Julien Co., In re, 93-6201
| Citation | 44 F.3d 426 |
| Decision Date | 25 January 1995 |
| Docket Number | No. 93-6201,93-6201 |
| Parties | 32 Collier Bankr.Cas.2d 1437, 26 UCC Rep.Serv.2d 117 In re The JULIEN COMPANY, Debtor. OAKLAND GIN COMPANY, INC., Defendant-Appellant, v. Jack MARLOW, Trustee for the Julien Company, Plaintiff-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
John McQuiston, II (argued and briefed), Bruce M. Kahn, Evans & Petree, Memphis, TN, for defendant-appellant.
C. William Denton, Borod & Kramer, David J. Cocke (argued and briefed), Bogatin, Lawson & Chiapella, Memphis, TN, for plaintiff-appellee.
Before SUHRHEINRICH, SILER, and BATCHELDER, Circuit Judges.
Defendant Oakland Gin Co., Inc. challenges the district court's decision affirming the bankruptcy court's ruling in favor of the bankruptcy trustee for the Julien Company on summary judgment regarding defendant's claims under Articles 2 and 9 of the Uniform Commercial Code and the United States Warehouse Act, 7 U.S.C. Sec. 262. The questions concern the superior title in the delivered cotton.
For the reasons stated below, we affirm the decision of the district court.
Oakland Gin Co., Inc. ("Oakland") and the Julien Company ("Julien Co.") entered into a series of contracts under which Oakland, representing a number of cotton farmers, sold bales of cotton to the Julien Co. The contracts required that Oakland, after ginning and baling the cotton, draw a draft on the Julien Co., with an accompanying bill of lading, at the time Oakland loaded the cotton for delivery. Both documents were to be submitted by Oakland to the Union Planters Bank in Memphis, Tennessee, for payment out of the Julien Co.'s account at the time of delivery. While not printed in the contracts, both parties understood that Oakland would deliver the cotton to the Julien Warehouse, a warehouse owned by the Julien Warehouse Company, a subsidiary of Julien Co., the buyer, and operated by Federal Compress & Warehouse Company, Inc. ("Federal"). Federal is an independently-licensed warehouseman which manages the Julien Warehouse pursuant to a management agreement with the Julien Warehouse Company. As the parties did not intend the warehouse to store the cotton, however, the contracts did not provide for the use of warehouse receipts. Instead, the parties intended to treat the cotton as "flow-through" cotton, which is cotton that remains in the warehouse only long enough to fill orders and immediately be reshipped.
Early in December, 1991, Oakland delivered four separate cotton shipments pursuant to four separate contracts. Several days after each delivery, Oakland forwarded drafts to the Union Planters Bank. The bank, however, dishonored the drafts. Oakland then orally demanded that Federal return the cotton. In response, Federal wrote to Julien Co. that it should claim its interest in the cotton or Federal would be bound to turn over the cotton to Oakland. Rather than turn over the cotton to Oakland, however, Federal filed an interpleader action in an Alabama state court to determine the rightful title to the cotton in question. Soon thereafter, Julien Co. filed its petition in bankruptcy and the court appointed Jack Marlow as trustee.
Marlow filed a complaint alleging superior title in the proceeds of the cotton. 1 Pursuant to a consent agreement, the parties removed the interpleader action to bankruptcy court, and proceeded in the present adversary proceeding. The bankruptcy court resolved the case on summary judgment, finding that the trustee had superior title in the cotton as a lien creditor of the estate, Oakland failed to reclaim the cotton, and the United States Warehouse Act did not apply to Oakland's situation. The district court affirmed.
In bankruptcy, the district court acts as an appellate tribunal, and this court, in turn, reviews the district court's decision on appeal. 28 U.S.C. Sec. 158. The bankruptcy court decided this case on summary judgment. This court then reviews the district court's determination de novo. Pinney Dock and Transp. Co. v. Penn. Cent. Corp., 838 F.2d 1445, 1472 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). Summary judgment is proper where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We must view all facts and inferences in the light most favorable to the non-moving party. White v. Turfway Park Racing Ass'n, 909 F.2d 941, 943 (6th Cir.1990).
