AG New Mexico, FCS, ACA et al v. Borges et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JOE BETTENCOURT BORGES,
d/b/a J&M Dairy,
Debtor. Case No. 11-10-12800 S11
AG NEW MEXICO, FCS, ACA;
AG NEW MEXICO, FCS, PCA; and
AG NEW MEXICO, FCS, FLCA;
Plaintiffs,
v. Adversary No. 10-01170 S
JOE BETTENCOURT BORGES; and
MARIA ROCHA BORGES, his wife,
d/b/a J&M Dairy.
Defendants.
MEMORANDUM OPINION IN SUPPORT OF ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiffs’ Motion for Partial Summary Judgment (“Motion”)
comes before this Court for decision. The Motion asks for a
determination that “Plaintiffs have a perfected security interest
in the CWT funds” and “that Plaintiffs are entitled to receive
the CWT funds for application to the Borges’ debts.” Doc 17-1, p.
2. For the reasons set forth below, the Court finds cause to
grant the motion in part and to deny it in part by determining
that one of the Plaintiffs has a perfected secured interest in
the funds at issue but that genuine factual disputes preclude the
award of the funds to Plaintiffs.1
The Court has subject matter and personal jurisdiction	1
pursuant to 28 U.S.C. §§1334 and 157(b); this is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(k); and these
are findings of fact and conclusions of law as may be required by
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BACKGROUND
Plaintiffs’ Motion, originally filed in the state district
court, asserts that Defendants disposed of their dairy cows, on	2
which Plaintiffs allegedly had a valid, perfected lien, without
delivering the proceeds of the disposition to Plaintiffs. The
Herd Retirement Program of Cooperatives Working Together (“CWT”)
is a nationwide program that removes dairy cows from the market
in order to stabilize milk prices. Defendants had previously
reached an agreement with CWT to remove the cows from the market,
for which CWT was to provide compensation to Defendants (“CWT
funds”). Plaintiffs assert that they, Plaintiffs, are entitled
to the CWT funds in order to apply the funds to Defendants’ debt
(doc 17-1, p. 1).
Rule 7052 F.R.B.P.
On August 28, 2009, Plaintiffs filed a Complaint for Money	2
Due and Foreclosure in the Fifth Judicial District Court, Eddy
County, New Mexico (“State Court Action”). On April 10, 2010,
Plaintiffs filed a Motion for Partial Summary Judgment with that
court (doc 17-1) and a supporting memorandum (doc 17-2).
Defendants filed a response on May 19, 2010 (doc 17-3, which is
missing a page; the complete document is at doc 25-5). While
that motion was still pending, on June 1, 2010, Debtors filed
their chapter 11 petition with this Court. On September 20,
2010, this Court entered an order granting relief from the
automatic stay for Plaintiffs to pursue the state court
litigation. Plaintiffs filed a reply to the response that same
day in the State Court Action (doc 18, exhibit 1).
Thereafter, on September 18, 2010, Defendants filed a Notice
of Removal of State Court Action (doc 1). Plaintiffs filed a
Motion to Remand on November 10, 2010 (doc 14). However, in the
stipulated order issued on February 17, 2011, the parties
consented to this Court’s jurisdiction after removal (doc 27).
Plaintiffs also consented to withdraw their jury demand.
2
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ANALYSIS
Summary Judgment Standard
Summary judgment is only appropriate when the pleadings and
evidence show that “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter
of law.” F.R.Civ.P. 7056(a). The burden is on the moving party
to establish a lack of disputed material facts as well as an
entitlement to judgment as a matter of law. The Court must view
the facts in the light most favorable to the party opposing
summary judgment. Harris v. Beneficial Oklahoma, Inc. (In re
Harris), 209 B.R. 990, 995 (10th Cir. BAP 1997)(“When applying
this standard, we are instructed to ‘examine the factual record
and reasonable inferences therefrom in the light most favorable
to the party opposing summary judgment.’”) Wolf v. Prudential
Ins. Co. of America, 50 F.3d 793, 796 (quoting Applied Genetics
Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241
(10th Cir.1990)) (internal quotation marks omitted); Henderson v.
