Faulkner v. Lone Star Car Brokering, LLC (In re Reagor-Dykes Motors, LP)
| Decision Date | 15 February 2022 |
| Docket Number | 18-50214-RLJ-11,Adversary 20-05028 |
| Parties | In re: Reagor-Dykes Motors, LP, et al., [1] Debtors. v. Lone Star Car Brokering, LLC, Defendant. Dennis Faulkner, as Trustee of the Creditors Trust, Plaintiff, |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
On July 31, 2020, Dennis Faulkner, the trustee of the creditors' liquidating trust in the debtors' bankruptcy cases ("Trustee"), filed his complaint seeking to recover transfers made to the defendant, Lone Star Car Brokering, LLC ("Lone Star"), under 11 U.S.C. §§ 547, 548, 549, and 550.[2] Lone Star now moves for summary judgment on the Trustee's § 547 preferential transfer claim.[3] As explained below, the Court denies Lone Star's motion.
This adversary proceeding arises under the jointly administered chapter 11 bankruptcy cases of Reagor-Dykes Motors, LP, et al. ("Debtors").[4] Prior to filing bankruptcy, the Debtors operated as a consolidated auto group with eight car dealerships across seventeen locations. During July 2018 Ford Motor Credit Company, a primary financier of the Debtors' operations, concluded that some of the Debtors had violated the terms of their financing agreement, and Ford ceased to provide additional funding. As a result, the Debtors were unable to sustain their business operations. On August 1, 2018, six of the Debtors filed their bankruptcy petitions, followed by the other five on November 2, 2018. On July 10, 2020, the Court confirmed the Debtors' bankruptcy plan, which provided for the creation of a creditors trust and the appointment of a trustee with the authority to assert causes of action under chapter 5 of the Bankruptcy Code.
Lone Star transported vehicles for the Debtors from June 2016 through August 1, 2018. Lone Star issued invoices to the Debtors, which were due on receipt, and received payment through checks from a bank account under the name "Spike Dykes Ford Lincoln." That name was an alter-ego of the Debtors, and the bank account was owned and controlled by them.
Lone Star continued to transport vehicles for the Debtors, issue invoices, and receive payments during the ninety days before the first Debtors filed bankruptcy-the preference period of § 547. Lone Star received four checks from the Debtors during the preference period totaling $33, 225. The Debtors issued a $4, 375 check on May 22, 2018, a $14, 200 check on May 31, 2018, an $11, 250 check on July 12, 2018, and a $3 400 check on July 20, 2018 (collectively, the "Transfers"). The Trustee contends that the $3, 400 check did not clear the Debtors' bank account until after the commencement of the Debtors' first bankruptcy filings. The checks constituted payment for a total of forty-eight invoices issued at various times.
"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a).[5] "A fact issue is material if its resolution could affect the outcome of the action." Peel & Co. v. Rug Mkt., 238 F.3d 391, 394 (5th Cir. 2001). The movant bears the initial burden of identifying portions of the pleadings and discovery that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "If the movant does meet its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial." Roberson v. Game Stop, Inc., 395 F.Supp.2d 463, 468 (N. D. Tex. 2005), aff'd, 152 Fed.Appx. 356 (5th Cir. 2005). On a preferential transfer action, when "the parties agree completely as to what payments were made[, ] . . . when [they were made], and for what," the material facts are not in dispute. Yaquinto v. Arrow Fin. Servs. (In re Brook Mays Music Co.), 418 B.R. 623, 625 (Bankr. N.D. Tex. 2009).
"[T]he court must review all of the evidence in the record, but make no credibility determinations or weigh any evidence." Peel & Co., 238 F.3d at 394. The facts and inferences to be drawn from the evidence must be viewed in the light most favorable to the nonmoving party. Id.
Lone Star argues it is entitled to summary judgment on the Trustee's preference claim under § 547(b). Under that section, a trustee may avoid a transfer of a debtor's interest in property if the transfer was:
§ 547(b).
