Gold Coast Seed Co. v. Beachner Seed Co. (In Re Gold Coast Seed Co.)

24 B.R. 595, 1982 Bankr. LEXIS 3216, 10 Bankr. Ct. Dec. (CRR) 202
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedSeptember 30, 1982
DocketBAP No. NC-82-1015-GVE, Bankruptcy No. 4-80-02038-H, Adv. No. 4-81-0129-AH
StatusPublished
Cited by19 cases

This text of 24 B.R. 595 (Gold Coast Seed Co. v. Beachner Seed Co. (In Re Gold Coast Seed Co.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gold Coast Seed Co. v. Beachner Seed Co. (In Re Gold Coast Seed Co.), 24 B.R. 595, 1982 Bankr. LEXIS 3216, 10 Bankr. Ct. Dec. (CRR) 202 (bap9 1982).

Opinion

OPINION

Lloyd D. GEORGE, Bankruptcy Judge:

The defendant/appellant, BEACHNER SEED COMPANY (“Beachner”), appeals from a summary judgment entered against it in the amount of $19,535.00, less a credit of $237.69. We AFFIRM.

BACKGROUND

Prior to the debtor, GOLD COAST SEED COMPANY (“Gold Coast”), filing its petition herein, Gold Coast and Beachner were engaged in the buying and selling of different types of seed. While so engaged, on July 9, 1979, these parties entered into an agreement whereby Gold Coast purchased some 160,000 pounds of Kentucky 31 Fescue grass seed from Beachner for a price of $59,200.00. Shipment of this seed was to be in February or March of 1980 and the terms of payment thereon were to be net cash against the shipping documents, payable upon first presentation.

In February 1980, Beachner informed Gold Coast that this shipment was ready for transporting. Nevertheless, the seed was never shipped from Beachner’s warehouse. Instead, on March 19,1980, Beachner repurchased the seed from Gold Coast to send to another buyer. By that time, however, the market price of this type of seed had fallen and the repurchase price was set at $40,-000.00, resulting in a balance of $19,200.00 due and owing Beachner.

On March 22,1980, pursuant to custom in the seed trade, Beachner sent Gold Coast an invoice for this remaining $19,200.00, which stated that payment on this sum was due in twenty (20) days following the receipt of that document. Gold Coast, however, did not make this payment. Rather, on April 18, 1980, some 26 days after the receipt of the invoice, a contract was entered into whereby Gold Coast agreed to sell some $19,535.00 worth of Oregon Annual Rye grass seed to Beachner, as a setoff against the $19,200.00 then owing the defendant/appellant. This seed was, thereafter, shipped on April 23, 1980, and April 30, 1980. Payment of the $335.00 difference in the above sums, minus $97.31 for finance charges — or $237.69 — was then made by Beachner.

On June 30, 1980, Gold Coast filed its petition for relief under Chapter 11 of the Bankruptcy Code.

As debtor-in-possession in its Chapter 11 case, Gold Coast thereafter sought to set aside the transfer of the rye seed to Beach- *597 ner. Its complaint, was based upon two principal causes of action: 1) that the transfer to Beachner was a voidable preference and 2) that the debt incurred by Beachner in receiving the shipments of the rye seed represented an unenforceable attempt of setoff. Arguing these grounds, on October 5, 1981, Gold Coast moved for summary judgment. Beachner then responded with its own motion for summary judgment. On or about November 30, 1981, the trial court entered a summary judgment in favor of the debtor/plaintiff and against the defendant/appellant. The instant appeal then ensued.

On January 28, 1982, Gold Coast’s Chapter 11 case was converted to a ease under Chapter 7 and a trustee was appointed to handle the property of the debtor’s estate. This trustee has since proceeded with the defense of the debtor’s judgment on appeal.

II. ANALYSIS OF THE FACTS AND THE LAW

There seems to be little question that the April 1980 transfer of the rye grass seed tentatively falls within the general preference provisions of 11 U.S.C. § 547(b). At issue is whether these two shipments also fit the criteria of the “ordinary course of business” exception found at 11 U.S.C. § 547(c)(2). This exception mandates:

“(c) The trustee may not avoid under this section a transfer—
“(2) to the extent that such transfer was—
(A) in payment of a debt incurred in the ordinary course of business or financial affairs of the debtor and the transferee;
(B) made not later than 45 days after such debt was incurred;
(C) made in the ordinary course of business or financial affairs of the debtor and the transferee; and
(D) made according to ordinary business terms

Beachner argues that the procedure utilized in satisfying the amounts due it from Gold Coast through the sale of grass seed stock was ordinary in the seed trade and in these parties’ past business dealings, being com- 1 monly referred to as a “washout.” TheJ trial court was, nevertheless, troubled by what appeared to be nothing more than an attempt by Beachner to receive more than other creditors. In this regard, the trial court noted the following facts, which led it to conclude that the transfer was a simple") preference, without business justification: J

“a. The two transactions were virtually an exact offset.
“b. There were no further sales or purchases.
“c. The two transactions were entered into after Gold Coast’s payment was overdue: Payment was due from Gold Coast within 20 days of receipt of the March 19 invoice. Assuming four days before delivery, receipt took place on March 22. Twenty days were up on April 12. Beachner’s two purchases from Gold Coast were by contracts dated April 18, when Gold Coast was overdue almost a week.
“d. The two contracts expressly provided for the offset.
“e. Beachner’s letter of August 19 confirmed that the ‘purchases or buybacks made were to reduce your account with us.’ ”

Appellant’s E.R., at 30-31.

We agree with the trial court that these facts — and, in particular, fact c. — take the transfer of April 1980, hs<á/-má'tter of law, y outside the ordinary course of business for \ both Beachner and Gold Coast. The transfer, therefore, did constitute a preference voidable by the debtor-in-possession or trustee.

Looking next to whether this transfer resulted in the creation of an enforceable setoff for the debt previously owed Beachner by the debtor, the following language from 11 U.S.C. § 553(a)(3) must be noted:

“(a) Except as otherwise provided in this section and in sections 362 and 363 of *598

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Bluebook (online)
24 B.R. 595, 1982 Bankr. LEXIS 3216, 10 Bankr. Ct. Dec. (CRR) 202, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gold-coast-seed-co-v-beachner-seed-co-in-re-gold-coast-seed-co-bap9-1982.