In re Hoffman Associates, Inc.
| Decision Date | 24 April 1995 |
| Docket Number | Bankruptcy No. 90-02419. Adv. No. 91-8293. |
| Citation | 194 BR 943 |
| Court | U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re HOFFMAN ASSOCIATES, INC., d/b/a Hoffman Drywall, Inc. and Hoffman Associates, Inc., Debtor. W. Ryan HOVIS, Trustee, Plaintiff, v. POWERS CONSTRUCTION COMPANY, INC., Wilbur O. Powers and South Carolina National Bank, Defendants. |
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Garland S. Cassada, Charlotte, NC, for W. Ryan Hovis.
Michael S. Church, Columbia, SC, for Powers Construction Company.
THIS MATTER comes before the Court for trial upon the Complaint, as amended, filed by the Plaintiff, W. Ryan Hovis, the Chapter 7 Trustee for the Debtor ("Trustee") asserting twelve causes of actions against the various defendants. The Trustee seeks recovery of allegedly preferential payments from Defendant Powers Construction Company, Inc. (hereinafter "Powers Construction") in the first cause of action, from Defendant South Carolina National Bank (hereinafter "SCN") in the second cause of action, and Defendant Wilbur O. Powers (hereinafter "Powers" or "Wilbur Powers") in the third cause of action. The Trustee in the fourth and fifth causes of action seeks recovery pursuant to 11 U.S.C. § 5481, and under S.C.Code § 27-23-10 for the sixth cause of action, of amounts alleged to have been fraudulently transferred to Powers Construction.2 The seventh cause of action alleges a right to recover from Wilbur Powers amounts claimed to have been paid as unlawful dividends. The Trustee in the eighth cause of action asserts a right to pierce the Debtor's corporate veil and recover on behalf of creditors from Wilbur Powers and Powers Construction. The ninth cause of action seeks a determination that the claim of Powers Construction should be subordinated to the claims of other creditors of the Debtor. The tenth cause of action has been stipulated to by the parties and the remaining two causes of action have been previously disposed of by Orders of this Court.
Based upon the evidence presented in the form of stipulated facts, documentary exhibits, the testimony of three witnesses, transcripts and exhibits from a 2004 examination and from an earlier proceeding on a motion for relief from stay filed on behalf of Powers Construction, and by taking judicial notice of all records of this Court in this bankruptcy proceeding including the previous Orders of this Court including an appeal to the District Court and Circuit Court of Appeals for the Fourth Circuit, this Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. In 1984, Defendant Wilbur Powers and Mr. Bobby Hoffman ("Mr. Hoffman") formed the Debtor, Hoffman Associates, Inc. (the "Debtor" or "Hoffman Associates") for the purpose of working as a subcontractor in the construction business. Wilbur Powers and Mr. Hoffman each owned fifty percent of the Debtor's common stock.
2. Prior to April 1989, Mr. Hoffman was the President of the Debtor and managed its day-to-day operations. Wilbur Powers was the Secretary and Treasurer. Both Wilbur Powers and Mr. Hoffman were directors of the Debtor.
3. On December 21, 1987, the Debtor executed an unsecured $150,000.00 note to refinance a working capital line of credit with SCN. ("Note # 9008").
4. Note # 9008 was personally guaranteed by Bobby Hoffman and Defendant Wilbur Powers.
5. The repayment terms of Note # 9008 were 36 payments of four thousand ($4,000.00) dollars, plus interest calculated at the SCN prime rate plus one percentage point.
6. Payments on Note # 9008 began as scheduled. The Debtor made the following payments on the note obligation during the year preceding the filing of the involuntary bankruptcy petition:
Payment Date Check Number Amount
09/29/89 customer debit3 $19,280.64
11/27/89 011662 $ 4,638.25
7. Beginning as early as October of 1987, Powers Construction and the Debtor engaged in a course of transactions whereby Powers Construction would on each banking day determine the total amount of the checks being presented for payment from the Debtor's account at SCN and the balance of funds contained in said account. If the amount in the Debtor's account was insufficient to cover the checks being presented for payment, Powers Construction would direct SCN to advance an amount sufficient to cover the checks from the Powers Construction account at SCN. If the account balance was in excess of that necessary to pay the checks being presented for payment, all but a nominal amount of the funds would be transferred from the Debtor's account to the Powers Construction account.
8. From July 17, 1989 through June 1, 1990, transfers between the Debtor and Powers Construction occurred as follows:
Transfers from Debtor Transfers from Powers
Date to Powers Construction Construction to Debtor
07-17-89 25,000.00
07-21-89 10,000.00
07-24-89 15,000.00
07-28-89 10,000.00
08-02-89 2,000.00
08-04-89 6,000.00
08-09-89 8,000.00
08-10-89 10,000.00
08-11-89 10,000.00
08-17-89 1,000.00
08-18-89 4,000.00
08-21-89 5,000.00
08-24-89 5,000.00
08-28-89 6,000.00
08-30-89 5,000.00
09-07-89 10,000.00
09-11-89 5,000.00
09-12-89 28,000.00
09-15-89 5,000.00
09-19-89 6,000.00
09-21-89 60,000.00
09-25-89 5,000.00
09-28-89 19,500.00
10-02-89 4,000.00
10-03-89 10,000.00
10-04-89 15,000.00
10-10-89 1,000.00
10-11-89 7,000.00
10-19-89 5,000.00
10-20-89 11,000.00
11-13-89 4,000.00
11-21-89 2,000.00
11-27-89 4,000.00
12-28-89 5,000.00
12-18-89 7,000.00
01-01-90 9,241.36
01-11-90 13,000.00
01-24-90 5,000.00
01-29-90 16,000.00
02-01-90 9,050.42
02-01-90 41,000.00
02-05-90 32,000.00
02-08-90 3,200.00
02-09-90 21,000.00
02-13-90 500.00
03-01-90 4,000.00
03-05-90 29,000.00
03-07-90 8,000.00
03-19-90 1,000.00
03-21-90 3,000.00
03-23-90 10,000.00
04-01-90 4,825.61
04-02-90 14,000.00
04-06-90 1,500.00
04-25-90 9,500.00
05-01-90 4,358.72
05-10-90 7,460.00
06-01-90 4,311.67
TOTALS $323,500.00 $262,947.78
9. Powers Construction maintained a business relationship with numerous other business entities in which Wilbur Powers had an interest on identical terms as the relationship maintained with Hoffman Associates.
10. In April 1989, Mr. Hoffman died. At the time of Mr. Hoffman's death, Defendant Powers Construction held a substantial unsecured claim against the Debtor, and Defendant Wilbur Powers was a personal guarantor of several unsecured claims against the Debtor owed to Defendant SCN. After the death of Mr. Hoffman, in or about May 1989, John Rabun, an employee of Powers Construction, took control over the operations of the Debtor.
11. On June 25, 1989, one year prior to the filing of the petition initiating the Chapter 7 proceeding involving Hoffman Associates, the Debtor had eight uncompleted construction contracts in varying stages of completion.
12. On June 22, 1989, Wilbur Powers executed on behalf of the Debtor a promissory note (the "Note") payable to Powers Construction in the principal amount of $404,175.13 to evidence the amount of an antecedent debt owed to Powers Construction by the Debtor on that day. Wilbur Powers also signed a security agreement (the "Security Agreement") purporting to grant Powers Construction a security interest in all of the Debtor's property to secure the antecedent debt and future advances to be made by Powers Construction.
13. On July 6, 1989, August 24, 1989, and October 20, 1989, Powers Construction received payments from the Debtor totalling $8,000.00,...
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