Inter–Chem Coal Co., 41 F.3d 567, 569 (10th Cir.1994)(stating
that the court must “view all facts and any reasonable inferences
that might be drawn from them in the light most favorable to the
nonmoving party ...”).
Analysis Under Rule 56(d)
Defendants contend that this Motion must be denied, without
(yet) considering its merits, because Defendants have not yet had
3
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access to reasonable discovery as required by Fed.R.Civ.P. 56(d)
(doc 25-5, p. 1). Defendants contend that Plaintiffs have failed
to produce documents more than two months overdue (as of the time
of Defendants’ response), and that this Court should deny the
motion as premature (doc 25-5, p. 21).
Rule 56(d), made applicable to bankruptcy through F.R.B.P.
7056, explicitly requires that the party opposing the motion, in
this case Defendants, show by affidavit that it cannot present
facts essential to justify its opposition. Defendants have filed	3
two affidavits (doc 25-5, pp. 26-28 [Maria Borges]; doc 25-2, pp.
1-3 [Karla Poe]) discussing the discovery problems. Defendants
have also explained the situation generally in their Response.
However, the requirements for relief under Rule 56(d) are rather
strict. Not only must the nonmovant produce an affidavit (or
declaration – the same thing as far as this Court is concerned),
but that affidavit must also “explain why facts precluding
summary judgment cannot be presented. This includes identifying
the probable facts not available and what steps have been taken
to obtain these facts.” Trask v. Franco, 446 F.3d 1036, 1042
F.R.Civ.P. 7056 reads in relevant part:	3
(d) When Facts are Unavailable to the Nonmovant.
If a nonmovant shows by affidavit or declaration that,
for specified reasons, it cannot present facts
essential to justify its opposition, the court may:
(1) defer considering the motion or deny it;
(2) allow time to obtain affidavits or
declarations or to take discovery; or
(3) issue any other appropriate order.
4
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(10 Cir. 2006) (quoting Comm. for the First Amendment v.	th
Campbell, 962 F.2d 1517, 1522 (10 Cir. 1992)) (internal	th
quotation marks omitted). “[T]he nonmovant must also explain how
additional time will enable him to rebut the movant’s allegations
of no genuine issue of material fact.” Id. While “a summary
judgment movant’s exclusive control of information” favors relief
under Rule 56(d), this by itself is not sufficient. See id.
(citing Price ex rel. Price v. W. Res., Inc., 232 F.3d 779, 784
(10 Cir. 2000)).	th
Thus, under Trask, Defendants are required to identify the
probable facts unavailable to them that they seek to discover.
The affidavit of Karla K. Poe identifies no specific probable
facts unavailable to the Defendants (doc 25-2, pp. 1-3). The
Affidavit of Maria Borges specifies the probable facts
unavailable to them as “the amount AgNM claims is due from
Borges, including the computation of interest and other charges,
the application of payments,” and “the amounts held in the slush
fund.” (Affidavit of Maria Borges, doc 25-5, p. 28, ¶ 24).
However, the affidavit must also “state with specificity how
the additional material will rebut the summary judgment motion.”
Id. (citing Ben Ezra, Weinstein & Co. v. Am. Online Inc., 206
F.3d 980, 987 (10 Cir. 2000). The probable facts unavailable to	th
the Defendants are entirely unrelated to the validity of
Plaintiffs’ lien on the CWT funds, and Defendants have not
5
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explained, as required by Ben Ezra, how this additional material
will rebut the Motion, or even how the unavailable facts are
related to Plaintiffs’ entitlement to the CWT funds in a general
way. Therefore, Defendants have not made a sufficient showing
under Rule 56(d).
Validity of the Security Interest
Background
Article 9 of the Uniform Commercial Code (“UCC”), codified
at Chapter 55, Article 9 N.M.S.A. 1978, applies to any
“transaction, regardless of its form, that creates a security
interest in personal property or fixtures by contract.” N.M.S.A.
