Court Opinion

ID: 9477208
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:17:20.788795+00
Date Added: 2024-06-11T17:45:45.499879
License: Public Domain

DONALD RUSSELL, Circuit Judge,
dissenting.
The dispositive issue in this case is one of jurisdiction. If the transaction is treated as controlled by Louisiana law, then Compliance Marine is entitled to an order fixing ownership of the barge in it; should the transaction be resolved under South Carolina law, it is equally clear that the trustee in bankruptcy must prevail. The issue is to be decided by applying the “most significant relationship” test to the transaction.
The transaction under which Merritt acquired possession of the barge was represented by a written agreement, dated May 24, 1983, drafted and agreed on by the parties in Louisiana. Since Merritt’s corporate headquarters were located in South Carolina, the contract was sent to South Carolina for formal signature by Merritt. All payments under the contract whereby Merritt had possession of the barge were received in Louisiana.
The barge was leased to Merritt for use in work on the Mississippi River under a contract with the federal Corps of Engineers. The work itself was controlled from New Orleans. The lease contract expressly limited the use and location of the barge for the life of the agreement to the Mississippi River basin. The contract for the use of the barge, however, was cancelled by the Corps of Engineers. After this cancellation, Merritt, without the knowledge of Compliance and contrary to the express language of the agreement under which it had secured possession of the barge, sailed the barge to South Carolina and shortly thereafter this bankruptcy proceeding ensued.
In my view, the “most significant relationship” of the transaction was to Louisiana and not to South Carolina and, under accepted conflict-of-laws principles, the contract between Compliance and Merritt was to be treated as controlled by Louisiana law. Restatement (Second) of Conflict of Laws §§ 6, 244 (1969). Under Louisiana law, a lease which binds the putative lessee to make “rental” payments equal to the purchase price of the item leased is considered a sale. Lee Constr. Co. v. L.M. Ray Constr. Corp., 219 La. 246, 52 So.2d 841 (1951). A lease without this obligation to make payments for the full amount, but with only an option to do so is considered merely a lease with an option to purchase. Id., 52 So.2d at 842.
Under the contract, Merritt was obligated to make only three monthly payments for the barge. The total value of these three payments, $7,500.00, is not even close to the purchase price of the barge as stated in the contract, $30,000.00. Merritt also had an option to continue making the payments, and after making twelve could have purchased the barge for no additional consideration. But, it was under no obligation to do so. It appears, therefore, that under Louisiana law the contract must be construed as a true lease with an option to purchase, and not a sale.
The fact that Merritt took the barge into South Carolina without the knowledge and approval of Compliance and against the express terms of the contract cannot defeat Compliance’s rights under what I conceive to be its Louisiana agreement and render the validity of Compliance's title subject to the South Carolina recordation statutes, e.g., S.C. Code Ann. § 27-23-80 (Law.Coop.1976) as a South Carolina contract. I would, therefore, sustain the claim of Compliance to the barge and dissent from the contrary holding of the majority opinion herein.