Nixon v. Davis Water & Waste Industries, Inc. (In re D.R. Goris Plumbing, Inc.)

49 B.R. 146, 1985 Bankr. LEXIS 6290
United States Bankruptcy Court, M.D. Florida·Decided April 18, 1985·No. Bankruptcy No. 83-227; Adv. No. 83-762·Published·Cited by 1 cases

Opinion

MEMORANDUM OPINION ON MOTION FOR SUMMARY JUDGMENT

ALEXANDER L. PASKAY, Chief Judge.

THIS IS a Chapter 7 liquidation case and the matter under consideration involves a Complaint to Avoid a Preferential Transfer filed by Jary C. Nixon, as Trustee, against Davis Water and Waste Industries, Inc., d/b/a Davis Meter and Supply Company (Davis). The Trustee seeks the entry of a judgment in the amount of $1,809 plus interest from May 12, 1983 and costs. The Trustee’s claim is based on the allegations that within 90 days prior to the commencement of the case, Davis repossessed on account of an antecedent debt incurred more than 45 days prior to the transfer by the Debtor, ceramic pipes with an approximate value of $1,809. The Trustee further alleges that he has made demand on Davis for payment of the value of the repossessed ceramic pipes; that Davis refused and failed to make payment; that at the time of the repossession the Debtor was insolvent; and that the effect of the repossession was to enable Davis to receive more than it would receive under Chapter 7.

Both the Trustee and Davis filed Motions for Summary Judgment based on the allegations that there are no genuine issues of material fact and the controversy before the Court may be resolved as a matter of law. The record reveals the following undisputed facts:

Sometime during 1982, the Debtor purchased from Davis, on open account, certain plumbing supplies and materials for the purpose of incorporating the same into an improvement at the Crossroads Baptist Church. All of the supplies and materials purchased from Davis were delivered to the job site. Thereafter, in September 1982, the construction project was completed and the Debtor removed part of the plumbing supplies to its warehouse and left the remainder at the construction site.

Davis filed suit in the County Court in and for Pinellas County to recover the balance due on the open account and on October 12,1982, a Final Judgment was entered in favor of Davis and against the Debtor in the case styled Davis Meter and Supply vs. D.R. Goris Plumbing, Inc. In due course, the sheriff executed a writ and levied on the ceramic pipes stored at both the construction site and the Debtor’s warehouse and sold them for the sum of $1,809. On January 31, 1983, the Debtor filed a Voluntary Petition for Relief pursuant to Chapter 7 of the Bankruptcy Code. The Trustee filed the instant complaint to avoid the transfer as a preference.

[148] It is the Trustee’s position that at the time of the repossession and sale of the ceramic pipe, Davis no longer possessed a perfected statutory lien as provided by § 713.15 Fla.Stat. (Florida Mechanics Lien Law); that Davis elected to file suit on the debt rather than pursue its remedies under § 713.15 Fla.Stat.; that by so doing, the Debtor lost its mechanic lien and was, at the time of the repossession and sale, merely an unsecured creditor; and that the proceeds from the sale of the repossessed pipe constitutes a preferential payment which may be recovered by the Trustee.

Davis contends that the transaction is not avoidable as a preference based on § 547(b) because (1) under the law of Florida, a lienor may sue and obtain judgment on its contractual debt without waiving its statutory mechanics lien; (2) that at the time the property was transferred, the property was subject to a perfected statutory lien by virtue of § 713.15 Fla.Stat.; (3) that § 547(c)(6) expressly states that the Trustee may not recover as a preference, property which was secured by a statutory lien that is not avoidable under § 545; and (4) that the Trustee is unable to show any superior interest in the goods. Thus, Davis urges the Court to enter a final judgment in its favor and dismiss the Trustee’s Complaint.

It is conceded by Davis and there is no dispute that all operating elements required by § 547(b) in order to avoid a transfer as a preference are present with the exception of subclause (b)(5)(A), (B) and (C). This subclause requires that before a transfer can be avoided as a preference, the trustee has a burden to establish that as a result of the transfer, the recipient of the transfer received more than he would have received in a Chapter 7 case. While this subclause, as drafted, appears to be complex and at first blush difficult to comprehend, it is merely nothing more than a not very well articulated restatement of an old and well-recognized principle that before there is a preference, there must be a “creditor” who is preferred over other creditors standing in the same legal position with the same legal status. Thus, when a transfer occurs within the prohibitive period, i.e. 90 days preceding the commencement of the case, an unsecured creditor may have a voidable preference. However, a transfer to a creditor holding a valid consensual, judicial or statutory lien on any property of the estate seldom, if ever, could be a voidable preference unless there are other creditors in the same legal class, in addition to the secured creditor who received the preference. For example, this might occur in the situation where there are several mechanics lienors whose liens relate back to the commencement of the construction, and encumber the identical properties of the owner, who happen to be a debtor involved in a case under any of the operating Chapters of the Code.

However, with this exception noted, a transfer to a secured creditor will not produce the result prohibited by § 547 because by retaining the properties transferred, the secured creditor would not receive more than it would have received in a Chapter 7 case, a condition required by § 547(b)(5)(A) before a transfer could be avoided as a preferential transfer.

Applying the foregoing general principles to the matter under consideration, it is evident that the ultimate question centers around the legal status of Davis at the time the ceramic pipes were repossessed from the job site. This is so because if at the time of the repossession, Davis had a valid lien on the ceramic pipes, the trustee cannot prevail for the obvious reason that Davis would be entitled to enforce its lien against the ceramic pipes in a Chapter 7 case by either repossessing the ceramic pipes or if sold by the trustee, by receiving the proceeds of the sale in satisfaction of its lien.

The defense asserted by Davis in opposing the trustee’s claim is based on Chapter 713.15 Fla.Stat. which in pertinent part provides as follows:

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Nixon v. Davis Water & Waste Industries, Inc. (In re D.R. Goris Plumbing, Inc.), 49 B.R. 146, 1985 Bankr. LEXIS 6290 (Fla. 1985).

49 B.R. 146 (Nixon v. Davis Water & Waste Industries, Inc. (In re D.R. Goris Plumbing, Inc.)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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