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IN RE THERMO-SENTINEL CORP.

February 22, 1977

In the Matter of Thermo-Sentinel Corporation, Debtor. THERMO-SENTINEL CORPORATION, Plaintiff-Appellee,
v.
CLAD METALS, INC., Defendant-Appellant



The opinion of the court was delivered by: WEBER

 This is a petition for review of an Order of the Bankruptcy Court.

 A Debtor-in-Possession under Chapter XI of the Bankruptcy Act, Thermo-Sentinel, brought this action in the Bankruptcy Court to determine the ownership of certain metal discs and finished cookware in the possession of Vita Craft Corp. in Shawnee, Kansas. The metal in question was shipped by defendant Clad Metals, Inc. to Vita Craft pursuant to purchase orders of Thermo-Sentinel. In simplest terms the dispute is over whether the ownership of the goods passed to Thermo, despite its non-payment, or whether Vita received these goods as Clad's agent and Clad retained title until delivery of the finished goods by Vita pursuant to C.O.D. sales. Vita Craft has ceased fabricating the metal discs into cookware under threat of litigation by Clad until the ownership of the metal discs is determined. Vita Craft claims no title to the metal but holds the metal and the fabricated cookware under a security agreement with Thermo. The Bankruptcy Court held that title to the goods was in Thermo-Sentinel, the Debtor-in-Possession.

 Rule 810 of the Bankruptcy Rules of Procedure provides that the district court "shall accept the referee's findings of fact unless they are clearly erroneous, and shall give due regard to the opportunity of the referee to judge of the credibility of the witnesses."

 Defendant raises five grounds for reversal, which may be summarized as follows:

 (1) failure to dismiss for failure to join Vita Craft Corporation;

 (2) holding that the metal in question is the property of Thermo is clearly erroneous;

 (3) failure to find Vita was agent of Clad is clearly erroneous;

 (4) holding that the three party agreement of September 15, 1971 modified the security agreement between Vita and Thermo dated January 10, 1971 is clearly erroneous and not supported by evidence;

 (5) error in enjoining Clad from enforcing its rights against Vita.

 The discussion may be separated into three areas: (1) whether Vita was an indispensable party, (2) whether the facts support the findings of the bankruptcy court, and (3) whether the relief granted by the bankruptcy court is too broad.

 (1) Indispensable party.

 Clad contends that since Vita claims a security interest in the metal, it is an indispensable party which is subject to the bankruptcy court's nationwide service of process.

 Thermo counters that while Vita has a security interest in the metal based on Thermo's ownership, Vita has not asserted any ownership in the metal and is willing to abide the determination of this court. Further, Thermo contends that there is not jurisdiction in the bankruptcy court, and that since Vita has possession of the property to which Thermo makes ...


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