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In re Solberg

United States Bankruptcy Appellate Panel of the Eighth Circuit

August 14, 2019

In re: Richard Allen Solberg, doing business as Solberg Farms Minnesota Debtor
v.
Bremer Bank, National Association Defendant - Appellee Zaitz Trust, LLP Plaintiff - Appellant Norcan Seeds, Inc. Defendant - Appellant Richard Allen Solberg, individually and in his capacity as a partner of Solberg Farms, a Minnesota partnership; Kasey Solberg, individually and in his capacity as a partner of Solberg Farms, a Minnesota partnership; Solberg Farms, a Minnesota Partnership Defendants

          Submitted: June 28, 2019

          Appeal from United States Bankruptcy Court for the District of Minnesota - Fergus Falls

          Before SCHERMER, SHODEEN and DOW, Bankruptcy Judges.

          DOW, BANKRUPTCY JUDGE

         This is a case involving competing rights in the crop proceeds and crop insurance proceeds of Richard Allen Solberg, Debtor. Zaitz Trust, LLP ("Zaitz") filed a complaint against Bremer Bank, N.A. (the "Bank"), Norcan Seeds, Inc. ("Norcan"), the Debtor individually and as a partner of Solberg Farms, Kasey Solberg individually and as a partner of Solberg Farms, and Solberg Farms, a Minnesota partnership. The Bank and Norcan counterclaimed. The Bank also filed a third party action against RRV, LLC ("RRV") and the Trustee, and RRV counterclaimed.

         The Bank subsequently filed a motion for summary judgment challenging the validity of the other parties' liens and asserting the priority of its own lien in the Debtor's 2017 crops. The Bankruptcy Court granted the Bank's motion. Zaitz and Norcan (collectively, the "Appellants") appealed. For the reasons that follow, we reverse and remand for further findings.

         STANDARD OF REVIEW

         We review a bankruptcy court's grant of summary judgment de novo. Mwesigwa v. DAP, Inc., 637 F.3d 884, 887 (8th Cir. 2011)(citing Anderson v. Durham D & M, L.L.C., 606 F.3d 513, 518 (8th Cir. 2010). We will affirm if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "We may affirm on any basis supported by the record." Seaver v. New Buffalo Auto Sales, LLC (In re Hecker), 459 B.R. 6, 10-11 (8th Cir. BAP 2011). Here we review de novo whether the bankruptcy court's conclusions interpreting the relevant statutes and applying them to the undisputed facts is correct. Fisette v. Keller (In re Fisette), 455 B.R. 177, 180 (8th Cir. BAP 2011).

         FACTUAL BACKGROUND

         In January, 2017, Zaitz leased approximately 3, 277 acres to "Solberg Farms - Rick Solberg." In the lease, Solberg Farms granted to Zaitz a security interest in the crops grown on the land. Zaitz filed a statutory lien notice against Richard Solberg in May of 2017.

         The Debtor and his son contracted with Norcan to purchase seed for planting. Norcan was unwilling to sell directly to the Debtor because of his financial position, but agreed to sell to the Debtor and his son jointly as Solberg Farms, a partnership. Norcan delivered the seed and presented its invoice to "Solberg Farms, Rick Solberg, Kasey Solberg." Norcan filed a UCC Financing Statement listing Rick Solberg, Kasey Solberg and Solberg Farms as debtors.

         The Bank made several loans to the Debtor beginning in 2009 secured by virtually all of the Debtor's personal property, including crops, farming supplies, and equipment. The Bank perfected its security interest by filing a UCC Financing Statement under the name of Richard Allen Solberg.

         The Debtor filed for Chapter 11 relief on August 11, 2017. Pursuant to the Interim Cash Collateral Agreement entered in the case, the Bank was granted a lien on the Debtor's 2017 crop insurance payments.

         Zaitz commenced an adversary proceeding to assert its lien in the Debtor's 2017 crops. The Bank moved for summary judgment seeking the adjudication of all the parties' rights. Specifically, it asserted that Solberg Farms was a fictitious d/b/a of the Debtor, that the Bank's interest in the Debtor's 2017 crop insurance proceeds was superior to all other parties' interests, and its interest in the Debtor's 2017 crop proceeds was superior to all parties' interests except for that of RRV. The Bankruptcy Court granted the motion. The Appellants appeal on the basis that the bankruptcy court erred in concluding that there was no genuine issue of material fact that precluded summary judgment. Specifically, they contend that there was substantive, probative evidence that the Debtor and his son engaged in farming as a partnership, and because this is a material ...


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