T.H. Richards Processing Co., In re
| Decision Date | 08 August 1990 |
| Docket Number | Nos. 88-15318,s. 88-15318 |
| Parties | In re T.H. RICHARDS PROCESSING COMPANY, Debtor. (Three Cases) ALVERNAZ FARMS, INC.; Dennis Bastiao, doing business as Bastiao Farms; Robert Borchard & Sons; Dettling Farms, Inc., Richard Dettling, Gary Dettling; Mike Dresick, doing business as D & H Farms, Inc.; Fred & Lloyd Durst, doing business as Durst Bros.; Galindo Farms; Holdener Farms, Inc.; Edgar Jane Farms, Inc.; J & R Kalsfbeek, Inc.; Denny Kidwell; Ard K. Kozono; Matsumura, Inc.; George Morita, Nishikawa Farms, Inc., Rosa Farms, Williams Schoeningh, Hiroshi Tabata, M. Wilbur, Jr., Yosh Yamato, dba Yamco Farms, Newhall Land & Farming Co., Plaintiffs-Appellants, v. BANK OF CALIFORNIA, Defendant-Appellee. Lloyd M. RIVES; Thomas C. Howe; John Goelet, as administrators with the will annexed of the Estate of Whitney Warren, Deceased, Plaintiffs-Appellants, v. HARRIS TRUST AND SAVINGS BANK; Security Pacific National Bank; Bank of California, Defendants-Appellees. CALIFORNIA CANNING PEAR ASSOCIATION; All State Packers, Inc.; California Bartlett Packers; A. Russell Gallaway, Jr.; G.C. Johnson & Sons; Ard K. Kozono; Naumes, Inc.; Runyon & Dorsey Orchards, Salisbury & Johnson, Scott's Valley Fruit Exchange, Fong Shee & Sons, Lloyd M. Rives, Thomas C. Howe and John Goelet, as administrators with the will annexed of the Estate of Whitney Warren, Deceased, Plaintiffs-Appellants, v. HARRIS TRUST AND SAVINGS BANK; Security Pacific National Bank; Bank of California, Defendants-Appellees. to 88-15320. |
| Court | U.S. Court of Appeals — Ninth Circuit |
William J. Bush, Hanson, Bridgett, Marcus, Vlahos & Rudy, San Francisco, Cal., for plaintiffs-appellants.
Jon Craig Gilliland, Murphy, Weir & Butler, San Francisco, Cal., for defendants-appellees.
Appeal from the United States District Court for the Eastern District of California.
Before NORRIS, THOMPSON and O'SCANNLAIN, Circuit Judges.
In this complex bankruptcy case, we examine the intricacies of California's agricultural producer's lien. The crucial question is whether a grower, merely by agreeing with a processor to a deferred payment for its produce, releases its lien as a matter of law. We conclude that such lien is not so released, and we therefore reverse the order of the district court which concluded otherwise.
Appellants are farmers (collectively hereinafter "Growers"). Twenty-three of them grow tomatoes; twelve grow pears; and one, in the past, grew peaches. 1
In 1981, all of the tomato growers (with one exception) signed identical individual contracts with T.H. Richards Processing Co. ("THR") to sell THR their produce. The contracts provided that THR would pay fifty percent of the contractually agreed-upon price within one week of delivery of the produce and fifty percent one year after delivery, without interest.
Each tomato contract contained a section entitled "Release of Producer's Lien," which purported to effect a release of the growers' statutory liens which arise under California law. See generally Cal.Food & Agric.Code Secs. 55631-55653 (West 1986 & Supp.1990). Only one tomato grower, Newhall Land and Farming Co. ("Newhall"), declined the contract with the release section; its representative crossed that section out before signing. Newhall's contract with THR was otherwise identical to the other tomato growers'.
Of the twelve appellant pear growers, ten are members of the California Canning Pear Association ("Pear Association" or "Association"). The Pear Association, a non-profit agricultural cooperative which acts as the exclusive sales agent for its members, entered into a contract on behalf of the members for the sale and delivery of pears to THR; the Association did not buy the pears from its members. The Association's written contract was orally modified to provide for the same type of deferred-payment schedule from THR as that contained in the tomato growers' contracts.
Part of the Pear Association's contract provided for assignment of processed pears to the Association if THR defaulted on its payments. Thus, in the event of non-payment, the Association would have a security interest in processed pears.
Only one principal here, Whitney Warren, was a peach grower. Warren was a member of the California Canning Peach Association ("Peach Association" or "Association"). His membership agreement with the Peach Association provided for Warren to sell the Association his peaches. The Peach Association, in turn, entered into a multi-year "Contract of Sale to Canner" with THR. Under the contract, THR bought the peaches from the Association.
