In re Grabill Corp.
| Decision Date | 19 November 1991 |
| Docket Number | Adv. No. 90 A 0799.,Bankruptcy No. 89 B 1639 to 89 B 1643 |
| Citation | 135 BR 101 |
| Parties | In re GRABILL CORP., Camdon Companies, Inc., Foxxford, Ltd., the Techna Group, Ltd., Windsor-Hamilton, Ltd., Debtors. Jay A. STEINBERG, Plan Trustee for Grabill Corp., and Windsor-Hamilton, Ltd., Plaintiff, v. NCNB NATIONAL BANK OF NORTH CAROLINA, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Jay Steinberg, Hopkins & Sutter, Chicago, Ill., trustee.
Glen H. Kanwit, Hopkins & Sutter, Chicago, Ill., for trustee.
Steven B. Towbin, Towbin & Zazove, Ltd., Chicago, Ill., Robert D. Dearborn, Moore & Van Allen, Charlotte, N.C., for NCNB Nat. Bank of North Carolina.
M. Scott Michel, Chicago, Ill., U.S. Trustee.
AMENDED MEMORANDUM OPINION
This matter comes before the Court on the motion of NCNB National Bank of North Carolina ("NCNB") for partial summary judgment as to Count I of the complaint pursuant to Federal Rule of Civil Procedure 56 and Federal Rule of Bankruptcy Procedure 7056. For the reasons set forth herein, the Court having reviewed the pleadings, the exhibits attached thereto and the affidavits, hereby denies the motion. A material issue of fact remains unresolved by the submissions, namely whether the Debtor's estate was diminished by the transfer sought to be avoided and recovered as preferential pursuant to 11 U.S.C. §§ 547 and 550.
The Court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 and General Rule 2.33(a) of the United States District Court for the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(A), (F) and (O).
William J. Stoecker ("Stoecker") was the sole shareholder of the Grabill Corporation ("Grabill"). Joint Pretrial Statement ¶ C.1(f) . Grabill was a holding company which owned all of the stock of one of the Debtors, Windsor-Hamilton, Ltd. ("Windsor"). Joint Pretrial Statement ¶ C.1(g). On or around November 1986, Windsor obtained a $20,000,000.000 line of credit from NCNB which was later increased to $25,000,000. Joint Pretrial Statement ¶ C.1(j). As security for this line of credit, Windsor pledged and delivered to NCNB stock that Windsor owned in several subsidiaries. Joint Pretrial Statement ¶ C.1(m) . The stock pledged included: J-L Industries, Ltd.; Veterans Supply Co., Inc.; Detroit Armor Corporation; and A Northstar Van and Storage, Inc. Id. As further security for the NCNB line of credit, Stoecker and each operating subsidiary guaranteed the line of credit. Joint Pretrial Statement ¶ C.1(k). By early May 1988, Windsor had used $13,177,250.00 of the available credit. Joint Pretrial Statement ¶ C.1(r) .
In May 1988, Grabill, Windsor, and the three other Grabill holding company subsidiaries (Camdon Companies, Inc.; Foxxford Group, Ltd.; and The Techna Group, Ltd.) (collectively referred to as the "Borrowers") entered into a $150,000,000.00 credit agreement ("New Loan") with The Connecticut Bank and Trust Company, N.A. ("CBT"), as the lead bank among a number of lenders, including: Harris Trust and Savings Bank; National Bank of Detroit; The Indiana National Bank; LaSalle National Bank; The Exchange National Bank of Chicago; Australia and New Zealand Banking Group, Limited (Chicago Branch); and Manufacturers National Bank of Detroit (collectively referred to as the "Lenders"). Joint Pretrial Statement ¶ C.1(n.) .
