In re Murphy, Bankruptcy No. 80-0506A.
| Decision Date | 11 August 1980 |
| Docket Number | Bankruptcy No. 80-0506A. |
| Citation | 5 BR 596 |
| Parties | In re William J. MURPHY, d/b/a Four Wheelers, Debtor. RETREADING EQUIPMENT, INC., Plaintiff, v. William J. MURPHY, d/b/a Four Wheelers, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Thomas Stamps, Macey & Zusmann, Atlanta, Ga., for plaintiff.
Mark A. Kelley, Carr, Abney, Tabb & Schultz, Atlanta, Ga., for trustee.
The above-named debtor filed a proposed plan under Chapter 13 of the Bankruptcy Code on October 12, 1979, and thereafter converted this Chapter 13 case to a Chapter 7 case on or about April 24, 1980. On June 19, 1980, the plaintiff herein filed a complaint for relief from the automatic stay, seeking authorization to take possession of certain retreading equipment in which the plaintiff claims a perfected security interest. On July 2, 1980, by consent of the parties, the trustee in bankruptcy in the above-styled case was joined as a party defendant in this adversary proceeding. On July 3, 1980, the trustee filed an answer to the complaint denying that the plaintiff had any interest in the subject property.
On July 7, 1980, the trustee filed a motion seeking an order transferring the alleged lien of the plaintiff to the proceeds of the sale of the retreading equipment or, in the alternative declaring the alleged lien to be void. On July 8, 1980, the debtor filed a motion requesting that he be dismissed as a defendant in this case. On July 10, 1980, the plaintiff's complaint and the motions of the trustee and of the debtor were heard by this Court. The debtor was dismissed as a party by oral order, the Court ordered briefs to be submitted on the issues raised by the trustee's motion and the complaint, and the hearing was continued until July 22, 1980.
On July 18, 1980, the plaintiff and the trustee each filed a brief. The plaintiff's brief stated that the following were the questions presented:
On July 22, 1980, the hearing was resumed, and the matters put in issue by the plaintiff's complaint and the trustee's motion were taken under advisement.
On July 30, 1980, the trustee filed a "Motion to Open the Record for the Admission of New Evidence." The Court finds that the evidence sought to be introduced, as described by the motion and brief, even if taken as true, could not affect the result of this case and, therefore, denied said motion.
At all times relevant herein the defendant William J. Murphy has resided at 2864 Bright Star Road, Douglasville, Douglas County, Georgia. T-8.
The defendant and Mr. Charles F. Hanna, Jr., discussed the possibility of operating a business as a partnership. T-8.
On March 14, 1977, the defendant and Mr. Hanna ordered certain equipment under the firm name of "Four Wheelers." Plaintiff's Exhibits B1, B2, B3, B4, B5, B6.
On March 19, 1977, a second order was made under the firm name of "Four Wheelers" and signed by the defendant alone. 5.
On March 21, 1977, Mr. Hanna and the debtor sent to the plaintiff a check for $7,000 intended as a 10% down payment on an equipment purchase. Plaintiff's Exhibits E-1, E-2.
6.
Mr. Hanna made no contribution to the $7,000 down payment. T-9.
7.
Prior to the delivery of the equipment, Mr. Hanna decided not to enter the proposed partnership and made his decision known to the plaintiff. T-10.
8.
The defendant confirmed by letter to the plaintiff dated April 11, 1977 the fact that Mr. Hanna was not his partner but that the plaintiff was desirous of completing the purchase transaction in question. Defendant's Exhibit B.
9.
The first order of equipment was delivered in May or June of 1977. T-12; Brief in Support of Plaintiff's Complaint, p. 4.
10.
On July 13, 1977, plaintiff and defendant entered into a security agreement concerning the equipment in question. Defendant's Exhibit C; Plaintiff's Exhibit B.
11.
A UCC-1 Financing Statement concerning this security agreement was filed on July 15, 1977 in the Superior Court of Cobb County, Georgia. Plaintiff's Exhibit D.
12.
Between June and August of 1977, one-half of the equipment ordered on March 19, 1977 was delivered. Plaintiff's Brief, p. 4.
