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IN RE DUPLAN CORP.

July 30, 1978

In re the DUPLAN CORPORATION, Debtor. IMPERIAL CHEMICAL INDUSTRIES LIMITED, Plaintiff,
v.
Alfred P. SLANER, as reorganization Trustee of the Duplan Corporation, Debtor, Defendant



The opinion of the court was delivered by: DUFFY

OPINION & ORDER

Defendant Alfred P. Slaner, as Trustee in Reorganization of The Duplan Corporation ("Duplan"), has moved (i) for an order, pursuant to Rule 12(b) (6), F.R.Civ.P., Bankruptcy Rule 712(b) and Chapter X Rule 10-701, dismissing plaintiff's second amended complaint ("complaint"), (ii) for judgment on the pleadings, pursuant to Rule 12(c), F.R.Civ.P., Bankruptcy Rule 712(b) and Chapter X Rule 10-701, dismissing the complaint, and (iii) for judgment on the pleadings in the Trustee's favor for $ 29,714.94 plus interest and costs and disbursements.

On August 31, 1976, Duplan filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. By order of Bankruptcy Judge Galgay dated October 5, 1976, the proceedings were transferred to Chapter X. On October 6, 1976, pursuant to my order, Alfred P. Slaner was appointed as Duplan's Reorganization Trustee.

 This adversary proceeding to reclaim goods or recover immediate payment therefor was commenced on or about July 1, 1977. For the purposes of this motion, the factual allegations of the complaint are uncontroverted.

 The goods in question consist of a quantity of nylon multifilament yarn ("yarn") sold and delivered by plaintiff to Duplan pursuant to a written agreement dated April 4, 1976. The agreement provided for payment in full within sixty days from the date of invoice and contained, Inter alia, the following terms and conditions:

 
2. . . .
 
PASSING OF PROPERTY:
 
(b) Notwithstanding delivery, the property in the goods shall remain in Seller until Buyer has paid in full therefor. If such payment is overdue in whole or in part Seller may (without prejudice to any of his other rights) recover or resell the goods or any of them and may enter upon Buyer's premises for that purpose. If any of the goods are incorporated in others goods before such payment, the property in the whole of such other goods shall be and remain with Seller until such payment has been made . . . .
 
14. PROPER LAW AND JURISDICTION
 
All disputes arising out of or in connection with this contract shall be governed by English law and Buyer accepts jurisdiction of such Courts whether in England or elsewhere as Seller may nominate.

 Pursuant to the contract, five shipments of yarn were shipped from the Netherlands and were delivered to and accepted by Duplan at its Dillon, South Carolina plant during the period July 2 to August 23, 1976. Duplan failed to pay the agreed price of $ 190,108.42 for the shipments, except that on August 24, 1976, Duplan paid plaintiff $ 29,714.94 which plaintiff applied to reduce Duplan's indebtedness on the yarn to $ 160,393.48. It is this sum, or alternatively, return of the goods which plaintiff now seeks.

 With regard to the $ 29,714.94 payment applied by plaintiff, the Trustee has asserted counterclaims seeking damages in the amount of that payment for breach of contract and conversion. These counterclaims essentially allege that Duplan's August 24, 1976 payment of $ 29,714.94 represented sums due plaintiff under an August, 1976 agreement between the parties for the purchase and sale of goods, comprised of nylon multifilament yarn singles and loaned tubes, which plaintiff concededly failed to deliver to Duplan.

 I

 To support its claim of present entitlement to reclamation of the goods (First Claim), or, alternatively, to payment of the balance of the purchase price therefor insofar as any of the yarn has been resold or transferred (Second Claim), plaintiff alleges that it has a valid perfected security interest in the goods which takes priority over the rights therein of Duplan or the Trustee as of August 31, 1976, the date of the filing of Duplan's Chapter XI petition. In this connection, it must be noted that under Section 70(c) of the Bankruptcy Act, 11 U.S.C. § 110(c), the Trustee is deemed a hypothetical lien creditor as of the date of the filing of Duplan's petition for an arrangement under Chapter XI. This status is accorded the Trustee as well under the South Carolina ...


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