In re Midway Airlines, Inc.

Decision Date17 May 1994
Docket Number91 B 06450,Bankruptcy No. 91 B 06449,91 B 06451.
Citation167 BR 880
PartiesIn re MIDWAY AIRLINES, INC., Midway Airlines (1987) Inc., Midway Aircraft Engineering, Inc., Debtors.
CourtU.S. Bankruptcy Court — Northern District of Illinois

Cynthia G. Swiger, Field, Golan & Swiger, Chicago, IL, for CAMCO, Inc., et al.

Sheldon L. Solow, Charles P. Shulman, Sachnoff & Weaver, Chicago, IL, for Midway Airlines, Inc., et al., debtors.

M. Scott Michel, Chicago, IL, U.S. Trustee.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the Trustee, Sheldon L. Solow's motion for summary judgment in opposition to the motion to modify the automatic stay brought by CAMCO Incorporated ("CAMCO"), CAMCO Connecticut (a division of CAMCO), Texas CAMCO Incorporated, Avmar Incorporated, Ardco Incorporated, and Aircraft Turbine Service, Incorporated (collectively referred to as "UNC") against Midway Airlines, Inc., Midway Airlines (1987) Inc., and Midway Aircraft Engineering, Inc. (collectively referred to as "Midway"). For the reasons stated herein, the Trustee's motion is denied and the remaining disputed issues of fact on UNC's motion will be tried as previously set.

I. JURISDICTION AND PROCEDURE

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)(G).

II. FACTS AND BACKGROUND

Commencing in the mid-1980s, UNC performed repair, testing and overhaul services on airplane engine parts for Midway. Midway sent the parts to UNC, who evaluated what services it thought were required, called Midway to recommend the services and the price thereof, and then repaired the parts in accordance with Midway's directions. UNC sent invoices to collect the amounts due. UNC relies on various statutory artisan's liens under New York, Texas and Florida law as the basis of the contention that it has valid possessory liens on the various parts it holds in those states.

The Trustee's motion attacks UNC's assertion that it has a secured claim against the parts under the various cited statutes on which UNC relies. The Trustee counters that the UNC invoice terms stated either "NET 30 DAYS" or "2% NET 30 DAYS." Often UNC sent the repaired parts back to Midway before the invoices were paid. Midway rarely paid the invoices within thirty days. Payment usually occurred 60 to 80 days following Midway's receipt of an invoice. The Trustee states UNC dealt with Midway solely on a credit basis. There were no written contracts or security agreements which granted UNC the right to use Midway's parts as security for outstanding obligations owed by Midway. Thus, the Trustee concludes that UNC's claimed statutory liens are eviscerated and defeated by the credit terms it gave Midway.

UNC denies that it dealt with Midway solely on a credit basis. UNC states it gauged its extension of credit upon the amount of Midway's repaired parts that UNC had "in house" as well as how much Midway owed UNC at that time. Hence, UNC states it has valid possessory liens against Midway's parts that it holds.

On September 24, 1990, UNC's controller informed Midway in writing that it would no longer be extending credit terms to Midway and that an immediate credit hold would be imposed. UNC's credit hold is an internal review procedure whereby it could closely monitor the open account with a customer who might be having payment problems. Parts already in the possession of UNC would not be released to Midway unless the outstanding repair costs plus $100,000 was paid in advance. The Trustee states the credit hold was implemented as leverage to force Midway to reduce its outstanding accounts payable to UNC. As a result, Midway did not send any more parts to UNC or make any further payments. Accordingly, UNC did not return any more parts to Midway.

On March 25, 1991, Midway filed voluntary Chapter 11 bankruptcy petitions. Thereafter, Midway voluntarily converted the cases to Chapter 7. Sheldon Solow was subsequently appointed Chapter 7 Trustee. The subject motions were filed thereafter.

III. APPLICABLE STANDARDS

UNC has the burden of proof on its stay motion under 11 U.S.C. § 362(g)(1) on the issue of Midway's equity in the subject parts and to show its colorable claim of statutory liens. The Trustee has the burden of proof on all other issues on the stay motion under 11 U.S.C. § 362(g)(2). In order for the Trustee to prevail on his motion for summary judgment, he 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 Carroll v. AcmeCleveland Corp., 955 F.2d 1107, 1114 (7th Cir.1992).

In 1986, the United States 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 Asso., 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 585-86, 106 S.Ct. at 1355-56. 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 249-50, 106 S.Ct. at 2510-11 (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).

The party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, identifying those portions of the "pleadings, depositions, answers to interrogatories, and affidavits, if any," which it believes demonstrates the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. 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 2552; Matsushita, 475 U.S. at 587, 106 S.Ct. at 1357; Patrick v. Jasper County, 901 F.2d 561, 564-66 (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, which is the Trustee in this matter, may satisfy Rule 56's burden of production by either submitting affirmative evidence that negates an essential element of the nonmoving 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 10A Charles Wright, Arthur Miller, Mary Kay Kane, Federal Practice and Procedure § 2727, pp. 130-131 (1983).

Moreover, all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Karazanos v. Navistar Int'l Transp. Corp., 948 F.2d 332, 335 (7th Cir.1991); Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir.1991); Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir. 1990). Furthermore, the existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under the applicable law. Donald v. Polk County, 836 F.2d 376, 379 (7th Cir.1988); Wallace v. Greer, 821 F.2d 1274, 1276 (7th Cir.1987); Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983). "Summary 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, 913 F.2d at 331. Rule 56 "requires the nonmoving party to go beyond the pleadings and produce evidence of a genuine issue for trial." Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. In order for an issue to be genuinely in dispute, there must be "sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249, 106 S.Ct. at 2511.

Rule 12(m) of the Local General Rules of the United States District Court for the Northern District of Illinois, adopted by General Order of the Bankruptcy Court on May 6, 1986, requires that "with each motion for summary judgment . . . the moving party shall serve and file . . . a statement of facts as to which the moving party contends there is no genuine issue. . . ." Local Rule 12(m). The...

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