1978 § 55-9-109(a)(1). This is what Plaintiff Ag NM in Count 1
claims to have done: created a security interest in Defendants’
personal property, including livestock and proceeds of those
livestock, by contract. Thus, the validity of Ag NM’s security
interest is governed by the UCC.
Generally, in order for a security interest to have attached
(that is, to be enforceable against) the collateral, three
requirements must be met: (1) value must be given to the debtor,
(2) the debtor must have rights in the collateral sufficient to
grant the creditor a security interest, and (3) the debtor must
have signed or otherwise authenticated a security agreement which
describes the collateral. N.M.S.A. 1978 § 55-9-203(a)-(b). As a
general rule, in order for an attached security interest to
6
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become perfected, a financing statement must also be filed.
N.M.S.A. 1978 § 55-9-310.
Undisputed Facts
Plaintiffs assert, and Defendants do not dispute, that value
was extended by Plaintiff Ag New Mexico, FCS, FLCA on June 6,
2006, August 17, 2006, May 29, 2008 (doc 17-2, ¶ 3-5; Defendants’
Response, doc 25-5, p. 3 (Defendants only dispute the remaining
amount owed)). Nor do Defendants dispute that Debtors signed
security agreements with Plaintiff Ag New Mexico, FCS, FLCA on
July 6, 2006, July 13, 2007 and May 29, 2008, providing Ag New
Mexico, FCS, FLCA with a security interest in Debtor’s livestock,
proceeds of livestock, and contract rights relating to livestock,
among other things (doc 17-2, ¶ 6-8; doc 25-5, p. 4). Similarly,	4
Plaintiffs assert, and Defendants do not dispute, that filing
statements were filed with the New Mexico Secretary of State on
July 17, 2006, and on July 6, 2006 [sic; should be June] with the
Eddy County Clerk as a fixture filing (doc 17-2, p. 3, ¶ 9;
referring to doc 17-3, pp. 31, 33-35; doc 25-5 p. 4-5). The UCC	5
definition of “proceeds” includes “(a) whatever is acquired upon
the sale, lease, exchange, exchange or other disposition of
Defendants dispute that the referenced security agreements	4
secure all of the notes.
Debtors dispute that the filings were effective to	5
perfect, but Plaintiffs, in their pre-bankruptcy filing, do not
assert that this is the case.
7
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collateral; (b) whatever is collected on, or distributed on
account of, collateral; (c) rights arising out of collateral.”
N.M.S.A. 1978 § 55-9-102(a)(64)(A)-(C). As Defendants do not
dispute, the CWT funds are proceeds of Debtor’s livestock within
this definition (doc 17-2, pp. 6-8). As Defendants also do not
dispute, the three security agreements and the financing
agreement all extend to proceeds of Debtor’s livestock such as
the CWT funds (doc 17-3, p. 19, 23, 26, 31; doc 25-5).
Effect of the Cross-Collateralization Clause
As Plaintiffs point out, each of the security agreements
signed by Debtor explicitly secure:
All present and future debts, regardless of whether this
Agreement is referenced, such as debts secured by other
collateral, or whether the future debt is unrelated to or of
a different type than the current debt, and including those
debts owed by Debtor or Borrower to any of Secured Party’s
affiliated institutions, including but not limited to Ag New
Mexico, FCS, ACA and/or to Ag New Mexico FCS, FLCA, or their
respective successors or assigns...
(doc 17-3, p. 19, 23, 26; doc 18, p. 6) (emphasis added). There
is no dispute that the cross-collateralization clause is valid as
to all debts incurred between Debtors and Creditor Ag New Mexico
FCS, PCA, the Creditor whose name is written both on the security
agreement and on the financing statement (doc 25-5, p. 4-5).
