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In the Matter of Spanish Language Television of Arizona,inc., Debtor.rca Corporation, Creditor-appellant, v. Julius Altschul, Trustee-appellee (two Cases)
United States Court of Appeals, Ninth Circuit. - 456 F.2d 159
Feb. 24, 1972.Rehearing Denied March 22, 1972
Frank C. Brophy, Jr. (argued), of Ryley, Carlock & Ralston, Phoenix, Ariz., for appellant.
Robert G. Mooreman (argued), Phoenix, Ariz., for appellee.
Before KOELSCH, ELY, and WRIGHT, Circuit Judges.
ELY, Circuit Judge:
Here, we have consolidated appeals taken by a secured creditor (RCA Corporation, hereinafter RCA) from certain Orders made in proceedings under Chapter X of the Bankruptcy Act (11 U.S.C. Secs. 501-676). The debtor corporation seeking to reorganize (hereinafter TV or Debtor) is engaged in televising activity, telecasting as KPAZ-TV, Channel 21, Phoenix, Arizona.
On August 6, 1969, TV filed a Petition for Reorganization pursuant to 11 U.S.C. Sec. 526. The Petition, which included allegations that TV's assets "on a going concern" basis exceeded its liabilities and that reorganization was necessary to realize the full value of those assets, was immediately granted by the District Court and a Trustee was appointed to guide the reorganization. That Trustee was subsequently replaced by Altschul.
While Altschul was attempting to formulate a viable plan for reorganizing TV, he continued its operations. He found, however, that the operating expenses, consistently exceeded income. This deficit was met by the court-approved issuance, in two installments, of $30,000 of high priority Certificates of Indebtedness under 11 U.S.C. Sec. 516(2).
RCA is one of TV's major creditors. Under a recorded conditional sales contract it sold valuable telecasting equipment to TV in 1967. Since its claim for the balance still owing on that contract, $367,000, would be subordinated to claims based on the Certificates, RCA protested their issuance. Ultimately, it appealed the District Court's order which authorized the last installment of the Certificates. In bringing that appeal to this court, RCA contended that not only was the issuance of the Certificates not in compliance with Sec. 516,1 but also that the telecasting equipment sold under the RCA/TV contract was, under Arizona law, the property of RCA and thus was not subject to the jurisdiction of the reorganization court.
Section 516 provides:
"Upon the approval of a petition, the judge may . . .-
(2) authorize a . . . trustee . . ., upon cause shown, to issue certificates of indebtedness . . . upon such terms and conditions and with such security and priority in payment over existing obligations, secured or unsecured, as in the particular case may be equitable."
If the equipment were improperly subject to the reorganization because it was not the property of TV, then, a fortiori, it could not be subjected to the lien created by the Certificates
The Uniform Commercial Code expressly denies the importance of the purported location of "title" in determining contractual rights (Sec. 9-902); hence, property sold under agreements governed by the Code are subject to the jurisdiction of District Courts in bankruptcy actions. See In Re Yale Express System, Inc., 370 F.2d 433, 436-437 (2d Cir. 1966)
The Code was adopted by the Arizona Legislature in 1967, but it was effective only after January 1, 1968. Agreements entered prior to the effective date are still governed by the U.C.S.A.:
"Transactions validly entered into before [January 1, 1968] and the rights, duties and interests flowing from them remain valid thereafter and may be . . . enforced as . . . permitted by any statute or other law . . repealed by the law by which this chapter was enacted as though such repeal . . . had not occurred." (44-3201 Ariz.Rev.Stat.)
There is an exception to the general rule of validity made for unfiled agreements, but since RCA recorded the instrument, the exception is not relevant in this case. See Ariz.Rev.Stat. Sec. 44-205; Castaneda v. National Cash Register Co., 43 Ariz. 119, 29 P.2d 730 (1934). See also Glessner v. Massey Ferguson, Inc., 353 F.2d 986 (9th Cir.), cert. denied, 384 U.S. 970, 86 S.Ct. 1859, 16 L.Ed.2d 681 (1965)
The contract considered by the court in Yale Express was governed by the Uniform Commercial Code, not the U.C.S.A. Although some doubt was expressed as to whether Lakes was ever correct, the thrust of the opinion went to whether the Code required results different than those of the U.S.C.A
The court went on to hold that since repossession occurred within four months of the bankrupt's filing of his petition for bankruptcy and Massey-Ferguson was aware of the debtor's insolvency at the time of foreclosure repossession constituted a voidable preference under 11 U.S.C. Sec. 96
RCA also raised numerous significant and, as we view the record of the proceedings below, probably meritorious objections to specific aspects of the reorganization plan confirmed by the District Court. Since it was the only creditor to prosecute an appeal, and its interests are fully vindicated by our decision on the issue discussed, we do not reach those other points. Since TV likely cannot operate without RCA's equipment, future proceedings in the District Court will deal with the disposition of a markedly different estate and our comments on the current plan would, therefore, serve no useful purpose