Matter of Burstein-Applebee Co., Bankruptcy No. 80-00968-3

• Decision Date: 22 June 1983
• Docket Number: Bankruptcy No. 80-00968-3,Adv. No. 82-0968-3.
• Citation: 30 BR 779
• Parties: In the Matter of BURSTEIN-APPLEBEE COMPANY, Debtor. C. Michael FRANKE, trustee in bankruptcy, Plaintiff, v. S.M.R.S., INC., and Allen Fishman, Defendants.
• Court: U.S. Bankruptcy Court — Western District of Missouri

30 B.R. 779 (1983)

In the Matter of BURSTEIN-APPLEBEE COMPANY, Debtor C. Michael FRANKE, trustee in bankruptcy, Plaintiff, v. S.M.R.S., INC., and Allen Fishman, Defendants.

Bankruptcy No. 80-00968-3, Adv. No. 82-0968-3.

United States Bankruptcy Court, W.D. Missouri, W.D.

June 22, 1983.

John R. Stonitsch, Kansas City, Mo., for plaintiff.

Daniel J. Flanigan, Kansas City, Mo., for defendants.

FINAL JUDGMENT DISMISSING COMPLAINT AS BARRED BY THE APPLICABLE STATUTES OF LIMITATION

DENNIS J. STEWART, Bankruptcy Judge.

This is an action brought by the plaintiff trustee in bankruptcy to compel the return of certain prebankruptcy and postbankruptcy payments allegedly made by the debtor to the defendants. It is alleged in the complaint at bar that these involuntary title 11 proceedings were commenced on April 3, 1980; that, prior to that date, "on or about March 18, 1980, authorization was given the corporation, Burstein-Applebee, to employ S.M.R.S., Inc., as a consulting agent, to perform certain services for Burstein-Applebee"; that the defendant Allen Fishman "was an officer of S.M.R.S., Inc., at the time of said employment";¹ that "the compensation rate to be paid S.M.R.S., Inc., was $100 per hour or $2,000 per week"; that, prior to the filing, "the following monies were paid to S.M.R.S., Inc . . . $2,000 on 3/17/80"; and that "the following monies were paid to S.M.R.S., Inc., subsequent to the filing: 4/22/80 $10,000, 4/1/80 $2,000, 5/15/80 $2,000, 5/15/80 $2,000."

Trial of this action was conducted by the court of bankruptcy on May 24, 1983, whereupon the plaintiff appeared personally and by John R. Stonitsch, Esquire, his counsel, and the defendants appeared by counsel, Daniel J. Flanigan, Esquire, and the defendant Allen Fishman also appeared personally. The evidence which was then adduced showed that the defendant Fishman was an "insider" of the debtor corporation and also caused the defendant S.M.R.S., Inc., to be incorporated; that it was a corporation comprised of his 17 year old daughter and his 12 year old daughter; that, according to his testimony, it was initially formed and incorporated for the purpose of offering "counseling services to diabetics"; that it later contracted with the debtor corporation to provide financial counseling; that it continued to do so right up to and past the date of the filing of the involuntary petition which inaugurated these title 11 proceedings and the date of the involuntary adjudication, admittedly receiving all the payments on the dates and in the amounts alleged in the complaint; that the defendant Fishman acted as an employee of the S.M.R.S. corporation in rendering the services, which are at best but generally described in the evidence²; that, according to his testimony, he received no salary from S.M.R.S. and did not benefit from the payments; that the last payment for such services was received by S.M.R.S., as alleged in the complaint, on May 15, 1980; and that the complaint at bar was filed more than two years later on June 15, 1982.

The evidence may thus warrant an inference that there was a scheme afoot for delivery of money out of the debtor corporation to insiders³ or others which might ordinarily be nullifiable in part under sections 547 and 548 of the Bankruptcy Code as preferential or fraudulent transfers and in part under section 549 of the Bankruptcy Code as unauthorized postpetition transfers.⁴ But, with respect to any challenge to unauthorized postpetition transfers, the trustee's complaint shows on its face and the evidence shows without contradiction that his complaint was filed more than two years subsequent to the last challenged payment. Accordingly, it is barred by the applicable statutes of limitation. Section 549(d) of the Bankruptcy Code requires that a trustee's suit to recover postpetition transfer of property of the estate "may not be commenced after the earlier of (1) two years after the date of the transfer sought to be avoided; and (2) the time the case is closed or dismissed." Thus, the clear wording of that statute requires dismissal of the action insofar as it pertains to the postbankruptcy transfers.

The same result must obtain with respect to the prebankruptcy transfers which are nullifiable, if at all, under the provisions of sections 547 or 548 of the Bankruptcy Code or other statute for nullifying prebankruptcy transfers which is limited by section 546(a) of the Bankruptcy Code. That section provides that "(a)n action or proceeding under section 544, 545, 547, 548, or 553 of this title may...