                                                       United States Court of Appeals
                                                               Fifth Circuit
                                                             F I L E D
                         REVISED APRIL 8, 2003
                                                            April 3, 2003
                    UNITED STATES COURT OF APPEALS
                                                         Charles R. Fulbruge III
                                                                 Clerk
                         For the Fifth Circuit



                             No. 00-60103



                  CIT GROUP/EQUIPMENT FINANCING, INC

                               Plaintiff-Counter Defendant-Appellee,


                                VERSUS


       CONDERE CORPORATION, doing business as Service Fleet Tire
                      Company, doing business as
                Fidelity Tire and Manufacturing Company

                               Defendant-Counter Claimant-Appellant.




             Appeals from the United States District Court
           For the Southern District of Mississippi, Jackson
                            (5:98-CV-5-BrS)
Before DeMOSS and STEWART, Circuit Judges, and LITTLE,* District
Judge.
PER CURIAM:**

  This is an appeal of two final judgments entered by the district

court.     Plaintiff-Counter Defendant-Appellee, CIT Group/Equipment


  *
   District Judge of the Western District of Louisiana, sitting by
designation.
  **
    Pursuant to 5th Cir. R. 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this opinion should not be published and is not precedent except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 5th Cir. R. 47.5.4.
Financing, Inc., (“CIT”), filed a replevin action in the district

court seeking immediate possession of equipment that was in the

possession     of    Defendant-Counter         Claimant-Appellant,        Condere

Corporation (“Condere”).        Condere posted a bond allowing it to

continue to possess the equipment and made counter claims asserting

that they had the right to have the lease reinstated because the

lease was part of its bankruptcy estate, or, alternatively, the

equipment    was    not   subject    to   a   lease   but   rather   a   security

agreement, that it had the right of redemption, and that the

equipment was a fixture.       The district court ruled in favor of CIT

and ordered Condere to return the equipment.                  Condere appealed

without supersedeas.        While the appeal was pending, the parties

settled two issues: Condere allowed CIT’s third-party purchaser to

remove the equipment and Condere paid CIT to release the lien on

certain equipment used as collateral for the lease.                  This Court

then ordered a stay of the appeal of the replevin action and

remanded the case for a hearing on damages.                 The district court

held a hearing and found CIT was entitled to $1,650,815.17 in

damages.     Condere now appeals the final judgment in the replevin

action and the final judgment awarding damages.              We affirm the two

judgments of the district court for the reasons stated therein and

summarize those reasons below.

                                    BACKGROUND

  Condere operated a tire manufacturing plant in Natchez,



                                          2
Mississippi.        On December 14, 1993, the City of Natchez executed a

Bill of Sale to Condere covering the equipment at issue in this

case.     Both the City’s resolutions authorizing the sale and the

Bill    of   Sale     itself    referred        to   the    equipment      as   “personal

property.”

  Also around the same time, because Condere needed cash, they

proposed and CIT approved a transaction whereby CIT would purchase

the equipment at issue, mainly eleven tire presses, from Condere

for    $1,300,000.00      and    lease     it    back      to    Condere   in   a   “sale-

leaseback” transaction, which is a common commercial transaction.

  On December 21, 1993, the transaction was closed.                                 Condere

executed a Bill of Sale to CIT for the equipment, which was to be

covered      by   a   Master     Lease     (“Lease”),           and   Condere    received

$1,300,000.00 for the equipment.                 The Lease provided for monthly

lease payments of $23,468.40 per month for 60 months, the last

being due December 31, 1998.             At the end of the Lease, Condere had

the option of purchasing the equipment or returning it to CIT at

Condere’s expense.         Condere was required to give CIT reasonable

written notice prior to expiration of the lease term as to which of

these options it would exercise.                     Condere has never given any

written notice to CIT.

  On December 21, 1993, Condere also executed a separate Security

Agreement to Collateralize the Master Lease (“Security Agreement”)

covering      different        equipment    for       the       purpose    of   providing

collateral to CIT in the event of a default on the Lease by

                                            3
Condere.     This equipment was not covered by the Bill of Sale to

CIT.

  U.C.C. Financing Statements were filed by CIT as the “Lessor”

under the Lease and as “Secured Party” for the equipment covered by

the Lease and Security Agreement.            At the time the transaction was

closed, CIT required Condere to install tags with “CIT” and a

number on all equipment covered by the Lease that did not have

identifying serial numbers.          The Lease form was one commonly used.

