In re Seneca Oil Co., CIV-85-1925-T
| Decision Date | 12 December 1985 |
| Docket Number | 85-00826-A,No. CIV-85-1925-T,Bankruptcy No. 85-00825-A,Adv. No. 85-0410.,CIV-85-1925-T |
| Citation | 76 BR 810 |
| Parties | In re SENECA OIL COMPANY and Seneca Drilling Company, Debtors. UNITED STATES DEPARTMENT OF ENERGY, Plaintiff-Appellant, v. SENECA OIL COMPANY and Seneca Drilling Company, Defendants-Appellees. |
| Court | U.S. District Court — Northern District of Ohio |
John E. Green, First Asst. U.S. Atty., Steven K. Mullins, Asst. U.S. Atty., Oklahoma City, Okl., Beth N. Mizuno, Floyd I. Robinson, U.S. Dept. of Energy, Economic Regulatory Admin. Office of Judicial Litigation, Washington, D.C., for plaintiff-appellant.
Stephen L. DeGiusti, Richard C. Ford, Crowe & Dunlevy, Oklahoma City, Okl., for Seneca Oil Co., defendants-appellees.
Lee Calligaro, Casson, Calligaro & Mutryn, Washington, D.C., Robert C. Bright, Bright, Nichols, Zrenda & Dunn, Oklahoma City, Okl., for debtor Seneca Oil Co., Frederic Dorwart, Holliman, Langholz, Runnels & Dorwart, Tulsa, Okl., of counsel.
This matter comes before the Court for consideration of the appeal of the United States Department of Energy (DOE) from an order of the bankruptcy court denying DOE's motion for summary judgment. Debtor-Appellee Seneca Oil Company (Seneca) has responded. The issues have been thoroughly briefed by DOE and Seneca.
At issue is whether approximately $1.3 million has properly been included as part of the debtors' bankruptcy estate. Only property to which the debtor has both legal and equitable title shall be included in the bankruptcy estate. 11 U.S.C. § 541(a) and (b).
The fund in question was created by Seneca when it began its challenge to a DOE ruling that Seneca had miscertified "upper tier" oil as "newly discovered" oil and was overcharging its customers. Pending the results of the challenge, Seneca set aside the proceeds representing the difference between the "upper tier" and "newly discovered" prices. Until March 1981 Seneca continued setting aside the revenues reflecting the excess of the "newly discovered" over the "upper tier" prices. Seneca informed its working and royalty interest owners, its shareholders, and the United States District Court in which the litigation was pending that it had deposited the potential overcharges in short-term, interest-bearing securities and that the disposition of the proceeds depended on the outcome of the litigation. Seneca referred to this fund as a "revenue suspense account".
The question presented by the litigation was resolved when the United States Temporary Emergency Court of Appeals held that Seneca had miscertified crude oil and had overcharged its purchasers. Seneca Oil Co. v. United States Department of Energy, 712 F.2d 1384 (Em.App.1983). The Court of Appeals ordered that judgment for the amount of the overcharges plus interest thereon and costs be entered for DOE. Before judgment was entered, Seneca filed for Chapter 11 Reorganization in the bankruptcy court. The District Court later entered judgment for DOE in the amount of $864,167.84 as principal (stipulated overcharges) and $877,429.23 interest for a total judgment of $1,741,597.77.
In the bankruptcy proceedings DOE filed a proof of claim and initiated an adversary proceeding to recover the proceeds from the overcharges, interest, and costs on the theory that the overcharges and interest earned thereon were not properly part of the bankruptcy estate because Seneca had neither legal nor equitable title to them. DOE then filed a motion for summary judgment which was denied. DOE now brings this appeal.
Bankruptcy Rule 8013 provides that a bankruptcy judge's findings of fact shall not be set aside unless clearly erroneous.
Seneca contends that the "clearly erroneous" standard is to be applied in this court's review as the determination of the appeal depends on this court's analysis of the bankruptcy judge's findings from the evidence. DOE, asserting that the facts are uncontested and only legal issues are presented, maintains that a de novo review is correct.
The standard applied by this reviewing court to each issue raised in this appeal will be stated in the discussion of each issue in this opinion.
A threshold issue that must be resolved is whether DOE has standing to seek equitable remedies. Contending that DOE has suffered no injury, Seneca argues DOE does not have standing to invoke any equitable remedies.
DOE is suing on behalf of the injured purchasers pursuant to statutory authority of § 209 of the Economic Stabilization Act of 1970, 12 U.S.C. § 1904 note, as incorporated in the Emergency Petroleum Allocation Act of 1973, as amended, 15 U.S.C. § 754(a)(1). Under these statutes DOE has authority to recover restitution for overcharged consumers. United States Department of Energy v. West Texas Marketing Corp., 763 F.2d 1411 (Em.App.1985).
DOE is statutory trustee for the overcharged purchasers. The Court finds no reason to deny DOE standing to assert equitable remedies in its attempts to recover restitution on behalf of the purchasers.
As its first argument, DOE urges that legal title to money in the fund never passed to Seneca. Only a question of law is presented in this proposition; the de novo standard will be applied. In re Golf Course Builders Leasing, Inc., 768 F.2d 1167 (10th Cir.1985).
DOE incorrectly asserts that legal title does not pass when property is transferred as a result of an illegal act. DOE also argues that the purchasers intended to pass title only on condition that purchasers were paying legal prices. Whether legal title passes is dependent on the parties' intent that title should pass. Standish Pipe Line Co. v. Oklahoma County Excise Bd., 193 Okl. 130, 141 P.2d 281 (1943); Commercial Standard Ins. Co. v. Universal Underwriters, 282 F.2d 24 (10th Cir. 1960).
DOE has offered no evidence that the purchasers did not intend title to pass to Seneca or that the purchasers attached a condition to passage of title. Without evidence DOE has wholly failed to overcome the presumption of ownership that accompanies possession of personal property. Kova Pipe Line Co. v. Liles, 186 Okl. 212, 97 P.2d 43 (1939).
The bankruptcy court's finding that Seneca holds legal title is not contrary to law and will not be...
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