735 F.2d 160 (5th Cir. 1984), 83-3326, Mitsubishi Intern. Corp. v. Clark Pipe and Supply Co., Inc.

Docket Nº:83-3326.
Citation:735 F.2d 160
Party Name:MITSUBISHI INTERNATIONAL CORPORATION, Plaintiff-Appellee, v. CLARK PIPE AND SUPPLY COMPANY, INC., Defendant, Associates Commercial Corporation, Intervenor-Appellant.
Case Date:June 28, 1984
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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735 F.2d 160 (5th Cir. 1984)




Associates Commercial Corporation, Intervenor-Appellant.

No. 83-3326.

United States Court of Appeals, Fifth Circuit

June 28, 1984

Page 161

Monroe & Lemann, Richard W. Bussoff, New Orleans, La., for intervenor-appellant.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, R. Patrick Vance, Andrew A. Braun, New Orleans, La., for plaintiff-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before THORNBERRY, WILLIAMS and GARWOOD, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Associates Commercial Corporation appeals from a district court judgment holding that under Louisiana law Mitsubishi International Corporation has a valid vendor's privilege on steel pipe sold to Clark Pipe & Supply Co., and that Mitsubishi's privilege primes Associates's chattel mortgage on the same pipe. We affirm the holding of the district court.


Clark Pipe & Supply Co. was in the business of buying and selling steel pipe. From 1979 through 1981, Clark purchased various quantities of Japanese manufactured steel pipe on credit from Mitsubishi. In their ordinary course of dealing, Mitsubishi's parent corporation, Mitsubishi Corporation Tokyo, would contact Mitsubishi when the Japanese steel mills "opened their books" each quarter for orders, and Mitsubishi would solicit business from various pipe purchasers, including Clark.

Negotiations would take place by and between Mitsubishi and Clark, and after an agreement was reached, Mitsubishi would place an order for the pipe with Mitsubishi Corporation Tokyo. Mitsubishi Corporation Tokyo would in turn place an order with a Japanese steel mill.

At the time that each of the five oral contracts or agreements at issue were concluded, the specific steel pipe forming the basis of each agreement was either not in existence, or was in the general inventory of the Japanese steel mill. The pipe would later be manufactured or taken out of inventory. The specific pipe being sold to Clark was designated as such at the Japanese steel mill by identifying numbers placed on the pipe itself. The pipe was subsequently shipped by vessel "CIF" by Mitsubishi Corporation Tokyo to Mitsubishi. Customs duties, insurance and freight were part of the purchase price paid by Mitsubishi. After the transporting vessels left Japan, the bills of lading were at all times held by Mitsubishi or its agents. Physical delivery of the pipe to Clark took place only after the pipe was unloaded on the dock in New Orleans and a customs broker under contract with Mitsubishi ensured that the pipe had cleared customs and the necessary charges were paid.

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On or about May 3, 1982, Mitsubishi filed a petition in Louisiana district court asserting a vendor's privilege 1 on the steel pipe sold by Mitsubishi to Clark. Subsequently, on May 7, 1982, Clark instituted bankruptcy proceedings. Mitsubishi then instituted an adversary proceeding against Clark, the debtor in possession, asserting a vendor's privilege arising from the Louisiana sale of the pipe to Clark and asking for an order lifting the automatic stay of Section 362 of the Bankruptcy Code so as to permit Mitsubishi to reclaim the pipe. On May 19, 1982, Associates intervened asserting that its chattel mortgage on Clark's inventory was superior to Mitsubishi's claim.

The bankruptcy court rendered a judgment in favor of Mitsubishi. Appeals were filed by Associates and on behalf of Clark when it was in Chapter 11 Bankruptcy proceedings. Subsequently, Clark was adjudicated bankrupt pursuant to Chapter 7 of the Bankruptcy Code and the trustee in bankruptcy disclaimed the pipe at issue and abandoned this appeal on behalf of the debtor's estate. The district court affirmed the judgment of the bankruptcy court as not clearly erroneous, and Associates appeals to this Court.


The first question presented on appeal is whether the district court committed reversible error by using the "clearly erroneous" standard in reviewing the findings of fact of the bankruptcy court. Associates argues that because the district court rendered its decision in this matter on May 4, 1983, the Interim Emergency Rule promulgated by the United States District Court for the Eastern District of Louisiana required the district court on appeal to hold hearings and receive evidence "as appropriate." Therefore, Associates continues, the "clearly erroneous" standard should not have been applied.

In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), the Supreme Court held unconstitutional the jurisdictional grant of the Bankruptcy Reform Act of 1978 ("the Act"). 2 The Act established a bankruptcy court in each judicial district as an adjunct to the district court, and granted the bankruptcy courts jurisdiction over "all civil proceedings arising under title 11 [the bankruptcy title of the United States Code] or arising in or related to cases under title 11." Because the Act conferred judicial power upon bankruptcy courts comparable to that granted Article III courts, without establishing safeguards to the independence of the bankruptcy judiciary comparable to those granted Article III judges, the Court held the Act violated Article III of the United States Constitution. Although the case was decided on June 28, 1982, the judgment was specifically made prospective only, and was stayed until December 24, 1982, to "allow Congress an opportunity to reconstitute the bankruptcy courts or to adopt other valid means of adjudication, without impairing the interim administration of the bankruptcy laws." Id., 102 S.Ct. at 2880. Between June 28, 1982 and December 24, 1982, courts around the country adopted emergency local rules designed to delegate certain authority to the bankruptcy courts and thus allow them to operate until Congress had acted to reform the 1978 Act. The emergency rule adopted by the United States District Court for the

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Eastern District of Louisiana states in part that:

In conducting review, the district judge may hold a hearing and may receive such evidence as appropriate and may accept, reject, or modify, in whole or in part, the order or judgment of the bankruptcy judge...

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