In re Powerburst Corp.
| Decision Date | 16 April 1993 |
| Docket Number | Bankruptcy No. 92-15384-A-11F,MC No. KMU-2,Adv. No. 92-1398. |
| Citation | 154 BR 307 |
| Parties | In re POWERBURST CORPORATION, Debtor. COMMITTEE OF UNSECURED CREDITORS, Plaintiff, v. RG FINANCIAL, LTD., Harold J. Goald, Thomas Parissidi, Richard A. Leibner, E. Gabriel Perle Profit Sharing Plan and Trust, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of California |
Russell D. Greer and Randolf Krbechek, Caswell, Bell, Hillison, Burnside, Greer & Azevedo, Fresno, CA., for defendants.
W. Richard Lee, Kimble, MacMichael & Upton, Fresno, CA, for the Committee.
Riley Walter, McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, CA, for debtor.
On January 19, 1993, the Committee of Unsecured Creditors, ("COMMITTEE") moved to sever and sought summary judgment on the First, Third, and Eighth claims in this adversary proceeding. After considering the evidence before the Court, argument of counsel, and ruling on the evidentiary objections after considering the Defendants' Response, summary judgment is appropriate as to the Third and Eighth Claims. The granting of summary judgment as to the Third and Eighth Claims renders determination of the First Claim moot and therefore that Claim is not decided.
DEFENDANTS' request for additional time to conduct discovery and more fully develop the facts in this case under F.R.C.P. Rule 56(f), incorporated in Bankruptcy proceedings by F.R.B.P. Rule 7056, is denied.
The COMMITTEE'S request for severance of these three claims under F.R.C.P. Rules 21 and 42(b), as incorporated by F.R.B.P. Rules 7021 and 7042 respectively, is granted.
Jurisdiction exists under 28 U.S.C. § 1334. Venue is proper under 28 U.S.C. § 1409. The District Court has generally referred these matters to the Bankruptcy Court for determination pursuant to 28 U.S.C. § 157(a) and United States District Court, Eastern District of California, General Orders 182 and 223. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(B) & (K). This Memorandum Opinion constitutes this Court's findings of fact and conclusions of law. The accompanying judgment shall constitute a final judgment for appeal purposes.
This matter came on for hearing on March 3, 1993. W. Richard Lee of Kimble, MacMichael, and Upton appeared for the COMMITTEE. Russell D. Greer and Randolf Krbechek of Caswell, Bell, Hillison, Burnside, Greer and Azevedo appeared for the DEFENDANTS.1 Riley C. Walter of McCormick, Barstow, Sheppard, Wayte & Carruth, debtor's counsel, was present. Argument was heard and the DEFENDANTS were allowed until March 5, 1993 to file a written response to the COMMITTEE's evidentiary objections. The matter was submitted March 5, 1993.
Summary judgment is a method for promptly disposing of actions in which no genuine issue of material fact exists. It serves to avoid trial where the moving party is entitled to judgment as a matter of law. Bloom v. General Truck Drivers, Office Food and Warehouse Union, Local 952, 783 F.2d 1356, 1358 (9th Cir.1986); IBEW, Local 47 v. Southern California Edison Company, 880 F.2d 104, 105-106 (9th Cir.1989). To prevail, the moving party must establish by affidavit, pleadings, or answers to discovery, that no genuine issue as to any material fact exists and that the moving party is entitled to judgment as a matter of law. F.R.C.P. Rule 56; F.R.B.P. 7056; see also IBEW, Local 47 v. Southern California Edison Company, supra; In Re Tilbury, 74 B.R. 73, 76 (9th Cir. B.A.P.1987); In Re Stephens, 51 B.R. 591, 594 (9th Cir.B.A.P.1985).
The mission of summary judgment is to pierce the pleadings and to assess the proof in order to determine whether a genuine need for trial exists. Evidence shall be viewed in a light most favorable to the nonmoving party, and any doubt as to the existence of genuine issues of material fact will be resolved against the moving party. IBEW, Local 47 v. Southern California Edison Company, supra; M/V American Queen v. San Diego Marine Construction, 708 F.2d 1483, 1487 (9th Cir.1983); Arizona Laborers, etc. v. Conquer Cartage Co., 753 F.2d 1512, 1515 (9th Cir.1985). Should the Court determine that no genuine issue for trial exists and that the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
Although all reasonable inferences which may be drawn from the facts before the Court must be drawn in favor of the nonmoving party to defeat a motion for summary judgment, it is the nonmoving party's obligation to produce a factual predicate from which such inferences may properly be drawn. Bhan v. NME Hospitals, Inc., 669 F.Supp. 998, 1005 (E.D.Cal. 1987), aff'd 929 F.2d 1404 (9th Cir.1991). The nonmoving party must show facts which support the existence of a viable legal theory and may not rely on unsupported or conclusory allegations in their pleadings. Blodgett v. County of Santa Cruz, 553 F.Supp. 1090, 1094 (N.D.Cal. 1981), aff'd 698 F.2d 368 (9th Cir.1982); Coverdell v. Department of Social and Health Services, 834 F.2d 758, 769 (9th Cir.1987). It is not enough that the nonmoving party point to disputed facts; rather, they must make a sufficient showing to establish the existence of a triable issue of material fact as to an element essential to the moving party's case. Lake Nacimiento Ranch v. San Luis Obispo County, 830 F.2d 977, 979-980 (9th Cir.1987), cert. denied 488 U.S. 827, 109 S.Ct. 79, 102 L.Ed.2d 55 (1988); see also In Re Apple Computer Securities Litigation, 886 F.2d 1109, 1112-1113 (9th Cir.1989), cert. denied sub nom Schneider v. Apple Computer, Inc., 496 U.S. 943, 110 S.Ct. 3229, 110 L.Ed.2d 676 (1990).
