Dill v. Brad Hall & Assocs. Inc. (In re Indian Capitol Distrib. Inc.)
| Decision Date | 05 October 2011 |
| Docket Number | Adv. No. 10-1180 S,No. 09-11558-s7,09-11558-s7 |
| Court | U.S. Bankruptcy Court — District of New Mexico |
| Parties | In re: INDIAN CAPITOL DISTRIBUTING, INC. Debtor. CRAIG H. DILL, Chapter 11 Trustee, Plaintiff, v. BRAD HALL & ASSOCIATES, INC., Defendant. |
This matter is before the Court on Defendant Brad Hall & Associates, Inc.'s ("Brad Hall") Motion for Summary Judgment1 (doc 4) with Accompanying Brief in Support (doc 5) and the Affidavit of Logan B. Hall. Doc 6. Craig H. Dill, chapter 7 Trustee ("Dill" or "Plaintiff") filed a Response (doc 7), and Brad Hill filed a Reply. Doc 10. This adversary proceeding seeks to avoid a postpetition transfer under 11 U.S.C. § 549 and to recover it for the benefit of the estate under 11 U.S.C. § 550. For the reasons set forth below, the Defendant's Motion will be granted, albeit on grounds not argued by the parties, and this adversary case will be dismissed without prejudice torefiling in the event that the Trustee can show that the estate has suffered a loss.2
Indian Capitol Distributing, Inc. ("Indian Capitol" or "Debtor") began its very short life as a debtor-in-possession chapter 11 case when it filed a voluntary Chapter 11 petition on April 14, 2009. On April 15, 2009, Debtor filed an Emergency Motion to Use Cash Collateral for an interim period (doc 5) in which it alleged, in part:
Debtor operates a oil sales and distributing business, generally consisting of a bulk sales operation and a number of retail gas stations and "convenience stores." Additionally, Debtor's principal is the part-owner and chief executive officer of another New Mexico corporation, Mataya's Travel Plaza, Inc., which operates a separate "travel plaza" selling, among other things, gasoline products it purchases from the Debtor. The travel plaza is in the process of paying back a substantial account receivable to the Debtor, and its ability to do so will likely depend on the Debtor's continued operations. In the course of such business operations, Debtor will incur various expenses in the ordinary course of business and expenses of this proceeding which must be paid in order to continue operations and in order to maintain and protect assets of the estate. If Debtor is unable to pay various operating expenses, even for a short period of time, it will not be able to continue its operations. Upon any cessation of operations, the"going concern" value of the business will be lost. Further, if such "going concern" value is lost or impaired, the marketability of the business, components of the business, and assets will also be impaired. In this regard, the Debtor has reason to believe that third parties may be interested in acquiring Debtor's assets and operations, and any possibility of selling such assets and operations will depend, at least in part, on the going concern value of the assets and continuation of operations.
On April 16, 2009, the various parties submitted a stipulated order authorizing use of cash collateral and granting adequate protection for an interim budget period, pending a final hearing on the Emergency Cash Collateral Motion. Doc 10. The final hearing was set for May 5, 2009. Doc 19. Debtor then filed its First [sic] Motion for Use of Cash Collateral (doc 25), seeking to use cash collateral through November 7, 2009. It contained virtually the same representations regarding the need for cash collateral as the Emergency Motion. Debtor then filed a Second Emergency Motion to use cash collateral on April 30, 2009. Doc 32.
At the May 5, 2009 hearing, the Court took under advisement the Emergency Motion to Use Cash Collateral and set a final hearing on the First Motion to Use Cash Collateral for May 18, 2009. (Minutes, doc 45). On May 12, 2009, the Court conducted a further hearing on cash collateral issues and orally granted interim use pending further order of the Court. (Amended Minutes, doc 54). The oral ruling was memorialized by an Order entered May 18, 2009. Doc 61. Also on May 18, 2009, the Courtconducted the final hearing on the First Motion to use cash collateral and took the First Motion under advisement. (Minutes, doc 63). On May 22, 2009, the Court conducted a hearing and orally denied further use of cash collateral. (Minutes, doc 66). On May 28, 2009 the Court conducted yet another hearing on cash collateral and denied use of cash collateral pending further order of the Court. (Minutes, doc 67). The Court entered an Order Prohibiting Use of Any Cash Collateral on May 29, 2009. Doc 68. The Court entered an order appointing Dill as Chapter 11 trustee on June 17 (doc 98), and he continued as the Chapter 7 trustee when the case converted to Chapter 7 on March 31, 2010. Doc 318.
