In re IDK Logging, Inc.
| Decision Date | 02 July 1990 |
| Docket Number | Bankruptcy No. 88-01599-K10,A89-0088-K10. |
| Citation | 116 BR 788 |
| Court | U.S. Bankruptcy Court — Eastern District of Washington |
| Parties | In re IDK LOGGING, INC., Debtor. Dan O'ROURKE, Trustee, Plaintiff, v. RAMEY TRUCK & EQUIPMENT COMPANY, INC., Defendant. |
Michael G. Thompson, Dan O'Rourke, Spokane, Wash., for trustee.
Peter A. Witherspoon, David Hellenthal, Spokane, Wash., for defendant, Ramey Truck & Equipment.
The chronologies set out by the parties are relatively similar. The point of divergence comes when each applies the facts to the law. The facts as they are presented to the court are as follows. David Rogne is the President of IDK Logging, Inc. (hereinafter IDK) and his wife Sandra is the Secretary of the corporation. Over a three year period IDK entered into contracts with Ramey Trucking as listed below.
On January 11, 1985 Ramey Trucking (hereinafter Ramey) and First National Bank (hereinafter Bank) entered into a Dealer's Repurchase Agreement with Full Recourse wherein Ramey had issued conditional sales contracts to IDK and the Bank had taken the option of buying each of the contracts.
September 4th of that year, Ramey sold the following property to IDK on an Installment Sales Contract:
1970 used Log Truck 1963 used Page Log Trailer Used Log Loader # 222571
This property was to be the collateral for the total purchase price of $46,541 which included 14 percent interest.
On September 5th, Ramey assigned the first installment contract to the Bank, giving them full recourse as previously agreed. The UCC-1 Financing Statement for the equipment was filed on September 16, 1985 with Department of Motor Vehicles.
Ramey sold the next group of equipment which consisted of a used 1971 log Truck, a used 1968 Frehauf log trailer and a used Prentice log loader # 1886 to IDK, on installment contract and security agreement for $55,186 at 14 percent interest. The third installment contract and security agreement related to a Log Skidder and used Swinging Grapple and which Ramey sold to IDK for $83,212 at 14 percent interest on May 5, 1986.
The Skidder and Grapple contracts were assigned to the Bank on the 16th of May, 1986. A UCC-1 Financing Statement on the third contract was filed June 12, 1986 with Department of Motor Vehicles. Although the Financing Statement identified the debtor as David and Sandra Rogne, in their individual capacity, the signature line acknowledged each signed the document in his/her corporate capacity as president and secretary of IDK Logging. The trade name itself was listed as "IDK Logging", Ramey was described as a secured party and the Bank as an assignee of the secured party.
Ramey also sold IDK a used Crawler Tractor and used Tree Sheer by installment contract and security agreement on November 21, 1987. The total purchase price for this fourth contract was $35,168 (including a 14 percent finance charge). Ramey assigned this contract to the Bank on November 24, 1987. The Financing Statement for this equipment was filed one week later with the same format as the previous statement listing Rogne as the debtor, IDK Logging under trade name, Ramey Trucking as the secured party and the Bank as the assignee of the secured party.
On July 20, 1987 Ramey sold to IDK by installment contract and security agreement a consolidation of the contracts entered into on September 4 1985, January 8 1986 and November 21 1987. The property in the former contracts was used as collateral for the consolidated contract.
By March 16, 1988 IDK owed the Bank $133,000, as did Ramey due to the full recourse agreement and Ramey's status as surety on all of the contracts. Between that date and March 19, 1988 IDK delivered all of the property listed above to Ramey because IDK was unable to cure its default. The fair market value of the property at that time appears to have been $66,856.
Ramey expended $37,394 restoring the property and subsequently sold it for $95,750. Consequently, Ramey asserts that it has an unsecured claim of $66,217.
On April 12, 1988 Ramey paid the Bank $133,073, the entire balance due. Having received full payment, the Bank filed termination statements to end its secured claim eight days after it received the amount owing. On May 12, 1988 IDK Logging filed for Chapter 7 relief.
This matter was initially brought before the court by way of adversary wherein the Trustee sought:
Three months after filing an answer to the amended complaint, the defendant brought a motion for summary judgment. The Trustee then filed a cross-motion for summary judgment. The Court bases the following decision on the pleadings contained within the court files as well as the hearing held March 21, 1990 in connection with this matter.
The Trustee in this Chapter 7 bankruptcy asserts Ramey Trucking is an unsecured creditor whose interest in specific equipment is subject to avoidance by the Trustee under section 547 of the Bankruptcy Code. Ramey moves for summary judgement claiming that as surety to First National Bank, it is subrogated to all the rights, remedies and securities of the Bank. Thus Ramey claims to be a secured creditor because the security interests were created by the debtor, IDK, and were perfected continuously and without interruption through filing and or possession.
The first question to be decided by the Court is whether Ramey Trucking's interest in the equipment transferred according to the installment sales contracts was perfected or unperfected. If the court finds the interest was perfected its inquiry begins with section 547 of the Bankruptcy Code.
The Trustee can avoid the transfer of the debtor's interest in the property if certain conditions are met. The transfer must be:
11 U.S.C. § 547(b).
In the case at bar the transfer of the equipment occurred between March 16 and 19, 1988. The debtor, IDK, transferred the property because it was in default on the installment contracts with Ramey and by March 16, 1988 the Bank was owed $133,000. Because the Bank had received full payment, on April 20, 1988, it filed termination statements to end its claim. The Chapter 7 bankruptcy was filed by IDK on May 12, 1988. The time-line and nature of the transfer indicates that if the interest in the equipment given to Ramey Trucking was a secured interest, the court's point of inquiry would have been with section 547. However, since Ramey's interest in the transferred equipment was not perfected the court must ultimately look to section 544 of the Bankruptcy Code to determine whether the Trustee can avoid the transfer.
RCW 46.04.670 governs the classification of equipment. In the instant case, each piece of equipment is "capable of being moved upon a public highway and in, upon, or by which any persons or property is or may be transported or drawn upon a public highway, . . ." and is therefore a "vehicle". As such, a security interest therein can only be perfected by "the department's receipt of: (...
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