Dill et al v. Michael P. Mataya Revocable Trust

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
INDIAN CAPITOL DISTRIBUTING, INC.
Debtor. No. 11-09-11558 SA
CRAIG H. DILL, Chapter 11 Trustee,
Plaintiff,
v. Adv. No. 09-1111 S
MICHAEL P. MATAYA REVOCABLE TRUST,
Defendant.
MEMORANDUM OPINION AFTER
TRIAL ON THE MERITS
This matter came before the Court for trial on the merits of
Craig H. Dill’s (“Trustee” or “Plaintiff”) Complaint to Recover
Preferential Transfer Pursuant to § 547(b) and Fraudulent
Transfer Pursuant to § 548 and for Recovery of Postpetition
Transfer under § 549. For the reasons set forth below, the Court
will issue a Judgment in favor of Plaintiff on the Postpetition
Transfer claim and in favor of Defendant on the Preferential
Transfer and Fraudulent Transfer claims.
This is a core proceeding. 28 U.S.C. §§ 157(b)(2)(A),(F)
and (H) . The postpetition transfer claim is core. See Pollner	1
v. Connecticut Bank and Trust Co., N.A. (In re Harbor Park Assoc.
Ltd. Partnership), 112 B.R. 555, 559 (S.D.N.Y. 1990)(A post-
petition claim against a non-creditor that affects administration
of the estate is a core proceeding.) The fraudulent transfer
This Court has subject matter jurisdiction and personal	1
jurisdiction under 28 U.S.C. §§ 157 and 1334. This Memorandum
Opinion constitutes the Court’s findings of fact and conclusions
of law as required by Federal Rule of Bankruptcy Procedure 7052.
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claim and the preferential transfer claims are core. See Turner
v. Davis, Gillenwater & Lynch (In re Investment Bankers, Inc.), 4
F.3d 1556, 1561-62 (10th Cir. 1993), cert. denied, 510 U.S. 1114
(1994).
DISCUSSION
A. Prepetition transfers.
Section 547(b), which authorizes avoidance of preferential
transfers, provides:
(b) Except as provided in subsections (c) and (i) of
this section, the trustee may avoid any transfer of an
interest of the debtor in property--
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the
debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made--
(A) on or within 90 days before the date of the
filing of the petition; or
(B) between ninety days and one year before the
date of the filing of the petition, if such
creditor at the time of such transfer was an
insider; and
(5) that enables such creditor to receive more than
such creditor would receive if--
(A) the case were a case under chapter 7 of this
title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to
the extent provided by the provisions of this
title.
Section 548(a), which allows avoidance of fraudulent transfers,
provides:
(a)(1) The trustee may avoid any transfer (including
any transfer to or for the benefit of an insider under
an employment contract) of an interest of the debtor in
property, or any obligation (including any obligation
to or for the benefit of an insider under an employment
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contract) incurred by the debtor, that was made or
incurred on or within 2 years before the date of the
filing of the petition, if the debtor voluntarily or
involuntarily--
(A) made such transfer or incurred such obligation
with actual intent to hinder, delay, or defraud
any entity to which the debtor was or became, on
or after the date that such transfer was made or
such obligation was incurred, indebted; or
(B)(i) received less than a reasonably equivalent
value in exchange for such transfer or obligation;
and
(ii)(I) was insolvent on the date that such
transfer was made or such obligation was
incurred, or became insolvent as a
result of such transfer or obligation;
(II) was engaged in business or a
transaction, or was about to engage in
business or a transaction, for which any
property remaining with the debtor was
an unreasonably small capital;
(III) intended to incur, or believed that the
debtor would incur, debts that would be
beyond the debtor's ability to pay as
such debts matured; or
(IV) made such transfer to or for the benefit
of an insider, or incurred such
obligation to or for the benefit of an
insider, under an employment contract
and not in the ordinary course of
business.
FACT
The Plaintiff’s evidence of prepetition transfers was ruled
inadmissible.
CONCLUSIONS OF LAW
Both sections 547(b) and 548(a) require the trustee to prove
that there was a transfer of property to a defendant. Therefore,
Plaintiff’s claims under these sections must be denied.
