In re New York Wholesale Distributors Corp.

• Citation: 58 BR 497
• Decision Date: 12 March 1986
• Docket Number: Bankruptcy No. 84 B 11577 (PBA),Adv. No. 84-6278A.
• Parties: In re NEW YORK WHOLESALE DISTRIBUTORS CORP., a/k/a N.Y.W.D. Corp., N.Y. Dist. and N.Y.W. Dist., Debtor. DUKSEUNG OF AMERICA, INC., Plaintiff, v. NEW YORK WHOLESALE DISTRIBUTORS CORP. and C.C. Hamilton & Co., Inc., Defendants.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

58 B.R. 497 (1986)

In re NEW YORK WHOLESALE DISTRIBUTORS CORP., a/k/a N.Y.W.D. Corp., N.Y. Dist. and N.Y.W. Dist., Debtor.

DUKSEUNG OF AMERICA, INC., Plaintiff, v. NEW YORK WHOLESALE DISTRIBUTORS CORP. and C.C. Hamilton & Co., Inc., Defendants.

Bankruptcy No. 84 B 11577 (PBA), Adv. No. 84-6278A.

United States Bankruptcy Court, S.D. New York.

March 12, 1986.

O'Melveny & Myers, New York City (Louis B. Kimmelman, of counsel), for plaintiff Dukseung of America, Inc.

Ballon, Stoll & Itzler, New York City (Ronald Itzler, of counsel), for defendant New York Wholesale Distributors Corp.

David Abramowitz, New York City, for defendant C.C. Hamilton & Co., Inc.

DECISION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

PRUDENCE B. ABRAM, Bankruptcy Judge:

The court is presented with a motion for summary judgment by defendant New York Wholesale Distributors Corp. ("NYWD"). NYWD's motion must be denied because there exist issues of material fact in dispute that preclude the entry of summary judgment and require a trial on the merits.

On November 21, 1984, Dukseung of America, Inc. ("Dukseung") commenced this adversary proceeding against NYWD and C.C. Hamilton & Co., Inc. ("Hamilton") seeking, inter alia, reclamation of a large quantity of shirts (the "goods"),¹ pursuant to Bankruptcy Code § 546(c) and New York Uniform Commercial Code § 2-702(2). The goods Dukseung seeks to reclaim were ordered on or about October 6, 1984 and delivered to NYWD during late October of 1984. By way of alternative relief, Dukseung seeks either an administrative priority for its claim based on the value of the goods, a lien on the goods and the proceeds thereof, or damages for conversion, with the proceeds of the goods deemed to be held by the debtor in constructive trust for Dukseung. Defendant Hamilton, a commercial warehouse company engaged in the business of storing merchandise, stored the goods for Dukseung prior to their delivery to NYWD, and for NYWD after their delivery to NYWD.² In addition to its dual role in the NYWD-Dukseung transaction, Hamilton had long-term business relationships with both its co-defendant and the plaintiff, having served as a warehouse for NYWD and Dukseung in prior transactions unrelated to the goods at issue herein.

The accuracy of the numerous non-negotiable warehouse receipts issued by Hamilton poses the major bone of contention between Dukseung and NYWD.³ NYWD contends that the dates entered on the warehouse receipts are dispositive on the issue of the dates the goods were delivered to NYWD, while both Hamilton and Dukseung allege that those dates were erroneous and thus fail to reflect accurately the dates the goods were delivered to NYWD. NYWD maintains that six of these warehouse receipts were issued and delivered to it on October 22, 1984, seven were issued and delivered to it on October 25, 1984, and one was issued and delivered to it on October 30, 1984. Hamilton agrees that it issued six of the warehouse receipts on October 22, 1984, but claims that it issued the remainder on October 30, 1984. Hamilton further claims that its entry of the October 25 date on seven of the warehouse receipts was a clerical error, because Dukseung's order to transfer the goods referred to in those receipts had not in fact even received by Hamilton until October 30, 1984. Dukseung denies that any of the warehouse receipts were issued by Hamilton or delivered to NYWD on either October 22 or October 25, but rather claims that all warehouse receipts were issued on or after October 30, 1984.⁴

At some point after October 30, 1984, Dukseung received information which led it to conclude that NYWD was insolvent. By letter dated November 9, 1984, Dukseung sent NYWD a demand for reclamation of the goods. On November 13, 1984, NYWD filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. It thus appears that Hamilton's reclamation demand was made and received by NYWD prior to the filing of the NYWD bankruptcy petition although no reclamation had been accomplished by that time.

