Reish v. Phoenix Heliparts, Inc. (In re Phoenix Heliparts Inc.)

Case Type:
Case Status:
Reversed and Remanded
AZ-17-1162-BLKu (9th Circuit, May 07,2018) Not Published
The bankruptcy court did not have subject matter jurisdiction over a dispute between the liquidating trustee for a bankruptcy estate and a third party which claimed ownership of property formerly owned by the debtor when the property had been sold prior to bankruptcy. The bankruptcy court also applied an incorrect legal standard, that the helicopter was a "future good" rather than a "good" under Article 2 of the UCC, in ruling that the liquidating trustee could recover the proceeds of an unauthorized post-petition sale of a helicopter.
Procedural context:
After discovering that Phoenix Heliparts, Inc. (PHP) had filed a chapter 11 bankruptcy petition and that a liquidating trustee had been appointed to liquidate PHP, appellant Reish sued the liquidating trustee for a declaratory judgment that he owned the proceeds from the sale of one helicopter and owned another helicopter that was an asset of the liquidating trust estate. The liquidating agent counterclaimed, seeking damages for the unauthorized post-petition sale of one helicopter and that a loan from an entity owned by Reish to PHP was a fraudulent transfer.
Phoenix Heliparts, Inc. (PHP) repaired and sold damaged helicopters. Appellant Reish had purchased helicopters from PHP before PHP entered bankruptcy in September 2015. When PHP filed its chapter 11 petition, two helicopters (H1 and H2) supposedly were in PHP's custody while being repaired in anticipation of delivery to Reish. Reish had paid PHP $1,220,000 of the $1,395,000 for the first helicopter (H1), and $875,000 of the $975,000 purchase price for the second helicopter. In addition, Reish, through a company that he owned (Ryuko), loaned $850,000 to PHP in 2015. PHP filed its chapter 11 petition on September 8, 2015. A chapter 11 trustee was appointed on October 22, 2015. A liquidating trust was then formed to liquidate PHP's bankruptcy estate. PHP did not include Reish or Ryuko on its schedules. In November 2015, the former president of PHP arranged for the sale of H1 to a third party through Reish. Reish, who had no notice of the PHP bankruptcy case, agreed to this sale, and received $2,150,000 from the third-party purchaser. After learning of the PHP bankruptcy, Reish filed a declaratory judgment action, and the liquidating trustee counterclaimed.
BRAND, LAFFERTY and KURTZ, Bankruptcy Judges

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