Graham v. Huntington National Bank (In re Medcorp. Inc.)

472 B.R. 444, 2012 WL 1098360, 2012 Bankr. LEXIS 1404
CourtUnited States Bankruptcy Court, N.D. Ohio
DecidedMarch 30, 2012
DocketNos. 11-3192
StatusPublished
Cited by7 cases

This text of 472 B.R. 444 (Graham v. Huntington National Bank (In re Medcorp. Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Graham v. Huntington National Bank (In re Medcorp. Inc.), 472 B.R. 444, 2012 WL 1098360, 2012 Bankr. LEXIS 1404 (Ohio 2012).

Opinion

[447]*447 MEMORANDUM OPINION AND DECISION

RICHARD L. SPEER, Bankruptcy Judge.

This cause comes before the Court on the Motion for Summary Judgment filed by the Plaintiff/Trustee, John N. Graham. (Doc. No. 16). The Plaintiffs Motion for Summary Judgment is brought in support of his complaint to avoid certain prepetition transfers made to the Defendant, the Huntington National Bank. (Doc. No. 1). Against the Plaintiffs Motion for Summary Judgment, the Defendant filed an objection, with the Plaintiff then filing a reply thereto. (Doc. No. 18 & 22). The Court has now had the opportunity to review the arguments made by the Parties in support of their respective positions. Based upon this review, the Court, for the reasons set forth herein, finds that the Plaintiffs Motion for Summary Judgment should be Granted.

FACTS

There are three Debtors in this case: (1) MedCorp, Inc.; (2) Stickney Avenue Investment Properties, LLC; and (3) Med-Corp E.M.S. South, LLC. (Hereinafter referred to collectively as the “Debtors”). The Debtors were formerly engaged in the business of operating an ambulance service; whereby they provided emergency and non-emergency transportation services for persons in need of medical care.

For their business operations, the Defendant, the Huntington National Bank (hereinafter the “Bank”), extended credit to the Debtors. The extension of credit included obligations set forth in a “Credit and Security Agreement,” dated August 28, 2009 which provided for: (1) a revolving credit facility in the principal amount of $7,500,000.00; and (2) a term loan in the principal sum of $4,100,000.00. As of January 28, 2011, there was an outstanding balance on the revolving loan in the amount of $6,075,296.07, and a balance of $3,529,070.03 outstanding on the term loan.

In exchange for the Bank’s extension of credit, the Debtors granted the Bank a security interest in substantially all of [448]*448their assets. According to the Bank, its security interest extended to the vehicles the Debtors used to operate their business — these vehicles being primarily ambulances and other similar vehicles. The certificates of titles produced for these vehicles, however, do not show the existence of the Bank’s lien on any of the titles. (Doc. No. 17). Also, there is no evidence that a notation of the Bank’s lien had been entered into an automated processing system used by the clerk of the common pleas court of Ohio for recording liens on vehicles.

In June of 2011, the Debtors’ business assets and operations were set to be sold to a third party through a state-court receivership. This sale, however, was stayed when, on June 10, 2011, the Debtors filed petitions in this Court for relief under Chapter 11 of the United States Bankruptcy Code. An order was thereafter entered, providing for the joint administration of the Debtors’ three bankruptcy cases.

On June 17, 2011, the Plaintiff, John Graham, was appointed as trustee for the Debtors’ bankruptcy estate pursuant to § 1104 of the Code. During the administration of their case, the Court entered an order approving the Debtors’ use of cash collateral. Among the terms of this Order, the Bank was granted a postpetition lien in estate assets. (Case No. 11-38239, Doc. No. 145). Specifically, the Order provided that, to the extent of any diminution in the Bank’s interest in prepetition collateral, the Bank would granted a “replacement security interests and liens (to the same extent, validity, enforceability, perfection and priority as security interest and liens that Huntington had immediately preceding the Petition Date).... ”

The Court’s cash collateral order then went on to further delineate the scope of the Bank’s postpetition interest in estate property. First, the Order specified that:

Nothing in this Order will be deemed to grant Huntington a lien or security interest on assets held by Debtor but not subject to Huntington’s liens or security interest on the Petition Date, excepting only (i) a replacement lien equal to ten percent (10%) of fees paid to Debtor’s receiver/custodian from Cash Collateral pursuant to the order of this Court, and (ii) a replacement lien equal to such other administrative expenses of Debtor or the Trustee paid from Cash Collateral; in either case Huntington shall be granted a corresponding replacement lien in any unencumbered assets, should they exist.

The Court’s cash collateral Order then further provided:

Notwithstanding anything contained in this Order to the contrary, including but not limited to this paragraph, Huntington shall have no right or interest in any avoidance actions or causes of action under sections 542, 544, 545, 547, 548, 549, 550, 551, or 553 of the Bankruptcy Code or proceeds thereof, (collectively, the “Avoidance Actions”) for or on account of the Replacement Liens.

On October 3, 2011, the Court entered an order approving the sale of substantially all of the Debtors’ assets pursuant to Bankruptcy Code § 363. The parties to this sale and the terms of this sale were substantially identical to those originally proposed during the pendency of the state-court receivership. On September 23, 2011, the Trustee, citing to § 544(a)(1) of the Bankruptcy Code, commenced this proceeding to avoid any security interests or liens claimed by the Bank in those vehicles the Debtors formerly used to operate their business.

DISCUSSION

In his Complaint, the Trustee asks that the Court enter a “judgment declaring [449]*449that any interest Huntington may have possessed in any of the vehicles that was not properly perfected under Ohio law is avoided pursuant to 11 U.S.C. § 544, and therefore, the Trustee may sell the vehicles free and clear of any lien Huntington claims to have upon the vehicles[.]” (Doc. No. 1). This matter, as it requires the Court to make a determination concerning the validity, extent, or priority of liens in a bankruptcy case, is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(E). Thus, this Court has the jurisdictional authority to enter final orders and judgments in this proceeding. 28 U.S.C. § 157(b)(1).

Legal Framework

The Bankruptcy Code recognizes two types of claims: (1) secured; and (2) unsecured.1 In re Reg'l Bldg. Sys., Inc., 273 B.R. 423, 469 (Bankr.D.Md.2001). A secured claim is defined by the Bankruptcy Code to mean “[a]n allowed claim of a creditor secured by a lien on property in which the estate has an interest ... to the extent of the value of such creditor’s interest in the estate’s interest in such property.” 11 U.S.C. § 506(a)(1). As used in this provision, the term ‘lien’ “means charge against or interest in property to secure payment of a debt or performance of an obligation.” 11 U.S.C. § 101(37). This term is often used interchangeably with the term “security interest” which the Code defines as a “lien created by agreement.” 11 U.S.C.

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Cite This Page — Counsel Stack

Bluebook (online)
472 B.R. 444, 2012 WL 1098360, 2012 Bankr. LEXIS 1404, Counsel Stack Legal Research, https://law.counselstack.com/opinion/graham-v-huntington-national-bank-in-re-medcorp-inc-ohnb-2012.