Tibble v. Farmers Grain Express, Inc. (In re Michigan BioDiesel, LLC)

510 B.R. 792
CourtUnited States Bankruptcy Court, W.D. Michigan
DecidedMay 20, 2014
DocketBankruptcy No. DK 10-05786; Adversary Nos. 13-80270, 13-80263
StatusPublished
Cited by4 cases

This text of 510 B.R. 792 (Tibble v. Farmers Grain Express, Inc. (In re Michigan BioDiesel, LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tibble v. Farmers Grain Express, Inc. (In re Michigan BioDiesel, LLC), 510 B.R. 792 (Mich. 2014).

Opinion

OPINION AND ORDER

SCOTT W. DALES, Bankruptcy Judge.

I. INTRODUCTION

Under chapter 5 of the Bankruptcy Code, avoidance and recovery are separate remedies available to a bankruptcy trustee, found in separate sections, with different purposes, discrete elements of proof, and distinct limitation periods. The present motion for partial summary judgment [794]*794puts the distinction between avoidance and recovery to the test. To resolve it, the court must decide whether subsequent transferees who were not named in the judgment avoiding the initial transfer, may require the trustee in a later § 550 recovery proceeding to re-prove the avoidability of the transfer.

In a prior adversary proceeding, Thomas R. Tibbie, as chapter 7 trustee of the estate of Michigan BioDiesel, LLC (the “Debtor”), sought and obtained from this court a judgment under § 549 avoiding a substantial post-petition payment the Debtor made to Tall Pine Trading, LLC (“Tall Pine”). In the current adversary proceedings, filed within one year after the avoidance of the payment, Mr. Tibbie (the “Trustee”) seeks to recover under § 550(a) the funds that he alleges Tall Pine transferred to defendants Farmers Grain Express, Inc., Jacobson Transportation Company, Inc., and Tracy Daniels (the “Defendants”).

As part of their defense, the Defendants contend that res judicata principles, simple fairness, and perhaps the Due Process Clause itself, require the Trustee to reestablish the avoidability of the transfer to Tall Pine as a prerequisite to recovery in this later action. The Trustee disagrees, and has filed in each adversary proceeding a Motion for Partial Summary Judgment Barring Defendant from Relitigating the Court’s Avoidance of the Debtor’s Transfer to Tall Pine Trading, L.L.C. (collectively, the “Motion”) (Adv. Pro. No. 13-80263 at DN 28; Adv. Pro. No. 13-80270 at DN 28). In his Motion, the Trustee asserts that subsequent transferees of an unauthorized post-petition transfer can only raise § 550 defenses in a recovery action, even when they were not parties to the initial avoidance proceeding.

The court held a hearing on April 23, 2014 in Kalamazoo, Michigan, to consider the Motion and the Defendants’ opposition. For the following reasons, and notwithstanding thoughtful argument and authority to the contrary, the court concludes that a trustee who pursues § 550 recovery in a later proceeding need only prove that the court avoided the initial transfer in the first action; he need not establish anew the avoidability of the initial transfer as part of his prima facie case under § 550(a)(2).

II. JURISDICTION

The court has jurisdiction over the Debt- or’s bankruptcy case pursuant to the grant of that power to the United States District Court under 28 U.S.C. § 1334(a), and the reference of the case and this adversary proceeding pursuant to 28 U.S.C. § 157(a) and LCivR 83.2(a) (W.D.Mich.). The adversary proceeding is a “core proceeding” under 28 U.S.C. § 157(b)(2)(A) and (O). Because the court’s decision today is interlocutory, it does not implicate the concerns underlying Stern v. Marshall, — U.S. -, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) and similar authorities.

III. ANALYSIS

A. Background

The Debtor filed for relief under chapter 11 on May 2, 2010. Before the court converted the case to chapter 7, the Debtor received $1,321,692.50 in tax credit payments from the Internal Revenue Service for bio-fuels the Debtor claimed were processed in its Michigan facility and then shipped to end users. Without bankruptcy court permission, the Debtor transferred $998,412.32 of these payments to Tall Pine, an entity owned and operated solely by Tracy Daniels.

On December 14, 2011, the Trustee filed Adversary Proceeding No. 11-80621 against Tall Pine and Mr. Daniels seeking to avoid and recover the $998,412.32 trans[795]*795fer (the “Funds”) pursuant to 11 U.S.C. §§ 549 and 550.1 On the same day, the Trustee also filed an emergency motion to enjoin Tall Pine and Mr. Daniels from transferring the Funds. Both Tall Pine and Mr. Daniels filed a response to the Trustee’s motion for a preliminary injunction. After holding an evidentiary hearing, the court denied the motion for preliminary injunction. Later in the Tall Pine AP, Mr. Daniels filed a motion to dismiss, and Tall Pine answered the Trustee’s complaint.

In their joint discovery statement filed February 21, 2012, the Trustee, Tall Pine, and Mr. Daniels agreed that the court should dismiss Mr. Daniels from the adversary proceeding, which the court did. The dismissal was without prejudice to the Trustee’s right to file a separate complaint against Mr. Daniels, including claims for recovery of any avoided transfers pursuant to § 550. The Trustee then amended his complaint in the Tall Pine AP, and Tall Pine timely filed an answer and a counterclaim.

After an opportunity for discovery in the Tall Pine AP, the Trustee filed a motion for summary judgment to which Tall Pine never responded, perhaps because by then its counsel had withdrawn from representation with Mr. Daniels’s express consent.

Despite Tall Pine’s failure to oppose the Trustee’s motion, the court carefully considered the pleading and, after deliberating, granted the motion for summary judgment and announced its intention to avoid the initial transfer of the Funds. The court could not enter judgment at that time, however, because Tall Pine’s counterclaim remained pending. See Fed.R.Civ.P. 54. After holding a pre-trial conference and after Tall Pine took no further action on its counterclaim, the court entered judgment in favor of the Trustee on October 29, 2012, avoiding the transfer under § 549, dismissing the counterclaim, and requiring Tall Pine to pay $1,201,293.62 on account of the avoided transfer and another transaction at issue in the Tall Pine AP.

On October 7 and 9, 2013, the Trustee filed the currently pending adversary proceedings, this time under § 550 seeking recovery of a portion of the Funds that Tall Pine allegedly transferred to the Defendants.

The Trustee filed his motion for summary judgment solely on the legal question of whether the court must allow the Defendants to re-litigate the Trustee’s § 549 avoidance action against Tall Pine.

B. Summary Judgment Standards

A court should enter summary judgment if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

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Bluebook (online)
510 B.R. 792, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tibble-v-farmers-grain-express-inc-in-re-michigan-biodiesel-llc-miwb-2014.