In re Alcom America Corp.
| Decision Date | 14 April 1993 |
| Docket Number | Bankruptcy No. 84-00138. |
| Citation | 154 BR 97 |
| Parties | In re ALCOM AMERICA CORPORATION, Debtor. |
| Court | United States Bankruptcy Courts – District of Columbia Circuit |
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Stephen B. Sale, Washington, DC, for debtor.
Harvey M. Katz, Washington, DC, for trustee.
Leslie M. Alden, McLean, VA, for Arab Banking Corp.
DECISION PROVISIONALLY GRANTING ARAB BANKING CORPORATION SUMMARY JUDGMENT AGAINST THE TRUSTEE AND THE DEBTOR
Under consideration is a motion for summary judgment filed by the trustee, Daniel E. Leach, against Arab Banking Corporation ("ABC" or "the bank"). The trustee has moved for the imposition of sanctions for contempt against ABC for violating the automatic stay. In support of the contempt motion, the trustee alleges that after repossessing certain ethanol owned by the debtor, ABC violated the stay by completing the sale of that ethanol to A.E. Staley Manufacturing Company ("A.E. Staley" or "Staley"). The debtor, Alcom America Corporation, has intervened and supports the trustee in his motion. ABC opposes the trustee's motion averring that at the time of sale the debtor had no interest in the ethanol.
The court agrees with the bank's position as the undisputed facts indicate title to the ethanol had passed to Staley before the petition was filed. Because the court believes that there are no genuine issues of material fact and that ABC is entitled to judgment as a matter of law, it is inclined to grant summary judgment in favor of ABC. However, the bank has not cross-moved for summary judgment. Therefore, the trustee and the debtor will be given the opportunity to submit any evidence demonstrating the existence of a genuine issue of material fact.
This contested matter had its genesis in a transaction involving the debtor, ABC, and the Fondo de Ordenacion y Regulacion de Producciones y Precios Agrarios ("FORPPA"), an agency of the Spanish government. In June 1983 the debtor contracted with FORPPA for the purchase of ethanol. Shortly after that, the debtor established commitments from Johann Haltermann, Ltd. ("Haltermann") for the processing of the ethanol and from A.E. Staley for the purchase of some of the ethanol.
In a facility letter entered into in August 1983 the debtor received a commitment from ABC for financing of $3 million. In exchange the debtor executed promissory notes in favor of ABC. As security for the loan the debtor and ABC executed two security agreements, one in August 1983 and the other in September 1983. The security agreements were nearly identical, and both gave ABC "a security interest in all the debtor's right, title and interest in the following contracts (and all proceeds therof sic)." Among the contracts listed in the security agreements was the debtor's contract with FORPPA. ABC filed financing statements in New York covering each security interest.
Between September and December 1983, ethanol was shipped to Houston, Texas and stored in terminals there. As the ethanol was stored, the warehousemen issued nonnegotiable warehouse receipts. These receipts were eventually endorsed by Joseph O. Jacobson, at that time an officer of the debtor, and turned over to ABC.
On December 31, 1983, Chemtank, one of the warehousemen, released roughly 270,000 gallons to Barge GBL-101 for processing by Haltermann. Of the 270,000 gallons, almost 147,000 gallons were sold to A.E. Staley well before the debtor's petition was filed on March 16, 1984, and are not implicated here. The remaining 122,000 gallons (after some loss from evaporation) form the heart of the instant dispute.
The debtor and ABC executed a new security agreement on January 9, 1984. This security agreement gave ABC a security interest in just about all of the debtor's personal property including inventory. A few days later, ABC filed a financing statement in New York covering this security interest.
From the outset of this transaction the debtor had experienced difficulties in fulfilling its obligations to ABC, and on January 19, 1984, ABC sent the debtor a telex indicating that the debtor had defaulted under the January 9, 1984 security agreement and that the bank was enforcing its security interest under the Uniform Commercial Code ("UCC").
On January 19, 1984, ABC also notified the warehousemen that it held a warehouse receipt covering the ethanol in storage and that it was enforcing its right to dispose of that ethanol. ABC further instructed the warehousemen to issue negotiable warehouse receipts in the name of ABC. In the next two weeks, ABC received negotiable warehouse receipts from the warehousemen.
