In re Ameri P.O.S. Inc.

• Citation: 355 B.R. 876
• Decision Date: 24 October 2006
• Docket Number: Adversary No. 06-1077-BKC-RBR-A.,Bankruptcy No. 04-24429-BKC-RBR.
• Parties: In re AMERI P.O.S. INC., Debtor. Soneet R. Kapila, Chapter 7 Trustee, Plaintiffs, v. Media Buying, Inc., Defendant.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

355 B.R. 876

In re AMERI P.O.S. INC., Debtor.

Soneet R. Kapila, Chapter 7 Trustee, Plaintiffs, v. Media Buying, Inc., Defendant.

Bankruptcy No. 04-24429-BKC-RBR.

Adversary No. 06-1077-BKC-RBR-A.

United States Bankruptcy Court, S.D. Florida, Broward Division.

October 24, 2006.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Zach B. Shelomith, Hollywood, FL, Michael I. Goldberg, Ft. Lauderdale, FL, for Plaintiff.

Ivan J. Reich, Ft. Lauderdale, FL, for Defendant.

Joel M. Aresty, Miami, FL, for debtor.

ORDER PARTIALLY GRANTING DEFENDANT, MEDIA BUYING, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT.

RAYMOND B. RAY, Bankruptcy Judge.

THIS MATTER came before the Court for hearing on Thursday, September 21, 2006 upon the parties cross motions for partial summary judgment. See C.P. 41 and C.P. 42. The Trustee instituted this adversary proceeding to recover allegedly preferential or fraudulent transfers made by the Debtor to Media Buying. See C.P. 1 para. 6, Subsequent to the filing of the complaint, the parties stipulated that a majority of the total sought is subject to the "ordinary course" defense defined in 11 U.S.C. § 547(c)(2)¹. Accordingly the Court entered an order granting the Defendant partial summary judgment as to that amount. See C.P. 55. Thus only $55,928.65 is left in dispute.

In his complaint the Trustee identified 53 separate checks as avoidable preferential transfers. See C.P. 1 at para. 8. Of the 53 checks only 6 remain in dispute. The Trustee seeks to avoid and recover preferential transfers in the amount of $55,928.65. The Court has reviewed and taken into consideration the stipulated facts and exhibits filed by the parties ("Stipulated Facts")(C.P. 40); the Answers to Interrogatories sworn to by Mr. Ellis Kahn ("interrogatory Answers")(C.P. 29); the memoranda of law filed by both the Defendant and Plaintiff (C.P. 43 & 44); and the representations and arguments made by counsel. The Court will grant Defendant's motion and deny Plaintiffs motion.

FACTS:

The Debtor filed a voluntary chapter 7 petition on July 13, 2004. (C.P. 1, No. 04-24429-BKC-RBR). On January 19, 2006 the Trustee filed the Complaint (C.P. 1 Adv. 06-01077-BKC-RBR-A) seeking, in Count I, the return of $619,736.22 in allegedly preferential payments or alternatively, in Count II, return of the payments as fraudulent transfers. On February 23, 2006 the Defendant filed and served its Answer and Affirmative Defenses. (C.P. 7).

The Defendant, Media Buying, is a Florida corporation which acts as a media buying agent on behalf of its clients. On behalf of the Debtor the Defendant was retained to purchase media with several outlets, bill the Debtor on behalf of the outlets, and forward payment from the Debtor to the respective outlets. The invoices, which are involved in this dispute involved purchases of media from (i) Direct TV and Dish Network, for television commercials; (ii) internet companies for banner ads; and (iii) retrieval services companies, who answered telephone numbers listed on the tv and internet ads.

The parties' business relationship lasted approximately 630 days. The fast invoice sent from the Defendant to the Debtor is dated September 26, 2002 and the last invoice, for which payment was received, is dated June 17,2004. Over that time frame the Defendant issued 548 invoices to the Debtor. Rounded, this reveals an overall pattern of an invoice every 1.15 days. The lag time between invoice and payment averaged approximately 8.24 days over the course of the relationship.

The non-preference period lasted from September 26,2002 through April 13, 2004, a total of 566 days. During this period the Defendant issued 488 invoices to the Debtor, which translates in a negligibly higher rate of one invoice every 1.16 days. The average lag time between invoice and payment during this period was marginally higher at 8.63 days.

Of the 53 payments made during the preference period the following 6 payments remain in dispute:

1. Check 11124, $8,355.50 is disputed of the total check amount of $11,839.72.

2. Check 12909. The entire $10,000 amount.

3. Check 12995. The entire $10,203.37 amount.

4. Check 12996. $6,962.64 out of the total check amount of $10,203.37.

5. Check 12997. The entire $10,203.37 amount.

6. Check 12998. The entire $10,203.37 amount.

According to the admitted business records and the stipulated facts. The following are the details for each of the checks:

1. Check 11124 was negotiated on April 14, 2004. It paid the entire amount of invoice # 4444 of $8,355.50. Although the invoice is dated as March 8,2004 it was not sent until April 7,2004. See C.P. 40 (Exhibit A MB0121 and MB0129).

