In re Victory Markets Inc.

202 B.R. 668, 1996 Bankr. LEXIS 1502, 1996 WL 685792
Procedural entryThis page is a short order in In re Victory Markets Inc.. Read the opinion of the Court — 212 B.R. 738
United States Bankruptcy Court, N.D. New York·Decided September 24, 1996·No. Bankruptcy Nos. 95-63366, 95-63367, 95-63368, 95-63369, 95-63370 and 95-63371·Published

Opinion

MEMORANDUM-DECISION, FINDINGS OF FACT CONCLUSIONS OF LAW AND ORDER

STEPHEN D. GERLING, Chief Judge.

Presently before the Court is a motion by Supermarket Equipment Resale, Inc. (“SER”) brought on by an Order to Show Cause dated August 30, 1996, seeking the enforcement of an Order signed by the Court on May 22, 1996, which approved the sale of personal property out of the ordinary course of business (“Sale Order”), pursuant to § 363 of the Bankruptcy Code (11 U.S.C. §§ 101-1330) (“Code”). Opposition to the motion was filed on September 6, 1996, by Victory Markets, Inc. (“Debtor”).

The motion was heard at the Court’s regular motion term on September 9, 1996, in Binghamton, New York. The Court heard oral argument, and the matter was scheduled for an evidentiary hearing on September 16, 1996, in Utica, New York. Following testimony, the matter was submitted for decision by the Court.

JURISDICTIONAL STATEMENT

The Court has core jurisdiction over the parties and subject matter of this contested matter pursuant to 28 U.S.C. §§ 1334(b), 157(a), (b)(1), and (b)(2)(A), and (N).

FACTS

Debtor, along with five of its wholly-owned subsidiaries, filed voluntary petitions pursuant to Chapter 11 of the Code on September 20, 1995. At the time of filing, Debtor operated approximately fifty grocery stores throughout the northern and central New York State regions under the trade name “Great American Food Stores.” Since the [670]*670filing of the petition, Debtor has continued to operate and manage its business as a debtor-in-possession pursuant to §§ 1107 and 1108 of the Code.

On May 1, 1996, Debtor filed a motion on shortened notice for an order approving the sale of personal property. According to the motion, the Debtor had entered into a contract on or about April 15,1996 (“Contract”), with SER for the sale of “all the Debtor’s refrigeration equipment, walk-in coolers and freezers (‘Equipment’) located at its frozen food warehouse in Norwich, New York, for the sale price of $50,000.” In support of its motion, Debtor asserted that it was not utilizing the “Equipment” and had' no need for it in its business operations.

The motion was heard at the Court’s regular motion term in Syracuse, New York, on May 14,1996, and the Sale Order was signed May 22,1996.

A dispute has now arisen as to the meaning of the terms in the Contract. The issue presented to the Court is whether the Contract included the sale of the outer walls and roof of the coolers and freezers.

ARGUMENTS

Tommy Breedlove (“Breedlove”), President of SER, contends that the Contract included the sale of an entire 72,415 square-foot walk-in cooler that is contiguous to the main braiding of the Debtor’s Norwich facility (see Application of Tommy Breedlove in Support of Order to Show Cause (“Application”), dated August 28, 1996, at ¶ 6), and that the outer walls and roof were part of the sale. Pursuant to a blueprint and a component parts list allegedly provided to SER by the Debtor, but not attached to the Contract, SER claims that the sale included “the entire walk-in cooler, all refrigeration equipment, component parts, and electrical control panel located outside the cooler, the exterior walls of the Debtor’s cooler, steel supports, the cooler room, a number of large cooling coils and related plumbing, a number of roof top condensers, all electric wiring, low temperature lighting units and shelving within the cooler box.” See Application, at ¶ 7.

According to the actual terms of the Contract, Debtor agreed to sell “[a]ll refrigeration equipment, walk-in coolers and freezers located at Norwich frozen food warehouse.” See Exhibit “A” of SER’s motion. Debtor contends that the Sale Order only authorized the sale of personal property, not the outer walls and roof. “Personal property,” it argues, does not include property erected on or affixed to the land, which is generally denominated as “real property.” See ¶ 7 of Debt- or’s Opposition. Debtor asserts that in order for SER to prevail, the Court would have to find that the building constituted personal property. Furthermore, Debtor asserts that since SER drafted the contract, any ambiguity should be construed against SER.1

For the purpose of ease of discussion only, the term “all refrigeration equipment, walk-in coolers and freezers located at the Norwich frozen food warehouse” will be hereinafter be referred to as the “walk-in cooler.”2

[671]*671 DISCUSSION

The parties to this dispute have both argued their positions that the contract at issue between SER and Debtor, to sell “[a]ll refrigeration equipment, walk-in coolers and freezers located at Norwich frozen food warehouse,” is unambiguous and clear on its face, and yet the parties proffer two dissimilar interpretations of the above terms. While SER claims that the contract clearly included the outer walls and the roof of the walk-in cooler in the sale, Debtor claims that the contract embodied a sale only of the personal property, which does not include the outer walls and roof.

To resolve this matter, the Court must look to the terms of the Contract. The single page Contract at issue reveals language stating that the “[g]RANTOR hereby represents and warrants that the personal property is owned by the Grantor and is subject to no mortgage, ...” in reference to the conveyance of the property described therein from Debtor to SER. See Contract, at 1 (emphasis added). Furthermore, in the Sale Order, the Court authorized the sale to SER of certain personal property owned by Debt- or, which included all refrigeration equipment, walk-in coolers and freezers located at Debtor’s frozen food warehouse in Norwich, New York. See Sale Order, at 1-2. Since by their terms the Contract and the Sale Order involved the sale of personal property of the Debtor, the property at issue must be examined to determine whether it is properly characterized as personal property or real property.

To shed light on this issue, the Court refers to the law relating to fixtures, and it is upon this discussion that the disposition of the outer walls and roof of the walk-in cooler is determined. A “fixture” is “[a]n article in the nature of personal property which has been so annexed to the realty that it is regarded as part of the real property.” BLACK’S LAW DICTIONARY 638 (6th ed. 1990). In New York, personal property is examined under a three part test to determine whether it is a fixture. Matter of Metromedia, Inc. v. Tax Commission of the City of New York, 60 N.Y.2d 85, 90, 468 N.Y.S.2d 457, 455 N.E.2d 1252 (1983). To meet the definition of a fixture, the personal property must: (1) be annexed to the real property or something appurtenant thereto; (2) be applied to the use or purpose for which the realty it is attached to is used; and (3) it must be intended by the parties to be a permanent accession to the realty. Id.

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In re Victory Markets Inc., 202 B.R. 668, 1996 Bankr. LEXIS 1502, 1996 WL 685792 (N.Y. 1996).

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