Swope (Trustee) v. Grove

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
WESTERN DIVISION
In Re:
Gamma Center, Inc.,
Debtor.
William L. Swope, Trustee,
Plaintiff,
v.
Stacy Grove,
Defendant.
) 	Case No.: 10-30193
)
) 	Chapter 7
)
) 	Adv. Pro. No. 12-3014
)
) 	Hon. Mary Ann Whipple
)
)
)
)
)
)
)
)
MEMORANDUM AND ORDER REGARDING MOTION FOR SUMMARY JUDGMENT
This adversary proceeding is before the court on Plaintiff’s unopposed Motion for Summary
Judgment [Doc. #13] and Plaintiff’s supplement to his motion [Doc. # 22]. Plaintiff is the Trustee in the
underlying Chapter 7 case filed by Debtor Gamma Center, Inc. In his complaint, Plaintiff seeks to recover,
as preferential transfers under 11 U.S.C. § 547(b), two payments in the total amount of $120,000.00 that
were allegedly made to, or on behalf of, Defendant by Debtor in settlement of a complaint filed in state
court.
Section § 547(b) of Title 11 provides as follows:
Except as provided in subsection (c) of this section, the trustee may avoid any
the record of the United States Bankruptcy Court for the Northern District of Ohio.
of this court the document set forth below. This document has been entered electronically in
The court incorporates by reference in this paragraph and adopts as the findings and orders
Dated: December 28 2012
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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; . . .
(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.
On September 24, 2012, the court entered a Memorandum and Order Regarding Motion for
Summary Judgment, finding that the evidence satisfied Plaintiff’s burden of proving all but two of the
elements under § 547(b). Specifically, the court found the evidence insufficient to satisfy Plaintiff’s burden
of showing that the transfers at issue were made within ninety days before Debtor filed its bankruptcy
petition on January 15, 2010, and, thus, that they were made while Debtor was insolvent. In support of that
fact, Plaintiff had relied solely on a Settlement Statement prepared by the law firm Mowery, Youell &
Galeano, Ltd. (Law Firm) that represented Defendant in the state court action, which is attached as Exhibit
B to Defendant’s answer. The Settlement Statement states that the Law Firm received two checks from
Debtor - one made payable solely to the Law Firm in the amount of $20,000.00 and one made jointly
payable to the Law Firm and Defendant in the amount of $100,000.00. [Doc. # 9 and attached Ex. B]. The
Settlement Statement then shows a deduction for attorney fees and expenses that were due and owing to the
Law Firm and that a balance of $95,470.26 was due to Defendant. Id. Defendant signed the Settlement
Statement on November 13, 2009, acknowledging receipt of the $95,470.27 by her from the law firm in full
settlement of her claims against Debtor. Id. Although November 13, 2009, is within ninety days of Debtor
filing its bankruptcy petition, the court found that the relevant date for determining whether the transfers
are preferential under § 547(b) was not the date Defendant actually received the funds from the law firm
but, rather, the date the drawee bank honored the checks. See Doc. # 14, p. 5 (citing Barnhill v. Johnson,
503 U.S. 393, 394-95 (1992)). However, the record was silent as to when the checks tendered by Debtor
were honored by the drawee bank.
Finding that, to the extent Plaintiff is able to show that the checks were honored during the ninety
days prior to Debtor filing its petition, all elements of his avoidance claim under § 547(b) would be satisfied,
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the court granted Plaintiff the opportunity to supplement his motion for summary judgment with evidence
supporting that fact. See Fed. R. Civ. P. 56(e)(1); Fed. R. Bankr. P. 7056. To that end, Plaintiff submitted
copies of the checks obtained from the drawee bank. Although the court cannot determine the date the
checks were honored, both checks are dated October 24, 2009, a date within ninety days of Debtor filing
its petition. This evidence, together with evidence that Defendant actually received a distribution of funds
from the $100,000.00 check made jointly payable to both her and the law firm on November 13, 2009,
satisfies Plaintiff’s burden of showing that the $100,000.00 transfer by Debtor was in fact made within the
ninety-day preference period and, thus, also made while Debtor was insolvent. 	Although Defendant
received only $95,470.26 of the $100,000.00 transfer, with the Law Firm retaining the balance, that transfer
was nevertheless made for the benefit of Defendant, which is made clear by the fact that the check was made
jointly payable to the Law Firm and Defendant and that a portion of those funds were used to pay attorney
fees owed by Defendant. The court thus finds that Plaintiff has satisfied his burden of proving all elements
of his avoidance claim under § 547(b) with respect to the $100,000.00 transfer by Debtor.
However, Plaintiff has not met his burden under § 547(b) with respect to the $20,000.00 transfer by
Debtor. 	That transfer was made by a check payable only to the Law Firm. 	The Law Firm is not a
defendant in this proceeding. Neither the settlement agreement resolving Defendant’s state court lawsuit
nor any other evidence has been offered to show that Defendant, rather than the Law Firm, was a creditor
of Debtor with respect to the $20,000.00 transfer. 	Because there are factual scenarios that could
conceivably result in a determination that the Law Firm, not Defendant, was Debtor’s creditor with respect
to that transfer, Plaintiff’s motion for summary judgment will be denied as to the $20,000.00 transfer.
THEREFORE, for the foregoing reasons and those set forth in the court’s Memorandum and Order
Regarding Motion for Summary Judgment entered on September 24, 2012, good cause appearing,
IT IS ORDERED that Plaintiff’s Motion for Summary Judgment is GRANTED with respect to the
$100,000.00 transfer by Debtor and DENIED as to the $20,000.00 transfer by Debtor; and
IT IS FURTHER ORDERED that this adversary proceeding be, and hereby is, set for a Further
Pretrial Conference on January 8, 2013, at 11:00 a.m., Courtroom No. 2, Room 103, United States
Courthouse, 1716 Spielbusch Avenue, Toledo, Ohio.
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