  In   all      the     Condere    corporate    documents       authorizing      the

transaction, the correspondence between CIT and Condere, and the

transaction     documents     themselves,       the    transaction      was   always

referred to as a “Lease.”          The invoices Condere received from CIT

were for “rent.”         As required by Mississippi law, on every lease

payment    made    by    Condere    to   CIT,   the     appropriate     amount    of

Mississippi sales tax was included.

  In      the     transaction      documents,         Condere    made     numerous

representations and warranties to CIT that all the equipment

covered by the Lease and the Security Agreement was personal

property.

  Condere made monthly lease payments of $23,468.40 rent plus

$352.03 sales tax to CIT on the Lease but was two payments

delinquent when, on May 13, 1997, Condere filed for bankruptcy.

  After filing for bankruptcy, Condere made no further payments on

the Lease, and on June 24, 1997, CIT filed a Motion to set a

deadline for Condere to reject or accept the Lease.                  On September

                                         4
11, 1997, Condere rejected the Lease and an Agreed Order was

entered by the bankruptcy court to that effect, but the Order

contained the provision “with the Debtor in possession reserving

the right to litigate whether said instrument is a lease or a

financing transaction, together with any other rights, claims or

defenses incident to such determination.”                  The automatic stay was

lifted as to all equipment covered by both the Lease and Security

Agreement, but Condere made no further payments on the Lease

thereafter.

  Condere took no steps to litigate any issues regarding the

rejected    Lease   from    September       11,    1997,    until    it   filed   its

responsive pleadings in the replevin action on February 13, 1998.

Condere    also   had   a   second   lease        from   CIT   covering    computer

equipment (which is not the subject of this case).                  Condere assumed

this lease in the bankruptcy proceedings and brought all payments

current.    No claim was made that the second lease was not a true

lease.

  Because     Condere   had   defaulted       and    rejected    the Lease,       CIT

actively sought buyers for the equipment covered by both the Lease

and the Security Agreement.          Condere was aware of CIT’s efforts

and, in fact, CIT contacted Condere about Condere’s interest in

purchasing the presses several times.               Nevertheless, Condere made

no effort to bring the Lease current or make any payments on it.

Condere and its successor Titan Tire Corporation of Natchez simply

did nothing and continued to use the equipment without paying.

                                        5
  On December 8 and 9, 1997, representatives of CIT and Specialty

Tire Company (“Specialty”) inspected the presses in the Natchez

plant.    Specialty made an offer to CIT to purchase the eleven tire

presses for $250,000.00 by a letter dated December 11, 1997,

conditioned upon acceptance that same day.          CIT accepted the offer

by a letter of the same date.

  On December 12, 1997, CIT’s attorney wrote to Condere’s attorney

and informed him of CIT’s contract to sell the eleven tire presses.

Condere refused to turn over the presses to CIT for delivery to

Specialty.

  A week later, on December 18, 1997, Condere, without seeking or

obtaining approval of the bankruptcy court, tendered $224,000.00 by

a cashier’s check to CIT’s counsel stating that “the debtor has

elected to cure the default in connection with the CIT equipment

lease.”     The $224,000.00 amount included an estimate of CIT’s

attorney’s fees to that date.         Condere did not introduce evidence

that this    amount   was   correct    nor   was   there   bankruptcy   court

approval of any transaction to “cure the default.”           CIT’s attorney

wrote to Condere’s attorney on December 29, 1997, returning the

$224,000.00 check advising that CIT could not accept it.

  When Condere sought to “cure the default in connection with the

CIT equipment lease,” no mention was made of a security agreement.

No request was made by Condere about what would be necessary to

bring any “loan” current or pay off a “loan.”          While Condere, when

it rejected the Lease in bankruptcy court, reserved the right to

                                       6
litigate whether it was a lease or a security agreement, Condere

made no attempt at this time to enjoin the sale or litigate any

issue as to whether the Lease was a security agreement.