The proceeds of this New Loan were to pay the Borrowers' existing indebtedness listed on Schedule 7 of the New Loan documentation, as well as provide funds for general working capital purposes. NCNB Exhibit No. C, p. 32, ¶ 5.01(a)-(c); see NCNB Exhibit No. B, p. 34. Payment to the Schedule 7 creditors was to consume approximately $140,000,000.00 of the New Loan. NCNB Exhibit No. D. Windsor and the other Borrowers executed a note with joint and several liability in favor of each of the Lenders, in the aggregate amount of each Borrowers' revolving credit commitment. NCNB Exhibit No. C, ¶ 3.01(f) and Exhibit A attached thereto. Although the New Loan was otherwise unsecured, the Lenders did secure a negative covenant which prohibited the Borrowers from pledging their assets to other lenders. NCNB Exhibit No. G, ¶ 16.
Among the numerous creditors to be paid from the New Loan proceeds was NCNB. Schedule 7 listed NCNB to receive $13,000,000.00 of the New Loan proceeds. NCNB Exhibit No. D. Even though Schedule 7 began with NCNB, all creditors listed on said schedule were paid simultaneously at the closing of the New Loan. NCNB Exhibit No. B, p. 34-36. On May 6, 1988, CBT wired $13,177,250.00 to NCNB (the "Transfer") to satisfy Windsor's indebtedness owed to NCNB. Joint Pretrial Statement ¶ C.1(r). Upon payment, NCNB returned Windsor's stock held as security on the NCNB line of credit. NCNB Exhibit No. I, ¶ 4.
Ms. Donna P. Alderman ("Alderman"), a loan officer with CBT testified that the purpose of the New Loan was to substitute the Borrowers' new Lenders for its old lenders. NCNB Exhibit No. B, p. 57-58; cf. Windsor Exhibit No. M. Alderman supervised the team formed to organize and structure the $150,000,000.00 credit agreement between the Lenders and Borrowers. NCNB Exhibit No. B, p. 7-8. In order to assure complete control over the funds and payment of existing indebtedness, Alderman testified that CBT wired the proceeds directly to the old lenders and not to the Borrowers. Id. Alderman qualified her testimony concerning the Borrowers' lack of control, however, by stating that CBT retained control over the funds simply because it was more efficient to have funds paid directly by CBT, rather than through the various Borrowers. NCNB Exhibit No. B, p. 58. Alderman analogized the position of CBT as that of an agent for the other Lenders to assure the recipients listed in the New Loan Schedule 7 were paid. Id. According to Alderman, the alleged agency relationship was not to safeguard the funds as much as it was to adhere to the New Loan agreement. NCNB Exhibit No. B, p. 60; cf. NCNB Exhibit No. C, p. 32, Article V.
Involuntary Chapter 7 petitions were filed against Grabill and Windsor on January 31, 1989. Joint Pretrial Statement ¶ C.1(a) . On February 3, 1989, the Debtors agreed to the entry for relief under Chapter 11 and the Court appointed Jay A. Steinberg as Chapter 11 trustee (the "Trustee"). Joint Pretrial Statement ¶ C.1(b). On July 9, 1990, the Court confirmed a plan of liquidation for Grabill and Windsor. Joint Pretrial Statement ¶ C.1(e) . Under the plan, the Lenders compromised their collectively filed claims against Windsor's estate aggregating $150,000,000.00 downward to $15,674,135.00. NCNB Exhibit No. F.
On October 5, 1990, the Trustee filed the instant adversary proceeding, seeking in Count I, to avoid the $13,177,250.00 payment to NCNB under 11 U.S.C. § 547 as a preferential transfer. NCNB answered denying that the payment was a preference. The crux of NCNB's instant motion focuses on the interest, if any, Windsor had in the proceeds of the New Loan. Other causes of action alleged in Count II based upon 11 U.S.C. §§ 548 and 550, and Count III based upon 11 U.S.C. § 544, and the Illinois Fraudulent Conveyance Act involving a series of payments, are not involved in this motion.
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, 378-379 (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 322, 106 S.Ct. at 2552; Matsushita, 475 U.S. at 585-586, 106 S.Ct. at 1355. There is no genuine issue for trial if the record, taken as a whole, does not lead a rational trier of fact to find for the non-moving 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 249-250, 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...
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