680 F.2d 451 (6th Cir. 1982), 80-1413, Ford Motor Credit Co. v. Weaver
|Citation:||680 F.2d 451|
|Party Name:||FORD MOTOR CREDIT COMPANY, Plaintiff-Appellant, v. Robert L. WEAVER, John C. Weaver and Sons and Weaver Farms, Defendants- Appellees.|
|Case Date:||June 10, 1982|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued Oct. 15, 1981.
[Copyrighted Material Omitted]
Lanier Fogg, Memphis, Tenn., for plaintiff-appellant.
Robert A. Udelsohn, Udelsohn, Turnage & Blaylock, Memphis, Tenn., for defendants-appellees.
Before KEITH and JONES, Circuit Judges, and HOLSCHUH, [*] District judge.
KEITH, Circuit Judge.
This appeal arose from a Chapter XI petition filed by the defendants-appellees, Robert L. Weaver, John C. Weaver, John C. Weaver & Sons, a partnership and Weaver Farms, also a partnership. The United States District Court for the Western District of Tennessee held that the defendant-appellees' debt to the plaintiff-appellant, Ford Motor Credit Company ("FMCC"), was dischargeable under Section 17a(3) of the Bankruptcy Act of 1898, as amended; that FMCC was an unsecured creditor; and that Robert Weaver was not personally liable.
For the reasons below, the judgment of the district court is affirmed in part and reversed in part, and this case is remanded to the district court for further proceedings consistent with this opinion.
Weaver Farms is a partnership whose co-owners are John C. Weaver and Robert L. Weaver. On October 25, 1974, Weaver Farms purchased two Ford tractors and other farm equipment from Cleveland Ford Tractor, Inc. ("CFT"). The terms of this purchase were included in a pre-printed retail installment contract. One provision of that contract indicated that the contract would be assigned to FMCC. FMCC's name appeared in the upper-left corner of the contract. The contract did not, however, include FMCC's address.
Eugene Tarsi, the president of CFT, executed the contract on CFT's behalf. William Maloney, the farm manager of Weaver Farms, obtained the contract from CFT and mailed it to Robert Weaver. Weaver executed the installment contract on behalf of Weaver Farms and mailed it to Maloney. Maloney subsequently delivered the fully executed contract to CFT. CFT was located in Cleveland, Mississippi. Robert Weaver, however, resided in Memphis, Tennessee.
Weaver Farms' address was improperly listed on the installment contract as Rt. 1, P.O. Box 90, Tutwiler, Mississippi. Tutwiler is in Tallahatchie County, Mississippi. The equipment, however, was located on Weaver Farms' property in Sunflower County, Mississippi.
On January 8, 1975, CFT filed a financing statement in Tallahatchie County, Mississippi. The financing statement listed CFT as the secured party and stated that CFT's address was P.O. Box 219, Cleveland, Mississippi 38732. The financing statement covered two Ford tractors, a cotton picker and a Greenline disc. Subsequently, CFT assigned the October 1974 installment contract to FMCC.
CFT is a wholly-owned subsidiary of Ford Tractor Company. Ford Tractor Company and FMCC are wholly-owned subsidiaries of Ford Motor Company. FMCC frequently purchases commercial paper from CFT. In fact, FMCC has a right of first refusal on the commercial paper that CFT creates. Customers occasionally leave installment payments and extension agreements at CFT which are intended for FMCC. CFT then forwards these documents to FMCC.
On February 27, 1975, Weaver Farms, Robert Weaver, John C. Weaver, and John C. Weaver and Sons filed Chapter XI petitions in the Bankruptcy Court for the Western District of Tennessee. On that same date, the bankruptcy court appointed Robert Weaver as the debtor in possession. Weaver Farms' Chapter XI petition listed FMCC as a secured creditor with a security interest in two Ford tractors and a "24 foot" disc. The petition also indicated that FMCC's address was P.O. Box 219, Cleveland, Mississippi; however, this was CFT's address. FMCC's correct address was P.O. Box 4685, Greenville, Mississippi.
The bankruptcy court mailed notice of the bankruptcy proceedings to the listed creditors sometime before April 21, 1975, the last day on which creditors could file
complaints. The court mailed the notice to FMCC at the address listed on the Chapter XI petition. FMCC claims, however, that it did not learn of the Chapter XI proceedings until November 1976.
On March 17, 1975, Maloney purchased another tractor purportedly on behalf of Weaver Farms. This March 1975 purchase was evidenced by a retail installment contract. CFT also assigned this contract to FMCC. The financing statement covering this purchase was filed in Tallahatchie County on April 18, 1975. The parties purportedly used the same method of execution as with the first installment contract. This March 1975 purchase, however, occurred after the filing of the Chapter XI petition and after the appointment of Robert Weaver as debtor in possession. Robert Weaver denied that he signed the second installment contract, and FMCC was unable to prove Robert Weaver's signature. In fact, the bankruptcy court found that the second installment contract contained a forgery of Robert Weaver's signature.