  When CIT sought to take possession of the equipment, including

the eleven tire presses sold to Specialty, Condere refused to

surrender it. CIT filed a replevin action in January 1998, seeking

immediate   possession   of    the   equipment.   As   is   allowed   by

Mississippi law, Condere posted a bond with a surety to prevent CIT

from obtaining immediate possession.        No approval was sought or

obtained in the bankruptcy court and Condere concedes that Titan

arranged for the bond.        This allowed Condere and subsequently,

Titan Tire Corporation of Natchez, to continue using the equipment

without paying.   Ultimately, the Lease expired by its own terms in

December 1998.    There is no evidence that Condere exercised its

option to purchase the equipment covered by the Lease.

  In May 1998, Specialty, the purchaser of the eleven tire presses,

filed suit in Pennsylvania against CIT seeking damages in excess of

$12,000,000.00 due to CIT’s inability to deliver the eleven tire

presses CIT had sold to Specialty.

  Meanwhile, in the replevin action Condere made counter-claims

asserting that they had the right to have the Lease reinstated

because it was part of their bankruptcy estate, or, alternatively,

the equipment was not subject to a lease but rather a security

agreement, that they had the right of redemption, and that the

equipment was a fixture.      There was a trial on October 13, 1999.

                                     7
The district court on January 25, 2002, ruled in favor of CIT and

ordered Condere to return the equipment.              Final Judgment was

entered on January 27, 2002.

  Because of the CIT/Specialty litigation, the district court

ordered Condere to post a supersedeas bond of $12,000,000.00 before

appealing.       Condere appealed without supersedeas.

  On February 4, 2000, summary judgment in favor of CIT was granted

in the Specialty litigation and the case was dismissed.                   This

ruling was affirmed on appeal on November 20, 2000.

  While the appeal was pending in this present case, the parties

settled    two    issues:   Condere   allowed   Specialty   to   remove   the

equipment and Condere paid CIT to release the lien on equipment

used as collateral for the Lease.          This Court then ordered a stay

of the appeal of the replevin action and remanded the case for a

hearing on damages.

  The district court held a hearing on August 20, 2001, concerning

damages.     The court conducted a detailed analysis of the damages

allowed under the Lease for: past due lease payments, late fees,

fees for continued use of the equipment by Condere without payment

after expiration of the Lease, the cost to CIT of having the

equipment removed, and attorney’s fees and costs.            CIT presented

evidence, including expert testimony from Lawrence McCabe, a former

general counsel of a Fortune 500 company, concerning the necessity

of the legal fees incurred by CIT, including the fees charge by

out-of-state lawyers at the Otterbourg firm.           The district court

                                       8
awarded CIT $1,650,815.17 in damages.

     Condere now appeals the final judgment in the replevin action in

so far as the court held that: 1) the Lease was rejected by Condere

and therefore not part of Condere’s bankruptcy estate and Condere

did not have a right to have the Lease reinstated; 2) the Lease was

not a disguised security agreement; 3) Condere had no right to

redeem the equipment; and, 4) the equipment was personal property.

     Condere also appeals the district court’s final judgment on

damages making four arguments: 1) no damages incurred by CIT were

caused by Condere; 2) the Lease limited CIT’s recovery; 3) the

district court should not have considered the testimony of CIT’s

expert, Lawrence McCabe; and, 4) the district court should have

reduced the fees of CIT’s out-of-state counsel, the Otterbourg

firm.

                                DISCUSSION

I.     Whether the district court erred in finding the Lease was not
       part of Condere’s bankruptcy estate and therefore Condere had
       no right to have the Lease reinstated.

     It appears Condere asserts that if the Lease really is a lease

then the Lease and Security Agreement, along with the equipment

covered, were part of the bankruptcy estate and therefore Condere

had the right, under the bankruptcy code, to reinstate the Lease

upon    full   payment   of   all   past   due   amounts.   However,   on

September 11, 1997, the bankruptcy court entered an order, that was

signed by both parties, finding that Condere had rejected the Lease


                                      9
and the court then lifted the automatic bankruptcy code stay

covering all the equipment that CIT was seeking to recover.                 The

effect of Condere rejecting the Lease and the court then lifting

the stay was to “return the parties to whatever legal relationship

existed before commencement of the [bankruptcy] case.”                    In re

Malone Properties, Inc., 1992 WL 611459 at *2 (Bankr. S.D. Miss.

1992); see Matter of Garfinkle, 577 F.2d 901, 904-05 (5th Cir.

