In re: Jan Weilert RV, Inc., 011303 FED9, 01-55455
| Party Name | In re: Jan Weilert RV |
| Case Date | January 13, 2003 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Ninth Circuit |
Appeal from the Ninth Circuit Bankruptcy Appellate Panel Perris, Brandt and Montali, Bankruptcy Judges, Presiding; BAP No. CC-00-01110-PBMo
and
Appeal from the United States District Court for the Central District of California Robert J. Timlin, District Judge, Presiding; D.C. No. CV-00-00158-RJT
Argued and Submitted October 9, 2002-Pasadena, California
Before: Stephen Reinhardt, Stephen S. Trott and Barry G. Silverman, Circuit Judges.
COUNSEL
John J. Bingham, Jr., Danning, Gill, Diamond & Killitz, LLP, Los Angeles, California, for the appellee-plaintiff.
John A. Hendry, South Pasadena, California, for appellant- defendant Ganis Credit Corporation.
Dave M. McGraw, Walnut Creek, California, for appellant- defendant Bank of the West.
OPINION
TROTT, Circuit Judge:
In this consolidated opinion we address the separate appeals of Ganis Credit Corp. ("Ganis") and Bank of the West. Their cases arose in the bankruptcy proceedings of Jan Weilert R.V., Inc. ("Debtor") before the United States Bankruptcy Court for the Central District of California. The bankruptcy court issued a consolidated opinion holding that Debtor's two payments to Ganis and two payments to Bank of the West were avoidable as preferential transfers under 11 U.S.C. § 547(b), and not made in the ordinary course of business under § 547(c)(2). Anderson v. Ganis Credit Corp. (In re Jan Weilert R.V., Inc.), 245 B.R. 377, 388-89 (Bankr. C.D. Cal. 2000). Ganis first appealed to the Ninth Circuit Bankruptcy Appellate Panel ("BAP"), and Bank of the West first appealed to the U.S. District Court for the Central District of California.
Ganis now appeals from the BAP's decision affirming the bankruptcy court's decision that the lien payoffs of two trade-in vehicles were not made according to ordinary business terms as required by § 547(c)(2)(C). We reverse. The bankruptcy court's findings as applied to trade-ins are erroneously limited to the average transaction in the industry rather than encompassing the broad range of practices that are not unusual in the industry.
Bank of the West appeals from the district court's decision (1) affirming the bankruptcy court's finding that the lien payoff of a consignment vehicle was not made according to ordinary business terms, and (2) reversing the bankruptcy court's finding that the refund of a mistaken double payment with regard to the financed sale of a new vehicle was made according to ordinary business terms. We affirm the district courts' holding as to the consignment payoff, however, we reverse the district court as to the refund payment, and hold that no further evidence of industry practices was required.
I
BACKGROUND
Debtor was a dealer in new and used recreational vehicles ("RV's"). As part of its business, Debtor accepted used RV's as trade-ins for resale. Debtor entered also into consignment agreements whereby it sold used RV's for their owners. The trade-in and consignment vehicles involved in this case were subject to perfected security interests held by lenders Ganis and Bank of the West, who had financed the vehicles' original purchases. Debtor petitioned for a Chapter 11 bankruptcy on April 4, 1997, which was converted to Chapter 7 on September 10, 1997. Appellee Karl T. Anderson ("Trustee") is the Chapter 7 trustee.
A. Trade-in Payoffs to Ganis
Ganis held a perfected security interest in an RV owned by Clyde Wilson, who traded-in the RV to Debtor on November 26, 1996. Debtor resold the RV on January 30, 1997, and received the proceeds of the sale that same day. Debtor's payment of $37,005.33 to Ganis, in full satisfaction of its lien, cleared Debtor's account on February 20, twenty-one days after the resale.
Ganis held also a perfected security interest in an RV owned by Mr. Springer, who traded-in the RV to Debtor on January 27, 1997. Debtor resold the RV on February 6, 1997, and received the proceeds of the sale that same day. Debtor's payment of $11,299.26 to Ganis, again in full satisfaction of its lien, cleared Debtor's account on March 19, 1997, forty- one days after the resale.
B. Consignment Payoff to Bank of the West
Bank of the West held a perfected security interest in an RV owned by Raymond Deeds, who delivered the RV to Debtor to sell under a consignment agreement. Debtor sold the RV on November 19, 1996, and received the proceeds of the sale that same day. Per the agreement with Deeds, Debtor delivered a check in the amount of $44,271.72 to Bank of the West in full satisfaction of its lien, but did not send it until January 8, 1997. The payment cleared Debtor's account on January 14, fifty-six days after the sale.
