Jackson v. Star Sprinkler Corp. of Florida
| Decision Date | 06 June 1978 |
| Docket Number | Nos. 77-1197,77-1218,s. 77-1197 |
| Citation | 575 F.2d 1223 |
| Parties | 24 UCC Rep.Serv. 753 Robert L. JACKSON, Trustee in Bankruptcy for Great Western Automatic Sprinkler Co. and Fabrication and Supply Co., Appellant, v. STAR SPRINKLER CORPORATION OF FLORIDA, Philadelphia National Bank, High Point Sprinkler Company, a/k/a High Point Sprinkler Co. of North Carolina, High Point Sprinkler Company of Atlanta, High Point Sprinkler Company of the Midwest, William F. Aldridge, FTM Sprinkler Company, Richard W. Miller, George T. O'Laughlin, Protection Sprinkler Company and Continental Automatic Fire Sprinkler Company, Appellees. STAR SPRINKLER CORPORATION OF FLORIDA, Appellant, v. Robert L. JACKSON, etc., Appellee. CONTINENTAL AUTOMATIC FIRE SPRINKLER COMPANY and Protection Sprinkler Company, Appellants, v. Robert L. JACKSON, etc., Appellee. FTM SPRINKLER COMPANY, Appellant, v. Robert L. JACKSON, etc., Appellee. PHILADELPHIA NATIONAL BANK, Appellant, v. Robert L. JACKSON, etc., Appellee. HIGH POINT SPRINKLER COMPANY OF ATLANTA, Appellant, v. Robert L. JACKSON, etc., Appellee. HIGH POINT SPRINKLER COMPANY OF the MIDWEST, High Point Sprinkler Company, a/k/a High Point Sprinkler Company of North Carolina and William F. Aldridge, Appellants, v. Robert L. JACKSON, etc., Appellee. to 77-1220 and 77-1223. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Duke W. Ponick, Jr., Morris, Foust, Beckett & Ponick, Kansas City, Mo., for Robert L. Jackson, etc., in these cases.
James D. Crawford, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for Star Sprinkler Corp. of Fla., Philadelphia Nat. Bank, High Point Sprinkler Co., etc., High Point Sprinkler Co. of Atlanta, High Point Sprinkler Co. of the Midwest, William F. Aldridge, FTM Sprinkler Co., Protection Sprinkler Co. and Continental Automatic Fire Sprinkler Co. and for cross-appellant Robert L. Jackson, etc., in No. 1197.
Harry P. Thomson, Jr., and Fred Wilkins, Shughart, Thomson & Kilroy, Kansas City, Mo., for Richard W. Miller and George T. O'Laughlin in No. 77-1197.
Robert L. Wesner, Sedalia, Mo., John C. Milholland, Harrisonville, Mo., for cross-appellant Robert L. Jackson, etc., in No. 77-1197, for appellants in Nos. 77-1218, 1223 and 1234, Protection Sprinkler Co., Continental Automatic Fire Sprinkler Co. and High Point Sprinkler Co. of Atlanta, for Star Sprinkler Co. of Fla., FTM Protection and Continental in No. 77-1197 (appellees).
Thomas J. Conway, Kansas City, Mo., for Philadelphia Natl. Bank, appellant in No. 77-1223, for cross-appellant Robert L. Jackson, etc., in No. 77-1197, for appellants in Nos. 77-1218, 1219, 1220, 1233 and 1234.
Anderson & Milholland, Harrisonville, Mo., for appellant High Point Sprinkler Co. of Atlanta, in No. 77-1234; and for appellants, High Point Sprinkler Co., etc., and High Point Sprinkler Co. of the Midwest; and William F. Aldridge in No. 77-1234.
Before GIBSON, Chief Judge, VAN OOSTERHOUT, Senior Circuit Judge, and LAY, Circuit Judge.
This plenary action was brought by the trustee in bankruptcy of Great Western Automatic Sprinkler Company (Great Western) and Fabrication and Supply Company (Fabrication), alleging a conspiracy fraudulently to acquire the assets of the bankrupts. The trustee sought relief in multiple forms including damages, recovery of property or its value, and subordination of claims, from Star Sprinkler Corporation of Florida (Star), Philadelphia National Bank, High Point Sprinkler Company (High Point of North Carolina), High Point Sprinkler Company of Atlanta (High Point of Atlanta), High Point Sprinkler Company of the Midwest (High Point of the Midwest), William F. Aldridge, FTM Sprinkler Company (FTM), Richard W. Miller, George T. O'Laughlin, Protection Sprinkler Company (Protection), and Continental Automatic Fire Sprinkler Company (Continental). 1 The District Court 2 granted summary judgment on eight of the eleven counts of the trustee's amended petition 3 and on Star's counterclaim. The court designated that this judgment was final for purposes of appeal but retained jurisdiction over other claims of the parties. All parties appeal except Richard W. Miller and George T. O'Laughlin. We affirm in part, reverse in part, and remand.
