importantly, "[a]ll material facts set forth in the [7056-1] statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party." Local Bankr.R. 7056-2B.

In the instant matter, Safeco filed a 7056-1 statement that complies with the Rule. It includes numbered paragraphs establishing undisputed facts with specific references to accompanying exhibits. In response, the Creditor Trust filed a 7056-2 statement that substantially complies with Local Rule 7056-2A (2)(a). It responded to each numbered paragraph in...