Speth v. Whitham Farms Feedyard, L.P. (In Re Sunbelt Grain WKS, LLC)Speth v. Whitham Farms Feedyard, L.P. (In Re Sunbelt Grain WKS, LLC)
MEMORANDUM OPINION
Security State Bank (“SSB”) moves for summary judgment on the trustee’s complaint against itself and Whitham Farms Feedyard, LP (“Whitham”). The trustee in bankruptcy, Steven Speth, filed an adversary complaint under
Procedural Background
This bankruptcy case was commenced by the filing of an involuntary chapter 7 petition on February 4, 2008. SSB was one of the petitioning creditors. Steven Speth was appointed chapter 7 trustee. After the order for relief was entered on March 5, 2008, the trustee sought and obtained court approval to sell Sunbelt’s grain inventory (corn and wheat). 4 Said sale occurred on April 10, 2008. Thereafter, the Court approved the trustee’s disbursement of a portion of the sale proceeds to various open storage holders. 5 SSB and Whitham asserted competing claims to the remainder of the corn sale proceeds held by the trustee, approximately $3.3 million. 6 According to the pretrial order, SSB asserts a claim of $3.2 million as Sunbelt’s secured lender and WTiitham asserts a claim of $2.19 million for 580,000 bushels of prepaid corn of which only 56,-000 bushels were delivered and received. 7
The trustee commenced the instant adversary on May 29, 2008 to determine these parties’ interests in the sale proceeds. Following a period of discovery, SSB filed its motion for summary judgment on the trustee’s complaint. The trustee does not contest SSB’s motion, leaving Wbdtham and SSB as the sole parties battling over the sale proceeds. 8 It is undisputed that SSB holds a valid and perfected security interest in Sunbelt’s grain inventory, accounts and proceeds thereof. 9 Accordingly, the motion for summary judgment centers on Whitham’s ability to establish its ownership of a portion of the corn inventory and its status as a buyer in the ordinary course or the doctrine of equitable subordination, in order to overcome SSB’s perfected security interest in the grain.
Summary Judgment Standards
This Court’s function in reviewing SSB’s motion for summary judgment is to first determine whether genuine issues of fact exist for trial. In making this determination the Court may not weigh the evidence nor resolve fact issues.
10
On summary judgment, it is not the Court’s function to determine witness credibility, weigh evidence or decide competing inferences.
11
Before addressing the specifically numbered paragraphs of the statements of fact, a few general comments are in order regarding Whitham’s compliance with summary judgment procedure in purporting to controvert SSB’s statement of un-controverted facts. Whitham’s memorandum in opposition to SSB’s summary judgment motion contains a three-page “factual narrative.” 14 While the narrative may be helpful in placing Whitham’s position and the chain of events in context, it is devoid of any references to the record and disregards the requirements of D. Kan. LBR 7056.1(b)(2) and (d). As such, the Court will disregard the narrative in its entirety in deciding whether Whitham has shown the existence of genuine issues of material fact that require a trial. 15 Instead, the Court focuses on Whitham’s specific responses to SSB’s statement of uncontroverted facts, keeping in mind that the Court disregards those factual disputes that are not material to the outcome 16 and a party’s characterization of the facts, whether made by the movant or the non-movant. 17
Whitham submits the affidavit of its general partner, Stewart Whitham, as the primary means to controvert SSB’s statements of fact.
18
Summary judgment affidavits must meet certain requirements.
19
They must be based upon personal knowledge and must contain information admissible at trial.
20
Statements of
The Whitham affidavit suffers from each of these defects. Mr. Whitham states that “[a]ll the facts set forth in this affidavit are based upon my personal knowledge; my review of relevant documents;
my opinion,
based upon my experience and knowledge of the operations of [Whitham and Sunbelt], by virtue of having been one of Sunbelt’s major — if not the largest — customers ...”
24
Yet at another point in his affidavit, Mr. Whitham asserts his “good faith
belief and understanding
” as a basis to conclude that SSB’s actions
“appear
to be a contrivance.”
25
Mr. Whitham’s affidavit contains several instances of hearsay statements attributed to third parties.
