UNITEDSTATES COURT OF APPEALS

TENTH CIRCUIT

SIMMONS FOODS, INC.,

Plaintiff - Appellant,No. 01-3375 v.(D. Kansas)CAPITAL CITY BANK,

Defendant - Appellee.(D.C. No. 98-CV-4035-RDR)

ORDER AND JUDGMENT(*)

Before SEYMOUR, ANDERSON, and O'BRIEN,Circuit Judges.

Simmons Foods, Inc. appeals from an adverse summary judgment in itsdiversity action against Capital City Bank following, and arising out of,bankruptcy proceedings involving their mutual debtor, Teets Foods Company,Inc.

In its suit, Simmons claims that Capital City, a senior secured creditor ofTeets, became liable to Simmons for various alleged acts and omissions whileTeets' assets were being managed and liquidated under the jurisdiction of thebankruptcy court. Specifically, Simmons' claims, pursued on appeal, include thefollowing: (1) failure to marshal assets in favor of Simmons, a junior securedcreditor, allegedly in violation of Kansas law; (2) breach of fiduciary duty arisingout of a dominant creditor position; (3) unjust enrichment; and (4) conversion ofproperty by a bailee.

Simmons contends that the district court erred in its analysis andapplication of the law as to each of those claims when it granted Capital City'smotion for summary judgment and that issues of fact precluded summaryjudgment. It also contends that the district court erred when it refused toconsider: (a) minutes of the Unsecured Creditors' Committee meetings; (b) theopinion of a law professor as to the applicable law; and (c) a letter from opposingcounsel.

We review the district court's grant of summary judgment de novo. ToolBox v. Ogden City Corp., 316 F.3d 1167, 1173 (10th Cir. 2003). For a factualissue to preclude summary judgment, there must be a genuine issue of materialfact, and the substantive law will determine which facts are material. Fed. R. Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Becausethis is a diversity case, we apply the substantive law of Kansas as to issues whereKansas law is invoked. See Wood v. Eli Lilly & Co., 38 F.3d 510, 512-13(10thCir. 1994) ("[W]e must apply the most recent statement of state law by the state'shighest court."). In a diversity action, "[w]here no state cases exist on a point, weturn to other state court decisions, federal decisions, and the general weight andtrend of authority." Barnard v. Fireman's Fund Ins. Co., 996 F.2d 246, 248 (10thCir. 1993) (quotation omitted).

The district court set out the central facts and fully addressed each ofSimmons' claims in a Memorandum and Order dated October 17, 2001. Afterfully reviewing the record, the arguments on appeal, and the district court'sreasoning, we conclude that the district court did not err. Accordingly, subject tothe additional observations set out below, we affirm the district court's judgmentsubstantially for the reasons set out in the district court's October 17, 2001,Memorandum and Order.A.

Whatever claim Simmons possessed against Capital City arose out of andduring the Teets Foods bankruptcy proceedings in the bankruptcy court. Accordingly, we look only to those proceedings in evaluating Simmons'allegations.

Simmons' principal assertion is that Capital City failed to marshal assets,i.e., to seek the liquidation of assets securing Teets' debt to Capital City in aparticular sequence that would most benefit Simmons, the junior secured creditoron some of those assets. Significantly, Simmons does not identify in itscomplaint, R. Vol. I at 64, 66-67, or its answer to interrogatories, id. at 107, 118,exactly what assets should have been liquidated first--or at least before CapitalCity collected part of its debt out of Teets' accounts receivable--or for how much,or how such a hypothetical liquidation could occur at a particular time relative tothe liquidation of other assets and the operation of the business. Furthermore,Simmons does not dispute that it failed to object to the sale of "the Wichitaproperty" before the liquidation of other non-jointly secured assets or to thedistribution to Capital City of most of the proceeds from that sale. Capital Cityand Simmons held senior and junior secured interests, respectively, in thatproperty.

Finally, the record shows that Simmons did not file formal motions in thebankruptcy court seeking a marshaling order until nineteen and twenty months,respectively, after Teets filed for reorganization in bankruptcy, which was six andseven months, respectively, after the bankruptcy court converted the bankruptcyfrom a reorganization to a liquidation. Those motions came many months afterCapital City had, pursuant to court approval, collected on its debt through theliquidation of secured assets.

The equitable doctrine of marshaling of assets was recognized in Kansasprior to the enactment of the Uniform Commercial Code (U.C.C.) in that state. Equitable Mortgage Co. v. Lowe, 35 P. 829, 831 (Kan. 1894); Burnham, Hanna,Munger & Co. v. Citizens' Bank of Emporia, 40 P. 912, 914 (Kan. 1895); Gore v.Royse, 44 P. 1053, 1055 (Kan. 1896); Rundquist v. O'Leary, 337 P.2d 1017, 1020(Kan. 1959). But there are no Kansas Supreme Court cases cited to us bySimmons recognizing or applying the doctrine after Kansas adopted the UniformCommercial Code in 1962. Hence, even though a comment to the U.C.C.suggests the possible availability of the concept, Kan Stat. Ann. § 84-9-501,Kansas Comment 1, it is clear that marshaling is not a provision of the U.C.C. andneither imposes an obligation on creditors nor reduces their rights under the code. And, to the extent this quiescent doctrine persists in post-U.C.C. Kansas law,there is no indication of the conditions for its application.