1978) (holding, under the old bankruptcy code, that after rejection

the bankruptcy estate no longer has an interest); and see also

Matter of Austin Dev. Co., 19 F.3d 1077, 1081-83 (5th Cir. 1994)

(finding Garfinkle’s holding to be persuasive even under the new

code).

     Condere was in default before filing for bankruptcy.                   The

agreement between the parties controls, not the bankruptcy code,

and the language in the Lease does not give Condere the right to

reinstate the Lease after defaulting.              Condere does not cite any

authority that supports its assertion that the Lease remains part

of    the   bankruptcy   estate   but    only   cites   to   bankruptcy    code

provisions     that   allow   for   cure     and     assumption,   which    are

inapplicable because the Lease controls. Accordingly, the district

court properly rejected Condere’s argument that Condere could

reinstate the Lease after being in default and rejecting the Lease

and the decision is affirmed.


II.    Whether the district court’s finding that Condere failed to

                                        10
          prove the Lease was a disguised security agreement was clearly
          erroneous.

     The district court’s finding that the Lease was not a security

agreement is, under Mississippi, a factual determination depending

on the intent of the parties and therefore subject to the clearly

erroneous standard of review.           MISS. CODE ANN. § 75-1-201(37).1   A

security interest under Mississippi law is defined as “an interest

in       personal   property   or   fixtures   which   secures   payment   or

performance of an obligation.”              MISS. CODE ANN. § 75-1-201(37).

According to the district court, Condere has the burden of proving

that the Lease was a disguised security agreement.

     In the present case the district court made the following

findings, which we agree with:


     1.     An option to purchase the equipment does not of itself make
            a lease a security agreement but an agreement that the
            lessee has the option to become the owner of the equipment
            upon completion of a lease for nominal consideration does
            make a lease one intended to be a security. MISS. CODE ANN.
            § 75-1-201(37). Condere offered no credible evidence that
            the option price in the Lease was nominal.

     2.     Condere’s corporate resolutions authorized both a lease and
            a security agreement - two separate documents.

     3.     All the transaction documents describe the Lease as a
            lease. The form is one commonly used for leases.


     1
   Neither the Lease nor Security Agreement contains a choice of
law provision and the contracts were to be performed in, and the
subject matter of the contract is in, Mississippi and therefore
Mississippi law governs. Todd v. Deposit Guar. Nat. Bank, 849 F.
Supp. 1149 (S.D. Miss. 1994). Additionally, the lease was executed
in 1993, so the 1990 version of MISS. CODE ANN. § 75-1-201 (37)
applies and not the current version.

                                       11
  4.   Contemporaneously, a security agreement was executed,
       demonstrating that the parties recognized the distinction
       between a security agreement and a lease and followed the
       directives of Condere’s resolutions.

  5.   Another equipment lease from CIT was involved, and Condere
       assumed it in the bankruptcy court, never claiming it was
       a security agreement.

  6.   Sales tax was added to each “rent” payment.                    This is
       applicable only to a lease.

  7.   The Lease had to be a lease for Condere to reject it in
       bankruptcy (see issue I supra). Condere had no right to
       reject a security agreement.

  8.   When Condere tendered $224,000.00 it was expressly stated
       to be for the purpose of curing “lease” defaults.

  9.   Not until this suit was filed did, Condere take any
       affirmative act to secure a judicial determination that the
       Lease was a security agreement.

  Thus, the district court found that the evidence established that

the Lease was exactly what it was: a lease.            CIT had title to the

equipment   and   therefore   was   entitled     to    immediate   possession

because Condere    was   in   default    under   the    Lease   and   Security

Agreement before it filed for bankruptcy (see supra).              Condere on

appeal makes several factual arguments that basically revolve

around their contention that the reason for the arrangement between

Condere and CIT was because Condere was “cash starved.”                 This,

however, does not overcome the findings of the district court

concerning the intent of the parties and may in fact support the

finding that the Lease was a lease.         Accordingly, the finding of

the district court that the Lease was a lease is not clearly



                                    12
erroneous and is affirmed.

  Additionally,   whether   Condere   had   the   right   to   redeem   the

equipment and did in fact properly redeem the equipment depends on

finding the lease was really a security agreement.             Because we

agree with the district court that the Lease really was a lease,

there is no need to address this issue.