In summary, Debtor filed bankruptcy on April 14, 2009 and promptly filed for permission to use cash collateral. The Court authorized the use of cash collateral, as conditioned in various orders, through May 22, 2009. Permission ended on May 22, 2009 and was never reinstituted.
This adversary proceeding alleges that Debtor purchased petroleum products from Brad Hall from May 24, 2009 to May 28, 2009, in the amount of $97,860.01 and that Brad Hall received payment of that amount from Debtor (as Debtor-in-Possession) in three payments made on May 26, 2009, June 1, 2009, and June 11, 2009. Dill seeks the return of these funds as unauthorized postpetition transfers prohibited by 11 U.S.C. § 549.
Summary judgment is proper when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Bankruptcy Rule 7056(a)4 . Indetermining the facts for summary judgment purposes, the Court may rely on affidavits made with personal knowledge that set forth specific facts otherwise admissible in evidence and sworn or certified copies of papers attached to the affidavits. Fed.R.Civ.P. 56(c)(1). When a motion for summary judgment is made and supported by affidavits or other evidence, an adverse party may not rest upon mere allegations or denials. Id. Rather, "Rule 56(e) ... requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). "Rule 56(e) permits a proper summary judgment motion to be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Id. Thecourt does not try the case on competing affidavits or depositions; the court's function is only to determine if there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
In ruling on a motion for summary judgment, the trial court views the evidence and draws reasonable inferences therefrom in the light most favorable to the nonmoving party. Mountain Highlands, LLC v. Hendricks, 616 F.3d 1167, 1169-70 (10th Cir. 2010)(citing Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir. 2005)). On those issues for which it bears the burden of proof at trial, the nonmovant "must go beyond the pleadings and designate specific facts so as to make a showing sufficient to establish the existence of an element essential to [its] case in order to survive summary judgment." Id. at 1170 (quoting Cardoso v. Calbone, 490 F.3d 1194, 1197 (10th Cir. 2007)) (internal quotation marks omitted). "If a party that would bear the burden of persuasion at trial does not come forward with sufficient evidence on an essential element of its prima facie case, all issues concerning all other elements of the claim and any defenses become immaterial." Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)(citing Celotex, 477 U.S. at 322-23). "[F]ailure of proof of an essential element renders all other facts immaterial." Mountain Highlands, 616 F.3d at 1170(quoting Koch v. Koch Indus., Inc., 203 F.3d 1202, 1212 (10th Cir.), cert. denied, 531 U.S. 926 (2000)).
New Mexico LBR 7056-1 governs summary judgment motions. It provides, in part:
Defendant's Brief (doc 5) contains a statement of 34 undisputed material facts. Plaintiff's response, doc 7, p. 6, disputes only Defendant's fact 8. That fact states: "From April 14, 2009 until a Trustee was appointed in its Chapter 11 case, Indian Capitol continued to purchase some petroleum products from Hall on a COD basis." Plaintiff argues that this fact is inconsistent with Defendant's fact 26 which suggests the last fuel was purchased from Brad Hall on May 28, 2009. Defendant concedes that the last purchase was May 28, 2009. (Reply, doc 10, p. 13.) Otherwise, Plaintiff claims that all of Defendantsother facts are not relevant or material to the case or its legal theory. (Response, doc 7, p. 6). However, NM LBR 7056-1 is clear: "All material facts set forth in movant's statement that are properly supported shall be deemed admitted unless specifically controverted." Therefore, the Court will adopt Defendant's statement of facts, with modified fact 8, as follows:
1. On or about December 5, 2006...
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