Silva

ORDER DENYING PETITION FOR REHEARING

Appellant Wells Fargo Bank, N.A. (“Wells Fargo”) brought this appeal from the bankruptcy court’s decision in an adversary proceeding initiated by Appellee Ed Silva. The adversary proceeding relates to the bankruptcy of GVF Cannery, Inc. (“GVF”). On September 11, 1996, this Court affirmed in part, reversed in part and remanded the case to the bankruptcy court. Now, Silva has filed a petition for rehearing, claiming that this Court failed to address one of his grounds for appeal: whether the subordination agreement that he signed could be rescinded based on GVF’s fraud. For the following reasons, Silva’s petition for rehearing is DENIED.

DISCUSSION

In its September 11,1996 Order, the Court found that the subordination agreement signed by Silva was properly subject to waiver analysis, but determined that the bankruptcy court incorrectly applied California’s law of waiver. Consequently, the Court remanded the case to the bankruptcy court to make further factual findings on the waiver issue. The Court did not address the bankruptcy court’s additional determination that the subordination agreement was subject to rescission on the basis of fraud by…

ORDER AFFIRMING IN PART, REVERSING IN PART AND REMANDING CASE

Appellant Wells Fargo Bank, N.A. (‘Wells Fargo”) brings this appeal from the bankruptcy court’s decision in an adversary proceeding initiated by Appellee Ed Silva relating to the bankruptcy of GVF Cannery, Inc. (“GVF”). Based on the following, the bankruptcy court’s decision is AFFIRMED IN PART, REVERSED IN PART and REMANDED for further proceedings consistent with this Court’s decision.

*142 BACKGROUND

GVF is a tomato cannery located in Gilroy, California. Wells Fargo began loaning money to GVF in 1982. Each year, Wells Fargo would provide the working capital necessary for GVF to complete its annual pack of processed tomato products, sell its inventory and collect receivables. As collateral, GVF gave Wells Fargo a first priority security interest in all of GVF’s accounts, inventory, equipment and fixtures.

To ensure Wells Fargo’s first priority as a creditor, GVF had a policy of asking all growers to sign subordination agreements at the time they executed tomato sales contracts. These agreements subordinated the growers’ first priority under their producer’s liens, Cal. Food & Agr.Code § 55631 et seq., to Wells…