Frederick S. Wyle Professional Corp. v. Texaco, Inc.
| Decision Date | 25 June 1985 |
| Docket Number | Nos. 83-2514,83-2515,s. 83-2514 |
| Citation | 764 F.2d 604 |
| Parties | Bankr. L. Rep. P 70,605 FREDERICK S. WYLE PROFESSIONAL CORPORATION, Trustee in Bankruptcy of Pacific Far East Line, Inc. and Atlantic Bear Steamship Company, Plaintiff-Appellant, v. TEXACO, INC., Defendant-Appellee. FREDERICK S. WYLE PROFESSIONAL CORPORATION, Trustee in Bankruptcy of Pacific Far East Line, Inc. and Atlantic Bear Steamship Company, Plaintiff-Appellant, v. MOBIL SALES & SUPPLY CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Peter J. Benvenutti, Dinkelspiel & Dinkelspiel, San Francisco, Cal., for plaintiff-appellant.
John N. Hauser, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendants-appellees.
Appeal from the United States District Court for the Northern District of California.
Before FAIRCHILD *, Senior Circuit Judge, and GOODWIN and BOOCHEVER, Circuit Judges.
Frederick S. Wyle, a professional corporation, acting as the trustee in bankruptcy of Pacific Far East Line, Inc. (PFEL) and its wholly-owned subsidiary, Atlantic Bear Steamship Company (ATCO), appeals from the district court's order affirming the bankruptcy court's grant of summary judgments in two consolidated proceedings in favor of Mobil Sales and Supply Corp. (Mobil) and Texaco, Inc. (Texaco) and affirming the bankruptcy court's denial of his motions for reconsideration of the summary judgments. We affirm the order of the district court.
On August 1, 1980 the trustee filed an action in the bankruptcy court against Mobil, and another against Texaco, alleging that payments made by PFEL and ATCO to Mobil and Texaco in the four months prior to PFEL's January 31, 1978 and ATCO's February 3, 1978 filings of Chapter XI petitions for reorganization were voidable preferences under Section 60 of the Bankruptcy Act. 1 During those four months Mobil received payment on eleven invoices totalling approximately $1 million and Texaco received payment on three invoices totalling approximately $200,000.
Section 60(a)(1) of the Bankruptcy Act defines a "preference" as:
a transfer ... of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition initiating a proceeding under this Act, the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class.
Section 60(b) further provides:
Any such preference may be avoided by the trustee if the creditor receiving it or to be benefited thereby or his agent acting with reference thereto has, at the time when the transfer is made, reasonable cause to believe that the debtor is insolvent.
On December 6, 1982 Mobil and Texaco separately moved for summary judgment contending that there was no genuine issue of material fact as to whether Mobil or Texaco had reasonable cause to believe PFEL or ATCO was insolvent at the time of the transfers. Mobil and Texaco filed a joint memorandum of points and authorities in support of their motions for summary judgment. The following items were submitted in support of the motions:
(a) Affidavits from Mobil and Texaco sales and credit officials.
(b) PFEL's Quarterly Report to its Shareholders, dated September 30, 1977.
(c) PFEL's Form 10-Q filed with the Securities and Exchange Commission for the quarter ending September 30, 1977.
(d) A Dun & Bradstreet Report on PFEL, available to Mobil, dated August 29, 1977.
(e) A December 14, 1977 report prepared by Export Consulting Services analyzing PFEL's financial condition.
(f) A December 16, 1977 supplement to the August 29, 1977 Dun & Bradstreet Report.
(g) Various newspaper articles from October and December of 1977 concerning PFEL's financial condition.
In opposition to the motion the trustee did not offer any affidavits, but merely submitted two amended responses to Mobil and Texaco interrogatories. The interrogatories asked for Wyle's contentions and information as to Mobil's and Texaco's cause to believe PFEL was insolvent.
The amended response as to Mobil stated:
Plaintiff believes that Mobil Sales & Supply Corporation had reasonable cause to believe that PFEL was insolvent at the time Mobil received the transfers from PFEL. Plaintiff relies on the fact that rumors and reports of PFEL's financial difficulties were circulating in the business community, especially in San Francisco. Moreover, plaintiff's own discovery has shown that Mobil actually saw and had possession of newspaper articles concerning PFEL's poor financial condition. Those newspaper reports found in defendant's possession and supporting this contention are entitled and dated as follows: "Alioto Lays Out PFEL's Bright Future," October 31, 1977; "MA Rescues Troubled Ship Line," December 21, 1977; and "PFEL Gets $1 Million Loan from U.S.," December 23, 1977.
