In re CFLC, Inc.
| Decision Date | 03 June 1997 |
| Docket Number | Adv. No. 94-4169 AN.,Bankruptcy No. 93-40001,BAP No. NC-96-1232-OVMe |
| Citation | 209 BR 508 |
| Parties | In re CFLC, INC., a Delaware Corporation, f/k/a Everex Systems, Inc., Debtor. EXPEDITORS INTERNATIONAL OF WASHINGTON, INC., Appellant, v. OFFICIAL CREDITORS COMMITTEE OF CFLC, INC., Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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Robert E. White, Law Offices of Robert E. White, San Francisco, CA, for Expeditors Intern. of Washington, Inc.
Terrence V. Ponsford, Bronson, Bronson & McKinnon, San Francisco, CA, for Official Creditors Committee of CFLC, Inc.
Before: OLLASON, VOLINN and MEYERS, Bankruptcy Judges.
Creditor Expeditors International of Washington, Inc. ("Expeditors") appeals the bankruptcy court's order granting partial summary judgment in favor of the Official Creditors Committee of CFLC, Inc. ("Committee") and dismissing its adversary complaint to determine the validity, priority and extent of an alleged possessory lien, and for attorney's fees.1
We Affirm.
Debtor CFLC, Inc., formerly known as Everex Systems, Inc. ("Everex"), filed a voluntary Chapter 112 petition on January 4, 1993. The 90-day period before the petition date began on October 6, 1992. The following facts were stipulated.
Since August of 1991, Expeditors provided transportation related services for Everex including freight forwarding, ocean shipping and customs brokerage. It is called an indirect air common carrier because it typically consolidates shipments and utilizes commercial air carriers to perform the physical transportation. For 17 months prior to Everex's bankruptcy petition date, Expeditors handled Everex's import and export shipments. Expeditors negotiated with Everex for all of the forwarder rates and services performed by its subsidiaries and agents, and was in continuous possession, directly or through its agents, of Everex's goods.
Expeditors billed Everex on its regular invoices, issued contemporaneously with its receipt of the shipments. From August, 1991 until January, 1993, Expeditors sent Everex approximately 330 invoices with the identical terms. The reverse side of the invoice contained a page of fine print entitled "Terms and Conditions of Service." The only reference to those terms on the bottom of the invoice fact was a reference to the conditional terms for credit:
Section 15 of the terms and conditions stated:
15. General Lien on Any Property. The Company shall have a general lien on any and all property (and documents relating thereto) of the Customer, in its possession, custody and control or en route, for all claims for charges, expenses or advances incurred by the Company in connection with any shipments of the Customer and if such claim remains unsatisfied for thirty (30) days after demand for its payment is made, the Company may sell at public auction or private sale, upon ten (10) days written notice, registered mail (R.R.R.) to the Customer, the goods, wares and/or merchandise, or so much thereof as may be necessary to satisfy such lien, and apply the net proceeds of such sale to the payment of the amount due to the Company. Any surplus from such sale shall be transmitted to the Customer, and the Customer shall be liable for any deficiency in the sale.
Section 16 stated, in pertinent part:
In any referral for collection or action against the Customer from monies due to the Company, upon recovery by the Company, the Customer shall pay the expenses of collection and/or litigation, including a reasonable attorney fee.
Everex never signed the invoices or any agreement with Expeditors regarding the terms contained in the invoices. The parties never discussed nor expressly bargained over Sections 15 and 16 of the invoice or any other provision on the reverse of the invoice. Everex did not object to the invoices prior to its bankruptcy. At no time prior to October 6, 1992, did Expeditors attempt to enforce Section 15 of the invoice by asserting a security interest or lien against the shipments. On or about October 29, 1992, Expeditors notified an Everex employee that it would be asserting its lien on the Everex goods in its possession until payments were made on outstanding invoices.
During the period before the petition date, the parties continued normal business operations. At the time of Everex's bankruptcy filing, Expeditors was in possession of property of Everex valued at $81,402. As of 90 days before the petition date, Expeditors was in possession of property of Everex valued at over $62,000.3 Also as of the petition date, Everex owed Expeditors $42,919.33, exclusive of postpetition interest, attorneys' fees and costs for 68 past-due invoices dated January 27, 1992, through October 16, 1992.
