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In re Reichley

December 28, 2005

IN RE: GALEN R. REICHLEY AND ALLEN L. REICHLEY, T/A REICHLEY BROTHERS, DEBTORS
GORDON BROTHERS RETAIL PARTNERS, LLC, CLEARBID, INC., AND AGRICAPITAL CORPORATION, AS SUCCESSORS-IN-INTEREST TO AGWAY, INC., APPELLANTS,
v.
MANUFACTURERS AND TRUST COMPANY, AS SUCCESSOR-IN-INTEREST TO KEYSTONE FINANCIAL BANK, N.A., APPELLEE



The opinion of the court was delivered by: Malcolm Muir U.S. District Judge

Chapter 13

ORDER #2 of December 28, 2005

THE BACKGROUND OF THIS ORDER IS AS FOLLOWS:

On March 21, 2003, Galen R. Reichley, his brother Allen L. Reichley, and their business Reichley Brothers filed bankruptcy petitions pursuant to Chapter 13 of the Bankruptcy Code. We hereinafter collectively refer to the Reichleys and Reichley Brothers as "the Debtors." Although the Debtors filed separate bankruptcy petitions in the bankruptcy court, that court consolidated them into one action on July 18, 2003.

The Debtors owned and operated poultry and dairy farms on various parcels of land in Union County, Pennsylvania. The Debtors used two of their tracts as security in connection with mortgages which they obtained from Agway, Inc., and Keystone Financial Bank, N.A. (Hereinafter "Keystone Financial"). The Agway mortgage was recorded on March 26, 1999, and the Keystone Financial mortgages were recorded on September 24, 1999. In the course of the bankruptcy proceedings, a dispute arose with respect to the priority of Agway, Inc.'s mortgage vis-a-vis Keystone Financial's mortgages.

Gordon Brothers Retail Partners, LLC; Clearbid, Inc.; and Agricapital Corporation (hereinafter collectively "Gordon Brothers") are successors in interest to Agway, Inc. Manufacturers and Traders Trust Company (hereinafter "M & T") is the successor in interest to Keystone Financial.

On September 27, 2004, Gordon Brothers initiated an adversary proceeding in the bankruptcy court by filing a complaint against M & T in which Gordon Brothers sought a judgment declaring that "the Agway Mortgage is senior in priority to the Keystone Mortgage ...." (Complaint, p. 5, ¶29) The parties filed cross-motions for summary judgment and on July 5, 2005, the Honorable Mary D. France issued an order and opinion in which she concluded that although the Agway mortgage was recorded first the Keystone Financial mortgages were entitled to priority because the liens at issue arose from future advances and the Agway mortgage did not on its face state that it secured such loans.

On August 16, 2005, Gordon Brothers appealed Judge France's decision to this court. On August 29, 2005, we issued an order setting forth the briefing schedule. The parties' briefs were timely filed.

M & T filed a sur-reply brief on October 24, 2005. On November 1, 2005, Gordon Brothers filed a motion to strike the sur-reply brief. In our order number 1 of this date we granted the motion to strike the sur-reply brief.

On December 1, 2005, we issued an order in which we allowed any party to seek our recusal because of the undersigned's connection with Manufacturers and trust Company. The time allowed for the parties to seek our recusal expired on December 23, 2005, and to this date no such election has been filed. This matter is ripe for disposition.

In considering the substantive merits of Gordon Brothers's appeal, we will apply a clearly erroneous standard to findings of fact, [conduct] plenary review of conclusions of law, and ... break down mixed questions of law and fact, applying the appropriate standard to each component. See, e.g., Resyn Corp. v. United States, 851 F.2d 660, 664 (3d Cir.1988); In re Jersey City Medical Center, 817 F.2d 1055, 1059 (3d Cir.1987); Ram Constr. Co., Inc., 749 F.2d at 1052-53; Universal Minerals, Inc., 669 F.2d at 101- 02.

In re Sharon Steel, 871 F.2d 1217, 1223 (3d Cir. 1989). We further observe that "we are not barred from considering any issue presented by the record, even though it was not discussed by ... the bankruptcy judge ...." In re Gilchrist Company, 410 F. Supp. 1070, 1074 (E.D. Pa. 1976)(Green, J.).

This appeal requires us to revisit the parties' cross-motions for summary judgment. Summary judgment is appropriate only when there is no genuine issue of material fact which is unresolved and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c). Initially, the moving party has a burden of demonstrating the absence of a genuine issue of material fact. Celotex Corporation v. Catrett, 477 U.S. 317, 323 (1986). This may be met by the moving party pointing out to the court that there is an absence of evidence to support an essential element as to which the non-moving party will bear the burden of proof at trial. Id. at 325. We also note that Rule 56 "mandates the entry of summary judgment ... against a party who fails 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." Id. at 323.

Rule 56 provides that, where such a motion is made and properly supported, the adverse party must show by affidavits, pleadings, depositions, answers to interrogatories, and admissions on file that there is a genuine issue for trial. Fed. R. Civ. P. 56(e). The United States Supreme Court has commented that this requirement is tantamount to the non-moving party making a sufficient showing as to the essential elements of their case that a reasonable jury could find in their favor. Celotex Corporation v. Catrett, 477 U.S. 317, 322-23 (1986).

The same standard governs cross-motions for summary judgment. Continental Ins. Co. v. Kubek, 86 F. Supp. 2d 503, 505 n.2 (E.D. Pa. 2000)(Katz, J.)(citing Appelmans v. Philadelphia, 826 F.2d 214, 216 (3d Cir. 1987)). When considering such cross-motions "each motion must be considered separately, and each side must still establish a lack of genuine issues of material fact and that it is entitled to judgment as a ...


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