13.
On February 9, 1978, the parties executed a security agreement covering the second order of equipment. Plaintiff's Brief, p. 4; Defendant's Exhibit E.
14.
On February 17, 1978, the plaintiff filed a second UCC-1 Financing Statement covering the second order of equipment with the Clerk of the Superior Court of Cobb County, Georgia. Plaintiff's Exhibit B; Defendant's Exhibit F.
15.
A partnership existed during the relevant time between Mr. Murphy and a Mr. Massingale for the purpose of buying and selling a single line of goods.
16.
The business of Four Wheelers was not within the scope of the Murphy-Massingale partnership.
The plaintiff herein seeks the lifting of the automatic stay to allow it to repossess certain equipment which is in the possession of the trustee. The trustee, on the other hand, asserts that any interest the plaintiff may have in the equipment is subordinate to the interest of the estate by virtue of the "strong arm clause" of 11 U.S.C. § 544. The plaintiff retorts that the issue raised by the trustee, i.e., perfection of plaintiff's security interest, has been previously decided by this Court in the context of the confirmation of a Chapter 13 plan at a hearing on December 4, 1979. The plaintiff further contends that even if the issue has not been previously resolved, that the security interest of the plaintiff is perfected.
The first question which must be addressed is whether the issue of the perfection of the plaintiff's security interest has been previously resolved by the confirmation of a Chapter 13 plan. The Court finds that it has not. The fact that the Court approved an uncontested plan under Chapter 13 does not create a "law of the case" situation inasmuch as the matter now presented was not previously contested. See 1B Moore's Federal Practice ¶ 0.4041 pp. 403, 404. Even if the issue had been previously determined, which it has not, the Court retains the power to reconsider any of its own orders. In re Pottasch Bros. Co. Inc., 79 F.2d 613 (2d Cir. 1935); Castaner v. Mora, 234 F.2d 710 (1st Cir. 1956). Clearly, the fact that the issue has never been heard is ground for reconsideration and, therefore, the plaintiff's "law of the case" argument will not bind this Court.
This determination leads to the decisive issue in this case, i.e., whether or not the plaintiff had a perfected security interest in the subject equipment. If the plaintiff's security interest were perfected, then the Court would be required to determine whether the automatic stay should be lifted. However, the plaintiff's security interest is not perfected and, therefore, the plaintiff's claim is subordinate to that of the trustee. 11 U.S.C. § 544.
The plaintiff's security interest is subordinate to the interest of the trustee because it was not perfected as required by Georgia law. Ga. Code § 109A-9-401(1)(b). That statute states in material part:
The plaintiff makes two arguments in support of its position that its security interest was perfected by filing in the county of the debtor's principal place of business rather than in the county where Mr. Murphy resides. The first argument is that Four Wheelers was a partnership when the UCC-1 Financing Statements were filed. The plaintiff alleges that Mr. Murphy was engaged in one of two possible partnerships and that whichever partnership he was engaged in was doing business as Four Wheelers during the material times.
The first partnership is alleged to have been between Mr. Murphy and Mr. Hanna. The unrebutted testimony of Mr. Murphy is that the proposed partnership with Mr. Hanna "was never consummated." T-8. Further, the evidence shows that the plaintiff was aware of this fact by the middle of April 1977, Defendant's Exhibit B, three months prior to the filing of the first financing statement.
The plaintiff argues that the fact that Mr. Hanna may have been personally liable on the first order of equipment creates a partnership for purposes of the filing of a financing statement. However, the issues involved in determining contractual liability (or transactional liability of any type) are far different from those involved in determining whether a particular financing statement gives sufficient notice to subsequent purchasers to perfect a security interest. In re Firth, 363 F.Supp. 369 (M.D.Ga. 1973); In re Eady, Goger v. United States of America, et al., 4 B.R. 1, (Bkrptcy., N.D. Ga. 1980) (Drake, B.J.), reported in part, 28 U.C.C.Rep. 1528 (1980). To state that a subsequent purchaser from Mr. Murphy searching the files of the Clerk of the Court of Douglas...
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