IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 95-40348
Summary Calendar
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IN THE MATTER OF: A & M Operating Co., Inc.
d/b/a Custum Vessel Co.,
Debtor.
THE RALPH M. PARSONS CO.
Appellant,
versus
SOUTH COAST SUPPLY COMPANY, INC.
Appellee.
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Appeal from the United States District Court for the
Eastern District of Texas
(6:93-CV-627)
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April 10, 1996
Before JOLLY, JONES, and STEWART, Circuit Judges.
PER CURIAM:*
The plaintiff, The Ralph M. Parsons Co. ("Parsons"), appeals
partially the March 29, 1995 order of the district court affirming
the award by the bankruptcy court to South Coast Supply Company,
Inc. ("South Coast") of a materialmen's lien in the amount of
$309,464.32 on several high pressure vessels constructed by the
bankrupt A & M Operating Company, Inc. d/b/a Custom Vessel Company,
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
Inc. ("CVC"), for Parsons and other CVC clients.1 The amount of
the materialman's lien impressed against the single high pressure
vessel constructed for Parsons is $207,980.00. Parsons challenges
this lien, arguing that the bankruptcy court's findings, affirmed
by the district court, are not supported by the record.
Specifically, it disputes whether (a) CVC owned the Parsons's
vessel at the time the materialman's lien arose, and (b) South
Coast, the materialman, was in privity with CVC.
I
In reviewing the affirmance by the district court of findings
of fact by the bankruptcy court, we credit the factual findings
unless clearly erroneous. Matter of Reed, 700 F.2d 986, 992 (5th
Cir. 1983). A finding of fact is clearly erroneous "when although
there is evidence to support it, the reviewing court on the entire
evidence is left with a firm and definite conviction that a mistake
has been committed." United States v. United States Gypsum Co.,
333 U.S. 364, 395 (1948). The parties agree that in the instant
case the ownership of personal property in possession of the debtor
at the time of bankruptcy is a question of fact, as is whether
privity existed between the debtor and the putative owner.
1
The district court's order also reversed the bankruptcy court
and awarded an additional materialman's lien against CVC in favor
of South Coast in the amount of $24,544.72 for sale of material to
CVC from South Coast's general inventory. This lien is not the
subject of this appeal as only the materialman's lien that South
Coast was found to have against the Parsons's vessel has been
appealed.
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The bankruptcy court found the following facts. CVC
specialized in building high pressure vessels, such as the one
constructed for Parsons in this case. South Coast was a supplier
of subcomponents for these high pressure vessels. South Coast
supplied its customers with these components both from its own
stock and on a special order basis. South Coast did not itself
manufacture any parts. To fill special orders for its customers,
such as CVC, South Coast maintained a relationship with a
manufacturer of parts, Forged Vessel Connections, Inc. ("FVC").
Under this relationship, South Coast's customers requiring a
special order item could order from a FVC catalog maintained by
South Coast or they could order directly from FVC. All orders,
whether placed directly with FVC or with South Coast, were billed
directly to customers, including CVC, solely through South Coast.
CVC was never directly invoiced for special order components by FVC
and CVC never disputed its liability for payment to South Coast for
special orders filled by FVC but billed by South Coast.
The bankruptcy court found that CVC experienced financial
difficulty in 1992 and was unable to pay South Coast for purchases
of components valued at approximately $656,462.27. South Coast
became concerned that CVC was about to transfer ownership of
certain uncompleted vessels to CVC's respective customers that had
ordered them. South Coast therefore filed state court actions
asserting its rights as a materialman to a mechanic's lien on the
vessels built by CVC with South Coast components, including the
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Parsons's vessel. In conjunction with these state court suits,
South Coast obtained a prejudgment order of sequestration
effectively impounding numerous vessels under construction at CVC's
facilities. The orders of sequestration required the payment of
$323,218.06 as a condition of replevy of the seized vessels. The
replevy of each individual vessel is dependent upon the dollar
amount of the material supplied by South Coast toward construction
of the vessel.
In January 1993, CVC filed for relief under Chapter 11 of the
Bankruptcy Code. South Coast then removed the state court lawsuits
to the United States District Court for the Eastern District of
Texas, Tyler Division. Three additional adversary proceedings
concerning the same basic issues were filed by two of CVC's
customers, Parsons and M.W. Kellogg Company. Because CVC, Parsons
and the M.W. Kellogg Company announced a resolution of their
disputes in open court, the only issue addressed by the bankruptcy
court concerned whether South Coast is entitled to a materialman's
lien as a supplier to CVC in the construction of various vessels,
including the Parsons's vessel.
The bankruptcy court found that the various vessels subject to
the sequestration order, including the Parsons's vessel, actually
were owned by CVC at the time of the sequestration order, and thus
able to be attached by CVC's creditors under Texas law.2 The
2
Parsons does not dispute whether the bankruptcy court
correctly sets forth the test for the lien under Texas law.
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bankruptcy court further found that the value of the components
used in the Parsons's vessel, and therefore the Texas
constitutional lien against the Parsons's vessel alone, amounted to
$207,980.00. In finding that the vessels subject to the
sequestration order could be attached, the bankruptcy court
rejected the claim of CVC's customers that the customers owned the
various vessels at the time of sequestration. Parsons premised its
ownership of the vessel constructed for it by CVC on (a) the
vesting title provision in its contract with CVC, and (b) Parsons's
payments of several hundred thousand dollars to CVC in the months
preceding CVC's bankruptcy filing. The court reasoned that the
vesting title provision conflicted with a December 16, 1992 letter
of Parsons's stating that title to the vessel did not transfer
until that date. It further found that the several hundred
thousand dollars paid by Parsons to CVC compensated CVC not for
components supplied by South Coast and incorporated into the
vessels, but for drawings of the vessel and the provision of
certain "head and plate" material.
The bankruptcy court also turned aside Parsons's argument that
because of a lack of privity, South Coast could not qualify as a
materialman. In so doing, the court found first that CVC was in
privity with South Coast, not FVC, even though South Coast
permitted its customers, including CVC, to order directly from FVC.
The court reasoned that because all invoices for components
furnished CVC were submitted to CVC by South Coast, CVC dealt with
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South Coast instead of FVC, as Parsons's had asserted, entitling
South Coast to claim the lien.
II
The issue on appeal is whether the district court committed
clear error in affirming the bankruptcy court's factual findings
that (a) CVC owned the vessels at the time that the lien in favor
of South Coast arose, and (b) South Coast was in privity with CVC.
Having reviewed the record, the briefs of the parties, the opinion
of the bankruptcy court, and the memorandum opinion and order of
the district court, we find that because the bankruptcy court's
factual findings have solid support in the record, the district
court's affirmance of the bankruptcy court's recognition of a
materialman's lien in the Parsons's vessel in favor of South Coast
for $207,980.00 is not clearly erroneous. For the reasons set out
by the district court in its order of March 29, 1995, the judgment
in favor of the defendant, South Coast Supply Company, Inc., is
hereby
A F F I R M E D.
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