United States District Court, S.D. New York
June 7, 2005.
In re: ACTION REDI-MIX CORP., Debtor. ACTION REDI-MIX CORP., Plaintiff-Appellee,
NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, THE INTERNAL REVENUE SERVICE, Defendants-Appellees, and LAFARGE CORPORATION, Defendant-Appellant.
The opinion of the court was delivered by: LEONARD SAND, Senior District Judge
MEMORANDUM AND ORDER
Lafarge Corporation appeals orders of the United States Bankruptcy Court
for the Southern District of New York dated September 15, 2003 and December
7, 2003, as amended December 8, 2003. The September order denied Lafarge's
motion to hold Action Redi-Mix Corp. in contempt and to lift an automatic
stay. The December orders granted Action Redi-Mix Corp's motion for summary
judgment to determine that Lafarge was an unsecured creditor. For the
reasons set forth below, the bankruptcy court's orders are affirmed. I. Background
In October 2002, Action Redi-Mix Corp. and Lafarge entered into a
Stipulation of Settlement to resolve Lafarge's claims that Action failed to
pay for cement it had ordered from Lafarge. As collateral for its
obligations under the Stipulation, Action Redi-Mix Corp. gave Lafarge a
security interest in ten cement mixer trucks.
After Action Redi-Mix Corp. failed to make a payment pursuant
to the Stipulation, Lafarge obtained a temporary restraining
order ("TRO") against it enjoining it from using the collateral.
That very day, however, Action Redi-Mix Corp. filed a voluntary
petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. The bankruptcy court held soon thereafter that
an automatic stay precluded enforcement of the TRO against the
On July 2, 2003, the Debtor commenced an adversary proceeding
against the IRS, the New York State Department of Taxation and
Finance (NYSDTF), and Lafarge, seeking a declaratory judgment
pursuant to 11 U.S.C. § 506(a) and 28 U.S.C. § 2201 to determine
the nature, validity, and extent of the parties' respective
In August 2003, Lafarge made a motion to lift the automatic
stay to permit Lafarge to take possession of the collateral and
to adjudge the Debtor and its principals in civil and criminal
contempt of court for their violations of the TRO. On September
15, 2003, the bankruptcy court issued an order denying Lafarge's
motion. On October 2, 2003, Lafarge filed a Notice of Appeal from
the September 2003 order, which is now before this Court.
On November 21, 2003, Action Redi-Mix Corp. filed a motion for
summary judgment to determine that Lafarge's claims against the
Debtor relating to the collateral constituted a general unsecured claim. In orders dated December
7, 2003 and December 8, 2003, the bankruptcy court granted Action
Redi-Mix Corp's motion on grounds that the collateral was part of
the bankruptcy estate and that the taxing authorities' security
interests, totaling roughly $3.7 million, were perfected prior to
the date on which Lafarge had perfected its lien and exceeded the
value of Lafarge's collateral security interest. Lafarge now
appeals this judgment.
A. The December Orders
Lafarge argues that the December orders granting summary
judgment to Debtor were flawed on several grounds. The core of
Lafarge's argument is that an award of summary judgment was
inappropriate because genuine material issues of fact existed as
to whether the collateral was part of Debtor's bankruptcy estate,
or whether it belonged to a distinct entity called the Action
A dispute regarding a material fact is genuine "if the evidence
is such that a reasonable jury could return a verdict for the
non-moving party." Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). Once the movant has established a prima
facie case demonstrating the absence of a genuine issue of
material fact, the nonmoving party must come forward with
evidence to support a jury verdict in its favor. See
Matsushita Elect. Indus. Co. v. Zenith Radio Corp.,
45 U.S. 574, 586 (1986).
Here, the parties disagree as to whether there was a genuine
dispute regarding whether the collateral was part of Debtor's
bankruptcy estate. Debtor produced evidence that all of the
documents relating to the purchase of the collateral in February
1997 were in the name of Action Redi-Mix Corp, rather than Action
Redi-Mix Group. In addition, Debtor's principal testified that no entity ever existed by the
name of Action Redi-Mix Group. Lafarge countered with evidence of
certain documents submitted to the New York State Department of
Motor Vehicles (DMV) that bore the name "Action Redi-Mix Group"
as owner of the collateral. However, Lafarge conceded that there
was no evidence in the record before the bankruptcy court, such
as a corporate filing with the Secretary of State, which
indicated the existence of a corporate entity called "Action
Redi-Mix Group." In light of the absence of any evidence
rebutting the prima facie case that Debtor made in favor of the
conclusion that the collateral was part of Debtor's estate, no
reasonable jury could find that the collateral belonged to a
distinct corporate entity by the name of Action Redi-Mix Group.
