In re TB Home Sewing Enterprises, Inc.
| Citation | 173 BR 782 |
| Decision Date | 08 April 1993 |
| Docket Number | Bankruptcy No. A90-07184. Adv. No. 91-6728. |
| Parties | In re T.B. HOME SEWING ENTERPRISES, INC., Debtor. Richard D. ELLENBERG, as Trustee, Plaintiff, v. TULIP PRODUCTION POLYMERICS, INC., Defendant. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia |
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Richard D. Ellenberg and Richard G. McBryan, Ellenberg & Associates, P.C., Atlanta, GA, for plaintiff.
Lewis E. Hassett and Karen E. Cooper, Neely & Player, Atlanta, GA, for defendant.
Before the court are cross-motions for summary judgment. Plaintiff seeks to avoid and recover preferential transfers in the amount of $141,812.69. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(F). The court will grant defendant's motion and deny plaintiff's motion.
On May 25, 1990, T.B. Home Sewing Enterprises, Inc. filed for bankruptcy protection under Chapter 11. The case was converted to Chapter 7 on November 19, 1990, and plaintiff, Richard D. Ellenberg, was appointed as the Chapter 7 trustee. Prior to its Chapter 11 petition, debtor purchased fashion paint on several occasions from defendant Tulip Production Polymerics, Inc.
Defendant issued invoices to debtor with credit terms of 60 days as follows:
INVOICE NUMBER INVOICE DATE INVOICE AMOUNT
143750 12/06/89 $ 8,346.24
143752 12/06/89 $ 6,568.80
143921 12/07/89 $ 9,004.00
143922 12/07/89 $15,644.94
143923 12/07/89 $ 9,359.28
144531 12/11/89 $44,422.40
144862 12/12/89 $10,260.00
144863 12/12/89 $ 6,636.00
144865 12/12/89 $ 9,162.72
145025 12/13/89 $ 76.75
145662 12/15/89 $ 357.86
146611 12/19/89 $ 1,172.40
(Defendant's Statement of Facts, ¶ 2-4).
Debtor's check number 10680 in the sum of $48,923.26 in payment of invoice numbers 143750, 143752, 143921, 143922, and 143923 was paid by debtor's bank on March 8, 1990. Debtor's check number 10681 in the sum of $44,422.40 in payment of invoice number 144531 was paid by debtor's bank on March 14, 1990. Debtor's check number 10683 in the sum of $27,665.73 in payment of invoice numbers 144862, 144863, 144865, 145025, 145662, and 146611 was paid by debtor's bank on March 22, 1990. Debtor also transferred check number 011329 dated April 27, 1990 to defendant. This was for a C.O.D. purchase and was paid by debtor's bank on May 1, 1990.
The four payments by debtor to defendant totalled $141,812.69.
By letter of July 15, 1991, plaintiff demanded that defendant repay the $141,812.69 as a voidable preference. (Plaintiff's Complaint, Exhibit "E"). When defendant did not make payment, plaintiff filed this adversary proceeding on September 13, 1991 to avoid and recover those payments as preferential transfers pursuant to 11 U.S.C. §§ 547(b) and 550(a). Defendant answered asserting that the payments totalling $141,812.69 are nonavoidable pursuant to the contemporaneous exchange exception, the ordinary course of business exception, and the subsequent new value exception. 11 U.S.C. § 5647(c)(1), (2), and (4). Thereafter, plaintiff filed his motion for summary judgment, statement of material facts, several exhibits, an affidavit, and the depositions of Teresa Dougherty and Michael Rocker. Plaintiff contends that he is entitled to judgment in the amount of $90,603.50, plus statutory interest. Plaintiff concedes that defendant has provided debtor with subsequent new value under § 547(c)(4) which offsets plaintiff's claims to the extent of $51,209.19. In addition to responding to plaintiff's motion, defendant filed a cross-motion for summary judgment, its statement of material facts, and the affidavits of Karen Cooper, Teresa Dougherty, and Mark Murovitz. Defendant contends that the subject payments were made within the ordinary course of business pursuant to § 547(c)(2), and in the alternative, that plaintiff provided an additional $18,317.40 of subsequent new value pursuant to § 547(c)(4). Plaintiff filed a motion to strike the affidavit of Mark Murovitz and an objection to defendant's motion for summary judgment as being untimely filed.
