860 F2d 1090 World Financial Services Center Inc Sanyo Electric Inc v. S Taxel

860 F.2d 1090

Unpublished Disposition

In re WORLD FINANCIAL SERVICES CENTER, INC., a California
corporation, dba World Financial Systems, Bargain
Furniture and Bargain Furnishings,
Appliances & Electronics, Debtors.
SANYO ELECTRIC, INC., Appellant,
v.
Harold S. TAXEL, Trustee, Appellee.

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

1

No. 87-6476.

2

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 4, 1988.
Decided Oct. 7, 1988.

3

Before CYNTHIA HOLCOMB HALL and LEAVY, Circuit Judges, and HOWARD D. McKIBBEN,* District Judge.

4

MEMORANDUM*

5

Sanyo Electric, Inc. (Sanyo) appeals from the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's grant of summary judgment in favor of Harold S. Taxel, Trustee of World Financial Services Center, Inc. (World Financial). We affirm.

6

The bankruptcy court correctly concluded that World Financial's payment of $18,347.82 to Sanyo on July 23, 1984 was an avoidable preference under 11 U.S.C. Sec. 547 (1982 & Supp.1985).

7

This court "review[s] de novo the bankruptcy court's grant of summary judgment." In re Center Wholesale, Inc., 788 F.2d 541, 542 (9th Cir.1986) (citing In re Daley, 776 F.2d 834, 836 (9th Cir.1985), cert. denied, 476 U.S. 1159 (1986)). This review is governed by the same standard used by the trial court under Fed.R.Civ.P. 56(c). Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). Rule 56 applies in its entirety to adversary proceedings before the bankruptcy court. Fed.R.Bank.P. 7056; In re Dempster, 59 B.R. 453, 455 (Bankr.M.D.Ga.1984).

8

Sanyo first contends a material issue of fact exists on whether World Financial was insolvent at the time of the July 23rd transfer. This transfer occurred within ninety (90) days immediately preceding the date World Financial filed bankruptcy. Therefore, there was a presumption of insolvency at the time of the transfer. 11 U.S.C. Sec. 547(f). Sanyo had the burden to present "evidence sufficient to cast into doubt the statutory presumption of insolvency." In re Emerald Oil Co., 695 F.2d 833, 838 (5th Cir.1983). In attempting to meet this burden Sanyo relied solely on the declaration of Sanyo's credit manager that he had examined the unaudited financial records of World Financial dated May 31, 1983, December 31, 1983 and October 31, 1984 and concluded World Financial was not insolvent in July 1984. The bankruptcy court correctly held these conclusory statements were insufficient to rebut the presumption of insolvency at the time of the transfer.

9

Next Sanyo argues the July 23rd transfer was a contemporaneous exchange of new value given to World Financial. This argument is without merit. When a payment made within the preference period is applied to an existing obligation, it is not a "contemporaneous exchange" pursuant to 11 U.S.C. Sec. 547(c)(1). In re Wadsworth, 711 F.2d 122, 124 (9th Cir.1983). Sanyo has admitted the July payment was an installment due under a $110,086.93 promissory note executed by World Financial in favor of Sanyo on April 19, 1984. Thus, the payment was not a "contemporaneous exchange" and the bankruptcy court did not err in holding that section 547(c)(1) did not bar avoidance of an otherwise avoidable preference.

10

Finally, Sanyo contends it did not receive more in the transfer than it would have received in a Chapter 7 distribution. If Sanyo held a perfected security interest, a transfer to Sanyo would not be preferential since a secured creditor would be entitled in a Chapter 7 proceeding to full satisfaction from the proceeds of its collateral. If Sanyo did not hold a perfected security interest, the transfer would be preferential.

11

Sanyo did not properly perfect its security interest. The requirements for a valid UCC-1 filing under section 9402(1) of the California Commercial Code are: (1) the names of both the debtor and the secured party; (2) assignment by the debtor; (3) the address of both the secured party and the debtor; and (4) a list of the collateral. The test for validity is whether a person undertaking a reasonable search could find the UCC-1 filing. Here, the name of the debtor, which appears in the financing statement, is "Howe, Margaret dba Bargain Furn/World Finance." The true name of the debtor is World Financial Services Center, Inc. On the signature line of the financing statement the name "Margaret Howe" appears with a line extending to the word "individually." The bankruptcy court properly concluded Sanyo failed to meet the minimum requirements for perfecting the security agreement and that the errors in the financing statement were seriously misleading. See: In re Lintz West Side Lumber, Inc., 655 F.2d 786, 791 (7th Cir.1981). Therefore, Sanyo is an unsecured creditor. Since the amount transferred is greater than the amount Sanyo would receive in a Chapter 7 liquidation, the transfer is preferential. In re Lewis W. Shurtleff, Inc., 778 F.2d 1416 (9th Cir.1985).

12

The bankruptcy court did not err in concluding the July 1984 payment by World Financial to Sanyo was an avoidable preference under 11 U.S.C. Sec. 547.

13

AFFIRMED.

*

Hon. Howard D. McKibben, United States District Judge for the District of Nevada, sitting by designation

*

The disposition is not appropriate for publication and may not be cited to or by the Courts of this Circuit except as provided by 9th Cir. R. 21