With the encouragement of the District Court, the parties took part in a procedure called melding. In addition to stipulating to the authenticity of numerous documents, the parties exchanged narrative statements. They attempted to complete the factual picture by admitting the correctness of portions of the opposing parties' narratives. In this manner "melds" of admitted facts were created. In entering summary judgment, the District Court made limited findings of fact in its order of May 27, 1975, and relied on the authenticated documents and the stipulated facts. This was permissible under Fed.R.Civ.P. 56. In the present case, we consider the appeals on the record before us, which includes eleven briefs and an 871-page appendix.
Summary judgment is permitted under Fed.R.Civ.P. 56 "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." All evidence must be interpreted in the light most favorable to the non-moving party. Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). The burden is upon the movant to establish "his right to judgment with such clarity as to leave no room for controversy and that the other party is not entitled to recover under any possible circumstances." New England Mutual Life Insurance Co. v. Null, 554 F.2d 896, 901 (8th Cir. 1977); Robert Johnson Grain Co. v. Chemical Interchange Co., 541 F.2d 207, 209 (8th Cir. 1976); Percival v. General Motors Corp., 539 F.2d 1126, 1128 (8th Cir. 1976).
The claims involved in this case depend in large part on the provisions of the Bankruptcy Act, which must be applied carefully to the factual situation disclosed by the record. Bank of Marin v. England, 385 U.S. 99, 103, 87 S.Ct. 274, 277, 17 L.Ed.2d 197 (1966). We are also mindful of the Supreme Court's directive that when a fraudulent scheme is involved the courts must be vigilant. "No matter how technically legal each step in that scheme may have been, once its basic nature was uncovered it was the duty of the bankruptcy court in the exercise of its equity jurisdiction to undo it." Pepper v. Litton, 308 U.S. 295, 312, 60 S.Ct. 238, 248, 84 L.Ed. 281 (1939). With these principles in mind we turn to the factual background 4 of this case.
In 1965, Great Western was incorporated to engage in the business of installing automatic fire protection sprinkler systems. R. W. Miller prepared the Articles of Incorporation and served as its attorney from its inception. Fabrication was incorporated in 1966 by the shareholders of Great Western to carry on the fabrication side of the business; most of Fabrication's business was done with Great Western, its sister corporation.
During 1969, Great Western had gross revenues of $5,766,116.68 from its operations in approximately fifteen midwestern and southern states. Its principal place of business was 1544 Howell Street, North Kansas City, Missouri. By the end of 1969, Great Western was experiencing financial problems and had exhausted its line of secured credit at Roeland Park State Bank. It also had other debts including a substantial amount owed to Star for sprinkler heads, valves, and related devices that Star manufactured.
In January 1970, Philadelphia National Bank loaned Great Western $300,000 based on Star's guarantee of the loan and the agreement of Great Western and Fabrication to grant to Philadelphia National Bank a security interest in all of their then-owned and after-acquired property and assets. In July 1970, Great Western and Fabrication executed security agreements in favor of Philadelphia National Bank and Star. These were perfected by filing financing statements that same month. R. W. Miller drafted the security interests and was representing Great Western and Fabrication as well as Star. Outside of agreeing to continue its loan on a demand basis in December 1970, this loan was the only significant involvement of Philadelphia National Bank prior to the bankruptcy petition of Great Western.
During 1970, representatives of Great Western, Fabrication, and the secured parties met from time to time. On December 18, 1970, Roeland Park State Bank called its loan and applied $222,000 of Great Western funds to its debt. Star then declared Great Western and Fabrication in default on their security agreement and took temporary possession of their assets by posting security guards at the premises of the two debtors.
Star set up FTM as a shell corporation. It opened an account at Roeland Park State Bank in which Great Western's and Fabrication's receivables were deposited. Of the $1,810,027.37 deposited in this account, all except $95,000 was released to Great Western and Fabrication to continue in business.
On December 19, 1970, T. L. Mitchell, the president of Great Western, requested Star's president, William J. Meyer, to find outside management. On that day Star's president contacted William Aldridge, president of High Point of North Carolina, and invited him to a meeting concerning financially ailing Great Western and Fabrication. That meeting occurred on December 20 in Star's offices in Philadelphia. Present were Meyer, Aldridge and his accountant, and the shareholders of Great Western and Fabrication. It was agreed among those present that High Point of North Carolina would...
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