26
It purports to state what Sunbelt or SSB intended or knew, matters as to which Mr. Whitham can claim no personal knowledge.
27
It abounds with conclusory statements regarding course of dealing without providing any underlying specific facts or evidence of that alleged course of dealing.
28
Many of Whitham’s conclusory statements are legal conclusions prefaced upon that alleged course of conduct and dealings
Applying the foregoing standards, the Court finds the following facts are uncon-troverted.
Uncontroverted Facts 36
Sunbelt was established in 2006 as an LLC. Its principals, Jim and Kathy Shafer, have been in the grain business in western Kansas for many years. Sunbelt operated elevators at various locations in western Kansas. It purchased grain (corn and wheat) from local farmers for resale to buyers and also maintained open storage operations for grain owned by the producers. SSB was its lender, holding several notes executed by Sunbelt in 2006 and 2007, and extending a line of credit. Sunbelt’s indebtedness was secured by nearly all of its property as collateral and the line of credit required it to submit monthly borrowing base certificates.
Whitham is a Colorado limited partnership and operates a feedyard near Leoti, Kansas. Stewart Whitham is the general partner. For a period of more than one growing season, Whitham bought corn from Sunbelt for its feeder operations.
On April 27, 2007, Sunbelt issued a Merchandising Target Offer (MTO) proposing to sell to Whitham or any other taker seven 100,000 bushel lots of corn at prices to be calculated based upon the futures market at the Chicago Board of Trade (CBOT or Board). Under the rather sparsely-worded terms of the offer, each
Whitham offered to buy five of the seven lots (500,000 bushels) at the offered prices. These purchases were confirmed by Confirmation of Sale and Purchase (CSP) forms executed by Karen Allen on behalf of Sunbelt and transmitted to Whitham. One CSP was executed for each of the five lots and each CSP was dated May 4, 2007. 37 Each CSP specified that the weight and grade of the corn would be determined at its destination and that the purchases would be prepaid on November 1, 2007, prior to delivery to Whitham. 38 Both the MTO and the CSPs provided that “NGFA Rules” would apply, referring to the National Grain and Feed Association Trade Rules. The MTO provides a place for the drafter to circle either “delivered” or “FOB.” Neither term is circled on this particular MTO, but the parties agree that these were “delivered” contracts. Factually, this means that Sunbelt was responsible for delivery to Whitham’s place of business. As will be discussed in the legal analysis below, the parties differ as to the legal effect of that term.
On November 1, 2007, Whitham prepaid Sunbelt $2,099,750 for the five lots of corn to be delivered in the coming months. 39 The delivery costs were included in the price term and in Whitham’s prepayment. Sunbelt deposited Whitham’s check in its operating account at SSB which at that time had a balance of $2,727.33. Upon deposit of Whitham’s check, SSB swept Sunbelt’s account and applied it to pay down Sunbelt’s line of credit which had a balance of $1,662,000. 40 The parties disagree whether there was sufficient grain in Sunbelt’s facilities to deliver to Whitham on November 1. The Court observes that the exhibits attached in support of SSB’s motion reference a “grain position book” among the books and records of Sunbelt. 41 This book would apparently show how much corn was on hand on November 1, 2007 or any other given date. Inexplicably, Sunbelt’s grain position book was not submitted by either party with their summary judgment materials.
On November 19, 2007, Whitham agreed to buy an additional 80,000 bushels of corn. Sunbelt confirmed that purchase with two more CSPs, each for 40,000 bushels, one for December 2007 delivery and the other for January 2008 delivery. Whitham prepaid $326,400 for this grain on November 20, 2007. Sunbelt also deposited this
On December 6, 2007, Kathy Shafer contacted James Arnold, president of SSB, and requested a prompt meeting. At that time, she reported to him that Sunbelt had suffered considerable monetary losses because of its hedging practice. This was the first time that Shafer had so advised SSB and Arnold confirms in his affidavit that this was when SSB first learned that Sunbelt was “out of position.” Sunbelt had not timely provided its borrowing base certificates to SSB for three months prior. As a result of Shafer’s revelation, Sunbelt was in default of the terms and conditions of its loans and SSB closed Sunbelt’s line of credit the next day, December 7.