B. Postpetition transfers.
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Under § 549, a trustee may avoid a transfer of estate
property that occurs after the commencement of the case without
court approval. Hill v. Kinzler (In re Foster), 275 F.3d 924,
926 (10th Cir. 2001). To recover under that section, the trustee
must prove: “(1) a transfer, (2) of property of the estate, (3)
made after commencement of the case, and (4) that is not
authorized under the Bankruptcy Code or by the bankruptcy court.”
Devan v. Phoenix American Life Ins. Co. (In re Merry-Go-Round
Enter., Inc.), 400 F.3d 219, 224 (4th Cir. 2005). The statute
provides:
§ 549. Postpetition transactions.
(a) Except as provided in subsection (b) or (c) of this
section, the trustee may avoid a transfer of property
of the estate--
(1) that occurs after the commencement of the case; and
(2)(A) that is authorized only under section 303(f)
or 542(c) of this title; or
(B) that is not authorized under this title or by
the court.
11 U.S.C. 549(a). Bankruptcy Rule 6001 discusses the burdens of
proof of authorization when a postpetition transfer is
challenged:
Rule 6001. Burden of Proof as to Validity of
Postpetition Transfer.
Any entity asserting the validity of a transfer under §
549 of the Code shall have the burden of proof.
See also Merry-Go-Round, 400 F.3d at 226 (Defendant had not met
its burden of proving that post-petition interest payments
qualified as “ordinary course of business” transactions that
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would have been authorized under 11 U.S.C. § 1107.)(citing
Fed.R.Bankr.P. 6001.)
FACTS
1. Indian Capitol Distributing, Inc. (“Debtor”) filed a
voluntary Chapter 11 proceeding on April 14, 2009. (Doc 1, main
case).
2. Michael P. Mataya (“Mataya”) is the trustee and sole
beneficiary of the Michael P. Mataya Revocable Trust (“Trust”).
3. Exhibit 47 consists of a copy of check # 1948 that Mataya on
direct adverse examination admitted contained his signature, and
was drawn on account xx-14422 which was the Trust checking
account.
4. Mataya also testified that account number xx-11208 was the
Debtor’s general checking account.
5. Exhibits 1, 2 and 3 show three transfers from account xx-
11208 into account xx-14422 made on April 17, 2009 in the amount
of $4,500; on April 29, 2009 in the amount of $21,000; and on
June 10, 2009 in the amount of $4,200. These transfers total
$29,700.
6. Mataya was unaware of any attempt to obtain court approval
for these transfers.
7. Defendant made no attempt to show any authorization for the
transfers.
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8. Defendant rested its case immediately after Plaintiff
rested.
9. The property transferred was property of the estate because
it consisted of funds in Debtor’s checking account.
10. Exhibit 5 is a cash collateral order filed in Debtor’s case
on April 16, 2009. It does not authorize payments to Defendant.
See main case, doc 10.
11. On May 22, 2009 the Court conducted a status conference at
which it orally denied any further use of cash collateral. See
Exhibit 7 (Minutes of May 22, 2009 status conference.)
12. On May 28, 2009 the Court orally denied further use of cash
collateral. See Exhibit 8 (Minutes of May 28, 2009 hearing.)
13. Exhibit 9 is an Order Prohibiting Use of Cash Collateral
filed in Debtor’s case on May 29, 2009.
14. The docket contains no other orders authorizing payment or
transfers to Defendant.
CONCLUSIONS OF LAW
Defendant received three transfers from the Debtor after the
filing of the case. The property transferred was property of the
estate. The transfers were not authorized by the Bankruptcy Code
or by Court order. Defendant did not meet its burden of proof to
demonstrate that the transfers were authorized. The Trustee is
entitled to a return of $29,700 consisting of unauthorized
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postpetition transfers. The Court will enter a judgment under	2
sections 549, 550, and 551 against Defendant avoiding the
transfers and preserving them for the estate.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: September 29, 2011
Copies to:
James A Askew
Arland & Associates, LLC
201 3rd ST NW, STE 505
Albuquerque, NM 87102-3331
William F. Davis
6709 Academy NE, Suite A
Albuquerque, NM 87109
Mataya filed a personal bankruptcy under Chapter 7, Case	2
7-10-13628-SA, after the trial of this matter. The automatic
stay was partially modified in that case by a stipulated order
entered on September 16, 2010 that allowed liquidation of this
claim but no collection activities without further Court order.
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