Indeed, it is clear that New Mexico FCS, PCA has a valid
perfected security interest in all of the collateral secured by
the financing statement. However, what about the other
Plaintiffs? May their debts also be cross-collateralized in the
8
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same security agreement, and then perfected in the same financing
statement, without being listed on the statement?
Defendants assert that Ag New Mexico, FCS, ACA (“the ACA”)
and Ag New Mexico, FCS, FLCA (“the FLCA”) are not “secured
parties” under any of the three livestock security agreements
(doc 25-5, p. 17). The UCC defines a “secured party” as “a
person in whose favor a security interest is created or provided
for under a security agreement.” N.M.S.A. 1978 § 55-9-	6
102(a)(72)(A). Regarding the cross-collateralization agreement:
Virtually any provision involving collateral is
permissible. The collateral may secure both the
obligation evidenced by the instrument itself, and any
other obligation of the obligor ("cross-
collateralization"). It is not necessary to include
such provisions in the note or other instrument itself.
The note or instrument may require reference to another
agreement to determine rights to the collateral.
6B. Anderson U.C.C. § 3-104:28 [Rev] (3d. ed.). Debtor’s
obligations to both the ACA and the FLCA may therefore be secured
by the cross-collateralization agreement (doc 17-3, p. 19, 23,
26). Thus, both the ACA and FLCA meet the basic definition of
“secured party” in the sense that they have a security interest
in their favor in the personal property secured by the
As Defendants point out, Plaintiffs’ security agreement	6
misuses the phrase “secured party” by identifying only Ag New
Mexico, FCS, PCA as “Secured Party” and not the ACA or the FLCA
who are also becoming “secured parties” within the UCC definition
(doc 25-5, p. 18). Nevertheless, the intended legal effect of
the cross-collateralization clause is clearly to make all three
entities secured parties.
9
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agreements.
As an additional objection, Defendants cite the Fifth
Circuit’s prohibition against “floating secured parties” in
Republic Nat’l Bank v. Fitzgerald (In re Fretz), 565 F.2d 366 (5th
Cir. 1978) (doc 25- 5, p. 17). However, Fretz is not analogous
to the present case. In Fretz, the Fifth Circuit ruled that
Revlon did not, by signing a security agreement as a creditor,
create a security interest in its wholly owned subsidiaries, that
could then be transferred back to the parent company post-
bankruptcy. Id. at 369. In the instant case both the ACA and
the FLCA were explicitly granted a security interest through the
cross-collateralization clause in each of the three security
agreements (doc 17-3, p. 19, 23, 26). The ACA and the FLCA are
not “floating secured parties” within the meaning of Fretz since	7
the cross-collateralization clause explicitly and specifically
grants them a security interest. Despite Defendants’
protestations to the contrary, the cross-collateralization clause
is a clear grant of a security interest to the ACA and FLCA (doc
25-5, p. 18). Thus, all three Plaintiffs are secured, although
not necessarily perfected.
Fretz’s prohibition against “floating secured parties” may	7
invalidate Plaintiffs’ attempts to cross-collateralize future
debts to affiliates not identified by name in the security
agreement, and almost certainly rules out affiliates not in
existence at the time the security agreement was signed. Neither
issue arises in this case, however.
10
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Deficiencies in the Financing Statements
Plaintiffs argue that it is not relevant or is a non-issue
whether Plaintiffs’ lien is perfected (doc 18, p. 6-7). This may
well have been true prior to Defendants’ bankruptcy filing when
Plaintiffs originally filed their reply in state court; obviously
it is no longer the case. “The Bankruptcy Code gives the
bankruptcy trustee the rights and powers of a hypothetical person
who acquired a judicial lien on the debtor's property at the time
that the bankruptcy petition was filed...[she] can avoid any lien
inferior to [her] interest in an asset of the bankruptcy estate.”
In re Roser, 613 F.3d 1240, 1243 (10 Cir. 2010) (citing	th
§544(a) ); In re Haberman, 516 F.3d 1207, 1210 (10 Cir. 2008).	8 th
Thus, any Plaintiff that has not perfected its security interest
is not entitled to receive funds stemming from that security
interest, during bankruptcy, including the CWT funds.