On December 14, 2007, SSB commenced a state court foreclosure proceeding in the District Court of Greeley County, Kansas, asserting a security interest in Sunbelt’s grain inventory. On that same date, the state grain inspector conducted an inspection of Sunbelt’s grain inventory. The state grain inspector’s report is not part of the summary judgment record before the Court. Sunbelt was forced to stop its December deliveries to Whitham after delivering only 57,000 bushels of the 580,000 bushels contracted for. 44 In January 2008, the Kansas Department of Agriculture commenced a state court receivership action against Sunbelt and the state court appointed Terry D. Criss, Esq., as receiver to take control of the assets.
On February 4, 2008, SSB, in concert with two other petitioners, commenced an involuntary bankruptcy petition against Sunbelt, and an order for relief was entered on March 5, 2008, resulting in the appointment of a chapter 7 trustee, Steven Speth, to administer and liquidate Sunbelt’s assets, and a stay of the state court cases.
In its opposing memorandum, Whitham set out 41 additional facts, nearly all of which are controverted by SSB. Those facts are largely supported by the same flawed affidavit Whitham used to controvert SSB’s facts. Nonetheless, Whitham’s additional “facts” may be summarized as follows. Whitham asserts in a conclusory fashion that over a period of 18 to 20 years, it and Sunbelt engaged in a course of dealing pursuant to which Whitham would bid for and buy corn in advance, pay for it, and take title to it immediately upon payment. Sunbelt would hold Whit-ham’s corn after payment as a courtesy to Whitham and deliver it to the feedyards when and as Whitham requested. Whit-ham asserts that over the 18-20 year period, neither party observed or considered themselves bound by the NGFA rules. Whitham further claims that on December 14, 2007, according to statements attributed to Kathy Shafer and Karen Allen, another Sunbelt employee, after the state grain inspector’s “full inspection of all the commodities of Sunbelt,” sufficient grain was present in Sunbelt’s inventory on December 14, 2007.
45
Unfortunately, Whit-ham fails to provide the inspector’s report
Whitham’s course of dealing contentions are the sole basis for many of its statement of uncontroverted “facts.” 47 These contentions are untenable for several reasons. First, the 18-20 year period referenced by Whitham encompasses an alleged course of dealing with Sunbelt’s predecessor, Sunbelt Grain, Inc. Kathy Shafer’s father, Vaughn Young, was the principal of Sunbelt Grain. Kathy and Jim Shafer formed the Sunbelt LLC in 2006 after they bought out Sunbelt Grain. The Court is not convinced that Whitham’s alleged course of dealing with Sunbelt Grain, a distinct business entity, is material to the transactions between Whitham and Sunbelt.
Second, Whitham’s affidavit avers a course of dealing in a generic and conclu-sory fashion. Whitham does not set forth specific facts demonstrating a course of dealing. Whitham’s affidavit does nothing more than express Whitham’s personal understanding of the terms of the CSPs and does not set forth any underlying facts that show his understanding was shared by Sunbelt, based upon the parties’ repeated conduct. 48 Whitham’s affidavit falls far short in supplying the evidentiary predicate for a course of dealing.
Third, and most significant, Whitham seeks to alter or vary the terms of the 2007 CSPs (including the application of the NGFA rules) by introduction of this alleged course of dealing. Because this contract involves the sale of goods, the parol evidence rule as codified in Article 2 of the UCC applies rather than the Kansas common law parol evidence rule.
49
Even applying this more liberal parol evidence rule, course of dealing would only be admissible to
explain
a contract term, not to contradict, alter or vary the existing term.
50
Here, the CSPs are clearly
Whitham further asserts that the CSPs were not honored because SSB commenced its legal action, doing so only after it had honored checks written on Sunbelt’s account to several farming entities that were indebted to SSB and operated by relatives of Kathy Shafer. The Court considers these facts, and the statement in Whitham’s affidavit about what the state court receiver told him to be immaterial. This Court does not question that when the Bank foreclosed on Sunbelt, Sunbelt lost its ability to perform these contracts, and that Whitham was forced to obtain a corn supply from an alternative source. Similarly, when the Bank commenced the involuntary bankruptcy case, Sunbelt acquiesced and converted the case to a voluntary chapter 7 case, resulting in this Court appointing a trustee who, with the assistance of the receiver, took possession and control of the assets and liquidated them in an orderly fashion. The Court concludes that this process prevented Sunbelt from performing Whitham’s contracts.
