Montoya v. Murray

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
Philip J. Montoya v. Kathy Murray
05-01068
Order Granting [8-1] Motion For Summary Judgment against Kathy Murray and
Memorandum of Law by Philip J. Montoya .
Received on: 2006-01-06 16:07:31.000
2006-01-06 00:00:00.000
2006-01-09 00:00:00.000
Patti Hennessy
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1See Affidavit of Philip J. Montoya, Trustee, Exhibit 1 to the Motion.
1
THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re: WILLIAM PRESTON McKINSEY, and No. 7-04-15604 ML
KELLI JO McKINSEY,
Debtors.
_____________________________________________________________________________
PHILIP J. MONTOYA, Trustee,
Plaintiff,
v. Adv. No. 05-1068 M
KATHY MURRAY,
Defendant.
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
THIS MATTER is before the Court on the Trustee Philip J. Montoya’s Motion for Summary
Judgment Against the Defendant Kathy Murray and Memorandum of Law (“Motion”). The Motion is
supported by an Affidavit.1 The Motion requests the Court to enter summary judgment in favor of
Plaintiff Philip J. Montoya (“Trustee”) on his claim to avoid a preferential transfer pursuant to 11 U.S.C.
§ 547. Defendant Kathy Murray did not file a response to the Motion. Upon review of the Motion,
the Court is satisfied that there are no genuine issues of material fact and that the Trustee is entitled to
judgment as a matter of law.
Summary Judgment Standards
Summary judgment is governed by Rule 56, Fed.R.Civ.P., made applicable to bankruptcy
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proceedings by Rule 7056, Fed.R.Bankr.P. Summary judgment is proper when there are no genuine
issues of material fact, and the moving party is entitled to judgment as a matter of law. Rule 56(c),
Fed.R.Civ.P. The moving party bears the burden of proving that there are no genuine issues of material
fact that would preclude summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the adverse party does not respond, the Court must
nevertheless determine whether the moving party has met its initial burden of proving that there are no
genuine issues of material fact and that judgment is appropriate as a matter of law. Murray v. City of
Tahlequah, Okl., 312 F.3d 1196, 1200 (10th Cir. 2002) (“If the nonmoving party fails to respond, the
district court may not grant the motion without first examining the moving party's submission to
determine if it has met its initial burden of demonstrating that no material issues of fact remain for trial
and the moving party is entitled to judgment as a matter of law.”). In considering a motion for summary
judgment, the Court must construe the evidence in the light most favorable to the non-moving party.
Jenkins v. Wood, 81 F.3d 988, 990 (10th Cir. 1996).
The following facts are not in dispute:
1. The Debtors filed a voluntary petition under Chapter 7 of the Bankruptcy Code on August
2, 2004. (Trustee’s Complaint to Avoid Preference (“Complaint”), ¶ 3; Answer to Complaint to Avoid
Preference (“Answer”), ¶ ).
2. Plaintiff Philip J. Montoya is the Chapter 7 trustee appointed to administer the Debtors’
bankruptcy proceeding. (Complaint, ¶ 2; Answer, ¶ 1).
3. Defendant Kathy Murray is an insider of the Debtors within the meaning of 11 U.S.C. §
101(31). (Complaint, ¶ 4; Answer, ¶ 1).
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2The facts recited in undisputed material fact No. 7 are established by the record of the
Debtors’ bankruptcy proceeding, Case No. 7-04-15604 ML. See Fed.R.Evid. 201 (allowing court to
take judicial notice, whether requested or not, of facts that are “not subject to reasonable dispute in that
[they are] . . . capable of ready determination by resort to sources whose accuracy cannot reasonably
be questioned.”); Rule 9017 Fed.R.Bankr.P. (“The Federal Rules of Evidence . . . apply in cases
under the Code.”); In re Reed, 293 B.R. 65, 69 (Bankr.D.Kan. 2003) (court takes judicial notice of
the contents of the debtor’s petition, schedules, etc. in considering motion for summary judgment in a §
727 action).
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4. During the year prior to the filing of the Debtors’ bankruptcy proceeding, the Debtors paid
Defendant Kathy Murray through several transfers totaling approximately $1,500.00. (Complaint, ¶ 5;
Answer, ¶ 4).
5. At the time the transfers were made, the Debtors were indebted to Defendant and the
transfers were in payment of an antecedent debt. (Complaint, ¶ 6; Answer, ¶ 1).
6. At the time the transfers were made, the Debtors were insolvent. (Complaint, ¶ 7; Answer,
¶ 1).
7. Debtors’ Statements and Schedules reflect real property with a secured claim in excess of
its reported value, and three vehicles with liens each in excess of the respective reported values for each
vehicle. The scheduled liabilities exceed the reported assets by several thousand dollars. Defendant
Kathy Murray is listed as an unsecured creditor with a claim amount of $3,000.00 based on a loan.