Defendants argue that Plaintiffs’ filing with the Secretary
of State is only effective as to Ag New Mexico, FCS, PCA (“PCA”)
11 U.S.C. § 544(a)(1) reads:	8
(a) The trustee shall have, as of the commencement of
the case, and without regard to any knowledge of the
trustee or of any creditor, the rights and powers of,
or may avoid any transfer of property of the debtor or
any obligation incurred by the debtor that is voidable
by-
(1) a creditor that extends credit to the debtor at the
time of the commencement of the case, and that obtains,
at such time and with respect to such credit, a
judicial lien on all property on which a creditor on a
simple contract could have obtained such a judicial
lien, whether or not such a creditor exists.
11
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and not ACA or FLCA because PCA is the only party named on the
filing statement. Therefore, Defendants argue, ACA and FLCA do
not hold perfected security interests (doc 25-5). Similarly,
Defendants also protest that Plaintiffs’ filing with the Eddy
County Clerk is defective and did not result in perfection,
because it lists ACA as the only secured party, and Debtors never
granted a security interest to that entity (doc 25-5).
Plaintiffs do not dispute what is written on the financing
statements, only the legal impact of those words (doc 18, p. 2).
Defendants do not contest that the PCA’s security interest
is perfected nor that the CWT funds are proceeds of Debtors’
livestock. Therefore PCA has a perfected security interest in
the CWT funds. Debtors however contest the status of the other
two entities, ACA and FLCA, as creditors holding perfected
secured claims on the basis that they are not named on the
financing statement (doc 25-5, p. 5).
The purpose of a financing statement is to give notice to
the world, particularly to would-be future creditors of the
existence of the liens on a debtor’s property. See Case Credit
Corp. v. Portales Nat. Bank, 966 P.2d 1172, 1173, 126 N.M. 89,
90, 1998-NMSC-035, ¶ 4 (1998); Flores de New Mexico, Inc. v.
Banda Negra International, Inc. In re Fores de New Mexico, Inc.),
151 B.R. 571, 582 (Bankr. D.N.M. 1993). In order to do that
effectively, the UCC provides strict guidelines for financing
12
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statements: “A financing statement is sufficient only if it”
“provides the name of the secured party or a representative of	9
the secured party.” N.M.S.A. 1978 § 55-9-502(a) & (a)(2). It is
not clear that Plaintiffs’ filing statements meet this
requirement. Thus Plaintiffs have failed to make a showing that
either ACA or FLCA hold perfected security interests in the CWT
funds.
Affirmative Defenses
In their answer, Defendants raised affirmative defenses.
Doc 5, pp. 7-8. Although Defendants argue that Plaintiffs have
failed to address their affirmative defenses and therefore the
Motion must fail by virtue of that fact (among others), the
reality is a bit more nuanced. Instead, the questions are
whether Defendants demonstrate through evidence any issues of
material fact as to the Motion through their affirmative
defenses, or make a sufficient evidentiary and legal showing that
the Motion must be denied by the operation or effect of one of
those defenses.
Burden of Proof on Affirmative Defenses
Defendant asserts that because Plaintiff has not addressed
Defendants’ affirmative defenses, Plaintiff is not entitled to
Plaintiffs do not allege any representative theory and the	9
Court is obligated to draw the inference on behalf of the
nonmoving party that PCA was not acting in such a capacity. See
Bell, 145 B.R. at 282.
13
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summary judgment (doc 25-5, pg. 1-2, 9-10). Defendant asserted
twelve affirmative defenses (doc 5, p. 7-8) , none of which	10
Plaintiffs have responded to in their motion for summary judgment
(doc 17-1). However, it is not necessarily required that the
moving party respond to affirmative defenses raised by the
nonmovant:
A claimant is entitled to summary judgment only when no
genuine issue of material fact exists, the papers on
the motion demonstrate the right to relief, and every
one of the defenses asserted legally are insufficient.