Analysis
The fundamental legal issues here are (1) whether Sunbelt retained title to the grain destined for Whitham’s feedyard when Whitham prepaid on November 1 and 20, 2007; and (2) whether SSB’s claim is susceptible to equitable subordination because of its conduct. Resolving these issues requires the Court to address some preliminary legal questions. First, the Court must determine the legal effect of the delivery contracts. Second, the Court must determine whether the “gap-fillers” in Article 2 of the Uniform Commercial Code (UCC) or the NGFA Rules, or both, define the rights of the parties here. Third, the Court must decide whether the uncontroverted facts in this record would support a finding of the requisite unfairness or misconduct necessary to subordinate SSB’s secured claim to Whitham’s unsecured claim.
A. Delivery Contracts
Even though the MTO does not designate whether the contracts are “delivery” or “FOB,” the parties agree that Sunbelt was to deliver the grain to Whitham when Whitham directed delivery. Delivery charges were included in the price. The CSPs specify that both weight and grade of the grain were to be determined at destination. As adopted in Kansas, UCC § 2-308, provides that “unless otherwise agreed,” the point of delivery is presumed to be at seller’s place of business.
53
By contrast, the NGFA Rules provide that “truck grain” shall be “considered to have
B. NGFA Rules
The contract clearly specifies that NGFA Rules will apply. Whitham’s attempt to contradict or vary this term with “course of dealing,” as discussed above, is unpersuasive. 55 The written contract clearly expresses application of the rules to the parties’ transactions. In any event, the pertinent NGFA rules are not much different from the general provisions of Article 2 governing contracts for the sale of goods.
Article 2 codifies a parol evidence rule that honors the provisions of written agreements and protects them from contradiction by extrinsic evidence of a previous or contemporaneous oral agreement.
Because both the MTO and the CSPs reference the NGFA rules, the Court concludes that they govern this transaction. Nothing in Whitham’s affidavit supports a conclusion otherwise. His largely conclu-sory statements that, over the years, neither party had reason to reference these rules and that they only became relevant when brought to Kathy Shafer’s attention during her deposition in this case, do not reference a course of dealing that “explains” the contract. Rather, these statements directly contradict an otherwise enforceable term of the agreement and the parol evidence rule contained in
NGFA Rule 3 provides for a confirmation process similar to that outlined in Article 2,
C. Ownership
The core issue here is when or if Whit-ham became the owner of the contracted corn. SSB argues that, according to NGFA rules and the contract’s terms, Sunbelt retained the risk of loss and, therefore, an ownership interest in the grain until it was delivered. Whitham says that it owned the grain immediately upon prepayment, notwithstanding any rules or other provisions because that was the parties’ course of dealing over many years’ time. This matters because, if Sunbelt retained ownership of the grain, the after-acquired property clause in SSB’s security agreements attached its security interest to the grain, giving it a prior interest to that of Whitham. If Whitham took ownership when it prepaid, it could claim that, as a purchaser in the ordinary course, its interest in the grain trumps SSB’s security interest. The Court notes that it is undisputed that Whitham received no bills of sale or warehouse receipts for the corn it agreed to purchase from Sunbelt, that Sunbelt did not charge storage fees to Wfhitham for the corn it agreed to sell WTiitham, and that Sunbelt bore the risk of loss for corn that is the subject of the CSPs until it was delivered to Whitham. 57 In short, no documents of title are before this Court showing Whitham’s ownership of any corn under the CSPs at any time.
