In re Professional Coatings (NA), Inc.
| Decision Date | 09 May 1997 |
| Docket Number | Bankruptcy No. 95-26580,Adversary No. 96-2160. |
| Citation | 210 BR 66 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re PROFESSIONAL COATINGS (N.A.), INC., Debtor. |
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
Barry Spear, Winberg & Stein, Norfolk, VA, for debtor.
Jonathan Hauser, Christian & Barton, Norfolk, VA, for Tank Lines, Inc.
STEPHEN C. ST. JOHN, Bankruptcy Judge.
This matter comes before the Court on a Motion to Dismiss by the following defendants: CFE Equipment Corporation; Creekmore Hardware, Inc.: Duron, Inc.; Empire Machinery & Supply Corp.; Eure Distributing, Inc.; James McGraw, Inc.; Nelson Industrial Services, Inc.; Prime Co., Inc.; Safeware, Inc.; Schwerman Trucking Co.; Tank Lines, Inc.; Industrial Marine, Inc.; Virginia Materials and Supplies, Inc.; Diamond/Goodson equipment Company of Hampton, Inc.; and B & B Hose & Rubber, Inc. ("Defendants"). The Motion to Dismiss by the defendants was converted by the Court, sua sponte, to a Motion for Summary Judgment, and the Court allowed additional time for the parties to file supplemental briefs and replies directed to the Motion For Summary Judgment.1 Having filed supporting affidavits and briefs within the parameters established by the Court, the defendants now move the Court to grant them summary judgment which would essentially dismiss the trustee's Complaint in this matter. After consideration of the evidence introduced at trial and the arguments of counsel, the Court makes the following findings of fact and conclusions of law.
In 1994, Professional Coatings (N.A.), Inc. ("PCNA") completed ship repair contracts as a subcontractor to Norfolk Shipbuilding and Drydock Corporation ("Norshipco").3 In addition to PCNA, there were other suppliers and subcontractors ("sub-subcontractors"), including the defendants, who also completed repair work and service contracts as subcontractors to PCNA for the benefit of Norshipco and its customers.
On November 28, 1994, PCNA filed an "At Law" Motion For Judgment against Norshipco for $539,579.33 for work that it allegedly performed and completed on the ship repair contracts. Although most of the work had been finished on these contracts and Norshipco was prepared to disburse the funds for work performed by PCNA and the sub-subcontractors, two occurrences made Norshipco apprehensive about releasing the funds to PCNA. First, it was brought to Norshipco's attention that the party responsible for the subcontracting work may have actually been Professional Coatings Corp. ("PCC") or Professional Coatings, Inc. ("PCI"), rather than PCNA. Second, ostensibly concerned about ultimately being paid for their sub-subcontracting services, many of the sub-subcontractors, including the defendants, approached Norshipco about having the funds for their sub-subcontracting efforts paid directly to them rather than through PCNA as the subcontractor.
As a result of the confusion as to which party performed the repair work and the sub-subcontractor requests for direct payment of the contract funds, Norshipco filed a Petition for Interpleader with the City of Norfolk Circuit Court on November 30, 1994 in the amount of $396,459.81. During the first half of 1995, Norshipco amended the interpleader complaint by depositing an additional $319,744.20 to make the total interpleader amount equal to $716,204.01. In conceding that it had no legal right to the funds, Norshipco filed the interpleader action requesting the state court to determine the rightful owner of the money.
PCC was the first to answer the interpleader petition and claimed that its name had been wrongfully used by the subcontractor without its permission. PCNA then made a general appearance by filing an answer to the interpleader petition requesting the court to pay the interpleader funds directly over to PCNA.4 PCNA also responded that it and not PCC nor PCI was the party responsible for the work, that it was the rightful and lawful recipient to the contract funds, and that PCC and PCI had no legal rights to the contract funds.5 Norshipco then moved to consolidate the interpleader action with PCNA's "At Law" Motion For Judgment. Subsequently, PCNA amended the November 28, 1994 Motion For Judgment moving to have Norshipco compensate PCNA for the repair contracts so as to include parties which were named in the interpleader action as additional defendants. More pleadings and motions were filed by the various parties beginning in December 1994 and continuing throughout 1995. In June 1995, having consolidated the Interpleader action and PCNA's Motion For Judgment, the Norfolk Circuit Court set a trial date in the matter for December 7, 1995.
On the date of the trial, most of the parties appeared except for PCNA. Although it is not clear to this Court as to what precisely transpired during the hearing,6 a final decree order ("final decree") was signed and entered by Judge Morrison of the Circuit Court of the City of Norfolk on December 7, 1995.
The final decree allocated the interpleader funds to the respective parties in the amount of $750,163.307 and also stated that "any claims filed by defendant Professional Coatings (North America), Inc. are hereby dismissed with prejudice." The decree listed the following parties as those that would receive payment on their claims along with pre-judgment interest from December 7, 1994 and, in some instances, attorney fees, in the following amounts:
The interpleader allocations were disbursed to the parties by the Clerk shortly after the entering of the final decree.
Shortly after the decree was entered and on December 14, 1995, the requisite number of creditors filed an involuntary chapter 7 bankruptcy petition against PCNA. H.B. Price, III ("trustee") was appointed as the chapter 7 bankruptcy estate trustee in this often contentious bankruptcy case. The acrimony between the parties was exacerbated when the PCNA designated representative failed to appear at the scheduled creditors meetings scheduled in March and April of 1996. However, pursuant to a court order, counsel for PCNA eventually appeared to represent PCNA to permit the conduction of the first meeting of creditors.
On August 30, 1996, a Complaint to Set Aside Preferential Transfers was filed by the trustee and became the underlying action for this summary judgment motion. In its Complaint, the trustee claims that the payments made to the aforementioned suppliers, sub-subcontractors, and the law firm pursuant to the December 7, 1995 final decree were actually recoverable preferential transfers under Bankruptcy Code §§ 547 and 550. The trustee alleges that these payments were made within 90 days of the petition filing, constituted antecedent debts owed by the debtor prior to the transfers being made, and were made while the debtor was insolvent. Finally, the trustee claims that the payments were made for the benefit of the defendants and allowed them to receive more than they would have in a liquidation under Chapter 7 had the transfers not been made. In summary, the trustee claims that the interpleader funds paid as a result of the interpleader decree are property of the estate earmarked for eventual distribution to creditors, are not property of the defendants, and should be returned to the estate with interest from the date of the transfers. The defendants' response to the trustee's complaint is embodied in its summary judgment motion and briefs.
The defendants make their motion for summary judgment based on three arguments.9 The defendants' first basis for their summary judgment motion is that the trustee's complaint is barred by the doctrine of res judicata because it has already been adjudicated that the interpleader funds were previously and lawfully distributed to the defendants and that PCNA has no ownership interest in the interpleader funds. The defendants' second pillar for their summary judgment motion is that the doctrine of collateral estoppel precludes the trustee from relitigating the issue of whether the debtor has any ownership in the interpleader funds or any future claims to the funds. Finally, the defendants argue that the trustee's claim fails because the alleged transaction occurred more than 90 days prior to the debtor's bankruptcy filing, and therefore, the requirements of the Bankruptcy Code for avoiding...
To continue reading
Request your trial
-
In re Copulos
... ... listed a pension plan maintained by Associated Mechanical Systems, Inc. ("AMS Plan") as an asset producing monthly distributions of $4,370.00. On ... ...