In re Olm Associates
| Decision Date | 28 February 1989 |
| Docket Number | Adv. No. 388-3797.,Bankruptcy No. 388-35435-SAF-11 |
| Parties | In re OLM ASSOCIATES, Debtor. OLM ASSOCIATES, Plaintiff, v. BRIGHT BANC SAVINGS ASSOCIATION, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Gerritt Pronske, Dallas, Tex., for debtor.
Paul Wickes, Dallas, Tex., for Bright Banc.
On November 16, 1988, OLM Associates, debtor and plaintiff in this adversary proceeding, filed a complaint against Bright Banc Savings Association, as defendant, seeking to void a security interest under § 544 of the Bankruptcy Code. On December 16, 1988, Bright Banc answered the complaint. Both parties have moved the court for entry of a summary judgment. The respective parties have objected to the respective motions for summary judgment and filed their responses with accompanying affidavits. On February 9, 1989, the court conducted a hearing on the motions for summary judgment. Both parties were represented by counsel at the hearing. After entertaining the arguments of counsel, and at the request of the parties, the court allowed OLM to file a brief in response to legal issues raised by Bright Banc at the hearing and afforded Bright Banc an opportunity to counter the response of OLM. On February 23, 1989, the record was completed and the court took the matter on advisement.
After review of the moving and responsive documents, briefs, affidavits, and all other files, records and documents in the bankruptcy case and this adversary proceeding, the court concludes that OLM's motion for summary judgment must be granted and Bright Banc's motion for summary judgment must be denied.
The court has jurisdiction over this core adversary proceeding under 28 U.S.C. § 157(b)(2)(K) and § 1334.
In 1983, OLM was formed to acquire, develop and construct a mid-rise office building in the Oak Lawn area, near downtown Dallas, Texas. Bright Banc, as the successor in interest to Texas Federal Savings and Loan Association, provided the construction financing to OLM. OLM contracted with Kajima International to construct the building. After completion of construction, OLM could not financially operate the office building. Additionally, OLM sued Kajima for major defects in the construction of the building. OLM's complaint seeks over $7 million in damages from Kajima.
Bright Banc secured the loan to OLM by, inter alia, a deed of trust lien, a security agreement, and an assignment of the Kajima construction contract. But Bright Banc's security interest in the personal property described in the financing statement, filed on August 8, 1983, lapsed upon Bright Banc's failure to file a continuation statement after the expiration of five years. The filing lapsed in August 1988. This dispute centers on the effect of that lapse on the Kajima construction contract and the proceeds of any successful litigation against Kajima.
On September 6, 1988, OLM filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Almost immediately after the filing of the bankruptcy petition, on September 15, 1988, Bright Banc moved for relief from the automatic stay to foreclose on the property securing the debt. At the preliminary hearing on Bright Banc's motion, the court continued the automatic stay pending the results of a final hearing. On November 16, 1988, the court conducted a final hearing on Bright Banc's motion. At the conclusion of the hearing, the court ruled that although the estate had no equity in the real property, the stay would remain in effect provided that OLM file a plan of reorganization and disclosure statement within the 120-day exclusivity period.
On January 18, 1989, Bright Banc filed its second motion for relief from the stay alleging, inter alia, that the plan filed by OLM was unconfirmable. At the preliminary hearing on Bright Banc's second motion, the court lifted the stay to allow Bright Banc to foreclose on the office building.
Prior to the lifting of the stay, on November 16, 1988, OLM filed a complaint seeking relief under 11 U.S.C. § 544. The complaint seeks to void Bright Banc's security interest in the Kajima construction contract. The complaint alleges, inter alia, that Bright Banc's security interest in the Kajima construction contract became unperfected upon Bright Banc's failure to file a continuation statement and is avoidable by OLM, as the debtor-in-possession, under 11 U.S.C. § 544.
Bright Banc does not dispute that its financing statement and security interest in personality lapsed and became unperfected prior to the filing of the bankruptcy petition. However, Bright Banc asserts that the Kajima construction contract "vested" in Bright Banc by virtue of the provisions of an assignment or, alternatively, the Kajima construction contract is covered by Bright Banc's deed of trust lien. In addition to the foregoing, Bright Banc has moved for summary judgment with respect to its security interest or right of setoff relating to certain funds held by Bright Banc pending resolution of the disputes between OLM and Kajima.
Under Rule 56(c), Fed.R.Civ.P., made applicable to this case by Bankruptcy Rule 7056, summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 552, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Washington v. Armstrong World Industries, Inc., 839 F.2d 1121, 1122 (5th Cir.1988) (per curiam) (). 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. Meyers v. M/V EUGENIO C, 842 F.2d 815, 816-17 (5th Cir.1988). On a summary judgment motion, the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Anderson, 106 S.Ct. at 2513; Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356; Myers, 842 F.2d at 816; Wallace v. American Petrofina, Inc., 668 F.Supp. 586, 589 (E.D.Tex.1987). The existence of a material factual dispute is sufficient to bar summary judgment when the disputed fact is determinative of the outcome under applicable governing law. Anderson, 106 S.Ct. at 2510.
The standard for granting summary judgment mirrors the standard for a directed verdict under Federal Rule of Civil Procedure 50(a). Celotex, 106 S.Ct. at 2553; Anderson, 106 S.Ct. at 2511. The primary difference between the two motions is procedural; summary judgment motions are usually made before trial and decided on documentary evidence, while directed verdict motions are made at trial and decided on evidence that has been admitted. Anderson, 106 S.Ct. at 2512. In essence, however, the inquiry under each is the same: whether the evidence presents a sufficient disagreement to require trial or whether one party must prevail as a matter of law. Id.
A party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the "pleadings, depositions, answers to interrogatories, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 106 S.Ct. at 2553. However, once the motion for summary judgment is made and supported as described above, Rule 56(e) provides that a party opposing the motion may not rest upon the mere allegations or denials in his pleading, but his response must set forth specific facts showing that there is a genuine issue for trial. Celotex, 106 S.Ct. at 2553; Anderson, 106 S.Ct. at 2510; Matsushita, 475 U.S. at 587. When the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Matsushita, 475 U.S. at 587.
Although both parties have requested and argued for summary judgment, that does not by itself indicate that there are no genuine issues of material fact; the court must look at each motion separately in determining whether judgment may be entered in accordance with applicable principles. In re Pettibone Corp., 90 B.R. 918, 922 (Bankr.N.D.Ill.1988) citing, C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2720 (2d ed. 1983 & Supp. 1987). Cross-motions for summary judgment do not require the court to decide the case on those motions; the court can deny both motions if the parties have failed to meet the burden of establishing no genuine issue of material fact. Id.
OLM asserts that the Kajima construction contract is covered by the provisions of Article 9 of the Texas Uniform Commercial Code as either an "account" or a "general intangible." OLM contends that any security interest Bright Banc had in and to the Kajima construction contract lapsed and became unperfected because of Bright Banc's failure to file a continuation statement. OLM concludes that Bright Banc was holding an unperfected security interest at the time of the bankruptcy filing which is voidable by OLM pursuant to § 544.
Bright Banc counters that the Kajima construction contract had "vested" in Bright Banc prior to the filing of the bankruptcy petition. Bright Banc asserts that by virtue of the assignment of contract agreement and/or the general assignment language contained in the deed of trust, the "vesting" occurred when OLM defaulted. Bright Banc concludes...
To continue reading
Request your trial