The three newspaper articles listed were among those submitted with Mobil's summary judgment motion.
As to Texaco the amended response stated:
Plaintiff believes that Texaco had reasonable cause to believe that PFEL was insolvent at the time Texaco received the transfers from PFEL. Plaintiff has not completed its own discovery with respect to this matter. Among the facts on which plaintiff relies are that PFEL's financial situation was common knowledge in the business community, especially San Francisco. Numerous newspaper articles were published about PFEL's financial difficulties. Many creditors were shipping to PFEL on a "C.O.D." basis, and PFEL was either very slow in or not paying its obligations. Plaintiff also believes discovery will show that Texaco made numerous telephone inquiries and personal visits to PFEL and others concerning PFEL's financial viability and overdue payments to Texaco.
Bill Devereaux, Nelle Mitchell, and Norm Miller have knowledge of the facts above. These individuals are currently employed by plaintiff. The newspaper articles will be produced, but there are no documents showing that many creditors were shipping on a C.O.D. [basis].
After hearing the motions together, the bankruptcy court entered summary judgments in favor of Mobil and Texaco finding that Mobil and Texaco lacked reasonable cause to believe PFEL insolvent.
The trustee moved for reconsideration of the summary judgments pursuant to Bankruptcy Rule 923 and for an order permitting him 120 days to depose certain of Mobil's and Texaco's witnesses. The trustee contended that the summary judgments were improper because (1) Mobil and Texaco were barred from relying on PFEL's statements concerning its financial condition, and (2) the credibility of Mobil's and Texaco's affiants raised genuine issues of material fact which could only be tested at trial. The trustee also moved for reconsideration based upon "newly discovered evidence," including additional newspaper articles from the preference period and sworn declarations of PFEL employees and the trustee's counsel. At the hearing before the bankruptcy judge on the motion to reconsider the trustee conceded that the material in the new affidavits was available at the time of the original summary judgment hearing. The bankruptcy court refused to reconsider its judgments.
The trustee then appealed to the district court. The district court, after reviewing the record on summary judgment, affirmed the bankruptcy court's summary judgment orders. The district court then reviewed the bankruptcy court's denial of the Motion for Reconsideration. The court applied an abuse of discretion standard to the bankruptcy court's denial of reconsideration and decided that the bankruptcy court had not erred in applying the law or in finding that no newly discovered evidence existed and thus had correctly refused to reconsider the summary judgments.
The trustee's first contention is that the district court erred in applying a "clearly erroneous" standard of review to the bankruptcy court's judgments and thereby unconstitutionally vested the non-Article III bankruptcy judge with too much power, relying on 1616 Reminc Ltd. Partnership v. Atchison & Keller, 704 F.2d 1313 (4th Cir.1983). 2 In his discussion the trustee fails to distinguish between the district court's review of the summary judgment and its review of the denial of the motion to reconsider apparently alleging that the district court reviewed everything under a "clearly erroneous" standard. The trustee's claim is entirely without merit.
In reviewing the bankruptcy court's grant of summary judgments the district judge declared himself bound by the standard in Hifai v. Shell Oil Co., 704 F.2d 1425 (9th Cir.1983):
In reviewing a grant of summary judgment, the appellate court's task is identical to that of the trial court. Viewing the evidence in the light most favorable to the non-moving party, the appellate court must determine whether the trial court correctly found that there was no genuine issue of material fact and that the moving party was entitled to judgment as a matter of law.
Id. at 1428 (citation omitted). It is clear from the text of the district court order that that is exactly what the court did. The trustee received de novo review on the summary judgments.
The district court reviewed the bankruptcy court's denial of the motion to reconsider under an abuse of discretion standard. The court noted that Bankruptcy Rule 923 made F.R.Civ.P. Rule 59 applicable to the trustee's motion and that denial of such a motion may not be reversed absent manifest abuse of discretion. Walker v. Bank of America National Trust & Sav. Ass'n, 268 F.2d 16, 25 (9th Cir.), cert. denied, 361 U.S. 903, 80 S.Ct. 211, 4 L.Ed.2d 158 (1959).
In his motion to reconsider the trustee contended that the summary judgments were erroneous as a matter of law for two reasons: (1) because the...
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