In re Calstar, Inc.

• Decision Date: 30 September 1993
• Docket Number: Bankruptcy No. 4-92-1206,Adv. No. 4-93-19.
• Citation: 159 BR 247
• Parties: In re CALSTAR, INC., Debtor. Timothy D. MORATZKA, Trustee, Plaintiff, v. VISA U.S.A. and Direct Marketing Guaranty Trust, Defendants.
• Court: U.S. Bankruptcy Court — District of Minnesota

159 B.R. 247 (1993)

In re CALSTAR, INC., Debtor Timothy D. MORATZKA, Trustee, Plaintiff, v. VISA U.S.A. and Direct Marketing Guaranty Trust, Defendants.

Bankruptcy No. 4-92-1206, Adv. No. 4-93-19.

United States Bankruptcy Court, D. Minnesota.

September 30, 1993.

COPYRIGHT MATERIAL OMITTED

Thomas J. Lallier, Bradley J. Halberstadt, Mackall, Crounse & Moore, Minneapolis, MN, for plaintiff.

Steven L. Freeman, Gurstel & Gurstel, Minneapolis, MN, William C. Penkethman, Jr., Kamberg & Berman, P.C., Springfield, MA, for defendants.

ORDER AVOIDING TRANSFERS

ROBERT J. KRESSEL, Chief Judge.

This adversary proceeding came on for hearing on June 8, 1993, on the parties' cross-motions for summary judgment. Thomas J. Lallier and Bradley J. Halberstadt appeared for the plaintiff and William C. Penkethman, Jr. and Steven L. Freeman appeared for the defendant.¹ This court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157(a) and Local Rule 201. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A).

UNDISPUTED FACTS

The debtor is a mail order merchant receiving orders by phone and payment by credit card. On January 25, 1989, the debtor and defendant, a credit card processor,² entered into a "Credit Card Processing Service Agreement." According to the agreement, each day the debtor electronically notifies the defendant of the amount and number of credit card sales. The defendant then electronically deposited the "net proceeds"³ of credit card sales into the debtor's bank account. That is, every day the defendant deposits in the debtor's bank account total credit card sales less customer refunds,⁴ "processing fees"⁵ and "chargebacks."⁶

On February 14, 1992, the debtor filed a chapter 11 case. The plaintiff was appointed trustee on March 27, 1992.

Notwithstanding the debtor's pending case, on March 5, 1992, the defendant agreed with the debtor to continue processing the debtor's credit card transactions as long as it could establish a post-petition reserve account.⁷ The reserve account⁸ was established and between March 5, 1992 and June 8, 1992, the debtor electronically submitted post-petition charges of $103,430.99 to the defendant. During approximately the same post-petition period, the defendant reduced the debtor's deposits by $59,679.96⁹ as chargebacks against pre-petition charges. The plaintiff requested that the defendant return the amounts charged back as unauthorized post-petition transfers. The defendant refused. The plaintiff commenced this adversary proceeding seeking to avoid the post-petition transfers pursuant to 11 U.S.C. § 549(a) and recover them pursuant to 11 U.S.C. § 550(a). Additionally, the plaintiff has asked me to either sanction the defendant pursuant to section 362(h) or hold the defendant in contempt for violating the automatic stay.

ISSUES

I. Are chargebacks, made post-petition against pre-petition charges, avoidable under section 549(a) or violative of the automatic stay?

II. Can a corporation be held in contempt or sanctioned pursuant to 362(h) or otherwise for violating the automatic stay?

DISCUSSION

I. The Standards For Summary Judgment¹⁰

Summary judgment plays a very important role allowing the judge to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Advisory Committee Notes to Rule 56. The importance of summary judgment cannot be overemphasized. Indeed, "summary judgment . . . is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986) (quoting Rule 1 of the Federal Rules of Civil Procedure). "The motion for summary judgment can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those cases that really do raise genuine issues of material fact." City of Mt. Pleasant, Iowa v. Associated Elec. Co-Op., Inc., 838 F.2d 268, 273 (8th Cir.1988); see Catrett v. Johns-Manville Sales Corp., 756 F.2d 181, 189-90 (D.C.Cir. 1985) (Bork, J. Dissenting).¹¹

Under Rule 56(c)¹² of the Federal Rules of Civil Procedure, summary judgment is proper "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). "The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552.

