In re Win-Vent, Inc.

• Court: U.S. Bankruptcy Court — Western District of Missouri
• Writing for the Court: KAREN M. SEE
• Citation: In re Win-Vent, Inc., 217 B.R. 803 (Bankr. W.D. Mo. 1997)
• Decision Date: 19 May 1997
• Docket Number: Bankruptcy No. 93-60637,Adversary No. 93-6041.
• Parties: In re WIN-VENT, INC., Debtor. COMMERCE BANK, N.A., formerly Commerce Bank of Springfield, N.A., Plaintiff, v. TIFTON ALUMINUM COMPANY, INC., and Fred Charles Moon, Trustee of the Estate of Win-Vent, Inc., Defendants.

217 B.R. 803 (1997)

In re WIN-VENT, INC., Debtor COMMERCE BANK, N.A., formerly Commerce Bank of Springfield, N.A., Plaintiff, v. TIFTON ALUMINUM COMPANY, INC., and Fred Charles Moon, Trustee of the Estate of Win-Vent, Inc., Defendants.

Bankruptcy No. 93-60637, Adversary No. 93-6041.

United States Bankruptcy Court, W.D. Missouri, Southern Division.

May 19, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas J. O'Neal, Shughart, Thomson & Kilroy, Springfield, MO, for Plaintiff.

William A. Dalton, City Utilities, Springfield, MO, for Defendant.

MEMORANDUM OPINION AND ORDER

KAREN M. SEE, Bankruptcy Judge.

This memorandum opinion rules all issues in this adversary action. Part A. consists of findings and conclusions on issues taken up at a hearing three days before trial on Commerce Bank's Motion for Summary Judgment on defendant Tifton Aluminum Company's First Amended Counterclaim, and Tifton's Motion to Dismiss First Amended Counterclaim Without Prejudice, filed in response to the motion for summary judgment. Part B. of this memorandum consists of findings and conclusions for the trial. The court has jurisdiction over this core proceeding and may enter final orders pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(2)(A), (B), (E), (K), (M) and (O).

A.

ORDER DENYING DEFENDANT TIFTON'S MOTION TO DISMISS COUNTERCLAIM WITHOUT PREJUDICE AND ENTERING PARTIAL SUMMARY JUDGMENT

Defendant Tifton Aluminum Company filed a counterclaim against plaintiff Commerce Bank on the following theories: Count I, Equitable Lien; Count II, Fraudulent Misrepresentation; Count III, Negligent Misrepresentation; Count IV, Lien Priority, and; Count V, Unjust Enrichment. Commerce Bank filed a motion for summary judgment on Tifton's counterclaim. In response, Tifton filed a motion to dismiss the counterclaim without prejudice.

Both motions were set for hearing on December 3, 1993, three days before the trial in this adversary action. Appearances were: Commerce by attorneys Thomas J. O'Neal and Richard A. Heider; Tifton by attorneys William A.R. Dalton and B.H. Clampett; and Fred C. Moon, bankruptcy trustee of the estate of Debtor Win-Vent, Inc., by attorney Timothy J. Harris. After reviewing the pleadings, arguments and authority, the court finds that Tifton's motion to dismiss its counterclaim without prejudice should be denied, and Commerce's motion for summary judgment on Tifton's counterclaim should be granted as to Counts I, II, III, and IV. Summary judgment will not be entered on Count V because it involves many of the same facts and issues as Commerce's complaint. Accordingly, Count V will be determined at trial.

Preliminary findings and conclusions made on the record at the conclusion of the hearing on summary judgment and on Tifton's motion to dismiss without prejudice, which was filed in response to the motion for summary judgment. The preliminary oral findings and conclusions may be supplanted in certain respects by these written findings and conclusions, made after further consideration of the issues and the record.

I. FACTS

Debtor Win-Vent, Inc. originally filed a Chapter 11 case, which was eventually converted to Chapter 7. Before bankruptcy, Debtor manufactured aluminum windows at its plant in Nixa, Missouri. Tifton Aluminum Company, Inc. makes aluminum extrusions at its plant in Tifton, Georgia and supplied this product to Debtor for use in manufacturing the windows.

Debtor is obligated to Commerce Bank of Springfield, Missouri under three promissory notes. By September 1990, Commerce had loaned approximately $1.5 million to Debtor. Commerce filed a proof of claim in this case for $1,180,049.08, the remaining balance on the notes. On January 29, 1990, Debtor executed two security agreements in favor of Commerce. On June 8, 1988, June 9, 1988, February 2, 1990 and February 5, 1990, Commerce perfected the security interests by filing four separate UCC-1 statements with the Missouri Secretary of State and the Recorder of Deeds for Christian County, Missouri. Consequently, Commerce held security interests in virtually all of Debtor's assets, including its inventory, accounts receivable, proceeds of accounts receivable, furniture, equipment, and intangibles. The three notes were also guaranteed by Oren Goble, Debtor's president. Mr. Goble's guarantee was secured by a second deed of trust on his real property.

