Furr's Supermarkets, Inc.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
FURRS SUPERMARKETS, INC.
Debtor. 	No. 11-01-10779 SA
MEMORANDUM OPINION ON TRUSTEE’S
MOTION FOR SUMMARY JUDGMENT ON
OBJECTION TO RECLAMATION CLAIMS
On November 11, 2008, the Trustee filed an Amended Threshold
Objection to all Reclamation Claims (doc 3364). 	Coca-Cola
Bottling Company of Santa Fe (“Coca-Cola”) filed a response (doc
3381). 	This matter is now before the Court on the Trustee’s
Motion for Summary Judgment on Amended Threshold Objections to
Reclamation Claims (“Motion”)(doc 3429) 1. 	The Motion was
directed at several creditors that responded to the amended
objection. All of those creditors settled with the Trustee except
Coca-Cola, which filed no response to the Trustee’s Motion. 	The
Court finds the motion well taken and will grant it.
In adversary proceedings Summary Judgment is governed by
Fed.R.Bankr.P. 7056, which incorporates Fed.R.Civ.P. 56, which in
turn provides, in relevant part:
Rule 56. Summary Judgment
(a) Motion for Summary Judgment or Partial Summary
Judgment. 	A party may move for summary judgment,
identifying each claim or defense--or the part of each
claim or defense--on which summary judgment is sought.
11 The Court has subject matter and personal jurisdiction
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(A); and
these are findings of fact and conclusions of law as may be
required by Rule 7052 F.R.B.P.
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The court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as
a matter of law. 	The court should state on the record
the reasons for granting or denying the motion.
Additionally, New Mexico Local Rule 7056-1 regulates the required
procedure:
SUMMARY JUDGMENT
(a) Memoranda. The movant shall file with the motion a
memorandum containing a concise statement in support of
the motion with a list of authorities. 	A motion for
summary judgment filed without a memorandum may be
summarily denied. 	A party opposing the motion shall,
within 21 days after service of the motion, file a
memorandum containing a concise statement in opposition
to the motion with a list of authorities. 	If no
response is filed, the court may grant the motion. 	The
movant may, within 14 days after the service of a
response, file a reply memorandum.
...
(c) ... All material facts set forth in movant's
statement that are properly supported shall be deemed
admitted unless specifically controverted.
UNDISPUTED FACTS
Because Coca-Cola filed no response, the Court deems the
Trustee’s Statement of Facts undisputed. 	They are:
1. On February 8, 2001 (the “Petition Date”), the Debtor filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy
Code.
2. On the Petition Date, the Debtor owed its secured creditors
over $127,000,000, secured by, inter alia, perfected security
interests in Debtor’s inventory.
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3. On the Petition Date, the value of the Debtor’s inventory of
goods purchased for resale was no more than $66,122,939.89.
4. When the Debtor’s assets were sold to Fleming Foods, Fleming
agreed to pay book value for the Debtor’s goods purchased for
resale, with certain downward adjustments for discontinued and
out-of-date product.
RECLAMATION
“Reclamation is the right of a seller to recover possession
of goods delivered to an insolvent buyer.” 	Pester Refining Co.
v. Ethyl Corp. (In re Pester Refining Co.), 964 F.2d 842, 844
(8 th Cir. 1992). 	To some extent, the Bankruptcy Code preserves a
creditor’s reclamation rights. 	See 11 U.S.C. § 546:
(c)(1) Except as provided in subsection (d) of this
section and in section 507(c), and subject to the prior
rights of a holder of a security interest in such goods
or the proceeds thereof, the rights and powers of the
trustee under sections 544(a), 545, 547, and 549 are
subject to the right of a seller of goods that has sold
goods to the debtor, in the ordinary course of such
seller's business, to reclaim such goods if the debtor
has received such goods while insolvent, within 45 days
before the date of the commencement of a case under
this title, but such seller may not reclaim such goods
unless such seller demands in writing reclamation of
such goods--
(A) not later than 45 days after the date of
receipt of such goods by the debtor; or
(B) not later than 20 days after the date of
commencement of the case, if the 45-day period
expires after the commencement of the case.
(2) If a seller of goods fails to provide notice in the
manner described in paragraph (1), the seller still may
assert the rights contained in section 503(b)(9).
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In New Mexico, a seller’s remedies for reclamation are set out in
the Uniform Commercial Code, N.M. Stat. Ann. § 55-2-702, which
provides:
(1) Where the seller discovers the buyer to be
insolvent, he may refuse delivery except for cash
including payment for all goods theretofore delivered
under the contract, and stop delivery under this
article (Section 2-705).
(2) Where the seller discovers that the buyer has
received goods on credit while insolvent, he may
reclaim the goods upon demand made within ten days
after the receipt, but if misrepresentation of solvency
has been made to the particular seller in writing
within three months before delivery the ten-day
limitation does not apply. Except as provided in this
subsection, the seller may not base a right to reclaim
goods on the buyer's fraudulent or innocent
misrepresentation of solvency or of intent to pay.
(3) The seller's right to reclaim under Subsection (2)
is subject to the rights of a buyer in ordinary course
or other good faith purchaser under this article
(Section 2-403). 	Successful reclamation of goods
excludes all other remedies with respect to them.
(Emphasis added.)
It is well-established that, absent a showing of
bad faith, a creditor with a prior perfected security
interest in inventory which contains an after-acquired
property clause is a good faith purchaser under the
UCC. 	See, e.g., In re Samuels & Co., 526 F.2d 1238,
1241–42 (5th Cir. 1976)(en banc); In re Affiliated of
Florida, Inc., 237 B.R. 495, 497 (Bankr. M.D. Fla.
1998); Mitsubishi Consumer Elec. America, Inc. v.
Steinberg's Inc.(In re Steinberg's, Inc.), 226 B.R. 8,
10 (Bankr. S.D. Ohio 1998); Sandoz Pharm. Corp. v.
Blinn Wholesale Drug Co. (In re Blinn Wholesale Drug
Co.), 164 B.R. 440, 443 (Bankr. E.D. N.Y. 1994); In re
Roberts Hardware Co., 103 B.R. 396, 398–99 (Bankr. N.D.
N.Y. 1988).
Allegiance Healthcare Corp. v. Primary Health Systems, Inc. (In
re Primary Health Systems, Inc.), 258 B.R. 111, 114-15 (Bankr. D.
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Del. 2001). 	“[W]e conclude that where a secured creditor has a
floating lien on all of a debtor's inventory and its claim
exceeds the value of the inventory, a creditor's reclamation
right is valueless and the reclamation creditor is not entitled
to receive an administrative or secured claim under section
546(c)(2).” 	Id. at 118. 	This Court agrees with the Delaware
Court’s conclusions.
SUMMARY JUDGMENT
The undisputed facts establish that on the petition date the
secured creditors had a floating lien on inventory and their
claims exceeded the value of that inventory. 	Therefore, any
reclamation right Coca-Cola had was of no value and Coca-Cola is
not entitled to an administrative or secured claim. 	Therefore,
the Plaintiff has shown that there is no genuine dispute as to
any material fact and that she is entitled to judgment as
a matter of law. 	The Court will enter an Order sustaining the
Trustee’s Objection to the reclamation claim of Coca-Cola.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	August 15, 2012
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Copies to:
Thomas Walker
Attorney for Trustee
500 Marquette Ave NW Ste 650
Albuquerque, NM 87102-5309
Coca-Cola Bottling Company of Santa Fe
PO Drawer K
Santa Fe, NM 87504
Office of the United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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