One day later, on January 20, 1984, ABC sent Haltermann similar notification. Haltermann quickly responded by telex dated January 25, 1984. That telex informed ABC that Haltermann held the 122,000 gallons currently in dispute, that the debtor was in default, and that ABC had only two days—until January 27, 1984—to remove the ethanol or it would be confiscated.
One week after sending the first notice of default, ABC sent the debtor another notice of default. This notice, dated January 27, 1984, was to the same effect as the earlier one, declaring the debtor in default and indicating ABC's intent to pursue its remedies under the UCC. However, this time ABC stated it was acting under the security agreement executed in September 1983 (as opposed to the January 9, 1984 security agreement).
In a telex to Haltermann dated February 9, 1984, ABC indicated its acceptance of Haltermann's proposal to process the ethanol. One day later, on February 10, 1984, ABC received a telex from A.E. Staley by which Staley accepted ABC's offer to sell the 122,000 gallons of ethanol presently at issue. The debtor has produced a telex from Staley directed to the attention of Jacobson identical to the telex sent to ABC.
In a letter dated March 8, 1984, ABC informed the debtor it had received an offer of $.57 a gallon for the roughly 7.4 million gallons of ethanol stored in Houston. ABC stated its intention to accept that offer unless the debtor came up with a better deal by March 16, 1984.
On March 9, 1984, Haltermann completed processing the 122,000 gallons of ethanol, which had been reduced to 110,000 gallons during processing, and released them to a carrier for shipment to A.E. Staley. The loading of the ethanol was closely monitored by an independent surveyor who measured how much ethanol was loaded and performed various tests on the ethanol. When the loading was completed, the carrier issued a bill of lading covering the ethanol.
ABC sent A.E. Staley an invoice on Alcom letterhead, dated March 16, 1984, requesting payment of $146,738.43 for the ethanol. On March 16, 1984, the debtor filed a voluntary petition for relief under chapter 7. According to the debtor, it notified ABC of the filing on that same day. ABC claims it did not receive notice until three days later, on March 19, 1984. ABC received payment of $145,590.93 from A.E. Staley sometime around March 23, 1984.
On April 13, 1984, the trustee moved for an order permitting sale of the remaining ethanol, totalling about 7.0 million gallons, free and clear of all liens and encumbrances. The motion indicated that ABC claimed a lien on the ethanol for roughly $8.4 million, but that the trustee believed the liens may be avoidable under 11 U.S.C. § 545. (The trustee probably cited § 545 by mistake since 11 U.S.C. § 544 seems to be the more relevant statute.)
A few days later, on April 17, 1984, ABC moved for an order to show cause why ABC should not be granted relief from the automatic stay to sell the remaining ethanol. The court elected to treat this motion as a motion for relief from the automatic stay. In an objection, the trustee indicated ABC's liens may be avoidable under § 545 and § 547 of the Code.
Hearings on the two motions were consolidated, and a single hearing was held on April 30, 1984. On that day, the court entered an order granting the trustee's motion and denying ABC's motion. In reaching its decision, the court noted that "the lien of ABC, if valid, will attach to the proceeds" of the sale and that "there has been no showing by ABC of a valid security interest in the ethanol."
ABC submitted a motion for clarification and amendment of the court's order. In opposing this motion, the trustee indicated he had taken no position on the validity of ABC's lien. In denying ABC's motion, the court held that the previous order specifically provided "that valid liens, if any, of ABC attached to the proceeds of the sale."
On October 29, 1984, the trustee filed a motion for compromise of claim and interest of ABC. Attached to the motion was a copy of the settlement document. Both the motion and the settlement document recite that compromise is in the best interests of the estate. According to these documents, compromise was preferable since it allowed both parties to avoid incurring the expenses necessary to determine the validity of ABC's claimed lien on the proceeds from the sale of the ethanol.
On November 28, 1984, the court entered an order granting the motion to compromise, and any questions as to the validity of ABC's lien were seemingly at an end. However, this changed almost five-and-a-half years later, in April 1990, when at the behest of the debtor, the trustee made application to undertake an investigation into certain aspects of ABC's conduct. The court approved the application in June 1990.
The investigation culminated in the trustee filing a motion in August 1991 to abandon all the claims against ABC with the exception of any claims arising from the March 1984 sale of ethanol to A.E. Staley. The court granted this motion in October 1991.
On December 13, 1991, the trustee filed a motion for sanctions against ABC alleging that ABC sold the ethanol and received the proceeds of $145,590.93 after the petition was filed....
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