2. Check 12909 was negotiated in June 7, 2004. It was applied against the total balance of invoice # 4577, which was $97,700.00. Invoice # 4577 was billed on May 26, 2004.

3. Check 12995 was negotiated on June 8, 2004. It was also applied against invoice # 4577.

4. Check 12996 was negotiated on June 8, 2004. Of $6,962.64 total payment amount, $2,089.89 was applied to invoice # 4577. The rest was applied as follows: $1,318.75 was applied to invoice # 4580; $285.00 was applied to invoice # 4581; and $3,269.00 was applied to invoice # 4582. Invoice # 4580, 4581 and 4582 were all billed on May 26, 2004. 5. Check 12997 was negotiated on June 10, 2004. Its entire balance was applied to invoice # 4577.

6. Check 12998 was negotiated on June 11, 2004. Its entire balance was applied to invoice # 4577.

The variance time is the number of days above the rounded historical average of 8 days it took for an invoice to be paid. It is calculated by subtracting the payment date less invoice date and then subtracting that total from the historical average. In the case of check 11124 the variance is -1 days (payment date of April 14, 2004 and invoice date of April 7, 2004). In the case of check 12909 the variance is + 2 days (payment date of June 7,2004 and invoice date of May 26, 2004). In the case of check 12995 the variance is +3 days (payment date of June 8,2004 and invoice date of May 26, 2004). In the case of check 12996 the variance is +3 days (payment of June 8, 2004 and invoice date of May 26, 2004). In the case of check 12997 the variance is +5 days (payment date of June 10, 2004 and invoice date of May 26, 2004). In the case of check 12998 the variance is + 6 days (payment date of June 11, 2004 and invoice date of May 26, 2004).

Furthermore, the parties have stipulated that:

1. The Defendant was a third-party vendor creditor of the debtor. See Stipulated Facts C.P. 40 para. 17.

2. The Defendant was not an insider or investor of the debtor. See id. at para. 16.

3. Each of the subject payments was made within the 90 days preceding the bankruptcy petition. See id at para. 16.

Finally, according to the schedules filed by the Debtor at the time of the petition there was $12,750.00 in assets and $1,438,502.42 in liabilities. See Summary of Schedules C.P. 16. These numbers result in a shockingly low ratio of assets to liabilities, Essentially, for every dollar of claim there is approximately $0.00886 of assets to satisfy it. As a result of the disputed payments the Defendant received more then it would have under a chapter 7 liquidation.

JURISDICTION

This court has jurisdiction to hear all core matters relating to this case. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(F).

CONCLUSIONS OF LAW

Federal Rule of Civil Procedure 56, made applicable by Federal Rule of Bankruptcy Procedure 7056, provides for the granting of summary judgment if "... there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). A fact is material if it "... might affect the outcome of the suit under governing (substantive) law..." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1985). A dispute of fact is genuine "... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." See id. The moving party has burden of establishing the right of summary judgment. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). The Court concludes that this matter is ripe for determination because all of the material facts have been stipulated to (See C.P. 40). Thus, the only issues before the court are: (1) whether any or all of the six payments can be avoided as preferences and whether any of the affirmative defenses apply or (ii) alternatively whether any of the payments are fraudulent transfers.

I. The Disputed Transfers Are Preferences Pursuant to § 547(b).

Although the Trustee asserts that the Defendant has stipulated to the fact that these payments meet the prima facie requirements under § 547(b), the Court will briefly evaluate each one, and note the facts that support the finding that indeed the prima facie elements of § 547(b) have been met. There are five elements that must be proven to avoid a transfer. The transfer must have: (i) been to or for the benefit of a creditor; (ii) for or on account of antecedent debt; (iii) made while the debtor was insolvent; (iv) made on or within 90 days before the date of the filing and (v) the creditor will received more through the transfer then they would have receiving only a chapter 7 distribution. See 547(b).

The first element of § 547(b) has been met. The Defendant has conceded that they are a creditor (See C.P. 40 para. 17). Furthermore it is undisputed that the Defendant received payments from Debtor, as the dispute centers around checks from the Debtor to the Defendant.

The second element has also been met. Under § 547(b)(2) the transfer must be "for or on account of an antecedent debt owed by the debtor before such transfer was made." The right to payment arises when the debtor obtains the goods or services. See e.g. In re First Jersey Securities, Inc., 180 F.3d...