In any event, Simmons has not cited, and we have not found, any case,from Kansas or anywhere else, granting legal relief to a junior lienholder for thesenior lienholder's failure to voluntarily marshal assets. More to the point, wehave found no case imposing liability for failure to marshal in the context of abankruptcy proceeding, in which the parties have full recourse, in the form ofmotions in the bankruptcy court, for any grievances against co-creditors, and anavenue for appeal from an adverse ruling. Finally, Simmons cites no caseestablishing that an action for failure to marshal in the context of a bankruptcywould survive the close of the bankruptcy proceedings. Despite the bankruptcycourt's order purporting to distribute the various claims that Simmons insisted ithad, we hold that it had no claim against Capital City following the termination ofthe Teets bankruptcy proceedings.B.

As indicated above, Simmons contends that the district court erred when itrefused to consider certain materials proffered by Simmons in response toCapital's motion for summary judgment. "Like other evidentiary rulings, wereview a district court's decision to exclude evidence at the summary judgmentstage for abuse of discretion." Sports Racing Servs., Inc. v. Sports Car Club ofAm., Inc., 131 F.3d 874, 894 (10th Cir. 1997). "An abuse of discretion occurswhere the district court clearly erred or ventured beyond the limits of permissiblechoice under the circumstances." Wright v. Abbott Labs., Inc., 259 F.3d 1226,1233 (10th Cir. 2001).

The district court found that many of Simmons' "uncontroverted facts"were based on documents that were hearsay and therefore were not competent tooppose a motion for summary judgment. See Order Granting Summary Judgment,R. Vol. III at 503, 506-07; Gross v. Burggraf Constr. Co., 53 F.3d 1531, 1541(10th Cir. 1995). Simmons argues that this ruling was erroneous because thedocuments in question were not hearsay.

Although it is difficult to determine from the Order what document ordocuments the district court excluded as hearsay, Simmons acknowledges thatthere were only three documents that the court possibly excluded: (1) ProfessorGriffin's Expert Report; (2) the Minutes for the Unsecured Creditors' Committee;and (3) a letter from counsel for Capital to counsel for Simmons. Appellant's Br.at 35.

Professor Griffin's report was inadmissible as it addressed a question oflaw, rather than fact, and therefore encroached on the domain of the judge, who is"the sole arbiter of the law and its applicability." Specht v. Jensen, 853 F.2d 805,807 (10th Cir. 1988) (en banc) (holding that expert testimony on purely legalissues is inadmissible).(1)

As to the second document, the Unsecured Creditors' Committee Minutes,after a careful review of the Minutes, we conclude that there were multiple baseson which the district court could have properly excluded them. First, the sectionof the minutes Simmons used to establish its "facts" was nothing more than asummary of the Unsecured Creditors' Committee's allegations of Capital City'swrongdoings during the course of the bankruptcy, without any supportingevidence or documentation, and more nearly constituted assertions of law than offact. Second, the Minutes contained errors, see e.g., R. Vol. II at 399 ("BrockSnyder [Simmons' counsel] was filing an objection to Simmons' 'Motion forAdequate Protection or Relief from Stay.'"), and hearsay within hearsay, seee.g.,id. at 392 ("Per Randy Hart, Jeff Willis advised Brock Snyder.").

Finally, even if the Minutes were not properly classified as hearsay,excluding them was not error because they did not establish any genuine issue ofmaterial fact in light of the applicable law. "Only disputes over facts that mightaffect the outcome of the suit under the governing law will properly preclude theentry of summary judgment." Anderson, 477 U.S. at 248. Simmons does notpoint to any fact established by the Minutes that, in light of the applicable law,might have affected the outcome of the suit. Therefore, summary judgment wouldhave been granted even if the Minutes had been considered. See Wright, 259F.3d at 1233.

With regard to the letter from counsel for Capital City Bank to counsel forSimmons, we conclude that it also failed to establish any material fact. Simmonsasserts that the letter demonstrates that Capital City agreed to marshal assets. SeeAppellants Br. at 23. However, as presented to us--without any indication of thesubstance of the prior conversations, which the letter references, and without anyevidence of Simmons' response to the letter, which the letter anticipated--theletter did not, even viewed in the light most favorable to Simmons, establish thatCapital agreed to marshal assets. Since the letter did not establish any genuineissue of material fact, failure to consider it was not error.

AFFIRMED.

ENTERED FOR THE COURT

Stephen H. Anderson

Circuit Judge

FOOTNOTES

Click footnote number to return to corresponding location in the text.

*.This order and judgment is not bindingprecedent, except under thedoctrines of law of the case, res judicata, and collateral estoppel. The courtgenerally disfavors the citation of orders and judgments; nevertheless, an orderand judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

1.While the district court did not explicitlyexclude the report on thesegrounds, we may affirm the district court's ruling on any grounds supported bythe record. Hayes v. Whitman, 264 F.3d 1017, 1025 (10th Cir. 2001).