Law School Case Brief
In re Miss. Valley Livestock, Inc. - 745 F.3d 299 (7th Cir. 2014)
Like the district court, the appellate court reviews a bankruptcy court's factual findings for clear error and its legal conclusions de novo. The decision whether to grant summary judgment is a legal conclusion.
Mississippi Valley Livestock was in the business of buying and selling fatted livestock for slaughter and processing. Mississippi Valley had an arrangement with J&R Farms (J&R) under which the former agreed to sell some of J&R's cattle to a particular buyer. Shortly before declaring bankruptcy, Mississippi Valley paid J&R nearly $900,000 representing completed sales. The bankruptcy trustee now seeks to recover those funds under the preferential-transfer provision of the Bankruptcy Code, 11 U.S.C. § 547(b). The trustee's efforts were unsuccessful in both the bankruptcy court and the district court.
Is granting summary judgment a legal conclusion?
Based on the facts found by the bankruptcy court, it appears likely that a constructive trust over the funds in Mississippi Valley's account was in some amount proper. Mississippi Valley took J&R's property (the cattle), sold it, and held the proceeds for J&R's benefit. But the court did not find anything in the record to tell such critical things as how much money was in Mississippi Valley's account, what the lowest intermediate balance of the account was after the proceeds were deposited, and thus whether all of the money was properly impressed with the trust. In other words, J&R has not yet shown that all of the funds paid were its property. Nor can we be certain that the courts below have given adequate consideration to potential defenses available to the estate. Because the court cannot determine whether the transferred funds were "an interest of the debtor in property" as required to support the trustee's preference action under 11 U.S.C. § 547, the court remanded for further proceedings consistent with this opinion.
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