The reference to Action Redi-Mix Group on the DMV form may be
seen either as a clerical error or simply an alternative
reference to the Debtor, but is insufficient to create a genuine
dispute as to whether the collateral was part of Debtor's estate.
Therefore, the bankruptcy court's grant of summary judgment was
In any event, the IRS correctly observes that Lafarge's lien,
which was granted by "Action Redi-Mix Corp.," would be a nullity
if the collateral were found to be owned by an entity called
"Action Redi-Mix Group."
Lafarge argues, further, that the bankruptcy court lacked
jurisdiction to rule on Action's summary judgment motion because
of Lafarge's previous appeal from the September order to this
Court. Lafarge cites a number of cases to support the proposition
that filing a notice of appeal divests a bankruptcy court of
jurisdiction to act on the matters that are the subject of the
appeal. See, e.g., In Re Winimo Realty Corp. et al. v. City
of Albany, et al., 270 B.R. 99 (S.D.N.Y. 2001) (citing United
States v. Rodgers, 101 F.3d 247, 251 (2d Cir. 1996) (filing of notice of appeal divests
lower court of jurisdiction over those aspects of the case
involved in the appeal)). Bankruptcy courts are not, however,
deprived of jurisdiction to decide issues and proceedings
different from those involved in a pending appeal. See, e.g.,
In re Bd. of Dir. of Hopewell Int'l Ins. Ltd., 258 B.R. 580,
583 (S.D.N.Y. 2001). Here, the issues decided in the September
order were different than the issues decided in the December
order: the former denied Lafarge's motion for contempt and to
lift the automatic stay, while the latter determined that Lafarge
had an unsecured claim. Therefore, it is a mischaracterization to
suggest that the September and December orders presented
Finally, Lafarge argues that the adversary proceeding leading
to the December orders was defective pursuant to
11 U.S.C. § 506(a) because it lacked a valid purpose. However, the IRS's
argument is persuasive that determining if Lafarge's claim was
secured was necessary for the purpose of determining whether
Lafarge was entitled to adequate protection and of enabling
Debtor to propose a plan. See, e.g., In re Dairy Mart
Convenience Stores, Inc., 351 F.3d 86, 90-91 (2d Cir. 2003)
(employing § 506(a) of the bankruptcy code to determine that
party was not secured creditor and thus not entitled to adequate
B. The September Order
Lafarge also appeals the bankruptcy court's September 2003
denial of its motion to hold the Debtor in contempt for
continuing to use the collateral after the bankruptcy petition
was filed. Lafarge argues, further, that the IRS has "no
standing" to oppose this portion of the appeal because of its
lack of pecuniary interest in the outcome. However, the cases
that Lafarge cites in support of this proposition are inapposite,
for they concern the standing requirement for the appellant from a bankruptcy
court ruling rather than for the appellee.
There is, as the IRS highlights, support in the Second Circuit
for the bankruptcy court's denial of Lafarge's contempt motion.
In In re Sonnax Indus., Inc., the court affirmed the denial of
a motion to lift a stay to permit enforcement of a pre-bankruptcy
petition preliminary injunction. 907 F.2d 1280, 1288 (2d Cir.
1990). There, as in the instant case, the pre-petition order
concerned "property of the estate." Id.; cf. In re
Rudaw/Empirical Software Prods. Ltd., 83 Bankr. 241 (Bankr.
S.D.N.Y. 1988) (stay lifted to permit creditor to proceed with
contempt proceedings where pre-petition order was not related
to property of the estate). Accordingly, the bankruptcy court's
determination that the pre-petition TRO did not prohibit Debtor
from continuing to use the collateral post-petition appears
consistent with Second Circuit case law, and to be within the
discretion of the bankruptcy court.
For the reasons set forth above, the orders and judgment of the
bankruptcy court are affirmed.
© 1992-2005 VersusLaw Inc.