Clean Burn Fuels, LLC v. Purdue BioEnergy, LLC (In re Clean Burn Fuels, LLC)
492 B.R. 445
Bankr. M.D.N.C.2013Background
- Cross motions for partial summary judgment filed Jan. 24, 2013 by Trustee for Clean Burn Fuels and Perdue BioEnergy.
- Debtor and Perdue executed a set of agreements in 2009 for sourcing corn for an ethanol plant.
- Corn was stored in bins at the plant; Perdue claimed ownership retained until crossing the weighbelt.
- Cape Fear Farm Credit holds a blanket lien; Cape Fear’s lien later reduced via settlement with Cap Fear waived security interest in Corn.
- Debtor filed for bankruptcy; trustee seeks to treat Corn as estate property and avoid Perdue’s unperfected security interest.
- Court determines Corn is property of the estate, Perdue holds an unperfected security interest, and Trustee may avoid it; setoff issues remain factual.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Delivery and title passage under NC UCC § 25-2-401(1) | Trustee: delivery at Debtor site completes transfer; Perdue unperfected. | Perdue: delivery occurs at weighbelt; title passes then. | Corn is estate property; Perdue unperfected security interest. |
| Perdue's perfection of security interest | Trustee: no perfection; avoid security interest. | Perdue: possession/perfection by control; retain security interest. | Perdue's security interest unperfected; avoidable; Counts 1,2,5,6 granted to Trustee. |
| Parol evidence to interpret contract | Trustee: parol evidence admissible to interpret terms. | Perdue: Parol Evidence Rule bars supplementation where writing is final. | Parol evidence barred; contract language unambiguous. |
| Setoff rights and their impact on Counts 7 | Trustee: no valid setoff; Debtor’s debts exceed and are not mutual. | Perdue: setoff may apply; evidence shows intent to offset. | Material facts in controversy; Count 7 denied at this stage. |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (genuine dispute requires substantial evidence; summary judgment proper when none)
- Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487 (U.S. 1941) (state law governs property interests in bankruptcy where federal law does not preempt)
- In re Samuels & Co., 526 F.2d 1238 (5th Cir. 1976) (U.C.C. § 2-401 limits seller’s retention of title; security interest governs)
- In re Phillips, 77 B.R. 648 (Bankr.E.D. Tenn. 1987) (retention of title after delivery generally creates a security interest)