A. The Burdens

1. The Moving Party

Initially, the burden is on the party seeking summary judgment. It is the moving party's job to inform the court of the basis for the motion, and identify those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. Simply stated, the moving party must show the court that there is an absence of evidence to substantiate the non-moving party's case. Id. at 325, 106 S.Ct. at 2554. To that end, the movant discharges its burden by asserting that the record does not contain a triable issue and identifying that part of the record which supports the moving party's assertion. See Id. at 323, 106 S.Ct. at 2553; City of Mt. Pleasant, 838 F.2d at 273.

2. The Non-moving Party

Once the movant has made its showing, the burden of production shifts to the non-moving party. The non-moving party must "go beyond the pleadings and by its . . . own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,'" establish that there is specific and genuine issues of material fact warranting a trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553 (quoting Fed.R.Civ.P. 56(c)). The non-moving party cannot cast some metaphysical doubt on the moving party's assertion. Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). The non-moving party must present specific significant probative evidence supporting its case, Johnson v. Enron Corp., 906 F.2d 1234, 1237 (8th Cir.1990) sufficient enough "to require a . . . judge to resolve the parties' differing versions of the truth at trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (quoting First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968)). Any affidavits must "be made on personal knowledge, must set forth such facts as would be admissible in evidence, and shall affirmatively show that the affiant is competent to testify to the matters stated therein." Fed.R.Civ.P. 56(e) (emphasis added). If, however, the evidence tendered is "merely colorable," or is "not significantly probative," the non-moving party has not carried its burden and the court must grant summary judgment to the moving party. Id. 477 U.S. at 249-50, 106 S.Ct. at 2511. Here, no material facts are in dispute. Accordingly, judgment may be entered as a matter of law.

II. Post-Petition Chargebacks as Avoidable Transfers

The plaintiff asserts that pursuant to 11 U.S.C. § 549(a) the chargebacks are avoidable post-petition transfers of property. According to section 549(a),

the trustee may avoid a transfer of property of the estate —

(1) that occurs after the commencement of the case; and . . .

(2) (B) that is not authorized under this title or by the court.

11 U.S.C. § 549(a). Thus, to avoid the transfer, the trustee must prove:

1. That property of the estate was transferred;

2. after the filing of a petition;

3. which was not authorized by the Code or by the court.

See 11 U.S.C. § 549(a). The defendant does not dispute the existence of the second and third elements. Thus, these motions boil down to one question: Was property of the estate transferred?

A. Was Property of the Estate Transferred?

The plaintiff argues that there was a transfer of property of the estate. I agree. The defendant, charging back pre-petition charges against post-petition credit card sales, transferred property of the debtor's estate.

1. Are Post-Petition Credit Card Sales Property of the Estate?

The plaintiff argues that the post-petition credit card sales are property of the estate. I agree. Section 541 states that a debtor's estate includes:

(6) Proceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case.

(7) Any interest in property that the estate acquires after the commencement of the case.

11 U.S.C. §§ 541(a)(6) & (7). Clearly, the post-petition credit card sales are property of the debtor's estate. That is, the debtor's post-petition sales of pre-petition inventory, are both an "interest in property that the estate acquired after the commencement of the case" as well as "proceeds, product . . . or profit of or from property of the estate. . . ." 11 U.S.C. §§ 541(a)(6) & (7). While the analysis is rather wooden, the result is clear: The post-petition credit card sales were property of the estate. See also United States v. Challenge Air International, Inc. (In re Challenge Air International, Inc.), 123 B.R. 661, 663-64 (S.D.Fla. 1991), aff'd., 952 F.2d 384 (11th Cir.1992). (Funds held in a charge back reserve account, pursuant to airline credit card service agreement with debtor, were property...