Cage v. Hardy Rawls Enterprises, L.L.C. (In re Moye)

5th Cir. Court of Appeal (August 21, 2012) - Case No. 11-20534
AFFIRMING the decision of United States Distrcit court for the Southern District of Texas (Houston) that the Trustee had proved that all but one of the payments in question made by the debtors were avoidable preferences and that the Creditor ("HRE") failed to provide successfully establish its affirmative defenses.
Procedural context:
An involuntary Chapter 7 was filed against the JMW Autosales, a car dealership, on October 31, 2007. A week later, Mr. and Mrs. Moyes filed for Chapter 7 bankruptcy. JMW Autosales was the business of Mr. and Mrs. Moyes. These parties are collectively referred to as debtors. The cases were jointly administered. In the bankruptcy case, HRE filed a secured proof of claim that was deemed disallowed by the bankruptcy court because of the failure of the creditor to file a UCC financing statement to perfects its interests, which was affirmed by the district court and court of appeals. After administration and review of the business records of the debtors, in July of 2009, the Trustee filed a complaint against HRE to recover the $143,167.37 in preferential payments by the debtors. The complaint was followed up by a motion for summary judgment by the trustee which was denied due to its conclusion that a genuine issue of fact existed to HRE's affirmative defense. Based on the request for a jury, the bankruptcy court recommended the case proceed to district court. The district court ruled that all payments made to HRE, except one on July 27, 2007 which occurred more than 90 days before filing, were avoidable. HRE timely appealed.
In conducting their business, debtors' purchased automobiles for resale. Debtors would enter in to installment contracts with customers, and the debtors would sell assemblages or "pools" of such installment contracts to its creditors. Debtors' would guarantee in their agreements to their creditors that they would replace defaulted installment contracts with new installment contracts. In June and July of 2007, Debtors began to experience financial difficulties and began to default on payments to pool participants. Between July 27 and October 15, 2007, debtors made 8 payments to HRE totaling $146,712. Then in October of 2007, an involuntary Chapter 7 was filed against the business. A week later, Mr. and Mrs. Moyes filed for voluntary Chapter 7.
Wiener, Elrod and Southwick

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