The total amount of the unsecured claims listed in Debtors’ statements and schedules is $41,385.95.2
APPLICATION OF UNDISPUTED FACTS TO APPLICABLE LAW
Preferential transfers are governed by 11 U.S.C. § 547, which provides, in relevant part:
Except as provided in subsection (c) of this section, the trustee may avoid any transfer
of an interest of the debtor in property --
(1) to or for the benefit of a creditor;
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3Section 547(c) provides, in relevant part:
The trustee may not avoid under this section a transfer --
(2) to the extent that such transfer was --
(A) in payment of a debt incurred by the debtor in the ordinary
course of business or financial affairs of the debtor and the transferee;
(B) made in the ordinary course of business or financial affairs of the debtor and
the transferee; and
(C) made according to ordinary business terms
11 U.S.C. § 547(c)
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(2) for or on account of an antecedent debt owed by the debtor before such
transfer was made;
(3) made while the debtor was insolvent;
(4) made --
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the
petition, if such creditor at the time of such transfer was an
insider; and
(5) that enables such creditor to receive more than such creditor would receive
if --
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided
by the provisions of this title.
11 U.S.C. § 547(c).
Defendant has admitted in her Answer the presence of elements (1) through (4), but disputes that the
transfer enabled her to receive more than she would receive if the case were a chapter 7 as required
under 11 U.S.C. § 547(c)(5). Defendant also asserts in her Answer that the transfers were made in
the ordinary course of business based upon the usual practices of other similar creditors, an exception
to the preferential transfer section outlined in 11 U.S.C. § 547(c).3
The ordinary course of business exception contained in 11 U.S.C. § 547(c) is an affirmative
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defense for which the creditor bears the burden of proof. In re Tulsa Litho Co., 229 B.R. 806, 809
(10th Cir. BAP 1999)(citing In re Meridith Hoffman Partners, 12 F.3d 1549, 1553 (10th Cir.
1993)). Defendant has offered no evidence to support her claim that the transfers meet all the elements
of the ordinary course of business exception under 11 U.S.C. § 547(c). When faced with a properly
supported motion for summary judgment, the non-moving party may not rest solely on its pleadings, but
must come forth with specific facts showing that there is a genuine issue for trial. Rule 56(e),
Fed.R.Civ.P. (“ . . . an adverse party may not rest upon the mere allegations or denials of the adverse
party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule,
must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not
so respond, summary judgment, if appropriate, shall be entered against the adverse party.”); Celotex
Corp v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Moreover,
“‘conclusory allegations without specific supporting facts have no probative value.’” Nichols v. Hurley,
921 F.2d 1101, 1113 (10th Cir.1990) (quoting Evers v. General Motors Corp., 770 F.2d 984, 986
(11th Cir.1985)). The conclusory allegations contained in the Defendant’s Answer are insufficient to
show that genuine issues of material fact exist with regard to the ordinary course of business exception
that would preclude summary judgment.
In light of applicable case law, the undisputed facts and the record of this proceeding support a
finding that fifth element for avoidance of a preferential transfer has also been satisfied.
Under 11 U.S.C. § 547(b)(5), “the trustee must prove that the creditor received more than it would if
the case were a chapter 7 liquidation case, the transfer had not been made, and the creditor received
payment of the debt to the extent provided by the provisions of the Code.” 5 Collier on Bankruptcy ¶
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547.03[7] (Alan N. Resnick and Henry J. Sommer, eds., 15th ed. rev. 2005). To make this
determination, the Court must consider “the actual effect of the payment as determined when
bankruptcy results.” Palmer Clay Products Co. v. Brown, 297 U.S. 227, 229, 56 S.Ct. 450, 451,
80 L.Ed. 655, 657 (1936). A transfer is preferential if it enables the creditor to receive a greater
percentage of his or her claim than the creditor would receive if the transfer had not been made and the
creditor participated in the distribution of estate assets by the chapter 7 trustee. See In re Powerine
Oil Co., 59 F.3d 969, 972 (9th Cir. 1995) (noting that a key factor in considering whether a payment is
a preference is the anticipated percentage distribution creditors will receive from the assets of the
bankruptcy estate).
Here, there will be no distribution to unsecured creditors absent a recovery of the $1,500.00
transferred to Defendant. See Debtors’ statements and schedules reflecting that there are insufficient,
unencumbered, non-exempt assets from which unsecured creditors could receive a distribution. If the
transfer had not been made, $1,500.00 would have been available to distribute among unsecured
creditors with listed claims totaling $41,000.00. Because Defendant received payment during the
preference period of $1,500.00, the transfer enabled Defendant to receive more than she would have
received had this case been a chapter 7 proceeding. Cf. In re AppOnline.com, Inc., 315 B.R. 259,
281 (Bankr.E.D.N.Y. 2004) (finding that where the unsecured creditor received a payment during the
preference period when the anticipated distribution to unsecured creditors is “‘only pennies on the
dollar’” the trustee established that the payments enabled the creditor to receive more than it would in a
Chapter 7 liquidation and satisfied § 547(b)(5)). The fifth element required under 11 U.S.C. §
547(b)(5) has, therefore, been satisfied, and Plaintiff is entitled to summary judgment as a matter of law.
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WHEREFORE, IT IS HEREBY ORDERED, that the Motion is GRANTED. An appropriate
judgment will be entered in accordance with this Order.
_______________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
I hereby certify that a true and correct copy of the foregoing was either electronically
transmitted, faxed, delivered, or mailed to the listed counsel and parties, on the date file-stamped
above.
George M. Moore Charles E. Hawthorne
Attorney for Plaintiff Attorney for Defendant
PO Box 216 900 Sudderth Drive
Albuquerque, NM 87103 Ruidoso, NM 88345
________________________________
Patti G. Hennessy
Law Clerk
(505) 348-2545
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