In re Woods Farmers Co-op. Elevator Co.
| Decision Date | 20 October 1989 |
| Docket Number | Bankruptcy No. 89-05299,Adv. No. 89-7067. |
| Citation | 107 BR 689 |
| Parties | In re WOODS FARMERS CO-OPERATIVE ELEVATOR COMPANY, Debtor. Wayne DREWES as Bankruptcy Trustee for Woods Farmers Co-operative Elevator Co., Plaintiff, v. Fred A. CARTER, Rodney Thompson, Marie Thompson, St. Paul Bank for Cooperatives, Dorothy A. Anderson, Norman Sletmoe, Merle Schatzke, Wayne Schatzke, Alex Watt, Jack Christensen, Cleo Brown, Clayton Brown, Wade Motter, Joanne Motter, Wayne L. Heuer, Gordon Pearson, Larry Nesemeier, Bradley Gust, Roger L. Thompson as personal representative of the Marion Thompson Estate, Colfax Farmers Elevator, James E. Nygard, United States of America, acting through Commodity Credit Corp., Roger McDonald, Carmen Lynnes, Lynnes Farms, Roesler Land & Cattle Co., Kent Roesler, Lyle Roesler, Ada Roesler, Kellerman Brothers, Sheldon Farmers Elevator, Orville Pfingsten, Roland Heuer, Gary Dittmer, Allen Solhjeim, Brian McDonald, Al Halvorson and Ron Halvorson, Paul Brakke, Jim Bueling, Ron W. Plath, Land O'Lakes, Inc., Farmers 690*690 Union Central Exchange, Inc., and Pepsi Cola Bottling Co. of Fargo, Inc., Defendants, v. FARMLAND MUTUAL INSURANCE CO., Intervenor. |
| Court | U.S. Bankruptcy Court — District of North Dakota |
Wayne Drewes, Fargo, N.D. Trustee.
Kip M. Kaler, Fargo, N.D. for trustee.
Roger J. Minch, Fargo, N.D. for St. Paul Bank for Co-ops.
Rodney and Marie Thompson, West Fargo, N.D., pro se.
Jay D. Carlson, Fargo, N.D. for James E. Nygard.
John C. Irby, Casselton, N.D., Lowell P. Bottrell, Fargo, N.D., and David L. Johnson, Fargo, N.D., for various grain claimants.
Vicki Aldridge, Fargo, N.D., for USA/CCC.
William Binek, Bismarck, N.D., for North Dakota Public Service Com'n.
Dorothy Anderson, Sheldon, N.D., pro se.
Bruce Carlson, Fargo, N.D., for Farmland Mut. Ins. Co. Rebecca Theim Benson, Bismarck, N.D., for North Dakota Grain Dealers.
The matters before the court are motions for summary judgment and judgment on the pleadings filed by various defendants. Wayne Drewes, trustee for the estate of Woods Farmers Co-operative Elevator Company, by Complaint filed September 8, 1989, seeks to avoid an alleged statutory lien on grain proceeds pursuant to section 545 of the Bankruptcy Code. Motions for judgment on the pleadings and/or motions for summary judgment were filed by various defendants in this matter. Objections to these various motions were filed by the trustee and St. Paul Bank for Cooperatives. In addition, St. Paul Bank for Cooperatives filed a counter-claim and cross-claim against the trustee and various defendants.
The Debtor, Woods Farmers Co-operative Elevator Company, filed for relief under Chapter 7 of the Bankruptcy Code on April 13, 1989. Prior to filing, the Debtor was a licensed and bonded grain warehouse and storage facility in Leonard, North Dakota. On June 7, 1989, this court authorized that all grain that remained on the Debtor's premises or in space controlled by Woods Condominum Elevator be sold by the trustee. The grain was sold and the proceeds in the amount of $1,603,459.94 were deposited with interest in a separate account. The trustee by the instant action seeks to avoid an alleged statutory lien upon the grain proceeds. The defendants in this present action move for dismissal of the trustee's complaint. All the motions in this case will be treated as motions for summary judgment because a Rule 12(c) motion can be granted only on the pleadings and if outside matter is introduced, the court must treat the motion as one for summary judgment. Brittian v. Belk Gallant Company, 301 F.Supp. 477, 478 (D.C. Ga.1969).
Summary judgment is available where the pleadings or other documents on file show there to exist no genuine issue as to any material fact and where the moving party is entitled to summary judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Mandel v. United States, 719 F.2d 963, 965 (8th Cir.1983). When considering motions for summary judgment the weight of authority is that summary judgment may be rendered in favor of the opposing party even though no formal cross motion has been made, providing the facts developed reveal the opponent is entitled to judgment. National Expositions v. Crowley Maritime Corp., 824 F.2d 131, 133 (1st Cir.1987); British Caledonian Airways, Ltd. v. First State Bank of Bedford, Tex., 819 F.2d 593, 595 (5th Cir.1987).