Deciding this pivotal question of ownership is complicated by the ongoing factual dispute concerning whether there was sufficient grain on hand on the May 4, 2007 and November 19, 2007 contract dates or on the November 1 and 20, 2007 prepayment dates. 58 Whitham relies heavily on the explicit terms of the parties’ agreement being subject to interpretation in light of the historical course of dealing between Sunbelt and itself. As noted above, terms in a writing may be explained or supplemented, but not contradicted, by evidence of a course of dealing. 59 The express terms of an agreement and the parties’ course of dealing shall be construed as consistent where reasonable, but when they cannot, the express terms of the writing control. 60 Among the express terms of the writing is, as noted above, a specific reference that reads into the CSPs the NGFA Rules.
Keeping these baseline principles in mind, the Court applies the law governing the passage of title under Article 2 to the explicit terms of the contract which, when contradicted by a purported course of dealing, take precedence. The Court cannot conclude as a matter of uncontro-verted fact that there was sufficient grain on hand to honor the contracts either in May or November of 2007. The only record support for concluding otherwise is found in Whitham’s affidavit and is based essentially on hearsay, Whitham’s characterization or interpretation of statements attributed to others, or Whitham’s own conclusory understanding. None of the statements in Whitham’s affidavit are based on personal knowledge regarding the quantity of corn on hand at Sunbelt’s
The only other evidentiary basis concerning the quantity of corn on hand in November of 2007 is the deposition testimony of Sunbelt’s Kathy Shafer. SSB cites to her testimony as support for the proposition that Sunbelt did not have a sufficient quantity of corn on hand at Sunbelt’s facility to satisfy the CSPs at the time of Whitham’s prepayment. 62 Whit-ham attempts to controvert that fact with other references to Shafer’s testimony where she could not state the precise quantity of corn on hand at certain times and with quantities that were on hand on dates other than November 1, 2007. 63 In its additional statements of uncontroverted fact, Whitham again alleges, based solely upon the Whitham affidavit, that a sufficient quantity was on hand at the time of prepayment. 64 This alleged fact is not properly supported by an affidavit made upon personal knowledge. Moreover, Whitham has not come forward with the key piece of evidence to refute Shafer’s testimony and to support its factual contention — the grain position book maintained by Sunbelt. Shafer testified that the grain position book would identify the quantity on hand in Sunbelt’s facilities at any given point in time, including that portion of the grain that was open-storage grain belonging to producers and the portion of grain to fulfill contracts with buyers other than Whitham. 65 Thus, the Court cannot find as uncontroverted fact that there was a sufficient quantity of corn on hand in November when Whitham prepaid for Sunbelt to fulfill the contracts (580,000 bushels) and therefore, Sunbelt’s commitment to sell to Whitham related to “future goods” as that term is employed in Article 2. 66
The status of goods as “existing” or “future” can affect the manner in which title to those goods passes. Section 2-401 provides that Article 2’s provisions apply without regard to the title of those goods “except where the provision refers to such title.”
67
In situations not covered by the other provisions of the article, and where title becomes material,
Was this corn identified to Whitham’s contract? Section 84-2-501 provides that the buyer obtains “a special property and an insurable interest” by identifying
existing
goods in any manner and at any time as the parties explicitly agree.
69
Here, the parties’ agreement reads in the NGFA rules and, under NGFA Rule 6, title and the risk of loss as to trucked grain passes when the grain arrives at the buyer’s facility.
70
Thus, the CSPs contain an explicit agreement governing title passage that dovetails nicely with
In the absence of explicit agreement identification occurs ... (b) if the contract is for the sale of future goods other than those described in paragraph (c) [growing crops or livestock young], when goods are shipped, marked, or otherwise designated by the seller_ 71
Here, the contract explicitly treats the passage of title by incorporating NGFA Rule 6 and the Court need not turn to § 2-501 (b) to replace that term.
72
If there were insufficient goods to fulfill the contract when Whitham paid in advance on November 1, title in the corn did not pass at that time. As Sunbelt retained title to what corn it had, SSB’s security interest attached to it.
As to the funds Whitham paid in advance, SSB’s security agreement attached all of Sunbelt’s accounts receivable
The Court concludes that, as a matter of law, SSB is entitled to judgment that its security interest in Sunbelt’s corn and accounts takes priority over Whitham’s unsecured claim for corn contracted and not delivered.