NYWD has conceded that the goods were still in their possession at the time the demand for reclamation was received. However, following NYWD's receipt of the demand, a portion of the goods were released to NYWD's customers as per its order to Hamilton on or about November 19, 1984. By stipulation dated November 28, 1984, the parties agreed that NYWD was authorized to sell the goods then remaining in its possession and Dukseung was granted a lien on all remaining goods and the proceeds thereof up to the amount of $144,636.00 pending a determination of the instant adversary proceeding. The rights of a reclaiming seller of goods in the bankruptcy context⁵ are expressly dealt with by Bankruptcy Code § 546(c), which provides, in pertinent part, that:

"The rights and powers of a trustee under sections 544(a), 545, 547, and 549 of this title are subject to any statutory or common-law right of a seller of goods that has sold goods to the debtor, in the ordinary course of such seller\'s business, to reclaim such goods if the debtor has received such goods while insolvent, but —

(1) such a seller may not reclaim any such goods unless such seller demands in writing reclamation of such goods before ten days after receipt of such goods by the debtor . . . "

Thus, the conditions imposed by Code § 546(c) on a seller who seeks to recover goods sold and delivered to a debtor may be briefly summarized as follows: (1) the seller has a statutory or common law right to reclaim the goods; (2) the debtor received the goods while insolvent; and (3) the seller makes a written demand for reclamation of the goods within ten days of receipt of the goods by the debtor. In addition, the courts have consistently required that the goods still be in the debtor's possession at the time the demand for reclamation is received. See In re Flagstaff Corporation (McCain Foods, Inc. v. Flagstaff Foodservice Company New England, Inc.), 14 B.R. 462 (Bankr.S.D.N.Y. 1981). For a general discussion of the rights of a reclaiming seller in bankruptcy proceedings, see In re Flagstaff Foodservice Corporation, 14 B.R. at 464-469. See also In re Marin Motor Oil, Inc. (Montello Oil Corporation v. Marin Motor Oil, Inc.), 740 F.2d 220 (3d Cir.1984); In re HRT Industries, 29 B.R. 861 (Bankr.S.D.N. Y.1983); In re Deephouse Equipment Co., 22 B.R. 255 (Bankr.D.Conn.1982); In re Koro Corp., 20 B.R. 241 (Bankr.App.Pan. 1st Cir.1983); In re Ateco Equipment, Inc., 18 B.R. 917 (Bankr.W.D.Pa.1982); In re Contract Interiors, Inc., 14 B.R. 670 (Bankr.E.D.Mich.1981); In re Original Auto Parts Distributors, Inc., 9 B.R. 469 (Bankr.S.D.N.Y.1981).

Thus in order to obtain the reclamation of goods it seeks, Dukseung's demand for reclamation must have been made within ten days after the goods were delivered to NYWD.⁶ Therefore a precise determination of when NYWD received the goods is central to the outcome of this adversary proceeding.

Summary judgment is appropriate only when there is no genuine "issue as to any material fact and the moving party is entitled to judgment as a matter of law." In the Matter of Iota Industries, Inc., 35 B.R. 693, 695 (Bankr.S.D.N.Y.1983); Quinn v. Syracuse Model Neighborhood Corp., 613 F.3d 438, 444 (2d Cir.1980); Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 717 (2d Cir.1984); Federal Rules of Civil Procedure 56(c). The party seeking the grant of summary judgment has the burden of demonstrating "the absence of any material factual issue genuinely in dispute." In re Tampa Chain, Inc., 35 B.R. 568, 573 (Bankr.S.D.N.Y. 1983). See also United States v. One Tintoretto Painting, 691 F.2d 603, 606 (2d Cir.1982); Quinn v. Syracuse Model Neighborhood Corp., supra; Hayden Publishing Co. v. Cox Broadcasting Co., 730 F.2d 64, 68 (2d Cir.1984); Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir.1975). In determining whether to grant a summary judgment motion the court "must resolve all doubts in favor of the party opposing the motion." In the Matter of Iota Industries, Inc., 35 B.R. at 695. See also Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983). The court's function with respect to the motion for summary judgment is not to try issues of fact but rather to determine "whether there are issues of facts that need to be tried." Schering Corp. v. Home Insurance Company, 712 F.2d 4, 9 (2d Cir.1983), quoting Heyman v. Commerce and Industry Co., 524 F.2d 1317, 1320 (2d Cir.1975); see also ...