In re Country Club Market, Inc., Bankruptcy No. 4-91-5834. Adv. No. 4-93-123.
| Decision Date | 29 December 1993 |
| Docket Number | Bankruptcy No. 4-91-5834. Adv. No. 4-93-123. |
| Parties | In re COUNTRY CLUB MARKET, INC., Debtor. DAIRY FRESH FOODS, INC., Plaintiff, v. James E. RAMETTE, Trustee, Defendant. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota |
Clinton E. Cutler, Fredrickson & Byron, Minneapolis, MN, for plaintiff.
Randall L. Seaver, Morris, Fuller & Seaver, Minneapolis, MN, for defendant.
ORDER FOR SUMMARY JUDGMENT
This adversary proceeding came on for hearing on the parties' cross-motions for summary judgment. Clinton E. Cutler appeared for the plaintiff and Randall L. Seaver appeared for the defendant. This court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334 and Local Rule 201. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(K).
On August 26, 1991, the debtor, Country Club Market, Inc., filed a Chapter 11 bankruptcy petition. Both prior to and during its Chapter 11 case, the debtor owned and operated several supermarkets in the Minneapolis-St. Paul metropolitan area. In this capacity, the debtor purchased wholesale quantities of food products to resell on the retail market. The plaintiff, Dairy Fresh Foods, Inc., is a wholesaler who regularly sold the debtor dairy and food products, including juices, fruit-flavored drinks, and punch. Between August 10 and August 31, 1991, the debtor received goods from the plaintiff for which payment had not been made at the time of filing. During this period, the debtor was also billed for deposits and credited for the return of bottles, pallets, and cases. The debtor's net account to the plaintiff totaled $186,895.94.
On September 26, 1991, pursuant to Minn. Stat. § 27.138,1 the plaintiff filed a beneficiaries notice of intent to preserve trust assets for the amount owed. Subsequently, the debtor paid the plaintiff $17,152 in settlement of the plaintiff's reclamation claim under 11 U.S.C. § 546(c) and Minn.Stat. § 336.2-702. The debtor converted its case to a Chapter 7 case on December 17, 1992. The defendant was appointed trustee.
The plaintiff commenced this adversary proceeding under Minn.Stat. § 27.138 seeking judgment in the amount of $169,743.94 plus pre-judgment interest. The plaintiff argues that Minn.Stat. § 27.138 creates a trust for the benefit of unpaid sellers such as Country Club, and that, as such, the proceeds of the trust are not part of the debtor's estate and should be turned over by the trustee to the plaintiff. The plaintiff also argues that, as a trust, this claim is not voidable by the trustee under 11 U.S.C. § 545.
This proceeding raises the question whether Minn.Stat. § 27.138 creates a trust or a statutory lien. If the statute creates a statutory lien, then the next question is whether that lien is avoidable by the defendant under 11 U.S.C. § 545. Since I conclude that the statute created a statutory lien in favor of the plaintiff which is avoidable by the defendant, I need not address any of the other arguments of the parties.
Summary judgment plays a very important role in the judicial process by allowing the judge to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial". Fed.R.Civ.P. 56 advisory committee note. 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 Fed.R.Civ.P. 1).
Summary judgment will be granted if there is no issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).3 "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
Initially, the burden is on the party seeking summary judgment. It is the moving party's duty to inform the court of the basis for the motion and to 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." Id. at 324. 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. To that end, the movant discharges its burden by showing that the record does not contain a triable issue and by 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, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir.1988).
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" to establish that there are 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). Rather, the non-moving party must present specific, significant, and probative evidence supporting its case, Johnson v. Enron Corp., 906 F.2d 1234, 1237 (8th Cir.1990) which is 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, 259, 106 S.Ct. 2505, 2515, 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, 1592-93, 20 L.Ed.2d 569 (1968)). Any affidavits must "be made on personal knowledge, shall 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). If, however, the evidence tendered is "merely colorable" or is "not significantly probative", the non-moving party has not met its burden and the court must grant summary judgment to the moving party. Id. at 249-50, 106 S.Ct. at 2511. Here, no material facts are in dispute.4 Accordingly, summary judgment may be entered as a matter of law.
A trust is an intentional fiduciary relationship with respect to property in which a party holding title to property is obliged to keep or use that property for the benefit of another. RESTATEMENT (SECOND) OF TRUSTS § 2 (1959).5 An express trust is a trust which is created by direct, express terms for a specific purpose. BLACK'S LAW DICTIONARY 1511 (6th ed. 1990). In a bankruptcy setting with the rights of creditors at stake, a trust will not be recognized unless the requirements of a trust relationship are present. Evans Fur Company of Houston, Inc. v. Chase Manhattan Bank, N.A. (In re Sakowitz), 949 F.2d 178 (5th Cir.1991). In the present case, the plaintiff argues that Minn.Stat. § 27.138 creates an express trust for the benefit of unpaid sellers. The plaintiff bases its argument on the premise that the legislature's use of the term, "trust", indicates an intention to create a trust relationship between a wholesale produce purchaser and an unpaid seller.6 I disagree. The word, "trust", in itself is not enough to create the trust relationship. It is well established that "talismanic language cannot throw a protective mantle over funds in the absence of a genuine trust mechanism." In re Morales Travel Agency, 667 F.2d 1069, 1071 (1st Cir.1981). See also In re Sakowitz, Inc., 949 F.2d at 182 (5th Cir.1991); Barclays American/Business Credit, Inc. v. Long (In re Long), 44 B.R. 300, 305 (Bankr. D.Minn.1983), aff'd, 744 F.2d 875 (8th Cir. 1985); MacArthur Co. v. Crea (In re Crea), 31 B.R. 239 (Bankr.D.Minn.1983). "If a ritualistic incantation of trust language were deemed conclusive, it would be a simple matter for one creditor, at the expense of others, to circumvent the rules pertaining to the creation of bona fide security interests." In re Sakowitz, Inc., 949 F.2d at 181. Therefore, to demonstrate that Minn.Stat. § 27.138 creates an express trust, the plaintiff must show that the statute establishes the basic requirements of a trust relationship.
Bush v. Crowther (In re Bush's Trust), 249 Minn. 36, 81 N.W.2d 615 (1957). The Restatement (Second) of Trusts defines the trustee's obligations to the trust and its beneficiaries and imposes a fiduciary duty upon the trustee to:
RESTATEMENT (SECOND) OF TRUSTS §§ 169-185 (1959). Case law discussing trust relationships imposes a similar duty upon the trustee and defines the fiduciary obligation as the cornerstone of the trust...
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