Matter of High-Line Aviation, Inc.
| Decision Date | 18 December 1992 |
| Docket Number | Bankruptcy No. A91-77924-ADK to A91-77926-ADK,Adv. No. 92-6094. |
| Citation | 149 BR 730 |
| Parties | In the Matter of HIGH-LINE AVIATION, INC., Debtor. In the Matter of HIGH-LINE AVIATION LTD., Debtor. In the Matter of HIGH-LINE AERO INVENTORIES LTD., Debtor. ATG AEROSPACE, INC., Plaintiff, v. HIGH-LINE AVIATION LTD., High-Line Aviation, Inc., High-Line Aero Inventories Ltd., Robert Trauner, in his capacity of Chapter 11 Trustee for High-Line Aviation Ltd., High-Line Aviation, Inc., and High-Line Aero Inventories Ltd., Stanchart Business Credit, Inc., and Standard Chartered Bank of Canada, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Charles C. Stebbins, III, Warlick, Tritt & Stebbins, Augusta, GA, for plaintiff.
Charles E. Campbell, Henry F. Sewell, Jr., Hicks, Maloof & Campbell, Atlanta, GA, for Robert Trauner.
Rufus T. Dorsey, IV, Jack C. Basham, Jr., Parker, Hudson, Rainer & Dobbs, Atlanta, GA, for Stanchart Business Credit, Inc. and Standard Chartered Bank of Canada.
Before the Court are two cross-motions for summary judgment filed by Robert Trauner, Chapter 11 Trustee for the Debtors, High-Line Aviation, Inc. ("HAI"), High-Line Aviation Ltd. ("HAL") and High-Line Aero Inventories Ltd. and two secured creditors of the Debtors, Stanchart Business Credit, Inc. ("Stanchart") and Standard Chartered Bank of Canada ("Standard") (collectively "Secured Creditors"). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K). The Court will grant the Trustee's motion and will grant the Secured Creditors' motion in part and deny in part based upon the following findings and conclusions.
On or about April 1, 1990, ATG Aerospace, Inc. ("Plaintiff" or "ATG") entered into an agreement with HAL for the consignment of certain aircraft parts ("Parts") ("Consignment Agreement"). The Consignment Agreement provided that the Parts were to be stored on HAL's premises in Ontario, Canada and were not to be removed from Canada without ATG's permission. Consignment Agreement, Article III(A), Exhibit A to ATG's Complaint. The Consignment Agreement also required HAL to designate the Parts as ATG's property. Id. Finally, the Consignment Agreement provided that it would be governed by the laws of Ontario. Consignment Agreement, Article XVII(A).
The Parts were moved from Ontario to Georgia in January 1991. Trustee's Statement of Material Facts as to Which There is No Genuine Issue to be Tried ("Trustee's Undisputed Facts"), ¶ 10 and Response of ATG Aerospace, Inc. to Statement of Allegedly Undisputed Material Facts Submitted by Trustee ("ATG's Response"), p. 3. After their removal, the Parts were stored in Atlanta, Georgia at a facility operated by the three Debtors ("Atlanta Facility"). On August 22, 1991, the Secured Creditors took possession of the Parts pursuant to certain security agreements they had with HAI and HAL. On August 28, 1991, ATG terminated the Consignment Agreement and demanded the return of the Parts. On or about September 24, 1991, each Debtor filed a Chapter 11 petition. Shortly thereafter, the Secured Creditors delivered the Parts to the Trustee. ATG filed its Complaint on January 9, 1992 naming as Defendants the Secured Creditors, the Debtors and the Trustee. ATG asserts that it is the owner of the Parts and that the Secured Creditors and the Trustee obtained possession of the Parts in violation of the Consignment Agreement. ATG seeks an order requiring the Debtors and the Trustee to turn over the Parts to ATG.
