This matter was heard by the court on November 16, 1994, on the motion of the defendants Phil T. Owens and Forest View Farm for summary judgment determining their right to receive payment from funds held in escrow which are proceeds from the September 1991 sale at Keeneland of a colt by CAPOTE out of EXCEEDINGLY BOLD.

Pursuant to an order entered, after notice and a hearing, on March 1, 1993 in the Calumet Farm, Inc. case, this court authorized the debtor in possession to distribute $37,023.97 of the sale proceeds, representing the one-half interest therein of Nick Zito, to Citizens Fidelity Bank, a creditor of Zito holding a security interest therein.

The court also authorized disbursement of $2,132.06 to Forest View Farm in payment of the September 1991 sales board related to the colt.

The remaining sales proceeds were paid to Dean Langdon, attorney for Janet Zito, to be held in escrow at interest pending further orders of the court.

In this adversary proceeding commenced on April 9, 1993, shortly after entry of the foregoing order, the plaintiff, Bank One, asserts a security interest in the portion of the sale proceeds distributable to the defendants Phil T. Owens and Norman Owens.

Norman Owens filed a petition for relief under chapter 11 of the Bankruptcy Code in this court on June 23, 1994. W. Thomas Bunch, attorney for Norman Owens as debtor in possession, did not appear at the hearing on November 16, 1994, on countermotions for summary judgment.

Bank One has moved for summary judgment determining that it is entitled to the remaining sale proceeds, except $2,125, which the bank apparently concedes is payable to the defendant Forest View Farm. This sum represents the commission of Forest View on the sales proceeds disbursed to Nick Zito/Citizens Fidelity (now PNC) Bank.

Bank One bases its claim to a security interest in the amount of the sale proceeds payable to the defendants Phil T. Owens and Norman Owens on a letter faxed to the bank on or about October 10, 1991. The letter from MMR Equine Services, Inc. of Villanova, Pennsylvania to Keene Shackelford, a bank loan officer, is signed by Marc Rash and Norman Owens. The letter advises "that all of the proceeds from the one-half interest in the CAPOTE/EXCEEDINGLY BOLD colt sold at Keeneland in Sept. 1991 will be used to pay off the $50,000 loan with MMR EQUINE SERVICE, Inc...."

This is merely a promise that proceeds of the sale will be used to pay a debt owed by a third party corporate entity, MMR Equine Services, Inc., to the bank. The language of the faxed letter does not convey to the bank a security interest in one-half of the sale proceeds of the colt.

Counsel for the bank contends that a one-half interest in the colt was owned in partnership by the Owens Brothers Partnership composed of Phil T. Owens and Norman Owens, and that Norman Owens, as a general partner of the partnership, was authorized to bind the partnership by the pledge of its one-half interest in the sale proceeds of the colt.

Counsel for Phil T. Owens asserts that the colt was owned in partnership by three parties, Nick Zito (1/2), Phil T. Owens (1/4) and Norman Owens (1/4), that partnership was effectively dissolved when the colt was sold, and that all that remained to be done was distribution of the proceeds of sale according to the interest of the parties.

The faxed letter does not specify whose one-half interest in the sale proceeds will be used to pay the indebtedness owed by MMR Equine Service, Inc. to the bank. It could be interpreted as a promise to use Zito's one half of the sale proceeds to pay on the indebtedness of Marc Rash's company to the bank. It could be argued that if Norman Owens were authorized to act for his brother Phil he was authorized to act for Zito as well.

Counsel for the bank avoids this interpretation by arguing that the colt was owned one half by Zito individually and one half by the Owens Brothers Partnership. The problem with this approach is there is no evidence the colt was owned other than by the three-way partnership of Nick Zito, Phil T. Owens and Norman Owens.

Moreover, since this was the only receivable of the former partnership and one half thereof would be a significant part of the outstanding accounts of the assignor, it would seem that filing would be required to perfect the assignment, if the faxed letter were viewed as an assignment.

In any event, the court is satisfied the bank does not have a security interest in any of the proceeds of the sale of the colt.

Accordingly, the motion of the bank for summary judgment is overruled.

The motion of Phil T. Owens for summary judgment is sustained to the extent that the court finds he is entitled to one-half of the $37,683.97 held in escrow pursuant to the court's order of March 1, 1993, plus any interest attributable to his portion of the proceeds, less any amount assessed for his share of the sales commission owed to Forest View Farm.

The motion of Forest View Farm for payment of its commission on the sale proceeds is likewise sustained.

Dated:

By the court -

_____________________________

JOE LEE, CHIEF JUDGE

Copies to:

James A. Philpott, Jr., Esq.

Philip L. Hanrahan, Esq.

Robert S. Miller, Esq.

W. Thomas Bunch, Esq.

Dean A. Langdon, Esq.

Joel C. Morgan, Esq.

In conformity with the memorandum opinion of the court this day entered IT IS ORDERED as follows:

1) The motion of Bank One, Lexington, N.A. for summary judgment is OVERRULED;

2) The motion of Phil T. Owens for summary judgment is SUSTAINED to the extent that he is entitled to one-half of the $37,683.97 held in escrow pursuant to the court's order of March 1, 1993, plus any interest attributable to his portion of the proceeds, less any amount assessed for his share of the sales commission owed to Forest View Farm;

3) The motion of Forest View Farm for payment of its commission on the sale proceeds is SUSTAINED.

Dated:

By the court -

_____________________________

JOE LEE, CHIEF JUDGE

Copies to:

James A. Philpott, Jr., Esq.

Philip L. Hanrahan, Esq.

Robert S. Miller, Esq.

W. Thomas Bunch, Esq.

Dean A. Langdon, Esq.

Joel C. Morgan, Esq.