Since a single valid defense may defeat recovery,
however, claimant’s motion for summary judgment should
be denied when any defense presents significant fact
issues that should be tried.
Wright, Miller, Kane & Marcus, 10B Fed. Prac. & Proc. Civ. § 2734
(3d ed.) (“FPP”). Thus, Plaintiffs’ motion is not defeated
merely for failure to respond. Plaintiffs’ motion could still
succeed despite Defendants’ affirmative defenses, if those
defenses are legally insufficient and present no genuine issues
of material fact.
Further, “[w]hen, as here, the nonmoving party will bear the
burden of proof at trial, that party must go beyond the pleadings
and through [evidence], designate specific facts showing there is
a genuine issue for trial.” Langley v. Adams County, Colo., 987
The twelve affirmative defenses are, in the order raised,	10
unclean hands, failure ot mitigate damages, waiver & estoppel,
breach of obligation of good faith and fair dealing, breach of
contract, duress, tender of payment, offset, accord and
satisfaction, settlement of claims with Dairy Farmers of America,
promissory estoppel, and failure to state a claim.
14
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F.2d 1473, 1476 (10 Cir. 1993) (citing Mares v. ConAgra Poultry	th
Co., 971 F.2d 492, 494 (10 Cir. 1992)); see also Celotex Corp.	th
v. Catrett, 477 U.S. 317, 324 (1986). Thus, it is up to
Defendants to demonstrate using evidence that their affirmative
defenses create a genuine factual issue for trial, or, if the
facts are uncontroverted, demonstrate that its defenses are
legally sufficient.11
Failure to state a claim
Defendants’ twelfth affirmative defense is failure to state
a claim. For a claim to be valid, the pleading party must comply
with the minimum requirements of F.R.B.P. 7008(a) incorporating
Fed.R.Civ.P. 8(a) . “Factual allegations must be enough to raise	12
a right to relief above the speculative level, ... on the
assumption that all the allegations in the complaint are true
(even if doubtful in fact)....” Bell Atlantic Corp v. Twombly,
550 U.S. 544, 555-56 (2007) (citations, footnote and internal
The Court also recognizes Defendants may face difficulty	11
in meeting this burden, given that discovery had not yet been
completed at the time the motion was filed. Defendants might
have avoided this problem by submitting a properly documented
Rule 56(d) response.
Fed.R.Civ.P. Rule 8(a) states:	12
A pleading that states a claim for relief must contain:
(1) a short and plain statement of the grounds for the
court’s jurisdiction, unless the court already has
jurisdiction and the claim needs no new jurisdictional
support; (2) a short and plain statement of the claim
showing that the pleader is entitled to relief; and (3)
a demand for the relief sought, which may include
relief in the alternative or different types of relief.
15
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punctuation omitted).
Defendants’ objection does not allege any way in which
Plaintiff fails to meet these requirements. Instead, Defendants
identify several factual disputes with Plaintiffs, objecting that
not all Plaintiffs are secured parties, or even parties,
generally (doc 25, exhibit 5, p. 15-16; doc 17, exhibit 2, p.10).
Twombly states repeatedly that for the purpose of objections for
failure to state a claim, all of the allegations in the complaint
are taken as true. Id. Therefore, merely disputing the facts as
alleged by Plaintiffs does not and can not constitute an adequate
defense of failure to state a claim.
Failure to Mitigate Damages
“Mitigation of damages is an affirmative defense and the
burden is on the defendant to show that the plaintiff, by the
exercise of reasonable diligence, could have minimized damages.”
Acme Cigarette Serv’s, Inc. v. Gallegos, 577 P.2d 885, 891, 91
N.M. 577, 583 (Ct. App. 1978) (Hernandez, J., specially
concurring) (citing Mitchell v. James, 138 P.2d 522, 47 N.M. 169
(1943); Rutledge v. Johnson, 465 P.2d 274, 81 N.M. 217 (1970)).
