Appeal from the United States District Court for the Northern District of California, Phyllis J. Hamilton, District Judge, Presiding, D.C. No. CV-08-02452-PJH.
The opinion of the court was delivered by: Mills, District Judge
Argued and Submitted November 3, 2009 -- San Francisco, California.
Before: Alfred T. Goodwin and William A. Fletcher, Circuit Judges, and Richard Mills, District Judge.*fn1
Ta Chong Bank ("the Bank") filed a complaint wherein it asserted several claims against Hitachi High Technologies America, Inc. ("Hitachi"). Those claims were based on the Bank's interest in the accounts receivable of a third party, CyberHome Entertainment, Inc. ("CyberHome"), pursuant to certain factoring agreements entered into by those entities. Although the factoring agreements provided that Hitachi was to pay the Bank, Hitachi made payment directly to Cyber-Home, several months before CyberHome filed for Chapter 7 bankruptcy.
The district court dismissed the Bank's claims, reasoning that they were based solely on its interest in CyberHome's accounts receivable, which the bankruptcy court had determined to be property of CyberHome's bankruptcy estate.
In August and September of 2005, Hitachi purchased a large number of DVD players from CyberHome for approximately $1.2 million. Since May 2004, the Bank had entered into a series of factoring agreements whereby it agreed to purchase from CyberHome certain of CyberHome's accounts receivable. CyberHome assigned to the Bank all of its right, title and interest in and to all amounts due from Hitachi under the invoices. On or about August 18, 2005, the Bank and CyberHome gave Hitachi notice in writing that effective September 1, 2005, CyberHome's future invoices to Hitachi would bear a notice that such invoices were assigned to the Bank. The notice instructed Hitachi that all payments on those CyberHome invoices must be made directly to the Bank. Despite this assignment, in January 2006, Hitachi paid Cyber-Home the full amount owed for the DVDs. Neither the Bank nor the CIT Group/Commercial Services, Inc. ("CIT"), which handled the processing of certain accounts receivable factored by the Bank, received any portion of the payment made to CyberHome. The payment was made to CyberHome without the Bank's or CIT's knowledge or consent.
On September 5, 2006, eight months after CyberHome was paid in full by Hitachi, CyberHome filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Northern District of California. The Bank has made demand on Hitachi for payment of the $1,214,852.20 that it paid to CyberHome, but Hitachi has not made any payment to the Bank.
On December 19, 2006, the Chapter 7 Trustee for CyberHome's bankruptcy estate filed an adversary proceeding against the Bank asserting several claims, including a claim to avoid the Bank's security interest in property of the Cyber-Home bankruptcy estate, including its accounts receivable. The trustee claimed that the accounts receivable constituted a preferential transfer and that the Bank had failed to perfect its security interest prior to 90 days before the bankruptcy petition.
On December 22, 2006, the Bank filed a secured proof of claim in the CyberHome bankruptcy case in the amount of $83,000,000 for amounts due under several credit accounts extended to CyberHome, including the accounts receivable at issue in this case. On February 2, 2007, the Bank filed a counterclaim for (1) fraud, (2) negligence, and (3) breach of contract in the adversary proceeding. The Bank attached its previously filed proof of claim as an exhibit to the counter-claim. The trustee subsequently moved for summary adjudication against the Bank.
On June 13, 2007, the bankruptcy court entered an order which, in part, advised account debtors to disregard any request from the Bank. The order provided that only the trustee was authorized to collect any receivables. The Bank did not oppose the trustee's motion for summary adjudication, and the bankruptcy court granted ...