Bruening, In re
| Decision Date | 13 May 1997 |
| Docket Number | No. 96-3006,96-3006 |
| Citation | 113 F.3d 838 |
| Parties | Bankr. L. Rep. P 77,371 In re Stephen Anthony BRUENING, Doing Business as Bruening Holding Company, and Nancy E. Bruening, Debtors. David C. STOVER, Trustee, Appellee, v. Jewett M. FULKERSON, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Gregory A. Pottorff, Kansas City, MO, argued, for appellant.
Gregory A. Carpenter, Kansas City, MO, argued, for appellee.
Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and MELLOY, 1 District Judge.
Jewett M. Fulkerson appeals a district court decision affirming the judgment of a bankruptcy court in favor of a trustee who brought an action to recover $13,700 that the trustee alleged was a preferential transfer under 11 U.S.C. § 547(b)(2). We find that only $13,000 of the payment that Mr. Fulkerson received was a preferential transfer and thus we affirm in part and reverse in part the judgment of the district court.
Sometime prior to February, 1993, Mr. Fulkerson transferred, pursuant to an oral agreement, several dozen cattle to Stephen Bruening, who, with his wife, is the debtor in this case. Whether this transfer was pursuant to a sale of the cattle, or merely a bailment accompanied by a series of option contracts, is, for reasons that we shall explain, crucial to the case and is in dispute. There is no dispute, however, about the fact that the agreement anticipated payments of $22,500 a year from Mr. Bruening to Mr. Fulkerson, because Mr. Bruening signed to Mr. Fulkerson's order a series of notes.
Each note indicated a sum due, a due date, an interest rate, and a description, such as on the note due February 10, 1995, which read "3rd Payment on 100 Bred Heifers." Mr. Fulkerson testified that these notes merely reflected the fact that Mr. Bruening was entitled to purchase twenty-five cows a year from the hundred or so cattle for which he was caring. He said that the notes were drawn up on inappropriate forms that happened to be in his possession, and that the execution of the notes was an afterthought to provide their respective wives with some evidence of their agreement in the event something should happen to the two men. Mr. Fulkerson received a total of five payments in 1993 and 1994 that were consistent with the schedule indicated by the notes, the last of which, for $13,700, is the one at issue here.
A second difficulty in this case arises from the fact that the $13,700 payment was drawn not on Mr. Bruening's personal account but on the account of Bruening Holding Company ("BHC"), a company wholly owned by Mr. Bruening and his wife and which did not file bankruptcy. That payment followed shortly on a transfer by Mr. Bruening of $13,000 from his personal account into the BHC account. A related factual dispute has to do with whether it was BHC or Mr. Bruening who owned (or had a bailee's interest in) the cattle.
There is no question that Mr. Bruening's interests were intermingled with the corporate interests in a very confusing way. He signed the notes personally, but testified that he thought that the company owned the cattle. He admitted, however, that "in the long run" the obligation on the debt was his personally. Mr. Fulkerson, although he argues on appeal that his dealings were with BHC alone, indicated in his testimony that he, in effect, equated BHC with Mr. Bruening. The cattle were listed on Mr. Bruening's bankruptcy filing. They also, apparently, were included in the security interest granted to Kearney Trust Company ("Kearney") when that company lent BHC money for cattle operations: It was Kearney that liquidated all of the livestock in Mr. Bruening's possession, including the cattle that Mr. Fulkerson had transferred to him, when BHC defaulted on that note.
The bankruptcy code provides that a trustee may recover a transfer of property made "on account of an antecedent debt owed by the debtor before such transfer was made." 11 U.S.C. § 547(b)(2). No such recovery is allowed, on the other hand, when the transfer was "intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor." 11 U.S.C. § 547(c)(1)(A). The bankruptcy court had to determine, therefore, whether the $13,700 that Mr. Fulkerson received was a payment on a promissory note for cattle bought in the past or a cash purchase of the cattle pursuant to an option contract.
The bankruptcy court found that it was the former. Mr. Fulkerson, contending that it was the latter, bases his appeal primarily on two related arguments: One, that because Mr. Bruening was permitted, under their agreement, to return cattle that he did not want, the arrangement must have been an option contract; and, two, that the sum of the evidence shows that the original intent of the parties was to create a bailment and option contract, not a sale.
The first point, Mr. Fulkerson appears to contend, establishes as a matter of law that the parties created an option contract and not a sale between them. We note, first of all, that the evidence is not conclusive that Mr. Bruening's ability to return the cattle was in fact part of the original understanding; indeed, Mr. Bruening's testimony suggests that it became part of the understanding between the two parties only after Mr. Fulkerson became aware of Mr. Bruening's financial difficulties. But assuming, arguendo, that this return provision was part of the original contract between the parties, Mr. Fulkerson is still unable to point to any case that holds that the existence of such a contractual provision, by itself, requires a court to conclude that the relevant arrangement was an option contract and not a sale. We do not think, moreover, that there is any such rule of law.
On the second point, we agree with Mr. Fulkerson that the parties' intent will determine how this business arrangement ought to be characterized. See Mo.Ann.Stat § 400.2-401(1). But Mr. Fulkerson's testimony with regard to his intent in placing his cows with Mr. Bruening, although it is certainly credible on its face, is nevertheless not the only evidence for the trier of fact on this point. Evidence in conflict with Mr. Fulkerson's testimony included the existence of the notes, as well as the testimony of Mr. Bruening, who said that he had signed the notes in order "to purchase cattle," and that the payment of $13,700 to Mr. Fulkerson occurred because "we owed him for the cattle and we were due [to make] a payment." Mr. Bruening also listed, when he filed for bankruptcy,...
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