With the above considerations in mind, the Court turns to the COMMITTEE'S Motion for Summary Judgment.
COMMITTEE seeks summary judgment as to the third and eighth claims for relief in this adversary proceeding. The third claim for relief seeks a declaration that the notes, supporting subscription agreements, and security agreements are void as a matter of law because, on their face, the notes charge a fee for the use of money which is prohibited under New York's civil and criminal usury law. As to the eighth claim for relief, the COMMITTEE seeks restitution of all post-petition payments from the DEFENDANTS.
The starting point in determining whether the notes and agreements are void as a matter of law is determining the choice of law issue raised in the third claim for relief. COMMITTEE contends that in this core proceeding, this Court must apply the federal common law choice of law rule to interpret and determine the consequences of the loan offering documents. Citing Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 162, 67 S.Ct. 237, 239-240, 91 L.Ed. 162 (1946) reh'g denied 329 U.S. 833, 67 S.Ct. 497, 91 L.Ed. 706 (1947); In re McCorhill Publishing, Inc., 86 B.R. 783, 792 (S.D.N.Y.1988); In re Perret, 67 B.R. 757, 772 (N.D.N.Y.1986).
DEFENDANTS, while not agreeing with the COMMITTEE's interpretation of Vanston Bondholders, do agree that, absent application by this Court of the "Rule of Validation," the Court should apply the law of the forum with the most substantial contacts to the transaction. DEFENDANTS argue California law is the law to be applied in this proceeding.
While there is little authority on this particular issue, one decision from the Second Circuit has been cited with some frequency, and in part held:
"The use of federal common law in specialized areas where jurisdiction is not based on diversity has been sanctioned by the Supreme Court since the day Erie was decided . . ." Corporacion Venezolana De Fomento v. Vintero Sales Corp., 629 F.2d 786, 795 (2d Cir.1980) cert. denied 449 U.S. 1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981) ()
The Ninth Circuit has embraced application of the federal common law choice of law rules in federal question cases. Harris v. Polskie Linie Lotnicze, 820 F.2d 1000, 1003 (9th Cir.1987); approvingly cited in Union of Flight Attendants, Local No. 1 v. Air Micronesia, Inc., 684 F.Supp. 1520, 1528 (D.Hawaii 1988). As core proceedings in bankruptcy are federal questions, this Court finds and holds that the federal common law choice of law rules apply in this instance.
The Court concurs with the COMMITTEE and DEFENDANTS that in applying federal choice of law rules, the significant relationship test is used to determine which state laws should apply to the transaction. Harris v. Polskie Linie Lotnicze, 820 F.2d 1000, 1003 (9th Cir.1987); In re Perret, 67 B.R. 757 (N.D.N.Y.1986); In re McCorhill Publishing, Inc., 86 B.R. 783, 792 (S.D.N.Y.1988).
Turning to the facts herein, the Court is persuaded by the COMMITTEE's argument that New York law should control. The evidence shows that all of the documents to the transaction were prepared by Daniel J. Barsky at his law firm in New York City. Of the four defendants affected by the instant motion, two at least reside in New York.2 COMMITTEE asserts that three of four of the individual defendants reside in New York. However, the Court can only determine that two reside in New York. The other two defendants reside in Connecticut and Washington, D.C.3
Of significant importance is the place of execution of each Subscription Agreements. (See In re McCorhill Publishing, Inc., 86 B.R. 783, 792 (S.D.N.Y.1988) holding that the most significant factor in determining whether a contract has a "substantial relationship" to a state is the place of contracting.) Each Subscription Agreement was executed and notarized in New York and each of the DEFENDANTS gave RG Financial powers of attorney in New York to enforce the contracts in New York. (See Exhibits C, D, E, F, & P to COMMITTEE'S...
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