World Imports, Ltd. v. OEC Group New York (In re World Imports, Ltd.)

498 B.R. 58
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedAugust 14, 2013
DocketBankruptcy Nos. 13-15929, 13-15933, 13-15934, 13-15935; Adversary No. 13-0402
StatusPublished
Cited by1 cases

This text of 498 B.R. 58 (World Imports, Ltd. v. OEC Group New York (In re World Imports, Ltd.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy 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
World Imports, Ltd. v. OEC Group New York (In re World Imports, Ltd.), 498 B.R. 58 (Pa. 2013).

Opinion

Opinion In Support Of Order Dated July 25, 2013

STEPHEN RASLAVICH, Bankruptcy Judge.

This Opinion is filed pursuant to Local Bankruptcy Rule 8001 — 1(b) for the purpose of amplifying the Court’s oral bench ruling and Order of July 22, 2013. That Order granted the Debtor’s Complaint for Turnover.1

Background

On July 3, 2013, the Debtors commenced this proceeding under Chapter 11 of the Bankruptcy Code. The Debtors are in the business of purchasing furniture wholesale.

On July 12, 2013, the Defendant OEC filed a motion for relief from stay. OEC provides international transportation services for the Debtors. OEC’s Motion stated that it is a secured creditor with a possessory lien on goods; that as a secured creditor it is entitled to perfect its possessory liens per § 546(a) of the Bankruptcy Code; that such perfection is expressly excluded from the automatic stay; and that it was entitled to refuse to release goods it held unless and until its prepetition claims have been satisfied. Specifically, it contends that, as of the petition date, the Debtors owe it $1.45 million for various shipping charges; that of that total amount, $458,251 consists of charges relating to good presently in its possession; that the remaining $994,000 consists of prepetition charges which remain unpaid; and that OEC presently holds $1.9 million of the Debtors’ goods. Because it asserts a prior secured interest in those goods pursuant to either a maritime lien or common carrier lien, OEC asks the Court for an order compelling the Debtors to pay OEC’s pre- and postpetition claim or, alternatively, to allow OEC to liquidate the collateral.

On July 18, 2013, the Debtors filed a Complaint for Turnover, Injunctive Relief, and Damages. Therein, it argued that OEC did not have a maritime lien or com[60]*60mon carrier lien on goods to secure 'prepet-ition debt. Alternatively, the Complaint argued that even if OEC had such a lien, (i.e., for prepetition debt), such lien could be avoided or was otherwise primed by the lien of the Debtors’ lender, PNC Bank.

Also on July 18, Debtors filed a Motion for Expedited Hearing and to Compel Turnover or, in the alternative, for Injunc-tive Relief. As grounds for urgency, the Debtors asserted that it is in the wholesale furniture business; that its sales typically consist of full furniture sets; that the goods presently being held by OEC were needed to complete various furniture sets ordered by customers; that such furniture often cannot be obtained elsewhere because various pieces are out of stock; and that unless the goods in question were released so that Debtors could complete pending orders, its customers would go elsewhere and the business will be lost forever. This, the Debtors urged, would doom its prospects for a reorganization.

On July 22, 2013, the Court heard testimony and oral argument on the parties’ positions. At the conclusion of the evidence, the Court held in favor of the Debtors as to its demand for turnover and its plea for injunctive relief. It thereupon ordered the turnover of the goods sought by the Debtors. See Saudi Basic Industries Corp. v. Exxon Corp., 364 F.3d 106, 112 n. 6 (3d Cir.2004) (citing four factors for injunctive relief: (1) finding the likelihood of irreparable harm, (2) the lack of an adequate legal remedy, (3) greater injury visited upon the Debtors were the relief not granted now, and (4) an implicated public interest) Specifically, the Court ordered the immediate delivery to the Debt- or of the Current Goods (i.e., Goods in Transit as well as Landed Goods, defined infra) as well as an accounting thereof. The Debtors, however, were expressly required to pay OEC the regular freight charges on the Current Goods as well as documented demurrage and retention charges.

Given the exigent nature of the proceeding the Court could not more elaborately memorialize its findings and conclusion at the time. An appeal having been since taken, the Court takes this opportunity to more fully lay out the reasons behind its ruling that Debtors were entitled to the immediate release and delivery of the goods.

At the beginning of the hearing, it became apparent that this was solely a legal question. OEC did not dispute that the goods which it has shipped and will ship are property of the bankruptcy estate. See 11 U.S.C. § 541(a) (defining broadly property of the bankruptcy estate). The Debtors, in turn, did not dispute that OEC is a secured creditor as to those goods. Where they disagreed was on the extent of OEC’s lien. Debtors maintain that OEC’s liens are limited and breaks them down into three categories for purposes of its argument: Prepetition Goods, Landed Goods, and Goods in Transit. The Prepet-ition Goods represent goods which OEC shipped and released to the Debtors. Unpaid charges for these goods total about $1 million. Landed Goods represent goods which had shipped, arrived at port, were ready for delivery, but had not yet been released by OEC. As to the Landed Goods, the Debtors owe about $120,000 in freight charges and the goods have a value of about $650,000. Finally, Goods in Transit were goods which were en route but had not yet arrived. Debtors contend that OEC’s liens extend to the charges due for the Landed Goods and for the Goods in Transit, but not beyond that. They contend that both the Landed Goods and Goods in Transit were being “held hostage” by OEC which was also demanding payment of the Prepetition Charges as a [61]*61condition of releasing those goods. Debtors maintain that OEC had held only a possessory lien on the Prepetition Goods released to the Debtors but not yet paid for sched. Once it released the Prepetition Goods without requiring payment, say the Debtors, OEC no longer had any lien on the released goods. OEC’s maritime lien, say the Debtors, could not be extended to the Prepetition Goods. Further, to the extent that OEC claimed a state law lien on Prepetition Goods, such lien, say the Debtors, is unperfected and otherwise primed by the lender’s purchase money security interest.

OEC, for its part, maintains that its maritime lien on the current goods extends beyond current charged and operates to secure payment of prepetition debt because the parties agreed to extend it. OEC relies here on the bills of lading, invoices, and credit agreement between the parties. The terms of these documents, it says, grant it a general lien on all of the Debtors’ property.

Maritime Liens

In the first instance, OEC asserts a maritime lien. As a general rule, ship-owners unquestionably, have a lien upon the cargo for the freight charges due thereon, and consequently may retain the goods after the arrival of the ship at the port of destination until the payment is made. See The Bird of Paradise, 5 Wall. 545, 72 U.S. 545, 554, 18 L.Ed. 662, 1866 WL 9421 (U.S.Cal.) It is settled law in the United States that a maritime lien can arise only by operation of law, regardless of any agreement between the parties. See Newell v. Norton and Ship, 70 U.S. 257, 262, 3 Wall. 257, 18 L.Ed. 271, 1865 WL 10771, at *4 (U.S.La.) (“Maritime hens are not established by the agreement of the parties....

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Bluebook (online)
498 B.R. 58, Counsel Stack Legal Research, https://law.counselstack.com/opinion/world-imports-ltd-v-oec-group-new-york-in-re-world-imports-ltd-paeb-2013.