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Thelma McCoy v. USA

Summarizing by Craig Geno

Waite v. Cage (In re Moye)

In the Matter of Marvin E. Moye, JMW Auto Sales; Joan M. Moye/ Waite v Cage/ 5th Cir
A judgement in favor of Trustee on Preference Claims pursuant to 547(b) against Waite, Jr. and Waite, III was affirmed. Agreeing with the District Court, the Fifth Circuit found that an installment contract, and the proceeds from the sale of the same, constituted an interest of the debtor, despite agreement providing that the installment contract had been transfered to the Waites. Since the transfer of installment contracts must be made to licensed parties pursuant to the Tex. Fin. Code Section 348.501(a), the alleged transfer was void as a matter of law. Additionally, despite retroactive reinstatement of Waite's license, the Bankruptcy Court's decision to deny reconsideration was not an abuse of its discretion.
Procedural context:
Chapter 7 Trustee had filed a 547(a) action in the Southern District of Texas Bankruptcy Court to avoid preferences and recover funds from the Waites. The Bankruptcy Court looked to state law, Tex. Fin. Code Section 348.501(a), to see if a legal transfer could have been made by the Debtor (a car dealer) to the Waites of an installment contract. The Court found that such a transfer would have been illegal, and therefore void. Waite Jr.then went and had a formerly revoked license reinstated and filed a Motion for Reconsideration, arguing the retroactive effect of reinstatement. However, reconsidertaion was denied. The Waite's appealed the Court's ruling as to the first two elements of Section 547 and the denial of reconsideration. These rulings were upheld by the District Court and 5th Circuit.
Debtors, Marvin Moye, Joan Moye and JMW Auto Sales had been engaged in a ponzi scheme. They generated cash flow by purportedly selling "pools" of installment contracts to outside pool investors, like the Waites. Under their written agreements they obtained lump sums from investors and would be transferring certain installment contracts to the pool investors.Then, per the agreement, the Debtors were to be remitting to the interest and principal to the pool investors. The Debtors made remittances even when they had not collected funds under the contracts. Debtors retained the lienholder interests on the vehicles financed and, in the case of the Waites, had not delivered the service agreements and installment contract schedules to the Waites. However,when the Debtors fell behind in payments they agreed to sell some installment contracts and remitted $391,948.22 of the proceeds to Waite Jr. and another $16,555.71to Waite III within 90 days of their bankruptcy. After the filing Waite Jr. applied to have his license reinstated, although he did not have a valid license at the time of the transfers. The Waites argued that the first two elements of 547 had not been satisfied. Since the court found the transfer of the installment contract void as a matter of law, the installment contract remained an asset of the Debtor. As to the second element, the Waites argued they obtained full title to the contracts and thus no debtor/creditor relationship existed. The Court looked to Section 101(10) that a creditor is simply one who has "a claim against the debtor' and thus found that the second element was met.
Higginbotham, Davis and Elrod

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