Blackford v. Commercial Credit Corporation

• Decision Date: 10 April 1959
• Docket Number: No. 17243.,17243.
• Citation: 263 F.2d 97
• Parties: Frank S. BLACKFORD, as Trustee in Bankruptcy of Munro-Van Helms Company, Appellant, v. COMMERCIAL CREDIT CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

263 F.2d 97 (1959)

Frank S. BLACKFORD, as Trustee in Bankruptcy of Munro-Van Helms Company, Appellant, v. COMMERCIAL CREDIT CORPORATION, Appellee.

No. 17243.

United States Court of Appeals Fifth Circuit.

January 23, 1959.

Rehearing Denied April 10, 1959.

COPYRIGHT MATERIAL OMITTED

Morris K. Sirote, George I. Case, Jr., and John Glasser, Birmingham, Ala., for appellant.

Kenneth Perrine, Alfred Swedlaw, Birmingham, Ala., Leader, Tenenbaum, Perrine & Swedlaw, Birmingham, Ala., of counsel, for appellee.

Before RIVES, BROWN and WISDOM, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

This is a bankruptcy case involving the validity of an assignment of accounts receivable by the Bankrupt, Munro-Van Helms Company, to CCC, the appellee, Commercial Credit Corporation.¹

After filing enough pleadings to consume 360 pages of the printed record, the trial's tone was set by a ten-page opening introductory colloquy of confusion in which all participants demonstrated with the candor born of impromptu their general lack of comprehension and agreement as to just what issues were about to be tried. And, days later, the trial ended with the last pages of testimony intertwined with the continued and concluding dispute between counsel as to just what the trial had been about. Not a little of the confusion is traceable to the complex prolixity of the pleadings in which a basic claim might be set forth as many as three or four times depending on the number of legal theories contrived or asserted. "Waivers" or "withdrawals" of many of these was apparently an effort — almost nowhere successful — to eradicate the lawyer-made complexity and restore to the pleadings their rightful office under the Civil Rules to simplify, not confuse, the issues. Small wonder that Judge Grooms had to follow his carefully constructed initial opinion and judgment with an amending order based on his ruling on CCC's motion for summary judgment, in which he acknowledged that issues he had understood to have been waived by the Trustee were in fact left in the case. Thus has it become our task to sift through 616 pages of record and 175 pages of briefs and supplemental briefs, to alternately save and discard, and formulate the issues before us.

I.

Background.

But before such an undertaking it is helpful to start "in the beginning." The transactions between Bankrupt and CCC had their inception in a contract made in May 1949. This contract was the basis for the future dealings between the two parties in which CCC would purchase, and Bankrupt would sell, Bankrupt's accounts receivable. Of course, "assignment of accounts receivable," or "non-notification financing" is an accepted commercial practice and is recognized and now provided for by statute in many states. The specific details of the contract will be dealt with more fully later. In general, it provided that CCC would purchase acceptable accounts receivable from Bankrupt from time to time advancing 85% of the purchase price immediately and the remaining 15% upon payment in full by the account debtor. Bankrupt was to be billed for a monthly service charge figured on a percentage of the "average daily outstanding face of accounts during such month." Bankrupt was authorized to collect on the accounts and in fact did so; warranted the payment in full by account debtors of all accounts; agreed to repurchase from CCC all delinquent accounts; and assumed liability for attorney's fees, court costs and other expenses incurred in collecting on the accounts or for amounts owed under the contract provisions. The contract stated that it should be governed by the laws of Maryland.

This whole case turns largely on the fact that Section 209 of the Alabama Assignment of Accounts Receivable Act of 1949, Ala.Code, Tit. 39, §§ 207-214 (1940), (referred to as ARA) requires filing of a notice of such assignments. Presumably pursuant to such Act the parties filed a "Statement of Assignment of Accounts Receivable" or renewal thereof in October of 1949, 1950, 1951, 1952 and December of 1952 with the Office of Probate Judge in Talladega County, Alabama (the residence of Bankrupt). There followed a continuous course of business dealings between Bankrupt and CCC until the filing of a Chapter XI, 11 U.S.C.A. § 701 et seq. petition in bankruptcy by Bankrupt on July 30, 1953. Adjudication of bankruptcy followed on April 12, 1954.²

Upon the filing of the petition in bankruptcy the Receiver in Bankruptcy took possession of the uncollected accounts receivable then in the possession of CCC, over its objection, by virtue of an order of the Referee. This order was subsequently reversed by Judge Lynne on April 22, 1954, upon a finding that the Referee was without summary jurisdiction,³ and the remaining uncollected accounts were thereupon turned over to CCC along with the funds already collected by the Receiver on the other accounts.