D. Equitable Subordination 75
Drawing all reasonable inferences against SSB, the Court finds for this motion’s purposes that SSB had some reason to be aware of Sunbelt’s distress before December of 2007. Sunbelt had failed to timely file its borrowing base reports for three months. The Court also finds that SSB swept funds from Sunbelt’s accounts on November 1, 2007, immediately after Whitham’s prepayment was deposited.
76
SSB’s $1.6 million sweep, added to Sunbelt’s payment of various producer entities for grain sold to the elevator, totaled approximately $2.07 million, expending near the full amount of Whitham’s prepayment ($2,099,750). Other than the familial relationship between Shafer and one of the owners of these entities, nothing in the record suggests that the producers were “related” or “affiliated” with Sunbelt or SSB. There is no evidence in the record suggesting any misconduct or meddling on the part of SSB by which it exerted control over Sunbelt. Indeed, the record suggests nothing more than SSB’s apparent exercise of its rights under its loan documents with both Sunbelt and these other producer entities.
77
The Court notes in this connection that no deposition testimony of any
Some finding of wrongdoing or inequitable conduct is a necessary predicate to equitable subordination. 78 The Tenth Circuit looks to a three-part test to determine when subordination is appropriate—
(1) The claimant has engaged in inequitable conduct;
(2) The conduct has injured creditors or given an unfair advantage to claimant; and
(3) Subordination is not inconsistent with the Bankruptcy Code. 79
In short, Whitham needed to produce some basis for a finding that SSB engaged in fraud, breached its fiduciary duty or controlled the debtor. 80 As the Tenth Circuit has stated, a non-insider creditor generally owes no fiduciary duty to the other creditors of a debtor and must be found to have engaged in specific conduct that gave rise to such a duty. 81 The degree of wrongful conduct necessary to predicate an equitable subordination claim has been described as “egregious,” “gross misconduct tantamount to fraud, misrepresentation, overreaching or spoliation.” 82
Whitham points to nothing in the record supporting this level (or any level) of wrongdoing on the part of SSB. SSB is entitled to judgment as a matter of law on Whitham’s equitable subordination claim.
Conclusion
Consistent with the forgoing, SSB’s motion for summary judgment should be granted and judgment entered for SSB on the trustee’s adversary complaint, finding that SSB’s perfected security interest in Sunbelt’s assets entitles it to a priority claim against the grain and its proceeds superior to the unsecured claim of Whit-ham. A judgment on decision will issue this day.
Notes
.
. Adv. Dkt. 33.
See
. See Final Pretrial Order, Adv. Dkt. 52.
. Dkt. 28 and 47.
. Dkt. 63 and 76.
. See Dkt. 120.
. Sunbelt stopped deliveries of corn to Whit-ham on or about December 14, 2007 when SSB commenced a state court foreclosure action against Sunbelt. The current principal amount of SSB's claim, after apparently liquidating some of its collateral, is $1,988,733.38 plus accrued interest. SSB contends that it is over secured and entitled to fees and costs. See Adv. Dkt. 52, p. 10.
. Adv. Dkt. 49.
. See Pretrial Order, Adv. Dkt. 52, Stipulation ¶ s G, H, I, and J.
.
First Sec. Bank of New Mexico, N.A. v. Pan American Bank,
.
Pan American Bank, supra; Masilionis v. Falley’s Inc.,
.
E.E.O. C. v. Lady Baltimore Foods, Inc.,
.
Security Nat. Bank v. Belleville Livestock Commission Co.,
. See Adv. Dkt. 51, pp. 2-5.
.
See Bond v. Queen,
.
See Cease v. Safelite Glass Corp.,
.
See Patton v. AFG Industries, Inc., 92
F.Supp.2d 1200, 1202 n. 3 (D.Kan.2000) (Controversion only denied characterization of a fact [a conversation] and therefore the fact is deemed admitted);
Stephens v. City of Topeka, Kan.,
. It does not appear from the record presented to the Court that Mr. Whitham was deposed.
.
.
Thomas v. International Business Machines,
.
Argo v. Blue Cross Blue Shield of Kansas, Inc.,
.
See Coca-Cola Co. v. Overland, Inc.,
.
