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In re Lansdale Family Restaurants Inc.

argued: September 22, 1992.

IN RE: LANSDALE FAMILY RESTAURANTS, INC. A/K/A LANSDALE BONANZA, DEBTOR LANSDALE FAMILY RESTAURANTS, INC., APPELLANT
v.
WEIS FOOD SERVICE



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 91-08009)

Before: Hutchinson, Alito and Seitz, Circuit Judges.

Author: Seitz

Opinion OF THE COURT

SEITZ, Circuit Judge.

Lansdale Family Restaurants, Inc., Debtor in Reorganization ("Lansdale"), appeals from a final judgment of the district court affirming a judgment of the bankruptcy court denying Lansdale's action seeking the turnover of property from one of its creditors, Weis Food Service ("Weis"). The bankruptcy court had jurisdiction of this core proceeding under 28 U.S.C. § 1334(b) and § 157 and the district court under 28 U.S.C. § 158(a). We have jurisdiction under 28 U.S.C. § 1291 and § 158(d).

I. FACTUAL BACKGROUND

We turn first to the undisputed facts or matters testified to by the sole witness for Weis. Lansdale is a family restaurant that was a customer of Weis, a food supply business. For several years Weis had supplied Lansdale with food on a billed cost-plus basis. There came a time when Weis began requiring Lansdale to make payments on a C.O.D. basis in response to Lansdale's failures to make timely payments. However, it did not change its mark-up rate. Weis's witness testified that Weis also imposed payment on a C.O.D.-plus basis which was designed to pay-down Lansdale's accumulated debt. Shortly thereafter, on January 7, 1991, Lansdale filed a voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code. 11 U.S.C. §§ 101-1303 (1988 & Supp. II 1990). At the time the bankruptcy petition was filed, Lansdale owed Weis approximately $50,000.00 for unpaid supplies.

After Lansdale filed its petition, Weis refused to continue to supply Lansdale unless some pricing adjustments were made to provide for what Weis felt was the increased risk in supplying a financially troubled customer. Initially this was reflected in a higher mark-up on the products sold to Lansdale. However, Lansdale was required to continue to pay for these supplies on a C.O.D. basis.

After a few weeks of deliveries on this basis, Lansdale expressed difficulty in calculating its real costs. In response, Weis switched Lansdale to a "delivery fee" provision. The delivery fee was $500.00 per delivery. The witness for Weis testified that each fee was "credited" on the monthly statement received by Lansdale for the period in which the fee was charged. He also testified that the fee was security for the risk of receiving checks drawn on insufficient funds. This payment method continued until the termination of the parties business relationship sometime in September, 1991. The monthly statement in the record shows that at that time Lansdale owed Weis $25,971.37.

II. BANKRUPTCY COURT DECISION

Lansdale, as debtor, filed a complaint in the bankruptcy court seeking turnover of property from Weis. It alleged that the payments of the delivery charges, amounting to $16,500.00 from January 22, 1991, through September 3, 1991, were post-petition transfers to Weis that were being applied to pre-petition debt in violation of 11 U.S.C. § 549(a) and the automatic stay provision of 11 U.S.C. § 362(a)(3). Lansdale sought the return of the delivery fee payments, costs, and attorney's fees.

After trial, the bankruptcy court made certain findings of fact. It found that the fees imposed were credited back on the immediate past month's statement and were not being applied to pre-petition debt. It implied that the $500.00 payments were imposed to cover the possibility of bad checks and thus they were reasonably required to protect Weis. It thereupon concluded that the delivery fees were "a proper and conservative means of securing payment from a credit-risk customer."

III. DISTRICT COURT DECISION

Lansdale appealed the final judgment of the bankruptcy court to the district court, alleging that the bankruptcy court erred in its factual finding that the payments were not applied in partial satisfaction of Lansdale's pre-petition debt. The district court affirmed the bankruptcy court's judgment, holding that the ...


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