C. Refund Payment to Bank of the West
The final transaction did not involve a consigned or traded-in RV, but arose after Debtor sold a new RV to Barbara Jones. Bank of the West financed the sale for Jones and mailed a cashier's check to Debtor in the amount of $42,280.79 on January 3, 1997. Then on January 7, Bank of the West mistakenly made a second payment - a direct deposit of $42,280.79 - into Debtor's account. Bank of the West almost immediately discovered the error, contacted Debtor, and requested a refund of the second payment. On January 10, Debtor issued a check to Bank of the West in the amount of $42,280.79 as a refund.
D. Proceedings in the Lower Courts
The Trustee brought adversary proceedings against Ganis and Bank of the West under § 547(b) to avoid the three lien payoffs and the refund payment as preferential transfers. After granting summary judgment against both defendants on all the elements of § 547(b) and on the "contemporaneous exchange for new value" ("new value") defense, § 547(c)(1), the bankruptcy court held separate trials on the issue of whether the transfers were made in the ordinary course of business (or "ordinary course") pursuant to § 547(c)(2). If so made, these transfers would not have been avoidable. After the trials, the bankruptcy court issued a published combined opinion, taking judicial notice of the evidence presented in both cases. Anderson, 245 B.R. at 379 n.1.
The bankruptcy court focused on § 547(c)(2)(C), the "ordinary business terms" prong of the ordinary course defense. The court found the testimony of David Russell ("Russell"), a Bank of the West vice-president and former RV dealer, to be most persuasive on the issue of lien payoff practices among RV dealers and lenders. Id. at 383. Ultimately, the court found that the payoffs "would meet the ordinary course standard [1] if payoff is within 45 days of trade-in or, [2] if payoff is within 20 days of receipt of funds from the third party purchaser," and described the test as giving creditors "two bites at the apple." Id. at 389. The bankruptcy court found that neither the trade-in nor consignment payoffs fit within either time frame and ordered Ganis and Bank of the West to return the funds to the Trustee. Both the district court and the BAP, in a published decision, affirmed the lien payoff findings and conclusions.1Ganis Credit Corp. v. Anderson (In re Jan Weilert R.V., Inc.), 258 B.R. 1, 7 (9th Cir. BAP 2001).
Regarding the refund payment on the new RV, the only witness to testify on "ordinary course of business" was Pamela Norton, a Bank of the West vice-president. Norton described Bank of the West's procedures for recovering double payments but provided no testimony on procedures followed by other lenders. Bank of the West argued that no additional evidence was necessary because no industry standard could be more stringent than immediate demand and repayment within three days. The bankruptcy court found the transfer to be within the ordinary course of business. The district court, however, reversed the finding on Trustee's cross- appeal, holding that Bank of the West failed to produce "evidence of the standard practices other lenders in the industry use to recover double payments."
Ganis and Bank of the West both timely appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 158(d). We reverse the BAP, and we affirm in part and reverse in part the district court.
II
STANDARD OF REVIEW
This court independently reviews the bankruptcy court's rulings on appeal from either the BAP or the district court. In re Su, 290 F.3d 1140, 1142 (9th Cir. 2002) (BAP appeal);Preblich v. Battley, 181 F.3d 1048, 1051 (9th Cir. 1999) (district court appeal) ("We independently review the bankruptcy court's decision and do not give deference to the district court's determinations"). We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. In re Su, 290 F.3d at 1142. This court must accept the bankruptcy court's findings of fact unless upon review we are left with the definite and firm conviction that a mistake has been committed. In re Banks, 263 F.3d 862, 869 (9th Cir. 2001). A determination of whether a transaction falls outside the ordinary course of business is a question of fact that depends on the nature of industry practice. Arrow Electronics, Inc. v. Justus (In re Kaypro), 218 F.3d 1070, 1073 (9th Cir. 2000).
III
THE ORDINARY COURSE OF BUSINESS EXCEPTION
We are asked to decide whether the bankruptcy court erred in holding that the transfers to Ganis and Bank of the West were not made in the ordinary course of business under § 547(c)(2), or more specifically, that they were not made according to ordinary business terms under § 547(c)(2)(C).
A debtor may not "prefer" one creditor over another by selecting to pay one but not the other during the debtor's slide into bankruptcy. "The...
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