82 F.3d 956 (10th Cir. 1996), 95-4066, In re Peterson Distributing

Docket Nº:95-4066.
Citation:82 F.3d 956
Party Name:13 Colo. Bankr. Ct. Rep. 120 In re PETERSON DISTRIBUTING, INC., Debtor, CONOCO, INC., a Delaware corporation, Appellee, v. Harriet E. STYLER, as Trustee for Peterson Distributing, Inc., Appellant.
Case Date:April 30, 1996
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 956

82 F.3d 956 (10th Cir. 1996)

13 Colo. Bankr. Ct. Rep. 120

In re PETERSON DISTRIBUTING, INC., Debtor,

CONOCO, INC., a Delaware corporation, Appellee,

v.

Harriet E. STYLER, as Trustee for Peterson Distributing,

Inc., Appellant.

No. 95-4066.

United States Court of Appeals, Tenth Circuit

April 30, 1996

Page 957

[Copyrighted Material Omitted]

Page 958

Appeal from the United States District Court for the District of Utah, 94-CV-697; David Sam, Judge.

Brent A. Bohman (Frederick M. MacDonald with him on the briefs), Pruitt, Gushee & Bachtell, Salt Lake City, Utah, for Plaintiff/Appellee Conoco, Inc.

Kevin R. Anderson (Harriet E. Styler with him on the briefs), Kruse, Landa & Maycock, Salt Lake City, Utah, for Defendant-Appellant.

ANDERSON, KELLY, and HENRY, Circuit Judges.

HENRY, Circuit Judge.

In this adversary action, brought by Conoco, Inc. ("Conoco") against the bankruptcy trustee ("Trustee") for Peterson Distributing, Inc. ("Peterson"), Conoco seeks to recoup or setoff $69,370.49 worth of credit card invoices against its $245,159.06 claim in Peterson's bankruptcy estate. The trustee of Peterson's bankruptcy estate counterclaims for the turnover of the $69,370.49 in credit card invoices. The United States Bankruptcy Court for the District of Utah held that the doctrine of recoupment did not apply and that Conoco was only entitled to a setoff of those invoices submitted and credited to Peterson's account prior to the date Peterson filed its bankruptcy petition. Conoco appealed the bankruptcy court's decision to the United States District Court for the District of Utah, which reversed the decision of the bankruptcy court. The district court found that Conoco was entitled to recoup the entire $69,370.49 against its claim in Peterson's estate. Peterson now appeals from the decision of the district court. We reverse the decision of the district court.

I. BACKGROUND

The parties have stipulated to the following facts:

The business relationship between Peterson and Conoco was governed by a Jobber Franchise Agreement, which incorporated the Conoco Credit Card Guide for Dealers (and its associated bulletins) and an Electronic Fund Transfer Agreement. Under the terms of the Jobber Franchise Agreement, Conoco agreed to sell products to Peterson on credit, who in turn sold those products to customers and other retail dealers. Conoco also agreed to accept credit card invoices from Peterson and to pay Peterson the face amount of the invoices less a three percent processing fee. If an invoice was acceptable under the terms of the Credit Card Guide, Conoco bore the risk of collection. The Credit Card Guide required, in part, that a credit card invoice be legible, signed by the consumer and not include charges for materials or services disputed by the cardholder. An invoice that failed to meet the requirements set forth in the Credit Card Guide was charged back to Peterson. On or about May 8, 1987, Peterson joined Conoco's Preauthorized Electronic Fund Transfer Payment System. The Electronic Fund Transfer Program provided that, on a bi-weekly basis, Conoco could automatically withdraw from Peterson's bank account the amount owing to Conoco for purchases. The amount owing to Conoco for purchases was reduced automatically by the face amount of the credit card invoices (less the three percent collection fee) that were submitted to Conoco and not charged back to Peterson.

Peterson filed a petition for relief under Chapter 11 of the United States Bankruptcy Code on June 28, 1991. As of that date, Peterson owed Conoco $245,159.06 for purchases of Conoco products. After the petition date, Peterson made six cash purchases of Conoco products. Also, Peterson continued to accept credit cards as payment for retail sales and to assign credit card invoices to Conoco. Peterson has submitted and Conoco has accepted credit card invoices totaling $69,370.49 that have not been credited against Peterson's account. Of these invoices, $22,808.90 were submitted and accepted

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before the petition date. The remainder, $46,561.59, was not available as a credit against Peterson's account until after the petition date.

II. DISCUSSION

We exercise jurisdiction pursuant to 28 U.S.C. § 158(d). Our review of the bankruptcy court's decision is governed by the same standards of review that govern the district court's review of the bankruptcy court. Taylor v. IRS, 69 F.3d 411, 415 (10th Cir.1995). Accordingly we review the bankruptcy court's legal determinations de novo and its factual findings under the clearly erroneous standard. Robinson v. Tenantry (In re Robinson), 987 F.2d 665, 667 (10th Cir.1993) (per curiam). A finding of fact is clearly erroneous if it is without factual support in the record or if, after reviewing all of the evidence, we are left with the definite and firm conviction that a mistake has been made. Anderson v. City of Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985).

Peterson raises two claims on appeal: (1) that the district court erred in reversing the bankruptcy court's judgment, which held that Conoco was not entitled to recoupment, and (2) that the bankruptcy court properly determined that Conoco's right of setoff under 11 U.S.C. § 553 was limited to $22,809.90, the total of the credit card invoices available as a credit against Peterson's account with Conoco before the bankruptcy filing. We address each issue in turn.

  1. Recoupment

    1. General Principles

      Although modern counterclaim doctrine has replaced common law recoupment in most areas of the law, recoupment remains a distinct doctrine in bankruptcy cases, Davidovich v. Welton (In re Davidovich), 901 F.2d 1533, 1537 (10th Cir.1990) (per curiam). Originally an equitable rule of joinder for claims arising out of a single transaction, recoupment allowed adjudication in one suit of two claims that otherwise had to be brought separately under the common law forms of action. Id. Davidovich described recoupment as follows:

      In the modern bankruptcy setting, this rule [of recoupment] has evolved to permit a creditor to offset a claim that " 'arises from the same transaction as the debtor's claim,' " without reliance on the setoff provisions and limitations of [11 U.S.C.] section 553, because the creditor's claim in...

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