In re KDT Industries, Inc.
| Decision Date | 23 June 1983 |
| Docket Number | Adv. No. 82-6481-A.,Bankruptcy No. 82 B 11453-82 B 11515 and 82 B 11678 |
| Citation | 31 BR 61 |
| Parties | In re KDT INDUSTRIES, INC., f/k/a King's Department Stores, Inc., d/b/a King's, Barker's, Kens, Coronet Cosmetics, Barkleigh Mammoth Mart, et al., Debtors. IMPERIAL AIR FREIGHT SERVICES, INC., Plaintiff, v. KDT INDUSTRIES, INC., Debtors-Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Angel & Frankel, P.C., New York City, for plaintiff; Bruce Frankel, Stuart I. Gordon, New York City, of counsel.
Levin & Weintraub & Crames, New York City, Goulston & Storrs, Boston, Mass., for debtors and debtors-in-possession; Richard S. Miller, William A. Horne, New York City, of counsel.
Defendant, KDT Industries, Inc. ("KDT"), contracted for the use of the freight forwarding services of plaintiff, Imperial Air Freight Services, Inc. ("Imperial"), to ship merchandise from various locations in the United States to locations of KDT subsidiaries in the Caribbean.1 Imperial seeks payment of freight charges aggregating $61,489.23 involving numerous shipments made during the period between August 27, 1981 through August 6, 1982. Between July 28, 1982 and August 6, 1982 KDT delivered merchandise to Imperial with a cost of $155,734.00 for shipment to the Caribbean. Imperial stopped these shipments in transit and asserted a lien against the goods for the $61,489.23 due it from KDT. Freight charges for the stopped merchandise accounted for $21,671.59 of the total amount sought.
On August 5, 1982 KDT and a number of its subsidiaries filed Chapter 11 petitions for reorganization under the Bankruptcy Code. Subsequently, on August 26, 1982, KDT's Caribbean subsidiaries also filed Chapter 11 petitions.
On August 19, 1982 the Bankruptcy Court issued an order directing Imperial to turn over the merchandise being detained, directing KDT to pay the $21,671.59 for freight charges on the stopped goods and granting Imperial an administrative claim in the amount of $39,817.64 in the event the court later determined that Imperial had a valid lien on the stopped goods for KDT's prior indebtedness. Imperial then released the merchandise without prejudice and initiated this adversary proceeding.
KDT has not only opposed Imperial's request for an administrative claim in the amount of $39,817.64, it has also objected to Imperial's retention of the $21,671.59 paid for the shipping charges relating to the stopped merchandise on the grounds that both payments would be preferences and in any event Imperial has no lien for the prior charges. Imperial contends that it has a valid lien on the merchandise detained for the purpose of satisfying all amounts due: both those owing on unpaid pre-petition shipments and those on the shipment stopped, all in accordance with its applicable tariff; and denies that payment would be a preference.
It is first necessary to address KDT's claim that any lien asserted by Imperial would constitute a preference under Section 547(b) of the Bankruptcy Code, 11 U.S.C. 547(b). A preference requires a finding that, among other things, there was payment of an antecedent debt and the payment enabled the creditor to receive more than other creditors of the same class. With respect to the lien asserted for freight charges on the stopped shipment, there was no payment of an antecedent debt since the lien was acquired at the moment Imperial accepted the goods shipment before it rendered any freight carrying services and further Imperial retained merchandise with a cost of $155,734.00 for freight charges of only $21,671.59. Thus Imperial was a fully secured creditor from the time it took possession of the merchandise and it did not receive more than creditors of the same class. Therefore KDT's assertion that this portion of the lien claimed by Imperial represents a preferential transfer cannot stand. Because the court finds, as set forth below, that Imperial had no lien on the stopped shipment for charges on prior shipments, it is not necessary for the court to reach the preference question since no contention has been made that Imperial is entitled to payment as an administrative expense in the absence of a lien.
Imperial asserts that it has a lien on the stopped shipment for charges due on previous shipments, i.e., that it holds a cross-over lien. Imperial contends that this cross-over lien arises by virtue of the contractual relationship between it and KDT. Pursuant to Section 403(a) of the Federal Aviation Act, 49 U.S.C.A. Section 1373(a), Imperial has placed its tariff on file with the Civil Aeronautics Board. The tariff is made applicable to its dealings with KDT by the "conditions of contract" notice printed on its standard airbills:
Imperial's tariff reads in pertinent part:
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