In re Goldblatt Bros., Inc.
| Decision Date | 03 June 1986 |
| Docket Number | Bankruptcy No. 81 B 7075,Adv. No. 81 A 2114. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | In re GOLDBLATT BROS., INC., Debtor. The FIRESTONE TIRE & RUBBER COMPANY, Plaintiff, v. GOLDBLATT BROS., INC., Defendant. |
Lawrence P. Bemis, Susan J. McDunn, Kirkland & Ellis, Chicago, Ill., for plaintiff.
John W. Costello, Jeffrey R. Liebman, Francesca J. Robertson, Arvey, Hodes, Costello & Burman, Chicago, Ill., for debtor-defendant.
Plaintiff Firestone Tire & Rubber Company ("Firestone") sued debtor/defendant Goldblatt Bros., Inc. ("Goldblatt") in five counts for failure to remit Firestone's funds held by Goldblatt on the date of its bankruptcy filing:
Through a series of rulings described below, the District Court found the liability issue against defendant on Count I. Firestone now seeks entry of final judgment for the principal amount due it plus interest on its money held by Goldblatt in what the District Court found to be an implied trust. The sum thus held on the date of filing of this bankruptcy case was stipulated to be $926,210.95. Pursuant to judgment for liability entered by this Court on Count I in favor of Firestone, all in conformity with the District Court decision, it is now necessary to enter final and appealable judgment on Count I for a definite amount of recovery. Goldblatt objects to the payment of interest in computing that recovery. It contends that the parties agreed the claim would be paid as an administrative expense under § 507(a)(1), so that post-petition interest is not allowed under § 502(b)(2) of the Bankruptcy Code. The parties have stipulated to all pertinent facts involving Count I and further stipulate that this Court rule on the remaining legal issues and enter final judgment without further evidence. There are no credibility issues and no facts in dispute.
For reasons set forth below, Firestone's prayer for interest is allowed. Judgment will be entered in favor of Firestone on Count I upon computations to be made pursuant hereto and judgment order to be prepared and tendered in accord herewith. All remaining Counts of the Adversary Complaint were previously adjudicated in favor of Goldblatt, so judgment on Count I will dispose of the case.
The facts in Count I of this case are not in dispute and are primarily taken from the Joint Pretrial Statement and stipulations submitted by the parties. Many facts in the pretrial statement were in turn taken from the District Court opinion. In Re Goldblatt, 33 B.R. 1011 (N.D.Ill.1983), appeal dismissed, 758 F.2d 1248 (7th Cir. 1985). The parties have therefore stipulated to all relevant facts and present only legal issues as to Count I.
The discussion in this section will stand as this Court's Findings of Fact.
Goldblatt and Firestone entered into a License Agreement in 1963 which authorized Firestone to operate tire centers near Goldblatt stores and sell its own tires and other automotive products under Goldblatt's trade name. Firestone operated the outlets as an independent contractor and paid Goldblatt a royalty based on a percentage of the net sales generated by Firestone. The royalty was to be 5% of the net sales if Firestone provided the real estate and building or 10% if the real estate and building were furnished by Goldblatt.
Goldblatt received the royalty by collecting all the cash and credit receipts from the Firestone tire centers at the end of each day. At the end of the month Goldblatt rendered a detailed monthly accounting of the sales from all of the tire centers and subtracted its royalty payments. Goldblatt's then remitted 90 or 95% of the net sales back to Firestone within 15 days.
On June 15, 1981, Goldblatt filed a voluntary Chapter 11 petition. At that time, Goldblatt had in its possession $926,210.95 from Firestone's preceding four weeks of sales.
On June 23, 1981, Firestone filed this Adversary Complaint seeking recovery of those moneys. It claimed that Goldblatt had neither legal title nor any equitable interest in the funds and they were not property of Goldblatt's estate. Firestone simultaneously moved for preliminary injunction to enjoin Goldblatt from dissipating, disbursing or using the funds which were the subject of the complaint. With respect to the latter motion, these parties agreed to an order obviously intended to provide interim protection to Firestone in lieu of injunctive relief. That order provided (emphasis supplied):
Firestone's Adversary Complaint seeks recovery from Goldblatt of $941,640.22 in Firestone's funds assertedly held in implied or constructive trust. Firestone moved for summary judgment seeking determination that those funds were not property of the bankruptcy estate, and that Firestone therefore was entitled to administrative priority. Firestone did not seek summary judgment as to the amount of the claim. Goldblatt responded with a cross motion for summary judgment to declare that Goldblatt and Firestone had a debtor/creditor relationship, rather than a trust relationship. On January 7, 1983, Judge James granted Goldblatt's motion for summary judgment as to all Counts of the Adversary Complaint.
On appeal to the District Court, Judge Leighton reversed the Bankruptcy Court decision only as to Count I, holding that Goldblatt possessed over $900,000 in an implied trust for Firestone. He found that Goldblatt had without authority commingled the funds from Firestone's tire centers with its own money. Firestone was found to have temporarily placed the tire center proceeds with Goldblatt, and Goldblatt thereupon was found to have held those funds in an implied trust for Firestone. The District Court thereby found Goldblatt liable under Count I, but did not reach the plaintiff's constructive trust or other theories. In Re Goldblatt Bros., Inc., 33 B.R. 1011, 1014-15 (N.D.Ill.1983), appeal dismissed, 758 F.2d 1248 (7th Cir.1985). The case was remanded by the District Court to the Bankruptcy Court for entry of an order granting Firestone's motion for partial summary judgment that the funds were not property of the estate and for further proceedings. Goldblatt appealed that order.
On April 5, 1985, the Seventh Circuit dismissed that appeal for lack of jurisdiction. Because neither the Bankruptcy Court nor Judge Leighton had adjudicated the exact amount of money held by Goldblatt in an implied trust no final judgment was rendered in Count I; therefore the District Court order was neither final or appealable. In Re Goldblatt Bros., Inc., 758 F.2d 1248 (7th Cir.1985).
The net effect of the foregoing events was to leave Goldblatt the victor on Counts II through IV because of Judge James' earlier ruling, but such judgment was not yet appealable until Count I would be disposed of.
After remand, on June 28, 1985, this Court entered an order of partial summary judgment as to liability on Count I in conformity with the District Court ruling:
The wording of that order was agreed to by the parties, and was intended by them and by the Court to preserve for ruling at this time the issues decided herein.
This Court also ordered the parties to file a Joint Pretrial Statement together with authority related to the remaining issues: the exact amount of money Goldblatt was holding for Firestone;...
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