Federal Rule of Civil Procedure 56, made applicable by Bankruptcy Rule 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 the governing (substantive) law. . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 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." Id. The moving party has the burden of establishing the right of summary judgment. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Clark v. Union Mut. Life Ins. Co., 692 F.2d 1370, 1372 (11th Cir.1982); United States Steel Corp. v. Darby, 516 F.2d 961, 963 (5th Cir.1975).
In determining whether there is a genuine issue of material fact, the court must view the evidence in the light most favorable to the party opposing the motion. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Rosen v. Biscayne Yacht & Country Club, Inc., 766 F.2d 482, 484 (11th Cir.1985); United States v. Oakley, 744 F.2d 1553, 1555 (11th Cir. 1984). The moving party must identify those evidentiary materials listed in Federal Rule 56(c) that establish the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); see also Fed.R.Civ.P. 56(e). Once the motion is supported by a prima facie showing that the moving party is entitled to judgment as a matter of law, a party opposing the motion must go beyond the pleadings and demonstrate that there is a material issue of fact which precludes summary judgment. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Coats & Clark, 929 F.2d at 608.
Plaintiff contends that defendant's cross-motion for summary judgment is untimely pursuant to Local Rule 220-5(c)1 because it was filed more than 20 days after the close of discovery. However, pursuant to LR 220-5(a), defendant has 20 days to respond to plaintiff's motion for summary judgment filed on September 17, 1992. The parties entered into a joint stipulation for extension of time granting defendant through October 20, 1992 to file a response. On October 21, 1992, defendant filed its response along with a cross-motion for summary judgment. Defendant's filing of a cross-motion for summary judgment is an appropriate response to plaintiff's motion. The fact that it was filed one day late does not give rise to a material default. Plaintiff has not shown that he is prejudiced in any way by defendant's filing of its cross-motion. The court concludes, therefore, that this matter is ripe for determination on the parties' cross-motions for summary judgment, and plaintiff's contention is without merit.
The court must determine whether the payments by check numbers 10680, 10681, and 10683 can be avoided as preferences.2 Five elements of a preference under § 547(b)3 must be proven to avoid a transfer. Defendant admits that the subject payments meet the first and second elements of a preferential transfer under § 547(b). (Defendant's Response to Plaintiff's Statement of Facts, ¶ 5, 6).
The third element of a preference requires that the transfer be made while the debtor was insolvent. 11 U.S.C. § 547(b)(3). Under § 547(f), debtor is presumed insolvent for the 90 days immediately preceding the filing of the bankruptcy petition. See 11 U.S.C. § 547(f). Defendant has presented no evidence to establish an issue of material fact with regard to insolvency or to rebut this presumption.
Under the fourth element of a preference, the transfer must be made within 90 days of the filing of the bankruptcy petition. 11 U.S.C. § 547(b)(4). For purposes of § 547(b), a "transfer" of an ordinary check as defined by 11 U.S.C. § 101(54) occurs on the date of honor by the drawee bank. Barnhill v. Johnson, ___ U.S. ___, ___, 112 S.Ct. 1386, 1390, 118 L.Ed.2d 39 (1992). In the present case, the checks for the subject payments were paid by debtor's bank on March 8, 1990, March 14, 1990, and March 22, 1990, within 90 days of the May 25, 1990 filing of the bankruptcy petition.
The fifth element of a preference is that the transfer enables the creditor to receive more than it would receive if the estate were liquidated under Chapter 7 and the transfer had not been made. 11 U.S.C. § 547(b)(5). The test for this element was established by the Supreme Court in Palmer Clay Prods. Co. v. Brown, 297 U.S. 227, 56 S.Ct. 450, 80 L.Ed. 655 (1936). As construed in Elliot v. Frontier Properties (In re Lewis W. Shurtleff, Inc.), 778 F.2d 1416 (9th Cir. 1986), whether a transfer is a preference:
. . . should be determined "not by what the situation would have been if the debtor\'s assets had been liquidated and distributed among his creditors at the time the alleged preferential payment was made, but by the actual effect of the payment as determined when bankruptcy results." This analysis requires that in determining the amount that the transfer "enables the creditor to receive," such creditor must be charged with the value of what was transferred plus any additional amount that he would be entitled to receive from a Chapter 7 liquidation. The net result is that, as long as the distribution in bankruptcy is...
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