Following Langley, since nonmovants would have had the burden of
proof at trial, they also have the burden of proof on summary
judgment. See Langley, 987 F.2d at 1476. Defendants allege that
Plaintiffs, by reneging on their payoff statement and refusing to
accept $3 million of the CWT funds as payment, failed to mitigate
16
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their damages, and that this presents a bar to recovery (doc 25,
exhibit 5, p. 20-21). “The law in New Mexico is clear that in a
breach of contract, the non-defaulting party has a duty to use
‘reasonable diligence’ to mitigate damages.” Elephant Butte
Resort Marina, Inc., v. Wooldridge, 694 P.2d 1351, 1357, 102 N.M.
286, 292 (1985) (citing Pillsbury v. Blumenthal, 272 P.2d 326, 58
N.M. 422 (1954)). Defendants’ allegations, through the Borges
Affidavit, present a genuine issue of material fact as to the
affirmative defense of mitigation of damages. In particular, the
two different payoff statements, copies of which are attached as
Exhibits A and B to the Borges Affidavit (doc 25-5, pp. 29-30),
raise significant questions about the parties’ conduct and
intentions.
Other Affirmative Defenses
Except for the defenses of failure to state a claim and
mitigation of damages, the affirmative defenses are referenced in
Defendants’ response but not elaborated on (doc 25-5, pp. 9-10,
pp. 15-16 and 20-21). Ordinarily that would mean that Defendant
would not have established what evidence there is for each of the
unelaborated affirmative defenses to serve as a basis for
defeating the Motion.
While the Court is obligated to draw all legitimate
inferences in favor of the nonmovant, that does not obligate the
Court to put together Defendants’ case for any affirmative
17
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defense, where Defendants have the burden of proof. See
generally Harper v. Delaware Valley Broadcasters, 743 F.Supp.
1076, 1090 (D.Del. 1990); see also Bell, 145 B.R. at 282. In
Harper, as in this case, Defendants raised affirmative defenses
in their answer, but did not address those defenses in response
to a motion for summary judgment. Harper, 473 F. Supp. at 1090.
A party resisting summary judgment cannot expect to
rely on the bare assertions or mere cataloguing of
affirmative defenses. Celotex, 477 U.S. at 323–24, 106
S.Ct. at 2552–53; Gans v. Mundy, 762 F.2d 338, 340 (3d
Cir.), cert. denied, 474 U.S. 1010, 106 S.Ct. 537, 88
L.Ed.2d 467 (1985). The requirement of pointing to
specific facts to defeat a summary judgment motion is
especially strong when the nonmoving party would bear
the burden of proof at trial, as these defendants would
on the affirmative defenses they plead. Celotex, 477
U.S. at 324, 106 S.Ct. at 2553; Security Pacific
Mortgage & Real Estate Services, Inc. v. Canadian Land,
690 F.Supp. 1214, 1219 (S.D.N.Y.1988), aff'd, 891 F.2d
447 (2d Cir.1989). Summary judgment will be entered
“against a party who failed to make a showing
sufficient to establish the existence of an element
essential to that party's case, and on which that party
will bear the burden of proof at trial.” Celotex, 477
U.S. at 322, 106 S.Ct. at 2552.
Id. In this context, Defendants “should have come forward with
evidence to support their affirmative defenses.” Id. at 1091.
Given that they did not, the Harper defendants “failed to meet
their burden on summary judgment.” Id. In the instant case,
Defendants have failed to meet their burden to defeat the Motion
with respect to certain affirmative defenses raised in their
answer but not addressed with specific evidence in their response
to the Motion.
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Based on the foregoing, and particularly in view of Exhibits
A and B to the Borges Affidavit (doc 25-5, pp. 29-30), certain of
Defendants’ other affirmative defenses pled in the Answer – that
is, unclean hands, waiver & estoppel, breach of obligation of
good faith and fair dealing, breach of contract, duress, tender
of payment and promissory estoppel - all continue to present
issues that must be explored at trial in order to resolve the	13
question of how much Defendants are indebted to Plaintiffs. On
the other hand, offset, accord and satisfaction, and settlement
of claims with Dairy Farmers of America do not address the issue
of payment of the funds to Plaintiffs and therefore for purposes
of the Motion, have not been shown to be relevant to that issue.