On March 7, 1990, Standard entered into a revolving credit facility and security agreement with HAL, and Stanchart entered into a revolving credit facility and security agreement with HAI (collectively "Security Agreements"). Pursuant to these Security Agreements, HAL and HAI granted Standard and Stanchart, respectively, a first priority security interest in all or substantially all of their assets. Security Agreement, p. 11, Exhibits A and B to Stanchart's Answer. The Security Agreements covered after-acquired property. Id. Standard and Stanchart filed financing statements on February 21, 1990 and March 23, 1990 representing their respective security interests. State of Georgia Uniform Commercial Code Financing Statement Form 1, Exhibit C to Stanchart's Answer. HAL and HAI defaulted on repayment of their loans to Standard and Stanchart, and on August 22, 1991 the Secured Creditors accelerated the indebtedness and took possession of the Parts. On August 28, 1991, the Secured Creditors received a letter from ATG in which ATG asserted that it had consigned the Parts to HAL and was entitled to possession of the Parts. Affidavit of Margaret Ceconi ("Ceconi Aff."), Exhibit F. After Debtors filed their Chapter 11 petitions on September 24, 1991, the Secured Creditors turned over the Parts to the Trustee. (Trustee's Undisputed Facts at 10) and (ATG's Response at 3). On October 31, 1991, Standard assigned to Stanchart all of its right, title and interest in the Security Agreement between Standard and HAL and the financing statements representing those interests. (Ceconi Aff.), Exhibit E. As of February 12, 1992, Debtors were indebted to Stanchart in the principal amount of $3,769,139.11 plus accrued interest of $148,554.86. (Ceconi Aff. at 16).
Stanchart asserted a counterclaim against ATG and cross-claims against the Trustee and the Debtors. Stanchart asserts that ATG delivered the Parts to Debtors to be sold in the ordinary course of Debtor's business and that Debtors have paid ATG, in whole or in part, for the Parts. Stanchart alleges that ATG failed to file a financing statement or notify Standard or Stanchart of its interest in the goods and asserts that therefore Stanchart's perfected security interest in the Parts has priority over ATG's interest. Stanchart seeks an accounting of all payments made by the Debtors to ATG and asserts that ATG is liable for such payments, at least to the extent of Stanchart's claim.
The Trustee answered Stanchart's crossclaim admitting that Stanchart has a fully perfected, first priority security interest in the Parts. The Trustee asserts that ATG is not entitled to possession of the Parts and has, at most, an unsecured claim against Debtors for the unpaid purchase price. The Trustee asks the Court to determine the priority of the asserted interests of ATG, Stanchart and the Trustee in the Parts and to issue an order authorizing the Trustee to sell the Parts with Stanchart's lien to attach to the proceeds.1 ATG replied to the Trustee's counter-claim admitting that it has not filed a financing statement or any other public notice in the United States or Canada evidencing its asserted interest in the Parts.
The Trustee moved for summary judgment on all issues raised by ATG's Complaint. Stanchart moved for summary judgment on ATG's Complaint and the Trustee's cross-claim against it.
The first issue is whether the Court should apply Ontario law or Georgia law in this proceeding. When a bankruptcy court considers an issue that is not addressed by federal law and does not implicate compelling federal interests, it is appropriate for the court to apply the choice of law rules of the state in which it sits to determine the applicable substantive law.2 Bi-Rite Enterprises, Inc. v. Bruce Miner Co., Inc., 757 F.2d 440, 442 (1st Cir.1985); Compliance Marine, Inc. v. Campbell (In re Merritt Dredging Co., Inc.), 839 F.2d 203, 206 (4th Cir.1988), cert. denied, 487 U.S. 1236, 108 S.Ct. 2904, 101 L.Ed.2d 936 (1988); Woods-Tucker Leasing Corp. v. Hutcheson Ingram-Dev. Co., 642 F.2d 744, 748-49 & n. 8 (5th Cir.1981).
The transactions at issue are transactions in goods. Official Code of Georgia Annotated ("O.C.G.A.") § 11-2-105. Accordingly, the Uniform Commercial Code ("U.C.C."), as enacted in Georgia, applies and furnishes the appropriate choice of law provision. O.C.G.A. § 11-2-102. The choice of law provision for transactions governed by the U.C.C. is O.C.G.A. § 11-1-105. It provides that:
The Court will first look to the nature of the interests that ATG and Stanchart assert and determine whether these asserted interests have any impact on the choice of law issue. Stanchart asserts that it has a perfected security interest in the Parts. Under the U.C.C. issues involving ". . . perfection and the effect of perfection or non-perfection of a security interest in collateral are governed by the laws of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected." O.C.G.A. § 11-9-103(1)(b). Standard and Stanchart filed their financing statements in Georgia on February 21, 1990 and March 23, 1990, respectively. HAL transported the Parts to Georgia in January, 1991. Accordingly, the last act necessary to determine whether Stanchart has a perfected security interest was the removal of the Parts to Georgia. Section 11-9-103(1)(b) requires the Court to look to Georgia law to determine whether Stanchart's security interest in the Parts is perfected. The Court has examined the Security Agreements and the financing...
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