As the bankruptcy and district courts correctly noted, the bankruptcy trustee only has rights in the cotton at issue if the cotton is "property of the estate." 11 U.S.C. Sec. 363. The term "property of the estate" encompasses all legal and equitable interests that the debtor has in property at the commencement of the bankruptcy case. 11 U.S.C. Sec. 541(a). This must be determined by reference to state law, In re White, 851 F.2d 170, 173 (6th Cir.1988), which in this case is Tennessee law, as provided in the contracts.
Oakland first argues that the Julien Warehouse and/or Federal 2 owed Oakland an obligation as bailee to return the cotton to Oakland, as bailor, upon Oakland's demand. The standard elements for a common law bailment in Tennessee are "a delivery of personalty for a particular purpose or on mere deposit, on a contract express or implied; that after the purpose has been fulfilled, it shall be redelivered to the person who delivered it...." Dispeker v. New Southern Hotel Co., 213 Tenn. 378, 373 S.W.2d 904 (1963). Whether a bailment relationship exists depends on the facts and circumstances of the individual case, In re Crabtree, 48 B.R. 528, 532 (Bankr.E.D. Tenn.1985), and the bailment agreement need not be express as "[a] bailment may result from conduct, though neither foreseen nor contemplated." Id.
Oakland contends that, while the bailment with Federal was not express, the parties' conduct gave rise to a bailment relationship. Oakland points out that Federal was an independently-licensed warehouseman, having no contractual obligation to the Julien Co. (although it was contractually bound to the Julien Co.'s corporate affiliate). Oakland also emphasizes that Federal admitted in its letter to the Julien Co. that it felt obligated to return the goods to Oakland. Finally, as Oakland retained the bills of lading in the present situation, Oakland argues that this court may not consider the bill's printed terms in deciding whether a bailment existed.
After reviewing the record, however, we find Oakland's version of the facts to be incomplete. The circumstances as a whole strongly indicate that the warehouse was actually an agent of the buyer rather than Oakland's bailee. The owner of the warehouse, the Julien Warehouse Co., was an affiliate of the Julien Co. and the two entities shared officers and shareholders. While Federal was independently-licensed, it operated the warehouse under a management agreement with the warehouse company mainly for the benefit of the Julien Co. Indeed, Federal stipulated that it dealt in cotton solely for the benefit, and in the control, of the Julien Co. The bills of lading used by the parties for a number of prior contracts, although not delivered for the shipments at issue, list the Julien Co. as the shipper, the Julien Warehouse Co. as Julien Co's consignee, and Oakland as the shipper's agent. Finally, the cotton at issue was flow-through cotton, under which Federal retained the custody of the cotton only so long as it took to immediately re-ship the cotton to Julien Co.'s customers. No storage or receipts were intended or used in these transactions, which indicates that a bailment did not exist.
The prior dealings of the parties and the circumstances of the present case lead us to conclude that Federal was not acting as bailee for Oakland at the time in question. For these reasons, we affirm the lower courts' determination of this issue.
Next, Oakland argues that it has a perfected security interest in the cotton pursuant to Tenn.Code Ann. Secs. 47-9-304 and 305 that succeeds the trustee's status as a lien creditor. Section 47-9-304 provides that "[a] security interest in goods in the possession of a bailee other than one who has issued a negotiable document ... is perfected by ... the bailee's receipt of notification of the secured party's interest...." Under Sec. 47-9-305, a secured party who claims perfection by possession (i.e., collateral in the hands of a bailee), is deemed to have possession from the time the bailee receives notice. Oakland argues that when it demanded the return of the goods from the warehouse, it satisfied both of these sections and attained perfection, thereby defeating the trustee's claim. However, this conclusion requires the court to find that Federal or the Julien Warehouse acted as a bailee for Oakland. In light of this court's resolution of the common law bailment issue, the present argument also fails.
Oakland also argues that the bankruptcy court erred in its discussion of passage of title concepts when deciding for the trustee. Tenn.Code Ann. Sec. 47-2-401(1). This argument does not require this court's attention, however, as neither lower court actually relied on this section in finding for the trustee. Moreover, the trustee does not contest that Sec. 47-2-401(1) does not apply in this case. Rather, he correctly notes that as this section does not apply, Article 2 or 9 provides Oakland's only possible remedies. For this reason, we will not decide this issue on appeal.
While Oakland failed to clearly raise this issue in its brief, based upon various statements made in Oakland's brief, the trustee's brief, and...
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