Lone Star argues that the Trustee cannot prevail as a matter of law on his preference claim because he has failed to provide sufficient evidence to show the Transfers were made on account of an antecedent debt owed by one of the Debtors. The Bankruptcy Code defines "debt" as a "liability on a claim." § 101(12) (emphasis added). A "claim" is a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." § 101(5). "A debt is 'antecedent' for purposes of § 547(b) if it was incurred before the alleged preferential transfer." Baker Hughes Oilfield Operations, Inc. v. Cage (In re Ramba, Inc.), 416 F.3d 394, 399 (5th Cir. 2005).
The Trustee introduced the invoices from Lone Star which underlie the Transfers; Lone Star introduced the checks it received as payment for each invoice. Lone Star does not rebut the sufficiency of this proof. An antecedent debt existed and was owed by a Debtor. Indeed, Lone Star admitted in its Rule 26 disclosure that it sent invoices and received checks from the Debtors. Trustee's Resp., Ex. 1 at 2 [ECF No. 40].[6] But now it argues that the Trustee must identify the specific Debtor that owed the antecedent debt. The checks sent to Lone Star came from a bank account with a name that does not match any of the Debtors, though the Trustee says the Debtors controlled and operated the account. Lone Star argues that the Trustee's preference claim must be denied because he failed to identify which Debtor owed an antecedent debt.
Some courts have held that "[i]n a [preference] case with multiple debtors, … the Complaint must sufficiently allege which debtor owed the antecedent debt and that the same debtor made the preferential transfer." THQ Inc. v. Starcom Worldwide, Inc. (In re THQ Inc.), No. 12-13398, 2016 WL 1599798, at *3 (Bankr. D. Del. Apr. 18, 2016); see also Miller v. Mitsubishi Dig. Elecs. Am. Inc. (In re Tweeter Opco), 452 B.R. 150, 154-55 (Bankr. D. Del. 2011). These courts require the identification of a specific debtor "to ensure that the defendant receives sufficient notice of what transfer is sought to be avoided." Miller, 452 B.R. at 154; THQ Inc., 2016 WL 1599798, at *3. Contrarily, in O'Connor v. DL-DW Holdings, L.L.C., the court held that a trustee over a consolidated bankruptcy case of multiple debtors did not need to identify which particular debtor owed the debt underlying a fraudulent transfer claim. (In re Extended Stay, Inc.), No. 09-13764-JLG, 2020 WL 10762310, at *66 (Bankr. S.D.N.Y. Aug. 8, 2020). While the court noted that a particular debtor ordinarily must be identified, it held that such requirement should be relaxed for trustees because of their lack of history with the debtors, and it determined the trustee there had provided otherwise sufficient information to provide the defendants notice of the particular transfers at issue. Id. at *63, *66.
Like O'Connor, the Trustee lacks a history with the Debtors. And like O'Connor, he has described the services rendered by Lone Star and the price owed by the Debtors thereby providing notice to Lone Star of which transfers are allegedly preferential. Still, at some point in the case, a specific debtor must be identified. This is not a non-issue, as the Trustee suggests. The Debtors' bankruptcy cases have not been substantively consolidated-if the Trustee prevails on his action, then it must be known to which Debtor's estate damages are owed.
The invoices the Trustee introduced were sent to "Spike Dykes Ford Lincoln Mercury," which essentially matches the name on the checks to Lone Star-"Spike Dykes Ford Lincoln." The address on the checks is in Lamesa, Texas, and the checks were sent from a bank account with Lamesa National Bank. The parties agree that "Spike Dykes Ford Lincoln (Mercury)" is an alter-ego of the Debtors. The Trustee has not pleaded or proved which Debtor entity owned the vehicles that were shipped by Lone Star. Fortunately, one of the Debtor's bankruptcy filings may provide the answer.
The bankruptcy petition for one of the Debtors, Reagor-Dykes Motors, LP, says that entity was "doing business as" Spike Dykes Ford Lincoln. Case No. 18-50214, ECF No 1. No other Debtor's bankruptcy petition reflects such a designation. While Reagor-Dykes Motors, LP's bankruptcy petition says its principal place of business was in Lubbock, it says its principal assets were located in Lamesa. Id. The Schedule A/B filed by Reagor-Dykes Motors, LP reflects that it leased the property in Lamesa, where the former Spike...
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