On March 15, 1994, Expeditors filed a complaint to determine the validity, priority and extent of the lien under dispute; it filed its first amended complaint on March 24, 1994. Expeditors also sought its attorney's fees under § 506(b) of the Code.4 Everex answered the complaint on May 16, 1994, and asserted counterclaims, inter alia, to set aside a purported preference and to avoid Expeditor's lien as unperfected.
On May 24, 1995, Expeditors and the Official Creditors Committee of CFLC, Inc. ("Committee") as a party defendant filed cross-motions for summary judgment premised on agreed facts. At a July 5, 1995, hearing, the bankruptcy judge found that the evidence did not amount to a course of dealing. The bankruptcy judge stated, according to the transcript:
By order filed August 3, 1995, the bankruptcy court determined that Expeditors did not have a security interest in Everex property. It further ruled that attorneys' fees were not available. Based on its oral findings and conclusions, referenced below, it granted the cross-motion of the Committee for partial summary judgment and denied Expeditors's cross-motion. A partial summary judgment was entered on August 3, 1995. On February 23, 1996, the bankruptcy court dismissed Expeditors' complaint. Expeditors timely appealed the February 23, 1996, order.
1. Whether the invoice terms and/or the parties' course of dealing established a security interest in favor of Expeditors in the goods which it possessed, pursuant to Article 9 of the Uniform Commercial Code ("UCC"), as adopted by California law.6
2. Whether Article 2 of the UCC applies to these facts by analogy to establish the existence of a security agreement by virtue of Everex's alleged consent to the invoice as additional contract terms providing for a security interest.
3. Whether there was a contractual basis for an award of Expeditors' attorneys' fees pursuant to § 506(b) of the Code.
We review grants of summary judgment de novo to determine whether, viewing the evidence in a light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the trial court correctly applied the law. In re De Laurentiis Entertainment Group Inc., 963 F.2d 1269, 1271-72 (9th Cir.), cert. denied sub nom. Carolco Television Inc. v. Nat'l Broadcasting Co., Inc., 506 U.S. 918, 113 S.Ct. 330, 121 L.Ed.2d 249 (1992).
Whether the actions of parties to a contract establish a course of conduct that adopts the terms of a writing is a question of law. Step-Saver Data Systems, Inc. v. Wyse Tech., 939 F.2d 91, 104 (3rd Cir.1991); Independent Machinery, Inc., v. Kuehne & Nagel, Inc., 867 F.Supp. 752, 765 (N.D.Ill.1994).
The rules governing secured transactions are embodied in Division 9 of the California Uniform Commercial Code (Cal. Com.Code, §§ 9101—9508) "Security interest" is defined as "an interest in personal property or fixtures which secures payment or performance of an obligation." Cal.Com. Code § 1201(37)(a) (West Supp.1997). An agreement which creates or provides for a security interest is a "security agreement." Cal.Com.Code § 9105(1)(l) (West Supp. 1997). "No magic words or precise form are necessary to create or provide for a security interest so long as the minimum formal requirements of the Commercial Code are met." In re Amex-Protein Dev. Corp., 504 F.2d 1056, 1058-59 (9th Cir.1974). The agreement must describe the property in which the debtor has conveyed a security interest to the creditor. In re Robert Bogetti & Sons, 162 B.R. 289, 295 (Bankr.E.D.Cal. 1993). The term "security agreement" should be defined broadly. In re County of Orange, 179 B.R. 185, 193 (Bankr.C.D.Cal. 1995).
Cal.Com.Code § 9203 specifies the requisites for the attachment and enforceability of a security interest, in pertinent part, as follows:
A security interest is not enforceable against the debtor or third parties with respect to the collateral and does not attach unless all of the following are applicable: (a) The collateral is in the possession of the secured party pursuant to agreement, the collateral is investment property and the secured party has control pursuant to agreement, or the debtor has signed a security agreement which contains a description of the collateral. . . . (b) Value has been...
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