Pecar et al v. Global Systems & Strategies, Inc. et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
IN RE: :
:
GLOBAL SYSTEMS & STRATEGIES, INC. : Case No. 04-12045PM
: Chapter 11
Debtor :
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
JOSEPH PECAR :
NANCY PECAR :
Plaintiffs :
vs. : Adversary No. 05-1980PM
GLOBAL SYSTEMS & STRATEGIES, INC. :
CITIZENS BANK OF PENNSYLVANIA :
Defendants :
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - :
MEMORANDUM OF DECISION
Before the court is the Motion to Dismiss this adversary proceeding filed by the
Defendant, Citizens Bank of Pennsylvania (“Citizens”). The grounds for the Motion are that the
Complaint fails to state a cause of action against Citizens. In a nutshell, the Complaint charges
that this fully secured creditor was not entitled to receive payments in excess of the amounts
provided for under the consent order (“Agreement”) between Citizens and the Debtor entered
into February 25, 2004. The parties have thoroughly briefed the issues presented.
For the purposes of this Motion, the court will find that there was no express
authorization for the payment of sums pursuant to the Agreement of the Debtor and Citizens
beyond the sum that was approved by order of this court. However, this does not end the matter.
Because Citizens is the only secured creditor, if the payments are avoided pursuant to § 549(a)
and § 550(a), then § 502(h) of the Bankruptcy Code becomes applicable. That section provides:
Date signed December 15, 2005
Entered: December 16, 2005 Case 05-01980 Doc 12 Filed 12/16/05 Page 1 of 3

Citizens also urges that the Pecars do not have standing to bring this adversary1
proceeding. At issue is whether the Pecars have the consent from the Examiner appointed by this
court pursuant to the Order entered July 7, 2005. Based on the representation made by counsel
during the argument, the court finds that counsel for the Pecars has obtained consent from the
Examiner to file this adversary proceeding.
11 U.S.C. § 502. Allowance of claims or interests
(h) A claim arising from the recovery of property under section 522, 550,
or 553 of this title shall be determined, and shall be allowed under subsection (a),
(b), or (c) of this section, or disallowed under subsection (d) or (c) of this section,
the same as if such claim had arisen before the date of the filing of the petition.
As noted in the case of In re Adams, 212 B.R. 703, 714 (BC Mass. 1997),
A similar flaw is present in the Debtor’s reliance on 11 U.S.C. § 549. That
statute allows a trustee (or a debtor, pursuant to § 522(h) to recover certain
postpetition transfers. It provides that “the trustee may avoid a transfer of property
of the estate . . . that is not authorized under this title or by the court.”
§ 549(a)(1)(B). The purpose of § 549 “is to ensure that similarly situated pre-petition
creditors are treated even-handedly.” Dave Noake, Inc. v. Harold’s Garage, Inc. (In
re Dave Noake, Inc.), 45 B.R. 555, 557 (Bankr. D. Vt. 1984); see also Weiss v.
People Savings Bank (In re Three Partners, Inc.), 199 B.R. 230, 237 (Bankr. D.
Mass. 1995). But, as with § 547, nothing would be achieved by recovering payment
to a secured creditor who in any event is entitled to the payment ahead of other
creditors. See Three Partners, 199 B.R. at 237 (“If the payments would be returned
ultimately to the Bank upon disbursement of the assets of the estate, no benefit to the
estate would accrue by their avoidance [under § 549].”); Dave Noake, Inc., 45 B.R.
at 557 (where creditor was secured to the full extent of debt owed it, postpetition
payment of debt by debtor did not effect other creditors and was not avoidable under
§ 549).
The court agrees with the reasoning of these opinions, namely, that nothing can be accomplished by
the avoidance of the questioned payments to Citizens. Therefore the court will dismiss this
adversary proceeding as to this Defendant. See also, In re Bank Vest Corp., 375 F.3d 51, 62-63, 68-
70 (CA1 2004), and the cases cited therein.1
Because no cause of action is stated as to the Debtor, the court will dismiss this adversary
proceeding as to it sua sponte. An appropriate order will be entered.
Case 05-01980 Doc 12 Filed 12/16/05 Page 2 of 3

cc:
Richard H. Gins, Esq., 3 Bethesda Metro, Suite 530, Bethesda, MD 20814
Philip J. McNutt, Esq., Hughes & Bentzen, 1667 K Street, N.W. Washington, DC 20006
United States Trustee, 6305 Ivy Lane, #600, Greenbelt MD 20770
James Vidmar, Examiner, Linowes & Blocher,
7200 Wisconsin Avenue, #800, Bethesda, MD 20814
Jeffrey W. Rubin, Esq., Shulman Rogers, 11921 Rockville Pike, Rockville, MD 20852
End of Memorandum
Case 05-01980 Doc 12 Filed 12/16/05 Page 3 of 3