The creditors approved a Plan of Arrangement ("Plan") on January 22, 1975. Under the Plan, the debtors would transfer certain assets to Union Planters National Bank ("Union Planters"), including the farm equipment at Weaver Farms. In exchange, Union Planters would transfer $1,500,000 to the debtors, which would be used to fund the Plan. The creditors would then be paid from this fund. The bankruptcy court approved the Plan and discharged the debtors on March 20, 1975.
Robert Weaver, as debtor in possession, transferred Weaver Farms' assets to Union Planters in accordance with the Plan. Union Planters, however, did not take possession of the equipment purchased under either the October 1974 contract or the March 1975 contract. Union Planters notified the debtors' attorney that it would not take possession of this equipment. Thereafter, Union Planters conducted a liquidation sale which did not include the equipment.
The equipment purchased under the October 1974 and March 1975 installment contracts could not be located after the liquidation sale. As of 1977, FMCC had been unable to locate this equipment.
I. Dischargeability of the Debt to FMCC
A confirmation of an arrangement will discharge a debtor from all unsecured debts and liabilities except those which are non-dischargeable pursuant to Section 17 of the Bankruptcy Act of 1898 ("Bankruptcy Act"). Bankruptcy Act, § 371, as amended, 11 U.S.C. § 771 (repealed). 1 Section 17a(3) of the Bankruptcy Act prevents the discharge of a provable debt which has not been duly scheduled with the creditor's name. 11 U.S.C. § 35(a)(3) (repealed). 2 If the creditor had notice or actual knowledge of the bankruptcy proceedings, however, Section 17a(3) allows a provable debt to be discharged even if the debt was not duly scheduled. Id. Thus, a provable debt is discharged under Section 17a(3) provided the debt was duly scheduled or the creditor had notice or actual knowledge of the bankruptcy proceedings.
The bankruptcy court held that Weaver Farms' October 1974 debt to FMCC was dischargeable pursuant to Section 17 of the Bankruptcy Act. The debtors listed FMCC as the creditor on the Chapter XI petition. However, the petition listed CFT's address and not FMCC's address. Nevertheless, the bankruptcy judge concluded that the October 1974 debt was duly scheduled. In so holding, the bankruptcy court relied upon Kreitlein v. Ferger, 238 U.S. 21, 35 S.Ct. 685, 59 L.Ed. 1184 (1915). In Kreitlein v. Ferger, the Supreme Court held that a debt was duly scheduled even though the creditor's street address was omitted from the schedule. Moreover, the bankruptcy court held that the March 1975 debt was not a provable debt because the March 1975 installment contract contained a forgery of Robert Weaver's signature.
On appeal, the district court affirmed the judgment of the bankruptcy court. The court agreed with the bankruptcy judge that the incorrect address for FMCC was not fatal to the discharge. The court noted that the incorrect address was listed inadvertently.
On this appeal, FMCC argues that Weaver Farms' debt payable to FMCC was not discharged because that debt was not duly scheduled. FMCC also argues that it had no notice or actual knowledge of the Chapter XI proceedings. We will address each argument separately.
Whether the October 1974 Debt to FMCC was Duly Scheduled.
A debt is duly scheduled if the debtor complies with the provisions of Section 7a(8) of the Bankruptcy Act. 11 U.S.C. § 25(a)(8) (repealed). 3 Section 7a(8) requires the debtor to list his creditors' residences or places of business. If the debtor does not know a creditor's address, Section 7a(8) requires the debtor to state this fact on the schedule.
FMCC argues that the October 1974 debt was not duly scheduled because the schedule did not list FMCC's correct address. We agree.
Courts have not adopted a per se rule as to what constitutes a duly scheduled debt. See Kreitlein v. Ferger, 238 U.S. 21, 35 S.Ct. 685, 59 L.Ed. 1184. Instead, whether a debt is duly scheduled usually depends upon the facts of each case. See, e.g., King v. Harry, 131 F.Supp. 252 (D.D.C.1955); Bartlett v. Taylor, 209 Mo.App. 612, 238 S.W. 141 (Ct.App.1922). In deciding whether a debt is duly scheduled, the extent to which the schedule fulfills the purpose of Section 7a(8) of the Bankruptcy Act is a significant factor. The purpose of the scheduling requirement is to enable creditors to receive timely notice of bankruptcy proceedings...
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