II.

Issues.

With this history behind us we attempt to ascertain the questions which were presented and those still in issue in this case. Stripped of all the voluminous charge and countercharge, amendment and reply, the Trustee advanced essentially these claims.

III Accounts assigned prior to bankruptcy but collected subsequent to it were invalid because

(A) the recorded notice of assignment was defective under ARA, or

(B) even though sufficient, the assignments were in fraud of creditors under Alabama law.

IV Accounts assigned prior to bankruptcy and collected prior to bankruptcy were invalid because of

(A) a failure to comply with ARA, or

(B) even though complied with, assignments were in fraud of creditors under Alabama law.

V Accounts assigned within four months, or one year, of bankruptcy were voidable preferences under section 60(a) 11 U.S.C.A. § 96(a) or invalid under section 67(d) (2), 11 U.S. C.A. § 107(d) (2).

VI Several claims involving miscellaneous issues such as

(A) usury,

(B) post-bankruptcy assignments,

(C) assignment of additional security,

(D) collections subsequent to adjudication,

(E) attorney\'s fees and expenses.

III.

Pre-Bankruptcy Assignments — Post-Bankruptcy Collections.

(A) Defective ARA Notice.

This claim which was listed above as III is the most serious both in content and amount.⁴ This relates to assignment of accounts receivable made to CCC during April through July 1953. Collections of the accounts from account debtors were all made after bankruptcy.

The principal attack disregards any assertion of knowledge of insolvency or of fraud, either actual or constructive, under Alabama law. The attack is the frontal one that the assignments were defective under ARA because the recorded notice specified the assignee's (CCC's) place of business as "Baltimore, Maryland" rather than Montgomery, Alabama, the place designated in certain other statutory filings. Voidable thus under the State law, the transfer was ineffective against the Trustee. Bankruptcy Act, § 70(e), 11 U.S.C.A. § 110(e).

Except in this one detail there is no dispute about the statutory adequacy of the assignment or notice. The notices were otherwise in the proper form filed at the right time, and in the office provided by statute.

It is not necessary to go beyond the language of the Act itself to sustain Judge Grooms' opinion and judgment on this point that CCC complied with ARA.

The ARA⁵ provided that "a statement" shall be filed "containing (a) a designation of the assignor and assignee, and of the principal place of business of each, within this state, if any; * * *." Section 209 continues, "The following form of statement (or any other form of statement containing substantially the same information) shall suffice for the purpose of this Act, viz.: * * *." A model form then follows, including, "The principal place of business of assignor in the State of Alabama is at ...............

........................................," (Street Address) (City) (County)

and, "The principal place of business of

assignee is at ........................." (Street Address) (City) (County)

The statement then "shall be filed in the office of the judge of probate for the county in which assignor's principal place of business within this state is located."

The two words "if any" following "place of business * * * within this state" certainly indicate that the Act did not consider a "principal place of business" within Alabama as a prerequisite to the protection it affords. This interpretation is strengthened by other provisions as well, as, for example, the comma after "each" ("the principal place of business of each, within this state, if any," rather than, "the principal place of business of each within this state, if any"). The "any other form * * * containing substantially the same information" liberality is consistent. And the statutorily approved forms themselves demonstrate a double standard by the provision that "the principal place of business of assignor in the State of Alabama is" while that for the assignee is simply "the principal place of business of assignee is" with no reference to location in Alabama. (emphasis supplied)

The Trustee's contention that the notice should have specified Montgomery, Alabama, does not rest on the fact that CCC's office there was engaged in accounts receivable financing or that, in contrast to the many other of its offices located in Alabama, Montgomery was the most principal. He could not have succeeded had he made the attempt. For the facts clearly justified the District Court's conclusions to the contrary. CCC had an office in Montgomery which, like many others throughout the state, was engaged in various forms of consumer and floor plan financing for household appliances, automobiles, and the like. But these offices were completely independent of each other, operating under the supervision of the Atlanta division office, and Montgomery was not the most prominent. And none of them, and certainly not Montgomery, had anything to do with accounts receivable financing,...