BancOklahoma Mortg. Corp. v. Capital Title Co., Inc.,
. Whitham Affidavit, ¶ 2 (emphasis added).
. Id. at ¶ 30 (emphasis added).
. Id. at ¶ 40 (hearsay statement of state court receiver, Terry Criss); ¶ 33 (hearsay statement of SSB's president, James Arnold); ¶ 35 (hearsay statement of Sunbelt personnel, Kathy Shafer and Karen Allen); ¶ 42 ("The state grain examiner's report confirmed that Whit-ham's ... corn was in Sunbelt’s inventory.”). The Court makes no determination at this stage of the proceedings whether some of these attributed statements are admissible under one of the hearsay exceptions.
. Id. at ¶ 4 ("Sunbelt was aware and fully expected that Whitham ... would prepay”); ¶ 5 ("James Arnold, president of Security State Bank, was well aware of the course of conduct and dealing among Whitham ... and Sunbelt ..."); ¶ 10 ("... the parties intended that the corn be identified ... at the time of payment”); ¶ 13 ("... Whitham ... and Sunbelt waived application of [the NGFA] rules ...”); ¶ 30 (“Security State Bank waited until Whitham ... had paid and then acted.”); IT 31 ("... James Arnold and Security State Bank were aware that Whitham ... would be prepaying in November 2007 ... ”); ¶ 37 (SSB "pursued and contacted numerous other local Kansas farmers to sign off on the involuntary petition, none of whom agreed to do so.”).
. Id. at ¶ s 3, 4, 10, 13.
. Id. at ¶ s 3, 4
. Id. at ¶ 6.
. Id. at ¶ 10
. Id. at ¶ 13.
. Id. at ¶ 11 (“On November 1 and 20, 2007, there was no question that the corn was on hand at Sunbelt’s facilities.”); ¶ 42 (stating that state grain examiner's report confirmed that Whitham's com was in Sunbelt’s inventory but not attaching an authenticated copy of the examiner’s report to his affidavit).
. Id. at ¶ 3 (Whitham's course of dealing with Sunbelt Grain, Inc., as opposed to Sunbelt Grain WKS, LLC); ¶ 5 (Arnold's banking relationship with other parties); ¶ 12 (no previous mention of NGFA rules); ¶ 18 (relationship or connection of Kathy Shafer to other entities); ¶ 37 (SSB’s pursuit of petitioning creditors for involuntary petition); ¶ 38 (observations at deposition of Kathy Shafer); ¶ 40 (state court receiver’s opinion of Whit-ham's prospects for winning state court suit).
.
See
. The Court notes that some of these uncon-troverted facts are derived from the parties' requests for admission and are incorporated as stipulated facts in the final pretrial order. See Adv. Dkt. 52, pp. 10-12.
. Sunbelt did not have 500,000 bushels of com on hand in its facilities on May 4, 2007.
. Adv. Dkt. 52, Stipulation ¶ A.
. Adv. Dkt. 52, Stipulation ¶ B.
. In addition, Sunbelt made several payments, drawn on its account, throughout the month of November to SSB and entities Whe-atbelt Farms, Inc., Plains Feeders, Inc., or K & K Farming, Inc., as dual payees. Kathy Shafer’s brother, Keith Young, had an ownership interest in each of these entities. These facts are immaterial in the absence of a showing that Kathy Shafer had any interest in these entities. See Whitham's Memorandum in Opposition, Adv. Dkt. 51, pp. 16-17, ¶ s 17, 19-27.
.See Shafer Depo., p. 155, I. 19-23.
. Adv. Dkt. 52, Stipulation ¶ s D and E.
. Adv. Dkt. 52, Stipulation ¶ F.
. Sunbelt did not deliver any corn to Whit-ham under the CSPs that provided for delivery of corn in January, February, March and April of 2008. Adv. Dkt. 52, Stipulation ¶ C.
.Adv. Dkt. 51, p. 19, ¶ 34.
. Nor is the alleged fact "[o]n November 1 and 20, 2007, there was no question that the com was on hand at Sunbelt’s facilities,” properly supported by Whitham's personal knowledge. Rather, the only support is Whit-ham's bald affidavit. See Adv. Dkt. 51, p. 15, ¶ 10.
