Rainey v. Intern. Harvester Credit Corp.
| Citation | 59 BR 987 |
| Decision Date | 13 March 1986 |
| Docket Number | No. 84 C 9019.,84 C 9019. |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | Clois RAINEY, d/b/a D & K Truck Sales, Plaintiff, v. INTERNATIONAL HARVESTER CREDIT CORPORATION and Northside International, Inc., Defendants. |
Richard A. Rheinstrom, Ben E. Palmer, Leslie Kipnis, Chicago, Ill., for plaintiff.
Robert A. Filpi, Stack & Filpi, Robert W. Hallock, John R. Teitgen, Chicago, Ill., for defendants.
This matter is before the court on appeal by plaintiff, Clois Rainey, d/b/a D & K Truck Sales ("Rainey"), from an order of the bankruptcy court. The bankruptcy court ruled that counter-defendant International Harvester Credit Corporation ("IHCC") had a superior right to the sales proceeds of two trucks which plaintiff allegedly sold to private parties through the debtor, defendant Northside International, Inc. ("Northside"). For the reasons stated below, the court affirms the decision of the bankruptcy court.
The facts found by the bankruptcy court are as follows. On January 24, 1983, Lawrence Jesewitz, Northside's president, called IHCC about an application by Mr. and Mrs. Allen Byrd for credit with which to purchase a used truck from Northside. Northside later sent IHCC a copy of the written credit application; IHCC approved the application and informed Northside that IHCC would purchase the retail installment contract to be entered into by Northside with the Byrds. After receiving this approval from IHCC, Northside and the Byrds executed a retail installment contract on February 7, 1983. The Byrds received financing in the amount of $26,000.
On February 15, 1983, Northside phoned in to IHCC another application for credit with which to buy a truck. This application was made by Mr. and Mrs. Paul Langer. About two days later, IHCC informed Northside that the Langer application was approved and that IHCC would purchase the retail installment contract to be entered into by Northside and the Langers. As a result of IHCC's approval, Northside and the Langers executed a retail installment contract on February 18, 1983. The Langers received financing in the amount of $14,500.
The Byrd and Langer contracts were sold and assigned to IHCC, on February 22, 1983, when Jesewitz signed the contracts and gave them to Richard S. Daniels, IHCC's collections manager. In the contracts Northside represented, among other things, that it had no knowledge of any facts which would impair the validity or value of the contracts. In addition, the contracts expressly made their assignment to IHCC subject to the terms and conditions of the financing agreements then in effect between IHCC and Northside. These financing agreements contained provisions in which Northside represented, in effect, that the Byrd and Langer contracts were free from defenses, offsets or counterclaims, constituted first liens in favor of IHCC upon the Langer and Byrd trucks, and that the contracts represented actual bona fide sales in the ordinary course of business. Also, at the time the contracts were given to Daniels, Jesewitz orally represented that the trucks were free and clear inventory with no liens or encumbrances.
On March 15, 1983, Rainey telephoned Daniels and told him that Northside owed Rainey money for the trucks. On about March 20, 1983, Rainey, Jesewitz and Daniels held a meeting. At that meeting, Rainey claimed that he owned the Byrd and Langer trucks and that IHCC owed him the proceeds of the retail contracts. IHCC refused to pay Rainey. As a result, Rainey filed the present complaint.
While Rainey does not dispute most of these facts, he does tell a somewhat different story. Rainey claims that the contract signed by the Byrds on February 8, 1983 was misdated. The error was discovered on February 21, 1983, and a new correct contract was signed on February 25, 1983. When Daniels arrived at Northside on February 21, 1983, neither this second Byrd contract nor the Langer contract had been forwarded to IHCC. Moreover, sometime before February 21, 1983, IHCC learned that Northside had materially breached the financing agreement between Northside and IHCC. Therefore, IHCC was under no obligation to purchase the Langer and Byrd contracts. Thus, IHCC gave nothing of value when it purchased these contracts at some point after February 21, 1983. In addition, Rainey claims that IHCC knew that Northside was not the true owner of the trucks.
In Count I of the amended complaint, Rainey alleges that the debt owed him by the debtor Northside should be declared nondischargeable under 11 U.S.C. § 523(a)(4). In addition he asks that Northside turn over to him the $40,500 he believes IHCC paid Northside as a result of the Byrd and Langer transactions. In Count II, Rainey seeks a determination that, if the $40,500 is in the possession of IHCC, IHCC holds these funds in trust for Rainey and IHCC should turn the funds over to him.
At the outset it should be noted that, in reviewing a decision of the bankruptcy court, the district court must accept the bankruptcy court's findings of fact, unless they are clearly erroneous. Fed.Bankr.P. 8013 (West 1984). Questions of law, however, are reviewed independently. In Re Kimzey, 761 F.2d 421 (7th Cir.1985). In this appeal, Rainey attempts to raise three issues: (1) that no bankruptcy judges lawfully existed after June 27, 1984; (2) that the bankruptcy judge lacked subject matter jurisdiction over the claims involved here since resolution of those claims involve determination of "non-core" issues; and (3) that the bankruptcy court erred in finding that IHCC had the superior right to possession of the two trucks. The first two questions are issues of law; the third question involves primarily a question of fact.
Rainey articulates the first issue as follows: "Does Congress have the right under Article II Sec. 2 of the U.S. Constitution to appoint judges with life tenure when such Act is clearly the sole dominion and providence of the office of the President of the United States?" Plaintiff's Memorandum at p. 3. Rainey's brief fails to cite the statute which he challenges, but the court assumes he means to attack the constitutionality of §§ 106 and 121 of the Bankruptcy Amendment and Federal Judgeship Act of 1984 ("1984 Amendments"). As one bankruptcy judge noted in ruling on this issue in another case, this challenge to the validity of the bankruptcy court system was very much in vogue at one time, but every district court which has ruled on the issue has rejected it. In Re Baldwin United Corporation, 12 Bankr.Ct.Dec. 913, 915, 48 B.R. 49 (Bkrtcy.S.D.Ohio 1985) citing In re Benny, 12 B.C.D. 495, 44 B.R. 581 (N.D. Cal.1984); In re Tom Carter Enterprises, 12 B.C.D. 536 (C.D.Cal.1984); In re Wastch Factoring, Inc., Misc. No. B-0015W (D.Utah Nov. 26, 1984). The court's opinion in In re Tom Carter Enterprises advances a scholarly analysis of this issue, and, since this court agrees with the decision reached there, the court need not add to that discussion. Plaintiff's first issue raises no grounds for reversal of the bankruptcy court's decision in this case.
Furthermore, the second issue does not require reversal of the bankruptcy court. Rainey appears to contend that by deciding the issue of who had the superior right to the two trucks, the bankruptcy court unlawfully decided a "non-core" issue. This argument is without merit...
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