Pillar Capital Holdings, LLC v. Williams (In re Living Hope Southwest Medical Services, LLC)

Citation:
Case No. 12-2044 (8th. Cir. Court of Appeals - Western District of Arkansas) (April 26, 2013 - Unpublished)
Tag(s):
Ruling:
AFFIRMING the judgment of the bankruptcy court and district court that post-petition payments to creditor-insider was a transfer avoidable by the chapter 7 trustee.
Procedural context:
Appeal from the district court to the court of appeals, which affirmed the bankruptcy court's ruling stating that post-petition payments totaling $111,200 to a creditor and interested member post-petition were avoidable by the chapter 7 Trustee since no court approval was obtained for the transfer and the transfers were not in the "ordinary course of business."
Facts:
The debtor, Living Hope Southwest Medical Services LLC, filed for Chapter 11 bankruptcy on July 18, 2006 and converted to Chapter 7 on August 15, 2008. The debtor was indebted to Northern Health Capital (NHC) $3.25M. Post-petition, NHC contacted Pillar, a New York LLC specializing in financing troubled businesses, regarding the possibility of obtaining an interest in the debtor. Pillar, through it's sole member Jack Goldenberg, thereafter provided a line of credit to the debtor of $250,000 and commenced with an initial payment of $25,000 and additional financing, in exchange for becoming a 50% member in the debtor. Over the course of the restructuring, debtor repaid a total of $111,200 to Pillar. Based on Pillar, there remained an outstanding balance of $88,500. When the case was converted to Chapter 7, the Trustee filed a complaint against Pillar and Golderberg seeking to avoid the post-petition transfers while the debtor operated as a debtor-in-possession under Chapter 11.
Judge(s):
Smith, Beam and Gruender.

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