Unlike the various contracts between THR, on the one hand, and the tomato and pear growers, on the other, the Peach Association's contract did not provide for deferred payments. Rather, under this contract, THR agreed to pay the Association and Warren within seven days of delivery. Despite these contractual terms, Warren had his own demand-payment arrangement with THR: THR would hold the money owed until Warren or his bank requested a partial payment. Like the contract between the pear growers and THR, the Peach Association's contract provided that in the event of THR's non-payment the seller would have a security interest in processed peaches.
On July 9, 1982, THR sought Chapter 11 relief in bankruptcy court. In August and September 1982, after the fifty-percent deferred payments by THR had become due, the tomato and pear growers initiated adversary proceedings in that court, seeking to enforce their producer's liens. The peach grower's adversary proceeding commenced in March 1983.
Defendants in Growers' actions included THR, various banks ("Banks"), which are appellees here, and certain other companies. This last set of companies, known as the "bill-and-hold defendants," had allegedly purchased, or at least contracted to purchase, processed forms of the tomatoes, pears, and peaches from THR but had not yet taken physical delivery as of July 9, 1982. For the most part, THR admitted owing Growers money, but Banks answered that Growers had released their liens by agreeing to the fifty-percent deferred payments.
After the various actions by Growers were consolidated and as discovery slowly proceeded, Banks and other defendants filed motions for summary judgment. On December 30, 1985, the court filed a pre-trial order setting forth certain conclusions of law that would govern the summary judgment motions and the upcoming trials on other issues. This order provided in part:
The Growers' lien is released, pursuant to Section 55637 of the Producer's Lien Statute, by a deferred payment contract satisfactory to the plaintiff Growers, absent a specific agreement to the contrary.
Pre-Trial Status Conference Order at 3, California Canning Pear Ass'n v. T.H. Richards Processing Co. (In re T.H. Richards Processing Co.), Adversary Proceeding No. 282-1254 (Bankr.E.D.Cal.) (Dec. 30, 1985) (Conclusion of Law No. 7). On January 10, 1986, the court indicated that it would enter orders of summary judgment against all plaintiff tomato growers except Newhall, but would defer entry of the judgments until after trials had occurred on the claims on which summary judgment would not be granted.
Trial of the consolidated proceedings was to begin with the pear case in February 1986. One week before trial, Growers entered into settlement agreements with the bill-and-hold defendants. On January 31, the court therefore dismissed all claims and counterclaims between the plaintiffs and the settling defendants.
On February 4, 1986, the first day of trial, Banks moved to dismiss the adversary proceedings under Bankruptcy Rule 7041 on the ground that Growers had violated an order of the court by settling with the bill-and-hold defendants and causing the court to dismiss those defendants. The court took Banks' motion under submission and trial on the pear growers' claims proceeded. The "tomato trial," limited to Newhall's claim, which was based in part on the argument that Newhall's crossing out of the release-of-lien provision was sufficient to preserve its lien rights, followed in June; the trial on the peach grower's claim took place in July.
On November 24, 1986, the bankruptcy court entered an order granting summary judgment against all of the plaintiff tomato growers except Newhall on the ground that such growers had released their producer's liens as a matter of law by agreeing to one-year deferred-payment arrangements. Two days later, the bankruptcy court entered judgment against Newhall on the basis of the June trial, finding that it, too, had released its producer's liens by agreeing to one-year deferred-payment arrangements.
The bankruptcy court also entered judgment after trial against the pear growers on the ground that they had released their liens by agreeing to a deferred-payment plan. The court found alternatively that ten of the twelve pear growers had released their liens by taking security interests in THR's inventory. The court also entered judgment against plaintiff Warren on the ground that he had released his producer's lien on his peaches by entering into a demand-payment arrangement with THR.
Finally, the bankruptcy court entered orders dismissing, under Bankruptcy Rule 7041 and Rule 41(b) of the Federal Rules of Civil Procedure, the actions against Banks by the tomato and pear growers.
Growers appealed from all of these orders and judgments. In its ruling entered August 31, 1988, the district court discussed specifically only whether Growers released their respective producer's liens as a matter of law by agreeing to a deferred-payment plan. The district court agreed with the bankruptcy court's ruling on this issue and affirmed all of the orders and judgments of the bankruptcy court.
Growers timely appealed to this court. Having jurisdiction under 28 U.S.C. Sec. 158(d), we ordered the appeals...
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