679 F.2d 821 (11th Cir. 1982), 81-7736, Flournoy v. City Finance of Columbus, Inc.

Docket Nº:81-7736.
Citation:679 F.2d 821
Party Name:Joe M. FLOURNOY, Plaintiff-Appellant, v. CITY FINANCE OF COLUMBUS, INC., Defendant-Appellee.
Case Date:June 14, 1982
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 821

679 F.2d 821 (11th Cir. 1982)

Joe M. FLOURNOY, Plaintiff-Appellant,

v.

CITY FINANCE OF COLUMBUS, INC., Defendant-Appellee.

No. 81-7736.

United States Court of Appeals, Eleventh Circuit

June 14, 1982

Page 822

Araguel, Sanders & Carter, Charles C. Carter, Columbus, Ga., for plaintiff-appellant.

William L. Slaughter, Columbus, Ga., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Georgia.

Before GODBOLD, Chief Judge, MERRITT [*] and HENDERSON, Circuit Judges.

HENDERSON, Circuit Judge:

The sole question on this appeal is whether a secured creditor who repossesses a debtor's automobile without legal process, as permitted by Georgia Code § 109A-9-503 (Rev.1979), is a "custodian" within the meaning of the Bankruptcy Act of 1978, 11 U.S.C. § 101(10)(C), so as to require delivery of possession to the trustee in bankruptcy in accordance with 11 U.S.C. § 543(b). The bankruptcy court held that the secured creditor is not a custodian, and the district court agreed with that conclusion. We affirm.

The facts are stipulated. City Finance of Columbus, Inc. (City Finance), a creditor of Argentina Williams Lewis, perfected its security interest in a 1970 Pontiac Grand Prix, securing an indebtedness of $1,575.00. Lewis defaulted on the note, and City Finance took possession of the automobile through the "self-help" mechanism of the security agreement. 1 Before execution was completed in compliance with Georgia Code § 109A-9-504(3), the Lewises filed a petition under Chapter 13 of the Bankruptcy Act of 1978, thereby invoking the automatic stay provision of 11 U.S.C. § 362(a) to prevent the sale of the collateral. The trustee filed a complaint for possession of the automobile. Both the trustee and City Finance then filed motions for summary judgment. The grant of summary judgment in favor of City Finance prompted this appeal.

The trustee relies only on the "custodian" status of City Finance as defined in 11 U.S.C. § 101(10)(C) in urging the turnover of the property pursuant to the provisions

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of 11 U.S.C. § 543(b). 2 Subpart (C) defines a custodian as a

trustee, receiver, or agent under applicable law, or under a contract, that is appointed or authorized to take charge of property of the debtor for the purpose of enforcing a lien against such property, or for the purpose of general administration of such property for the benefit of the debtor's creditors.

He reasons that City Finance took possession of the property for the purpose of enforcing a lien, as authorized by the security agreement and, hence, is an agent under applicable law because of the fiduciary obligations which govern the sale of the collateral. See Georgia Code §§ 68-417a(b), 96-1007, 109A-9-504 to 9-507 (Rev.1979).

Under former sections 2(a)(21), 69(d) and 70(a)(8) of the Bankruptcy Act of 1898, as amended, 3 summary jurisdiction to order the turnover of property to the bankruptcy trustee was not available where the third party held that property under a bona fide adverse claim of right. E.g., May v. Henderson, 268 U.S. 111, 45 S.Ct. 456, 69 L.Ed. 870 (1925); Gorenz v. State of Illinois Department of Agriculture, 653 F.2d 1179 (7th Cir. 1981); Burnham v. Todd, 139 F.2d 338 (5th Cir. 1943); see Phelps v. United States, 421 U.S. 330, 95 S.Ct. 1728, 44 L.Ed.2d 201 (1975). Section 2(a)(21), for example, governed property in the possession of "receivers or trustees appointed in proceedings not under this title, assignees for the benefit of creditors, and agents authorized to take possession of or to liquidate a person's property." Bankruptcy Act of 1898, c. 541, § 2(a)(21), 30 Stat. 544, as added by Chandler Act of 1938, c. 575, § 1, 52 Stat. 840 (formerly codified at 11 U.S.C. § 11(a)(21)). This provision was intended to give bankruptcy courts the power to regulate equity receiverships, and assignments and agency relationships for purposes of liquidation. H.R.Rep.No.1409, 75th Cong., 1st Sess. 20 (1937); S.Rep.No.1916, 75th Cong.3d Sess. 12 (1938). It extended to court officers appointed in certain state insolvency proceedings, e.g., In re Park Beach Hotel Corp., 96 F.2d 886 (7th Cir.), cert. denied, 305 U.S. 638, 59 S.Ct. 105, 83 L.Ed. 411 (1938), and to agents...

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