In re Stewart

• Decision Date: 17 June 1964
• Docket Number: No. B-54402.,B-54402.
• Citation: 233 F. Supp. 89
• Parties: In the Matter of Raymond Chester STEWART, Bankrupt. Socony Mobil Oil Company, Inc., a New York corporation, Petitioner.
• Court: U.S. District Court — District of Oregon

233 F. Supp. 89

In the Matter of Raymond Chester STEWART, Bankrupt.

Socony Mobil Oil Company, Inc., a New York corporation, Petitioner.

No. B-54402.

United States District Court D. Oregon.

June 17, 1964.

John B. Leahy, Eugene, Or., for trustee.

Gilbert Sussman, Portland, Or., for petitioner.

KILKENNY, District Judge.

Socony seeks a review of the order of the referee in bankruptcy holding against petitioner on a claim it had presented for allowance.

The facts are not in serious dispute. For many years the bankrupt operated a service station in Eugene and sold petitioner's products. In early October, 1960, the bankrupt was unable to pay petitioner for the last load of gasoline and at that time petitioner learned of the bankrupt's insolvency. Thereupon, they agreed on an arrangement whereby two loads of gasoline would be delivered to bankrupt on credit. Before an additional load was delivered, the parties agreed that bankrupt would pay for the load delivered before the last load. Each load had a value of approximately $2,500.00. The adjudication in bankruptcy occurred on September 29, 1961. In the four months preceding that date, petitioner delivered six loads of gasoline to the bankrupt, the bankrupt, pursuant to said agreement, making a payment prior to each delivery. The sum total of the six payments was $13,148.40. Bankrupt's indebtedness to petitioner in October, 1960, was $4,453.32 and on the date of adjudication is was $4,419.48. Petitioner filed a claim, as a general creditor, for the last mentioned amount. The trustee filed formal objection to the claim and entered a counterclaim for $13,148.40, the amount of the final six payments within the four month period, on the theory that such payments were voidable preferences under §§ 57, sub. g and 60, sub. a of the Bankruptcy Act. The referee found that the payments within the four month period were for antecedent debts and that if Socony was allowed to retain the challenged payments, it would obtain a greater percentage of its debt than other creditors of the same class. The referee concluded that the trustee should have judgment against Socony for $8,980.73, this sum being the difference between the alleged preferential payments and the amount of the claimant's original claim, less $244.44, which was deducted in connection with certain credit cards in the possession of the bankrupt. The trustee seeks a review on the allowance of the set-off in the sum of $4,167.00.

To be invoked, at the outset, is the general rule that a reviewing court is required to accept and uphold the referee's findings, unless they are clearly erroneous. Costello v. Fazio, 256 F.2d 903 (9th Cir. 1958); Heath v. Helmick, 173 F.2d 157 (9th Cir. 1949); Tepper v. Chichester, 285 F.2d 309 (9th Cir. 1961). The rule, however, has no application to a case, such as here, where there is no dispute as to the facts, since in such a case the reviewing court is as well equipped as the referee to arrive at a proper conclusion. Costello v. Fazio, supra; Carr v. Southern Pacific Co., 128 F.2d 764 (9th Cir. 1942); Tepper v. Chichester, supra. The rule stated is of particular significance where it appears that the referee has made a clear mistake in applying the law. First National Bank of Portland v. Dudley, 231 F.2d 396 (9th Cir. 1956); Kowalsky v. American Employers Insurance Co., 90 F.2d 476 (6th Cir. 1937). Questions of the nature, effect and validity of a transfer under § 60, sub. a(1), 11 U.S.C. § 96, sub. a, are controlled by state standards and state law governs. McKenzie v. Irving Trust Co., 323 U.S. 365, 370, 65 S.Ct. 405, 89 L.Ed. 305; Davies Warehouse Co. v. Bowles, 321 U.S. 144, 155, 156, 64 S.Ct. 474, 88 L.Ed. 635; Eberly v. Dudley, 314 F.2d 8, 12 (9th Cir. 1962).

The vital findings of the referee, supported by the undisputed record, follow:

* * * * * *

"Factually, the testimony indicated that the debtor in October, 1960 was in financial difficulty. A contributing factor was a gasoline price war which worked a hardship on the service station operated by the debtor under lease with Socony for sale of Socony products. Socony had before this time in practice delivered a load of gasoline on credit which was to be paid for by the debtor at or before delivery of the next load. On or about October 5, 1960, debtor was in need of gasoline and unable to pay for the last load to get another. Socony representatives agreed to extend his credit limit to 2 loads of gasoline and before delivery of additional gasoline, payment for the first of the 2 unpaid loads was required. Load values approximated $2,500.00, more or less. * * *"

* * * * * *

For that matter, the undisputed record shows that the October agreement required the debtor to deliver to Socony's dispatcher's office full payment for load one before load three would be dispatched. This procedure was faithfully adhered to by the parties from October 5, 1960, to the date of adjudication on September 29, 1961, the last load being delivered a few days prior to the adjudication.

The findings of the referee and the undisputed evidence clearly established that each load of gasoline, delivered after October 5, 1960, was delivered on condition that Socony be paid in cash for the first of the two unpaid loads. This was a more cautious and protective arrangement than would be one based on the widely used method of cash on delivery. The admitted arrangement required the payment of cash before delivery, rather than on delivery.

Both the statutory and the decisional law of the State of Oregon recognize and enforce sales of property on condition. ORS 75.200.¹ Keegan v. Lenzie, 171 Or. 194, 212, 213, 135 P.2d 717; Mogul Transportation Co. v. Larison, 181 Or. 252, 181 P.2d 139. On this type of an agreement title does not pass to the vendee until the condition is fulfilled by making the payment. Mogul Transportation Co. v. Larison, supra, p. 259, 260, 181 P.2d 139. What constitutes a preferential transfer must be determined by federal, rather than state law. Collier on Bankruptcy, 14th Ed., Vol. 3, § 60.39. United Pacific Insurance Company v. First National Bank of Oregon, D.C., 222 F.Supp. 243, 247. For all practical purposes the bankrupt was paying for each load before it was delivered, although the payment was credited, under the agreement, to the first of the previous two deliveries.

The conditional credit arrangement, here before the court, is a far cry from the customary open account credit arrangement which was the subject of discussion in practically all of the cases cited by the referee and employed by opposing counsel. The rule, as stated in the Oregon cases, includes a circumstance where payment is made by check, and payment never...