III. Whether the district court’s finding that the equipment was
     personal property was clearly erroneous.

  In Mississippi, the question of whether an object is a fixture

or personal property is one of intent and a question of fact.

Bondafoam, Inc. v. Cook Const. Co., 529 So. 2d 655, 658 (Miss.

1988).   The general rule is that whatever is affixed to land

becomes part of the realty; however, Mississippi courts recognize

that the parties, such as a lessor and lessee, can agree between

themselves as to whether or not something is to be considered a

fixture and the parties can incorporate this agreement into a

lease.   Simmons v. Bank of Miss., 593 So. 2d 40, 42 (Miss. 1992).

  In the present case, the Lease in the first and second paragraphs

describes the equipment as personal property.        Further the eighth

paragraph of the Lease states that the equipment shall remain

personal property.   The Bill of Sale refers to the equipment as

personal property and the Security Agreement, which collateralizes

the Lease, states that regardless of how the property is affixed it

shall remain personal property.       Accordingly, the intent of the

parties is clear and the district court did not err in finding the

                                 13
equipment was personal property and the decision is affirmed.

IV.    Whether the district court erred in awarding damages.

  A district court’s factual determination of damages is subject

to clear error review and legal determinations are reviewed de

novo.     Sockwell v. Phelps, 20 F.3d 187, 192 (5th Cir. 1994).

Condere    makes   four,   basically    factual,   arguments   concerning

damages: 1) no damages incurred by CIT were caused by Condere; 2)

the Lease limited CIT’s recovery; 3) the district court should not

have considered the testimony of CIT’s expert, Lawrence McCabe;

and, 4) the district court should have reduced the fees of CIT’s

out-of-state counsel, the Otterbourg firm.

  The factual history of this case indicates that Condere brought

this damages judgment upon itself and the district court did not

err.

  First, as to whether Condere caused the damages.             Condere’s

argument is based on its earlier argument that had it been given

the right of redemption and had CIT complied with the notice

requirements, CIT would not have incurred any damages.              This

argument depends on a finding that Condere had the right of

redemption and properly exercised the right, a finding the district

court properly rejected.

  Second, Condere claims Section 11 of the Lease limits recovery

in a default situation.      This argument was not made until post-

trial briefing to the district court.       Nonetheless, Section 11 of


                                   14
the Lease refers only to CIT’s right if Condere is in default

during the term of the Lease.       Condere’s holdover and use of the

equipment for 21 months after the Lease term is not limited by

Section 11.     Condere’s limitation argument does not make sense

because it only applies to the past due lease payments and if

adopted would result in Condere possibly paying more in damages.

  Third, as to Condere’s argument that the court should not have

considered the testimony of CIT’s expert, Lawrence McCabe, because

according to Condere, McCabe’s area of experience was not in

bankruptcy    matters   involving    leases   nor    in    Mississippi     law.

Condere presents no legal arguments but only its disagreement with

the district court that McCabe was qualified to testify.                   CIT,

however, used McCabe, a former general counsel of a Fortune 500

company, to testify as to whether the expenses incurred by CIT in

the litigation between CIT and Condere and CIT and Specialty were

reasonable.    There is nothing to indicate McCabe lacked experience

in the area for which he offered testimony.

  Fourth, as to whether the out-of-state attorney’s fees were

reasonable. Condere argues that the rate charged by the Otterbourg

firm   was   unreasonably   excessive     compared    to   local   rates    and

therefore should have been reduced. The Lease obligates Condere to

pay attorney’s fees and the fees in this case were, in part, the

result of Condere’s refusal to surrender the equipment, which

caused Specialty to bring suit against CIT.                In summary, the

bankruptcy    litigation,    the    Mississippi      litigation,    and     the

                                     15
Pennsylvania    litigation    were     intertwined    and   CIT   sought   the

assistance     of   the   Otterbourg    firm   in    coordinating   all    the

litigation.     The district court was correct in accepting CIT’s

evidence that the fees were necessary and reasonable when Condere

presented no evidence to the contrary but merely complained about

the fees.

  Accordingly, the district court did not err in awarding damages.

Therefore, the decision is affirmed.

                                CONCLUSION

  Having carefully reviewed the record of this case and the

parties’ respective briefing and arguments, for the reasons set

forth above we conclude that the district court did not err in

deciding any issue now appealed and therefore both judgments are

affirmed.    AFFIRMED.




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