In re Bownic Insulation Contractors, Inc., Bankruptcy No. 3-89-00265
| Citation | 134 BR 261 |
| Decision Date | 05 December 1991 |
| Docket Number | Bankruptcy No. 3-89-00265,Adv. No. 3-91-0008. |
| Parties | In re BOWNIC INSULATION CONTRACTORS, INC., Debtor. John Paul RIESER, Trustee, Plaintiff, v. LANDIS & GYR POWERS, INC., Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio |
John Paul Rieser, Dayton, Ohio, for plaintiff.
John T. Ducker, Dayton, Ohio, for defendant.
DECISION ON ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
This proceeding, which arises under 28 U.S.C. § 1334(b) in a case referred to this court by the Standing Order of Reference entered in this district on July 30, 1984, is determined to be a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(F)—proceedings to determine, avoid, or recover preferences.
This proceeding is presently before the court on the parties' cross-motions for summary judgment (Docs. 17-1, 18-1). The parties request that summary judgment be entered upon the issue of whether payments made to the defendant, Landis & Gyr Powers, Inc. (Powers), by the debtor, Bownic Insulation Inc. (Debtor), within ninety days of filing for relief under the Bankruptcy Code are avoidable by the plaintiff (Trustee) as preferences under 11 U.S.C. § 547. Powers asserts that these payments are not avoidable as preferences under 11 U.S.C. § 547(c)(1) and 11 U.S.C. § 547(c)(6) and under principles of equity.
The pleadings, including the Agreed Joint Statement Of Facts And Joint Exhibits (Doc. 14-1), establish the following relevant facts:
1) Osterfeld was a principal contractor with respect to the HVAC systems in a construction project with Montgomery County, Ohio on the Montgomery County Coroner Crime Lab (the Project). The Debtor was a subcontractor under Osterfeld and performed the insulation and air balance portion of Osterfeld's work on the Project. Powers provided labor and air balance materials in performance of a subcontract with the Debtor, specifically the Landis & Gyr Powers Contract 260-E-2448 (the Subcontract). Osterfeld provided payment and performance bonds on the Project in conformance with Ohio Revised Code § 153.54 et seq.
2) On January 24, 1989, the Debtor filed a voluntary petition under chapter 11 of the Bankruptcy Code. As of this date, the Debtor was "insolvent" within the meaning of 11 U.S.C. § 101(32). Within ninety days before the date of filing, the Debtor transferred to Powers two payments in the sum of fifteen thousand three hundred seventeen dollars and ten cents ($15,317.10) (the Preference).
3) On July 10, 1990, this case was converted to a chapter 7.
4) The Debtor's creditors will receive, upon distribution in this chapter 7 proceeding, less than one hundred percent of their claims.
5) The total amount of the Subcontract was $45,938.00. Of this amount, the Debtor paid $30,142.90 to Powers. The remaining balance of $15,795.10 was paid postpetition pursuant to a court order in the Debtor's chapter 11 case entitled Notice and Joint Motion For Approval Of Settlement Among Bownic Insulation Contractors, Inc. and H.J. Osterfeld Mechanical Contractors, Inc. With Respect To Claim Of Landis & Gyr Powers, Inc. (the Settlement). Pursuant to this Settlement, approved by this court on January 17, 1990, Osterfeld was allowed to set-off the remaining $15,795.10 it owed the Debtor against the release of a lien Powers filed against public funds held by Montgomery County, Ohio and the release of a claim made by Powers against the bond provided by Osterfeld. These funds were remitted directly to Powers. The Trustee does not seek avoidance of this payment made to Powers.
6) A formal written demand for the Preference in the amount of $15,317.10 was made by the Trustee on December 13, 1990 (Doc. 18-1, affidavit). Powers did not remit any portion of this amount to the Trustee.
7) This adversary proceeding was commenced on January 22, 1991. Powers filed a Motion For Summary Judgment (Doc. 17-1). The Trustee filed a Motion For Summary Judgment Of Plaintiff, John Paul Rieser, Trustee (Doc. 18-1). In addition, the Trustee filed Response Of Plaintiff To Defendant's Motion For Summary Judgment (Doc. 19-1).
1) Whether Powers' forbearance from including the amount it received as a preference in its lien against public funds held by Montgomery County, Ohio and in its claim against the bond held by Osterfeld constitutes "new value" under 11 U.S.C. § 547(c)(1).
2) Whether the preference payments made to Powers can be excepted from avoidance by the Trustee under 11 U.S.C. § 547(c)(6).
3) Whether preference payments may be excepted from avoidance under principles of equity.
4) If the preference is held avoidable, whether the Trustee is entitled to prejudgment interest from the date of his first formal demand for repayment of the preference.
Summary judgment is governed by Bankruptcy Rule 7056, which incorporates Rule 56 of the Federal Rules of Civil Procedure. Rule 7056(c), in relevant part, provides:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
"This standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) (emphasis in original). Materiality is determined by substantive law. Id. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. Additionally and more importantly, a dispute over a material fact must be genuine, "that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.
Id., 106 S.Ct. at 2511 (citations omitted).
"In ruling on a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden"; for example, "whether a jury fact finder could reasonably find either that the plaintiff proved his case by the quality and quantity of evidence required by the governing law or that he did not." Id. at 2513 (emphasis in original). See generally Carl Subler Trucking, Inc. v. Kingsville-Ninety Auto/Truck Stop, Inc. (In re Carl Subler Trucking, Inc.), 122 B.R. 318, 320-21 (Bankr.S.D.Ohio 1990); Talbot v. Warner (Matter of Warner), 65 B.R. 512, 515-18 (Bankr.S.D.Ohio 1986). No genuine issue of material fact exists; thus, this proceeding is appropriate for summary judgment.
The Trustee asserts that the payments made to Powers in the amount of $15,317.10 constitute an avoidable preference. To be a preference, a transfer must satisfy all the requirements of 11 U.S.C. § 547(b).1 The Trustee bears the burden of proving that the transfer made to Powers is avoidable under section 547(b). 11 U.S.C. § 547(g). Based upon Powers' admissions (Doc. 3-1) and the agreed stipulations and exhibits (Doc. 14-1), this court finds that the payments made to Powers in the amount of $15,317.10 constitute a preference. However, preference payments may be excepted from avoidance if any of the affirmative defenses set forth in 11 U.S.C. § 547(c) are met. The party asserting a defense under 11 U.S.C. § 547(c) bears the burden of proof. 11 U.S.C. § 547(g).
Powers asserts that the two payments paid to it in the sum of $15,317.10 are not avoidable as preferences because, theoretically, had these payments not been made, this amount would have been included in the lien on public funds held by Montgomery County, Ohio and in the claim made on Osterfeld's bonding company. Powers posits that this forbearance constitutes "new value." The "new value" defense is set forth in 11 U.S.C. § 547(c)(1).2 Section 547(c)(1) provides:
To come within the parameters of § 547(c)(1), three requirements must be satisfied: "(1) the creditor must extend new value to the debtor; (2) both the creditor and the debtor must intend the new value and reciprocal transfer to be contemporaneous; and (3) the exchange must in fact be contemporaneous." Cimmaron Oil Co., Inc. v. Cameron Consultants, Inc., 71 B.R. 1005, 1008 (N.D.Tex.1987). Thus, this court must first address whether "new value" was given to the Debtor.
"New value" is defined in § 547(a)(2) as follows:
Courts, in analyzing whether forbearance constitutes "new value," note the purpose underlying § 547 and the effect of forbearance on the value of the estate. See Nordberg v. Arab Banking Corp. (In...
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