In re Weiss-Wolf, Inc.
| Decision Date | 30 May 1986 |
| Docket Number | Bankruptcy No. 82 B 10935,Adv. No. 82-5890-A. |
| Citation | 60 BR 969 |
| Parties | In re WEISS-WOLF, INC., Debtor. WEISS-WOLF, INC., Plaintiff, v. ISRAEL DISCOUNT BANK LIMITED, Union Bank of Israel, Ltd., and Bank Leumi Le-Israel, B.M., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Marvin Neiman, New York City, for the debtor; Marvin Neiman, Theodore Mairanz, and Moshe Z. Mirsky, of counsel.
Proskauer Rose Goetz & Mendelsohn, New York City, for defendants; Steven Stein, John Woodward, of counsel.
The second count is identical to the first except that it is directed at UBI and alleges the diamonds sought to be turned over are valued at slightly in excess of $2.5 million. The third count alleges that IDB on various dates during the period 1979 through 1981 converted to its own use diamonds belonging to plaintiff which were valued at approximately $4.1 million at the time of conversion. The fourth count is identical to the third except that it is directed at UBI. The fifth count alleges that the three banks have joined in a conspiracy to share the proceeds of their conversions of the diamonds alleged to belong to the Debtor. On the fifth count the Debtor seeks actual damages of $4.1 million in addition to punitive damages of $1 million.
In their answer, the Banks responded to the first two counts by admitting to still having certain diamonds (hereafter the "Diamonds")4 received in pledge from Limited. They denied knowledge or information sufficient to form a belief as to whether the Diamonds were the Debtor's in the absence of any identification by the Debtor of the diamonds as to which it was seeking turnover. As to counts three and four, the Banks denied converting any diamonds belonging to the Debtor to their own use. The Banks also denied count five which had alleged a conspiracy relative to conversion of diamonds. UBI asserted lack of personal jurisdiction as a defense. As a second defense, the Banks alleged that the officers, directors or employees of the Debtor and Limited who engaged in dealings with the Debtors had the actual or apparent authority to do so. As their third defense, the Banks alleged that under applicable law, the ownership of the diamonds was irrelevant to the Banks' right of possession and disposition of diamonds delivered to them by Limited to collateralize Limited's obligations.
On July 8, 1983, the Debtor filed a motion, based on an affidavit of counsel, in which it sought preliminary relief in the form of an order directing that the Banks turn over the Diamonds to the Debtor or to the court pending final determination of the adversary proceeding. The Debtor alleged that the Banks had moved in Israel in the Limited receivership proceeding for an order authorizing the sale of the Diamonds.
Thereafter and on August 16, 1983, the Banks filed a cross-motion for an order granting summary judgment dismissing the adversary proceeding and also opposed the Debtor's motion. The summary judgment motion is supported by three affidavits, one from the Senior Manager of IDB, one from the Assistant General Manager of UBI and one from an attorney for the Banks which authenticates the accompanying exhibits consisting principally of deposition transcripts. The Banks' main position is that the Debtor is estopped from claiming any rights in the diamonds pledged by Limited superior to those of IDB and UBI. The Banks also urge that this court lacks jurisdiction to enter an order directing delivery of the diamonds because the Israeli receiver for Limited has not been named as a party. The Banks filed a supporting memorandum of law.
The Debtor has opposed the Banks' cross-motion for summary judgment in the form of a lengthy affidavit from an attorney for the Debtor which incorporates both factual and legal arguments. An affidavit from Isaac Wolf, a shareholder and officer of the Debtor, has also been submitted. It is the Debtor's position that material facts are in dispute. Subsequent to oral argument on the Debtor's motion and the Banks' cross-motion, the Debtor submitted a supplemental affidavit requesting that the summary judgment motion be denied until the Debtor had discovery of the Banks' records with regard to the identity of the diamonds in their vaults.
The fortunes of Weiss-Wolf and Limited had suffered major reverses by early 1982 at least in part because of a substantial and world-wide decline in the price of diamonds. This adversary proceeding is but one of many actions, both civil and criminal, in a number of different courts resulting from Limited's failure to repay the Banks and from the guarantees of Limited's debt alleged to have been given by Messrs. Weiss and Wolf and the Debtor.5 The present adversary proceeding does not concern either the validity of any guarantee given by the Debtor or the amount or allowability of any claim of the Banks in this case.
Limited, which was engaged in a similar business to that of Weiss-Wolf, obtained financing for its operations by borrowing from the Banks secured by the pledge of diamonds. UBI has alleged that it was owed over $6 million by Limited as of March 1982. As of April 1982, IDB has alleged that it was owed approximately $5 million by Limited.6
Limited's banking relationship with IDB began in January 1980. An "Agreement of Undertaking" was executed in which IDB agreed to grant loans and extend credit to Limited in order to finance Limited's diamond business. At the same time, the parties also executed a "General Agreement Regarding Mortgage and Lien of Merchandise"7 pursuant to which it was agreed that any loans would be collateralized by diamonds pledged by Limited. In the following month, February 1980, Limited entered into similar loan and pledge agreements8 with UBI.
Each of the pledge agreements provided that Limited, the pledgor, would pledge only diamonds that it owned, free of any adverse interest or claim.9 The arrangements with the Banks provided that Limited could withdraw packets in trust from the collateral pool so that the diamonds could be shown and sales made and would thereafter redeposit the unsold diamonds or remit the sales price. Such withdrawals are routine in the diamond banking business.10 Most, if not all, of the diamonds pledged by Limited to the Banks were deposited by Moshe Reich, an agent and employee of Limited. Reich was empowered to act on behalf of Limited pursuant to the terms of a written power of attorney executed by Limited and it is undisputed that Reich had authority to act on behalf of Limited.11 When it pledged a particular parcel of diamonds to the Banks, Limited signed a deposit ticket which stated, inter alia, that the deposit was made in accordance with the loan and pledge agreements.12
For the reasons which follow, the court has determined that the Debtor's motion for turnover of the Diamonds should be denied and that the Banks' motion for summary judgment in their favor should be granted.
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." Federal Rules of Civil Procedure 56(c).13 See also 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.2d 438, 444 (2d Cir.1980); and Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 717 (2d Cir.1984). It is the burden of the party who seeks the grant of summary judgment to demonstrate "the absence of any material factual issue genuinely in dispute." In re Tampa Chain Company, 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. 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 (Bankr.S.D.N.Y.1983). See also Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983). All inferences to be drawn from the evidence must be viewed in the light most favorable to the party opposing the motion. Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975), cert. den. 425 U.S. 904, 96 S.Ct. 1495, 47 L.Ed.2d 754. The court's function with respect to the motion for summary judgment is not to try issues of fact but to determine "whether there are issues to be tried." Schering Corp. v. Home Insurance Company, 712 F.2d 4, 9 (2d Cir.1983) quoting Heyman v....
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