Gray v. Giant Wholesale Corp.
| Citation | 758 F.2d 1000 |
| Decision Date | 04 April 1985 |
| Docket Number | No. 84-1439,84-1439 |
| Parties | Bankr. L. Rep. P 70,390, 40 UCC Rep.Serv. 1480 David G. GRAY, Trustee, Appellant, and A. Wayne Ingle and William Jerry Page t/d/b/a Ingle-Page Enterprises, Inc., Plaintiffs, v. GIANT WHOLESALE CORP., a Tennessee Corporation, Appellee, v. Joyce P. INGLE and Joanna W. Page, Third-Party Defendants. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
David G. Gray, Asheville, N.C. (Gray, Kimel & Connolly, P.A., Asheville, N.C., on brief), for appellant.
E. Glenn Kelly, Asheville, N.C. (Bennett, Kelly & Cagle, P.A., Asheville, N.C., on brief), for appellee.
Before RUSSELL, WIDENER and SNEEDEN, Circuit Judges.
This is a case brought by David G. Gray, trustee in bankruptcy for the estate of William Jerry Page d/b/a Hendersonville Food Center, against Giant Wholesale Corp., a Tennessee corporation, to recover for allegedly ineffective, voidable and preferential transfers made to Giant before Page filed his voluntary Chapter 7 bankruptcy petition. 1 The district court held, as a matter of law, that Giant was a secured creditor, thereby defeating Gray's attempt to subordinate Giant's security interest under N.C.Gen.Stat. Sec. 25-9-301(1)(b) (Supp.1983); that Giant was not an "insider" and did not receive any voidable preferential transfers; and that Giant had not received an unlawful bulk transfer. 2 The district court submitted to the jury the question whether Giant's sale of Page's repossessed inventory and equipment was commercially reasonable, 3 and the jury found the sale to have been commercially reasonable. We affirm.
Page began working in Wayne Ingle's Stoney Knob Superette (a grocery store) in 1979. Shortly thereafter, Ingle apparently made Page a part-owner of the store. Ingle and Page then contemplated opening a new store, the Hendersonville Food Center (Food Center), and they contacted Giant, the primary inventory supplier of the Stoney Knob store. Giant agreed to supply groceries to Food Center, provided Ingle and Page agreed to guarantee all indebtedness incurred by Food Center. Subsequently, on April 23, 1980, Ingle and Page, purportedly representing Ingle-Page Enterprises, Inc., 4 signed promissory notes, a security agreement, and a guaranty agreement. The security agreement provided that Giant was to retain a security interest in Food Center's then owned or thereafter acquired inventory, including its groceries, floats, shelves, refrigeration equipment, cash registers, and heating and air-conditioning equipment. Although Giant filed a financing statement on April 23, 1980, it concedes that it did not perfect its security interest in Food Center's inventory by notice filing.
Shortly after Giant agreed to supply Food Center, Ingle and Page had a "falling out." Ingle agreed to retain ownership of the Stoney Knob store, and Page succeeded to sole ownership of Food Center. Page, however, was unable to revive the solvency of Food Center. On October 17, 1980, Page agreed to relinquish control of Food Center's checking account to Giant. Giant controlled the dispensation of all checks, but Page determined the amount of money to be placed into the checking account and Page continued to manage Food Center. Between October 17, 1980, and February 12, 1981, Giant issued over 300 checks from Food Center's account; only 23 checks were issued to Giant and the amount of Food Center's indebtedness to Giant increased while Giant controlled its checking account.
On February 12, 1981, Giant notified Page that it intended to repossess all of Food Center's inventory because of the mounting indebtedness and Page's default under the security agreement. In fact, Giant repossessed Food Center's inventory and equipment on the evening of February 12, transported it to Tennessee, returned the non-perishable inventory to its stock, and sold the equipment and perishable inventory at private sales. Giant informed Page of the manner of disposition. One day after repossessing the inventory, Giant induced Page to sign a security agreement and a financing statement covering the inventory and equipment that Giant had already repossessed. Giant filed such financing statement. Thereafter, on September 30, 1981, over seven months after the inventory was repossessed, Page filed a voluntary Chapter 7 bankruptcy petition. Gray was appointed as trustee, and he brought this action against Giant.
Initially, Gray contends that Giant failed to perfect its security agreement in Food Center's inventory by notice filing, therefore, Gray contends that Giant's interest in the inventory is subordinate to the rights of the trustee as a hypothetical lien creditor pursuant to Bankruptcy Reform Act Sec. 544(a)(1) 5 and the North Carolina Uniform Commercial Code Sec. 9-301(1)(b). 6 Gray, however, overlooks the fact that a financing statement need not be filed to perfect a security interest in collateral which is in the possession of the secured party. 7 Giant, due to the default of Page under the security agreement signed by Page on April 23, 1980, lawfully repossessed the inventory on February 12, 1981 without breaching the peace. 8 Giant thereby perfected its security interest by possessing the inventory, pursuant to N.C.Gen.Stat. Sec. 25-9-305. See Raleigh Indus. of America v. Tassone, 74 Cal.App.3d 692, 141 Cal.Rptr. 641 (1977); Rosner v. Plaza Hotel Assoc., Inc., 146 N.J.Super. 447, 370 A.2d 41 (1977). Consequently, Giant had a perfected security interest in Food Center's inventory that was not subordinated to the Sec. 544(a)(1) strong-arm powers of the trustee.
Gray next argues that Giant, by dispensing itself checks from Food Center's account and by repossessing the inventory, received voidable preferential transfers. 9 Gray, recognizing that the alleged preferential transfers took place more than ninety days yet less than a year before Page filed his bankruptcy petition, contends that Giant was an "insider" who knew that Food Center was insolvent. Giant, however, was not an insider or a person in control 10 of Food Center merely because Giant controlled the dispensation of its checks. In re Schick Oil & Gas, Inc., 35 B.R. 282, 285...
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