Facts in Dispute
Amount of Debt
Plaintiffs contend that many of Defendants’ affirmative
defenses are “issues that have no bearing on Plaintiffs’ request
for partial summary judgment as to the CWT proceeds but only as
to the total amount of debt owed to Ag New Mexico.” Doc 18, p.
9. “Plaintiffs have simply asked that the Court grant partial
summary judgment in their favor on the question of whether they
have a lien on the CWT proceeds.” Id., p. 4. And further on,
Plaintiff recite that “[Borges] simply disputes the manner that
Or through a further summary judgment process, though the	13
Court is certainly not suggesting that anyone pursue that route.
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Plaintiffs have calculated the debt owed, which Plaintiffs
concede is not an issue that is ripe for summary judgment at this
stage of the proceedings.” Id., p. 5. However, Plaintiffs’
Motion requested not only a determination that “Plaintiffs have a
perfected security interest in the CWT funds” but also “that
Plaintiffs are entitled to receive the CWT funds for application
to the Borges’ debts,” (doc 17-1, p. 2). Even if Plaintiffs (or
one of them) have a perfected security interest in the CWT funds,
they are only entitled to receive the funds to the extent that
the Borges’ actually owe Plaintiffs money. Thus, the amount of
the debt in question is a material fact as to which there is a
genuine issue. Defendants have demonstrated through evidence,
particularly the Borges Affidavit, that there is a genuine issue
as to the amount of the debts owed by Defendant to Plaintiffs.
Therefore, Plaintiffs’ request that the Court rule that they are
entitled to receive the CWT funds must be denied.
Status of June 2006 Cow Note
Defendants argue that the May 2008 Cow Note, one of the
debts in question, is not a renewal of a previous, June 6, 2006
Cow Note, but in fact a novation of that note (doc 25-5, pp. 12-
13). This disputed fact does not appear to be material in any
way to the Motion. Even if the June 6, 2006 note was in fact
extinguished by novation, as Defendants argue, Plaintiffs have
clarified that they are not suing on that note (doc 18 p. 8). In
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addition, the allegations about a “slush fund” not being applied
to the debt raise genuine factual issues (doc 25-5, pp. 14-15).
So there is no need to examine the note further at this stage.
CONCLUSION
For the foregoing reasons, the Court finds that all three
Plaintiffs have a security interest in the CWT funds and that
Plaintiff Ag New Mexico, FCS, PCA holds a perfected security
interest in the CWT funds. Plaintiffs Ag New Mexico, FCS, ACA
and Ag New Mexico, FCS, FLCA have not made a sufficient showing
that their security interests in the CWT funds are perfected.
The Court further finds that the amount of the debt owed by
Defendants to Plaintiffs is a material fact as to Count 1 of the
Complaint, and that there is genuine dispute as to the amount of
such debt. As there is a dispute as to material fact regarding
the amount of the debt owed, Plaintiffs’ prayer that this Court
find that they are entitled to the CWT funds is not well taken
and will be denied. An order will enter.
James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: September 6, 2011
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COPIES TO:
Linda S Bloom
PO Box 218
Albuquerque, NM 87103-0218
Richard F Rowley, II
Rowley Law Firm, P.C.
PO Box 790
305 Pile
Clovis, NM 88102-0790
Karla K Poe
201 Third Street NW, Suite 505
Albuquerque, NM 87102
George M Moore
Moore, Berkson & Gandarilla, P.C.
PO Box 7459
Albuquerque, NM 87194
William J Arland, III
PO Box 1089
Santa Fe, NM 87504-1357
Gerald R Velarde
2531 Wyoming Blvd NE
Albuquerque, NM 87112-1027
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