Fujian Zhangzhou Foreign Trade Co. v. World Imports, Ltd. (In re World Imports, Ltd.)

549 B.R. 820, 2016 U.S. Dist. LEXIS 5768
CourtDistrict Court, E.D. Pennsylvania
DecidedJanuary 19, 2016
DocketCIVIL ACTION NO. 14-4920; BANKRUPTCY NO. 13-15929
StatusPublished
Cited by1 cases

This text of 549 B.R. 820 (Fujian Zhangzhou Foreign Trade Co. v. World Imports, Ltd. (In re World Imports, Ltd.)) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fujian Zhangzhou Foreign Trade Co. v. World Imports, Ltd. (In re World Imports, Ltd.), 549 B.R. 820, 2016 U.S. Dist. LEXIS 5768 (E.D. Pa. 2016).

Opinion

MEMORANDUM

Tucker, Chief Judge.

Currently before the Court is a Certificate of Appeal from a June 18, 2014 Order entered by the Honorable Stephen Rasla-vich, United States Bankruptcy Judge for the Eastern District of Pennsylvania (Doc. 1), denying two Motions for Allowance and Payment of Administrative Expense Claims filed by Appellants Fujian Zhang-zhou Foreign Trade Co, Ltd. (“Fujian”) and Haining Wansheng Sofa Co., Ltd. (“Haining”) (collectively, “Appellants”). Upon consideration of the parties’ briefs and exhibits, this Court affirms the judgment of the Bankruptcy Court.

1. BACKGROUND

On July 3, 2013, World Imports, Ltd. (“Appellee”) petitioned for relief under Chapter 11 of the Bankruptcy Reform Act, 11 U.S.C. § 1101, in the United States Bankruptcy Court for the Eastern District of Pennsylvania (“Bankruptcy Court”). Appellants are claimants in Appellee’s bankruptcy filing, having each filed a Motion for Allowance and Payment of Administrative Expense Claims pursuant to 11 U.S.C. § 503(b)(9) on October 23,2014.1

The facts underlying this appeal are not in dispute, as the parties submitted this matter to the Bankruptcy Court on stipulations of fact which are part of the Designated Record on Appeal (Bankruptcy No. 13-15929, Doc. 280, Ex. A, B). It is settled that vendors Fujian and Haining sold goods to debtor World Imports, Ltd. in the ordinary course of business. The operative dates of the sale are not in dispute.2 The [822]*822parties also agree that the goods were shipped “FOB” or “free on board” from the port of origin. The sole question before the Bankruptcy Court was whether Appel-lee received the goods from Appellants within twenty (20) days prior to the bankruptcy filing, thereby qualifying for administrative expense priority pursuant to 11 U.S.C. § 503(b)(9). The parties disagree on this point because Appellants shipped the goods from China more than 20 days before the July 3, 2013 bankruptcy filing, but Appellee took physical possession of the goods in the United States fewer than 20 days before the bankruptcy filing. Because the Bankruptcy Code does not define the word “receive,” the Bankruptcy Court was tasked with determining whether the authority controlling the definition of “receive” in this context is international commercial law or non-bankruptcy state law. The parties agree that this appears to be a case of first' impression, as neither party could locate a decision on point.

The Bankruptcy Court found that the goods in question were received on the shipment date. Since this was more than 20 days before the bankruptcy filing, the court found that Appellants’ claims were not entitled to administrative expense priority status. Though the court found that international trade law was the controlling authority, it noted that state law may provide a rule of decision for the gaps in federal statutes so long as the state law does not contravene an established federal law. U.S. Const. Art. VI cl. 2; see Malley-Duff & Assoc., Inc. v. Crown Life Insur. Co., 792 F.2d 341, 346 (3d Cir.1986) (“If federal law is both pertinent and valid, it applies because the supremacy clause of the Constitution so commands.”) However, because federal law was established as a result of the United States’ adoption of the Convention on Contracts for the International Sale of Goods (“CISG”), the Bankruptcy Court determined that the application of the UCC would be improper.

II. DISCUSSION

A. Standard of Review

In reviewing the Bankruptcy Court’s judgment on appeal, this Court reviews the Bankruptcy Court’s legal determinations de novo, its factual findings for clear error, and its exercise of discretion for an abuse thereof. See In re Heritage Highgate, Inc., 679 F.3d 132 (3d Cir.2012); In re Grayboyes, No. 05-1780, 2006 WL 437546, at *3 (E.D.Pa. Feb. 22, 2006).

B. Analysis

A claimant seeking allowance and payment of an administrative claim must establish that: (1) the vendor sold goods to the debtor; (2) the goods were received by the debtor within 20 days prior to the filing; and (3) the goods were sold to the debtor in the ordinary course of business. In re Goody’s Family Clothing, Inc., 401 B.R. 131, 133 (Bankr.D.Del.2009).

Appellants contend that because the Bankruptcy Code does not define the word “receive,” the Court must look to applicable non-bankruptcy law for an express definition of the term. Appellants maintain that the Uniform Commercial Code (“UCC”) definition of “receipt” as taking “physical possession of [the goods]” should apply. UCC § 2-103(l)(c). If the UCC were to apply, then Appellee received the goods on the dates it took physical posses[823]*823sion of the goods. Because those dates were within 20 days of Appellee’s bankruptcy filing, the claims would qualify for administrative priority.

Appellee asserts that the controlling authority is international commercial law because the parties did not elect to exclude its application in their contract. Pursuant to the accepted terms of international trade, in a sale which occurs free on board (“FOB”) in the country of origin, the property is transferred to the buyer once the goods are put on the ship. If international trade law were to apply, then Appellee received the goods in question on a date which was more than 20 days prior to bankruptcy, precluding the claim from administrative expense status.

“Where Congress has chosen to exercise its authority, contrary provisions of state law must accordingly give way,” In re Roach, 824 F.2d 1370, 1373 (3d Cir.1987) (citing Johnson v. First National Bank of Montevideo, 719 F.2d 270, 273 (8th Cir.1988)), cert. denied, 465 U.S. 1012, 104 S.Ct. 1015, 79 L.Ed.2d 245 (1984). The Supreme Court has explained that uniform federal law displaces state law as to matters involving international relations. See Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 425, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964). As such, state law is preempted when it is inconsistent with or impairs the policy or provision of a treaty. U.S. v. Pink, 315 U.S. 203, 231, 62 S.Ct. 552, 86 L.Ed. 796 (1942); see also Nielsen v. Johnson, 279 U.S. 47, 52, 49 S.Ct. 223, 73 L.Ed. 607 (1929) (explaining that the meaning of a treaty provision is not restricted by possible conflict with state legislation).

i. Convention on Contracts for the International Sale of Goods

The treaty upon which the Bankruptcy Court based its decision is the CISG3

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Related

In Re World Imports, Ltd.
862 F.3d 338 (Third Circuit, 2017)

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Bluebook (online)
549 B.R. 820, 2016 U.S. Dist. LEXIS 5768, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fujian-zhangzhou-foreign-trade-co-v-world-imports-ltd-in-re-world-paed-2016.