In September 1990, Commerce's representatives informed Debtor that Commerce did not want to continue as Debtor's lender, and that it wanted Debtor to find another lender and pay off the notes to Commerce. Debtor was unable to find another lender. On July 15, 1991, all three of Debtor's notes matured. On December 17, 1991, Commerce demanded payment of the balance due on the notes.

Since 1985, Tifton supplied Debtor with a significant amount of aluminum extrusions, which constituted the majority of the raw material used in Debtor's business. In December 1990, Debtor was delinquent on its Tifton account. Tifton and Debtor determined that 30-31% of the cash collected from inventory sales was allocable to the aluminum extrusions supplied by Tifton. Therefore, the two companies agreed in January 1990 that Tifton would continue to supply aluminum extrusions to Debtor if Debtor agreed to pay 30-31% of its receivables to Tifton on a weekly basis. In November 1992, Tifton began requiring Debtor to pay cash on delivery for the aluminum extrusions shipped.

Commerce was aware of Debtor's arrangement with Tifton. On February 5, 1991, Commerce wrote Debtor and detailed arrangements to extend credit to debtor for 90 days. The letter contained a provision that allowed Debtor to continue paying Tifton approximately 31% of Debtor's cash collections. The letter asserted that debtor was not to allow the agreement to impair Commerce's collateral. Further, the letter stated that the consent is conditioned on debtor and Tifton's clear understanding "that the bank is not allowing a security interest to be taken in the proceeds of the bank's collateral."

On December 30, 1991, Debtor filed an action against Commerce in state court seeking to enjoin Commerce from collecting on Debtor's obligations. On January 14, 1992, the state court granted a temporary injunction, with the parties' consent, to allow Debtor to obtain other financing. The order required Debtor to enter into a cash collateral agreement creating an account at Commerce into which Debtor would deposit all cash collected from sales. If Debtor failed to satisfy its obligations to Commerce by March 30, 1992, Debtor was to turn over all of its loan collateral to Commerce. Debtor sought, but was denied, an extension of the temporary injunction. Tifton was aware of the terms of the temporary injunction and of Debtor's failure to obtain an extension of the order.

On July 27, 1992, Commerce's attorney sent a letter to Debtor's attorneys again demanding the turnover of all collateral and all proceeds of the collateral. The letter also states that Commerce denied Debtor permission to use the cash collateral account to pay its obligations to Tifton. On September 9, 1992, the state court found Debtor in contempt of court for failing to turn over the collateral to Commerce pursuant to the state court order entered January 14, 1992.

On August 17, 1992 the state court granted Tifton's motion to intervene in the state court lawsuit to assert its claim for an equitable lien on Debtor's inventory to the extent of the raw materials supplied by Tifton. On August 26 and 31, 1992, Tifton purported to perfect two security interests in all aluminum products and the proceeds of these products furnished by Tifton.

II. MOTION TO DISMISS WITHOUT PREJUDICE

In response to Commerce's motion for summary judgment, Tifton filed a motion to dismiss its counterclaim without prejudice. The court finds that, pursuant to Bankruptcy Rule 7041 and Fed.R.Civ.P. 41, dismissal of Tifton's counterclaims without prejudice should not be permitted at this stage in the proceeding, three days before trial and in the face of Commerce's motion for summary judgment. Dismissal under these circumstances would create an undue hardship for the parties, who have spent a significant amount of time and resources preparing for trial and the summary judgment hearing on the issues presented in the counterclaim. Accordingly, Tifton's motion to dismiss its counterclaims without prejudice is denied.

III. SUMMARY JUDGMENT

A. TIMELINESS AND NOTICE

Tifton contends that Commerce filed its motion for summary judgment in order to interfere with Tifton's trial preparation. Commerce argues that a ruling on the motion for summary judgment prior to trial would reduce the evidence and streamline the issues at trial.

One of the primary purposes of Rule 56 is to secure a just, speedy and inexpensive determination of every action by isolating and disposing of factually unsupported claims. Celotex Corporation v. Catrett, 477 U.S. 317, 327-29, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986); Postscript Enterprises v. City of Bridgeton, 905 F.2d 223, 225 (8th Cir.1990). The court agrees with Commerce that deciding certain issues at the summary judgment hearing will simplify the case and reduce the length and expense of trial. Tifton's summary judgment preparations addressed the same issues involved at trial scheduled for three days later. The summary judgment motion did not raise any additional or different issues from those Tifton was already working on. Furthermore, the court notes that Tifton's preparation for the hearing on the summary judgment was minimal because Tifton did not dispute any of the facts asserted by Commerce. Rather, Tifton responded to the summary judgment motion with a motion to dismiss its counterclaim without prejudice on the eve of trial.

Tifton also contends it did not receive proper notice of Commerce's motion for summary judgment. A motion for summary judgment must be served at least 10 days before the time...