. See Adv. Dkt. 51, pp. 13-20.
.
See
. Kan. Stat. Ann
.
.
.
Decatur County Feed Yard, Inc. v. Fahey,
.
. Rule 30(D)(2), NGFA Grain Trade Rules (hereafter “NGFA”), authenticated copy of which is attached as Exhibit H to Adv. Dkt. 40, SSB's Memorandum in Support of Summary Judgment.
. See pp. 927-29, supra.
. NGFA Rule 3(B) requires the non-confirming party (Whitham) to immediately notify the confirming party (Sunbelt) of any dispute with the terms of the CSPs.
. See SSB's Uncontroverted Fact ¶ s 42-45.
. The CSPs for the five lots of 100,000 bushels each, were issued May 4, 2007 and were prepaid on November 1, 2007. The CSPs for an additional 80,000 bushels were issued November 19, 2007 and prepaid on November 20, 2007. It is undisputed that Sunbelt did not have 500,000 bushels of com on hand in its facility at the time the May 4 CSPs were issued. See SSB Uncontroverted Fact ¶ s 25-26; Shafer Depo. pp. 33-34, 44, 51-52.
.
.
. See Whitham Affidavit ¶ s 11, 35, 42.
. See Adv. Dkt. 40, Fact No. 33, Shafer Depo., p. 155.
. See Adv. Dkt. 51, p. 9.
. See Adv. Dkt. 51, p. 15, Fact No. 10, stating: "On November 1 and 20, 2007, there was no question that the corn was on hand at Sunbelt’s facilities.”
. See Shafer Depo., pp. 153, 155. The Court is mindful that not all grain at Sunbelt's facilities was available to fulfill the Whitham contracts. For example, some portion of the grain on hand belonged to producers who stored the grain at Sunbelt under an open storage arrangement. The Court received no evidence of what proportion of the grain on hand on the November prepayment dates was open storage grain. Likewise, Sunbelt had grain at its facility to fulfill sales contracts with other buyers. The grain position book of Sunbelt, not made available to the Court, would show the amount of grain on hand on any given day and how much of that was producer-owned grain. See Shafer Depo., pp. 134-39, 161-162.
.
.
.
.
. NGFA Rule 6(B)(2).
.
. In any event, Kansas law on identification of goods requires an intent to identify
particular
goods and
some overt act
manifesting that intent, such as loading the com on the trucks and sending the trucks to their destination, Whitham.
See Reeves v. Pillsbury Co., 229
Kan. 423, 428,
. Even if the corn was identified to the contract as Whitham contends, it does not follow that title passed at the moment of identification. As noted in
Reeves, supra
at 429,
.
See
.
See
. After that $1.6 million sweep, however, further advances were made on Sunbelt’s line of credit. See Ex. 2 attached to Whitham’s summary judgment papers.
.Subordination claims against secured lenders such as SSB have generally been rejected when the secured creditor is simply enforcing its rights, even though the exercise of those rights may be detrimental to other creditors. Hon. William L. Norton, Jr. and William L. Norton III, 3 Norton Bankruptcy Law & Practice § 53:4 (3rd ed, Thomson/West 2008).
See United States Abatement Corp. v. Mobil Exploration & Producing U.S., Inc. (In re U.S. Abatement Corp.),
. The doctrine of equitable subordination looks to behavior of the parties involved.
In re Hedged-Investments Associates, Inc.,
.
Sloan v. Zions First National Bank (In re Castletons),
. See In re Hedged-Investments Associates, Inc., supra at 1301 (The categories of "inequitable conduct” necessary to support an equitable subordination claim are (1) fraud, illegality and breach of fiduciary duty; (2) undercapitalization; or (3) use of debtor as mere instrumentality or alter ego). Neither the second or third categories is at issue in this case.
.
Carter-Waters Oklahoma, Inc. v. Bank One Trust Co., N.A. (In re Eufaula Industrial Authority),
. In re Castletons, supra at 559; In re Hedged-Investments Associates, Inc., supra at 1301-02.