Bergquist v. Anderson-Greenwood Aviation Corp. (In Re Bellanca Aircraft Corp.)

56 B.R. 339, 1985 Bankr. LEXIS 4818, 13 Bankr. Ct. Dec. (CRR) 1172
CourtUnited States Bankruptcy Court, D. Minnesota
DecidedDecember 9, 1985
Docket19-30139
StatusPublished
Cited by70 cases

This text of 56 B.R. 339 (Bergquist v. Anderson-Greenwood Aviation Corp. (In Re Bellanca Aircraft Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bergquist v. Anderson-Greenwood Aviation Corp. (In Re Bellanca Aircraft Corp.), 56 B.R. 339, 1985 Bankr. LEXIS 4818, 13 Bankr. Ct. Dec. (CRR) 1172 (Minn. 1985).

Opinion

ORDER

MARGARET A. MAHONEY, Bankruptcy Judge.

The above-entitled action came on for trial on April 15, 1985, on Plaintiff’s complaint seeking to avoid certain alleged preferential and postpetition transfers under 11 U.S.C. §§ 547 and 549, and to equitably subordinate Defendants’ claims against the bankruptcy estate under 11 U.S.C. § 510(c)(1). Defendants additionally seek a claim for administrative expenses for certain expenditures occurring postpetition. The parties submitted this matter for my determination based upon the trial record, consisting of five days of testimony, certain factual stipulations, approximately 350 exhibits, and upon the parties’ post-trial oral and written arguments. This Court has jurisdiction over and the power to hear and finally determine all issues arising hereunder pursuant to 28 U.S.C. §§ 1334 and 157, and the July 27, 1984, Order of Reference from the United States District Court for the district of Minnesota. This is a core proceeding under 28 U.S.C. § 157(b)(2)(F).

FACTS

A. Introduction

1. The Parties

Plaintiff is the bankruptcy trustee for the estate of Bellanca Aircraft Corporation (Bellanca), the Debtor in this matter. Bel-lanca was incorporated under the laws of the state of Minnesota in 1955 as Northern Aircraft, Inc., and adopted the name Bel-lanca Aircraft Corporation in 1966. On July 25, 1980, Bellanca filed its voluntary petition under Chapter 11 of the United States Bankruptcy Code. Defendants, Anderson, Greenwood & Co. (AGCO) and Anderson-Greenwood Aviation Corp. (Aviation), are corporations formed under the laws of the state of Texas in 1947 and 1970 respectively. Aviation was created as and remains a wholly-owned subsidiary of AGCO.

Throughout its active existence, Bellanca was chiefly engaged in the business of manufacturing and selling single-engine aircraft and their parts and accessories. Prior to the Defendants’ involvement with *348 the corporation in early 1976, Bellanca had concurrently been producing two separate aircraft known as the Viking and the Champion. The Viking line, which was a descendant of the Bellanca Columbia, the second airplane to make a trans-Atlantic crossing, was a low wing aircraft constructed of plywood, fabric, and tubular steel, and was designed principally for business and recreational use. Production of the Viking began in approximately 1964 in Alexandria, Minnesota, and it enjoyed increasingly strong sales until 1974 or 1975, when the fuel crisis, recessionary and interest rate pressures, and approaching obsolescence greatly reduced demand. In 1970, Bellanca added the Champion to its inventory by virtue of the acquisition that year of the Champion Aircraft Co. Produced out of Bellanca’s Osceola, Wisconsin, facility, the Champion was a high wing aircraft designed for pleasure and agricultural use. Unlike the Viking, it accounted for a substantial and increasing percentage of Bel-lanca’s overall production and sales.

Defendant AGCO, like Bellanca, shared an interest in aircraft development and production at the time of its formation in 1947. At that time AGCO was formed for the purpose of designing and manufacturing an airplane envisioned by the corporate founders. While five such airplanes were actually produced, supply shortages during the Korean war caused production to cease, and the corporation redirected its efforts toward the manufacturing of instrument and safety relief valves for aeronautical applications. Eventually, AGCO engaged in the manufacture of various valves for use in oil and gas production, the petrochemical, chemical, and refining industries, power generation, pulp and paper production, as well as food, beverage, water, and sewage applications.

While AGCO continued the development and production of valves, its founders persisted in their dream of producing their own airplane. For many years AGCO engaged in the designing of a single-engine aircraft known as the Aries T-250. By the early 1970’s it more actively began to pursue the development of the Aries in anticipation of the possibility of receiving a type certificate from the Federal Aviation Administration (FAA) conferring upon the corporation the exclusive right to manufacture and sell the aircraft. On December 30, 1970, Aviation was incorporated by AGCO for the purpose of serving as the corporate repository for the Aries type certificate, as well as for the purpose of manufacturing, designing, developing, and selling the aircraft. On December 12, 1973, AGCO filed its application for the Aries T-250 type certificate, which certificate was then issued on July 28, 1976. While AGCO was the recipient of the type certificate, and no actual transfer of the certificate to Aviation ever occurred, it is clear that AGCO transferred certain rights under the certificate to Aviation. The certificate was in fact recorded in the name of Aviation.

Despite testimony to the effect that Aviation remained inactive up until receipt of the Aries type certificate, and then served as little more than a cost center for future Aries design, development and manufacture, it is evident that at all material times this subsidiary corporation to AGCO maintained a board of directors and officers. Moreover, the evidence indicates that significant engineering, drafting, and production assistance was provided in the name of Aviation during the relevant time period, as well as some manufacturing of parts for the Aries due to particular expertise in either Aviation or AGCO. In conjunction with at least some of these activities, Aviation further maintained its own corporate record book and separate bank accounts. The record also indicates that Aviation possessed contracting capacity independent of AGCO.

Although the evidence clearly demonstrated that a variety of services were rendered in the name of Aviation to Bellanca, it is unclear to what extent these services were actually rendered by persons in the employ of Aviation. 1 Testimony at trial *349 established that all such services were provided by persons whose income was paid directly by AGCO. In contrast, it is undisputed that Bellanca was directly billed by Aviation for the receipt of such services from 1978 to early 1980, and, presumably, issued checks in the name of Aviation for those Aviation invoices paid. The record indicates, though, that in the year preceding the commencement of the bankruptcy no such Aviation invoices were paid by Bellanca.

2. Commencement of the Bellanca-AGCO-Aviation Relationship

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Bluebook (online)
56 B.R. 339, 1985 Bankr. LEXIS 4818, 13 Bankr. Ct. Dec. (CRR) 1172, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bergquist-v-anderson-greenwood-aviation-corp-in-re-bellanca-aircraft-mnb-1985.