It is with the foregoing standard in mind that the facts and issues as they presently appear will be considered.
At the outset, the court would point out that the grain and subsequent proceeds are "property of the estate", within the jurisdictional parameters of section 541 of the Bankruptcy Code. See, State of Mo. v. U.S. Bkrtcy. Court, 647 F.2d 768, 774 (8th Cir.1981). In light of the broad definition of property under section 541 of the Code the possessory interest of the Debtor, in the grain/proceeds, are sufficient to trigger jurisdiction over the property in this bankruptcy court. Id. at 774. Whether in fact the grain proceeds are "property of the Debtor" is an issue previously dealt with in an opinion of this court entered October 13, 1989, and which will now be further discussed in the context of the section 545 avoidance powers.
The trustee, by the nature of his complaint, has two primary assertions. First, the trustee asserts that section 60-02-25.1 of the North Dakota Century Code creates a statutory lien upon the grain proceeds. Second, that the trustee has the power to avoid the statutory lien pursuant to section 545 of the Bankruptcy Code. Therefore, in order to address these various motions the court must determine whether North Dakota Century Code § 60-02-25.1 creates a lien in favor of the receipt holders on the grain proceeds.
Section 60-02-25.1 provides:
60-02-25.1. Receipt Holders Lien. Grain contained in a warehouse, including grain owned by the warehouseman, is subject to a first priority lien in favor of outstanding receipt holders storing, selling, or depositing grain in the warehouse. The lien created under this section shall be preferred to any lien or security interest in favor of any creditor of the warehouseman regardless of the time when the creditor\'s lien or security interest attached to the grain. Notice of the lien created under this section need not be filed in order to perfect the lien. The lien created by this section is discharged as to grain sold by the warehouseman to a buyer in the ordinary course of business. Such sale does not discharge the lien in favor of an individual receipt holder in the remaining grain in the warehouse. N.D.Cent.Code § 60-02-25.1.
It is clear that section 60-02-25.1 as determined in this court's October 13, 1989, opinion that the subject statute does create a lien in favor of receipt holders. Therefore, once determining that there is a lien on the subject grain proceeds the issue becomes whether such lien may be avoided by the trustee pursuant to section 545 of the Bankruptcy Code.
Section 101(47) of the Bankruptcy Code defines "statutory lien" as a lien arising solely by force of statute on specified circumstances or conditions. 11 U.S.C. § 101(47); Gardner v. Com. of Pa., 685 F.2d 106, 109 (3rd Cir.1982). Since the lien created by 60-02-25.1 arises by force of statute it is a statutory lien within the definition of the Bankruptcy Code. 11 U.S.C. § 101(47).
In order for the trustee to avoid a statutory lien pursuant to section 545 the lien must be on "property of the debtor". 11 U.S.C. § 545. Generally, all the defendants contend that the trustee's complaint should be dismissed because the grain proceeds are not "property of the debtor." North Dakota Century Code § 60-02-25 provides in part:
Whenever any grain shall be delivered to any public warehouse and an unconverted scale ticket or warehouse receipt is issued therefor, such delivery shall be a bailment and not a sale of the grain so delivered. N.D.Cent.Code § 60-02-25 (emphasis added).
Therefore, pursuant to 60-02-25 any grain delivered to a warehouse for the purpose of storage is a bailment whether the storage is evidenced by a scale ticket or warehouse receipt. The North Dakota Supreme Court defines a bailment as:
A trust relation arising from lawful possession of property taken with consent of the owner for an agreed time and purpose, and the duty to later account for it to the owner. Bower v. Western Livestock Company, 103 N.W.2d 109, 112 (N.D.1960).
Therefore, by statute and case law the grain owners who deposited grain for storage had a bailment relationship with the Debtor.
It is well settled under bankruptcy law that a bailor may recover property held by a debtor as bailee. In re Ralph Veon, Inc., 12 B.R. 186, 188-89 (Bankr.W.D.Pa. 1981). Furthermore, in a bailment relationship, title to the property remains in the bailor and since the trustee takes only the property rights which the debtor/bailee possessed, title to the property does not become a part of the Debtor's estate. Id. The court agrees with the defendants that the proceeds represented by a receipt holder are not property of the Debtor because the Debtor has no ownership interest in the grain proceeds, and thus, the trustee may not avoid the statutory lien on such proceeds. However, in earlier hearings the trustee testified that there may be grain owned by the Debtor in the warehouse. Additionally, consistent with this court's previous Order dated October 13, 1989, commodity quantities in excess of receipt totals for that commodity held by individual receipt holders/owners of that commodity is not owned in common by receipt holders of other non-fungible commodities but instead may be owned by the Debtor, and would therefore constitute "property of the debtor". It is apparent from this court's Order dated October 13, 1989, with the exception of winter wheat and rye, that there is sufficient...
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